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

                                Form 10-K

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

               For the fiscal year ended December 31, 2006
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

        Securities registered pursuant to Section 12(b) of the Act:

     Title of Each Class         Name of Each Exchange on Which Registered
Common Stock, $.01 par value              New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes [X]   No [ ]

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ]    No [X]

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 requires for the past 90 days. Yes [X]    No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment of this Form 10-K. [X]

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

    Large accelerated filer [X]     Accelerated filer [ ]
    Non-accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ]   No [X]

As of June 30, 2006, 14,639,312 shares of the registrant's Common Stock,
$.01 par value, were outstanding and the aggregate market value of the
voting stock held by non-affiliates of the registrant was approximately
$959,606,902 based on the New York Stock Exchange closing price on June
30, 2006.

As of February 1, 2007, 14,639,312 shares of the registrant's Common
Stock, $.01 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None


<PAGE>
                                   PART I

ITEMS 1. AND 2. BUSINESS AND PROPERTIES.

GENERAL

     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 wholesale group distributes commercial wholesale
petroleum products primarily in Arizona and New Mexico.

     We have three business units:

     -  our refining group;

     -  our retail group; and

     -  our wholesale group.

     On August 26, 2006, we entered into an Agreement and Plan of Merger
(the "Plan of Merger") with Western Refining, Inc. ("Western") and New
Acquisition Corporation ("Merger Sub"). On November 12, 2006, we entered
into an Amendment No. 1 to Agreement and Plan of Merger (the "Amendment")
with Western and Merger Sub. The Plan of Merger and Amendment are
collectively referred to as the "Agreement". If the transaction closes,
Western will acquire all of our outstanding shares of common stock for
$77.00 per share, and we will be merged with Merger Sub and became a
wholly-owned subsidiary of Western.

REFINING GROUP

     Our refining group operates our Ciniza and Bloomfield refineries in
the Four Corners area of New Mexico and our 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.



                                    1


<PAGE>
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 and our wholesale group supply the gasoline and diesel fuel
our retail group sells. We purchase general merchandise and food products
from various suppliers. At December 31, 2006, our retail group operated
155 service stations with convenience stores or kiosks. Included in the
155 service stations are 21 convenience stores that were acquired from
Amigo Petroleum Company ("Amigo") in August 2006 and 12 convenience stores
that were acquired in the July 2005 acquisition of Dial Oil Co. ("Dial").
See Note 18, "Acquisitions", to our Consolidated Financial Statements
included in Item 8 for further information about these acquisitions.

WHOLESALE GROUP

     Our subsidiaries Phoenix Fuel Co., Inc. ("Phoenix Fuel"), Dial, and
Empire Oil Co. ("Empire") and certain assets acquired from Amigo make up
our wholesale group. We acquired Dial in July 2005, the Amigo assets in
August 2006, and Empire on January 2, 2007. See Note 18, "Acquisitions",
to our Consolidated Financial Statements included in Item 8 for further
information about these acquisitions. Our wholesale group primarily
distributes commercial wholesale petroleum products. Our wholesale group
includes several lubricant and bulk petroleum distribution plants,
unmanned commercial fleet fueling cardlock operations, a bulk lubricant
terminal facility, and a fleet of finished product and lubricant delivery
trucks. We purchase petroleum products for resale from other refiners and
marketers as well as our refining group.

REFINING GROUP

OUR YORKTOWN REFINERY

REFINING

     Our Yorktown refinery is located on 570 acres of land known as
Goodwin's Neck, which lies along the York River in York County, Virginia.
It has a crude oil throughput capacity of 61,900 barrels per day. The
Yorktown refinery is situated adjacent to its own deep-water port on the
York River, close to the Norfolk military complex and the Hampton Roads
shipyards.

     Our Yorktown refinery can process a wide variety of crude oils,
including certain lower quality crude oils, into high-value finished
products, including both conventional and reformulated gasoline, ultra low
sulfur diesel fuel, and heating oil. We also produce liquefied petroleum
gases ("LPG's"), fuel oil, and anode grade petroleum coke.






                                     2


<PAGE>
     Below is operating and other data for our Yorktown refinery:

<TABLE>
                                                              Year Ended December 31,
                                             --------------------------------------------------------
                                               2006        2005        2004        2003       2002(1)
                                             --------    --------    --------    --------    --------
<S>                                          <C>         <C>         <C>         <C>         <C>
Feedstock throughput(2):
  Crude oil...............................    52,300      54,500      52,000      51,600      53,300
  Residual feedstocks and intermediates...     7,200       6,500       6,900       6,100       4,000
                                             -------     -------     -------     -------     -------
    Total.................................    59,500      61,000      58,900      57,700      57,300
                                             =======     =======     =======     =======     =======
Crude oil throughput (as a % of total)....        88%         89%         88%         89%         93%
Rated crude oil capacity utilized.........        84%         88%         84%         83%         86%
Refinery margin ($ per barrel)............   $  3.95     $  8.72     $  5.60     $  4.07     $  2.32
Products(2):
  Gasoline................................    26,400      29,000      29,600      30,200      30,400
  Diesel fuel and No. 2 fuel oil..........    23,000      23,900      20,900      20,500      19,100
  Other(3)................................    10,100       8,100       8,400       7,000       7,800
                                             -------     -------     -------     -------     -------
    Total.................................    59,500      61,000      58,900      57,700      57,300
                                             =======     =======     =======     =======     =======
High-value products (as a % of total):
  Gasoline................................        44%         47%         50%         52%         53%
  Diesel fuel and No. 2 fuel oil..........        39%         39%         35%         35%         33%
                                             -------     -------     -------     -------     -------
    Total.................................        83%         86%         85%         87%         86%
                                             =======     =======     =======     =======     =======
-------
(1) Since our acquisition of the refinery on May 14, 2002.
(2) Average barrels per day.
(3) Other products include LPG's, fuel oil, and anode grade petroleum coke. The quantities
    of anode grade petroleum coke have been converted to the equivalent average barrels per
    day.
</TABLE>

YORKTOWN REFINERY INCIDENT (2006)

     On September 30, 2006, a fire occurred at our Yorktown refinery in
the processing unit required to produce ultra low sulfur diesel fuel.
Repairs to the unit cost approximately $12,000,000 and were completed in
January 2007. The unit was returned to operation in February 2007. Until
the unit became operational, we sold more heating oil than otherwise would
be the case, which was a less profitable product than ultra low sulfur
diesel.

     We have property insurance coverage with a $1,000,000 deductible that
should cover a significant portion of the costs of repairing the ultra low
sulfur diesel unit. We also have business interruption insurance coverage
that should cover a significant portion of the financial impact of the
fire after the policy's 45-day waiting period was exceeded. As of December
31, 2006, we wrote-off approximately $5,000,000 of property, plant and
equipment to accounts receivable in connection with the fire.


                                     3


<PAGE>
YORKTOWN REFINERY FIRE INCIDENT (2005)

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

     Our property insurance covered a significant portion of the costs of
repairing the Yorktown refinery and our business interruption insurance
reimbursed us for a portion of the financial impact of the fire. As of
December 31, 2006, we had received $89,000,000 of insurance proceeds
consisting of $27,700,000 for property claims and $61,300,000 for business
interruption claims. We recorded a gain of $82,003,000 as a result of
insurance recoveries received related to the fire. No more proceeds will
be received as all of our claims have been resolved with our insurance
carriers.

     For a further discussion of these matters, see the discussion in our
Risk Factors section in Item 1A regarding significant interruptions to our
operations.

TURNAROUNDS

     The operating units at our refineries require regular inspection and
maintenance, as well as major repair and upgrade shutdowns (known as
"turnarounds"), during which they are not in operation. Turnaround cycles
vary for different units.

     For turnaround purposes, we divide the operating units at our
Yorktown refinery into three groups. Each of these groups has a turnaround
approximately every five years that lasts approximately three to four
weeks. Certain groups are scheduled for a turnaround in 2007 (the
ultraformer and two hydrotreaters) and 2008 (the crude unit and the coker
unit). Shorter scheduled maintenance shutdowns and unscheduled maintenance
shutdowns also may occur at the refinery from time to time. In addition,
some production units must be shut down approximately once a year, for
approximately 10 to 14 days at a time, for catalyst change out, which is
necessary to improve the efficiency of the unit. During these shutdowns,
equipment inspections also are made and maintenance is performed.

     We originally had planned a 30-day turnaround of the fluid catalytic
cracker ("FCC") in April 2006. The FCC is a unit that alters the molecular
composition of materials sent into the unit in order to produce gasoline,
diesel, fuel oil, heating oil, and other products. As a result of the
November 2005 fire, which damaged this unit, we decided to perform the
turnaround while the unit was not operating and eliminate the scheduled
April turnaround. During the downtime, we completed a project on the FCC,
which cost approximately $8,100,000, which has increased our yield of
higher value finished products.





                                     4


<PAGE>
RAW MATERIAL SUPPLY

     Most of the crude oil for our Yorktown refinery comes from Canada,
the North Sea and West Africa. The refinery can process a wide range of
crude oils, including certain lower quality crude oils. The ability to
process a wide range of crude oils allows our Yorktown refinery to vary
crude oils in order to maximize refinery margins. Lower quality crude oils
can generally be purchased at a lower cost, compared to higher quality
crude oils, and this can result in improved refinery margins for us. The
Yorktown refinery also purchases some process unit feedstocks to
supplement the feedstocks going into various process units, and
blendstocks, to optimize refinery operations and blending operations.

     In the first quarter of 2004, we entered into a long-term crude oil
supply agreement with Statoil Marketing and Trading (USA), Inc., pursuant
to which Statoil agreed to supply us and we agreed to purchase acidic
crude oil. We believe this arrangement will satisfy a significant portion
of our Yorktown refinery's crude oil needs. We began taking supplies of
this crude oil at our Yorktown refinery in February 2004. Following
various upgrades at the refinery, which took place in the third quarter of
2004, the volumes processed have increased. The term of this agreement
expires when we have received the total volumes of crude oil committed to
be provided by Statoil, which we believe will be in approximately 2009.
The consummation of the pending transaction with Western gives Statoil the
right to terminate the Agreement. We currently do not expect Statoil to
exercise this right.

MARKETING AND DISTRIBUTION

     The Yorktown Markets. The markets for our Yorktown refinery are
grouped into tiers, which represent varying refining margin potential.
Tier 1 areas generally have the highest refining margin potential and
include the Yorktown region. Tier 2 markets include Salisbury, Maryland
and Norfolk, Virginia. North and South Carolina are considered Tier 3
markets, and the New York Harbor area is designated Tier 4. We focus on
selling products within Tiers 1, 2 and 3, unless favorable refining margin
opportunities arise in the New York Harbor.

     Dock System and Storage. Our refinery's dock system is capable of
handling 150,000-ton deadweight tankers and barges up to 200,000 barrels.
The refinery includes approximately 1,900,000 barrels of crude oil
tankage, including approximately 500,000 barrels of storage capacity in a
tank leased from the adjacent landowner. We also own approximately 600,000
barrels of gasoline tank storage, 800,000 barrels of gasoline blendstock
tank storage, and 400,000 barrels of distillate tank storage.

REFINED PRODUCT SALES

     Our refined products, including products we acquire from other
sources, are sold through independent wholesalers and retailers,
commercial accounts, and sales and exchanges with large oil companies.
Refined products produced at the refinery were distributed as follows:



                                     5


<PAGE>
<TABLE>
                                                                          2006     2005
                                                                         ------   ------
<S>                                                                        <C>      <C>
Direct sales to wholesalers, retailers and commercial customers......      67%      69%
Sales and exchanges with large oil companies.........................      33%      31%
</TABLE>

TRANSPORTATION

     Our Yorktown refinery's strategic location on the York River and its
own deep-water port access allow it to receive supply shipments from
various regions of the world. Crude oil tankers deliver all of the crude
oil supplied to our Yorktown refinery and most of the finished products
sold by the refinery are shipped out by barge, with the remaining amount
shipped out by truck or rail. This flexibility gives us the opportunity to
purchase economically attractive crude oil and to sell finished products
in economically attractive markets. The CSX rail system, which serves the
refinery, transports shipments of mixed butane and anode coke from the
refinery to our customers.

OUR CINIZA AND BLOOMFIELD REFINERIES

REFINING

     Our refining group operates two refineries in the Four Corners area.
Our Ciniza refinery 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. It is located on approximately 850 acres near Gallup, New
Mexico. Our Bloomfield refinery has a crude oil throughput capacity of
16,000 barrels per day and a total throughput capacity including natural
gas liquids of 16,600 barrels per day. It is located on 285 acres near
Farmington, New Mexico. We operate the two refineries in an integrated
fashion.

     The Four Corners area is the primary market for the refined products
and also is the primary source of crude oil and natural gas liquids
supplies for both refineries.

     We believe the technical capabilities of these two refineries,
together with the high quality of locally available feedstocks, enable us
to produce a high percentage of high-value products. Each barrel of raw
materials processed by our Four Corners refineries has resulted in
approximately 90% of high-value finished products, including gasoline and
diesel fuel during the past five years.

     Below is operating and other data for our Four Corners refineries:








                                     6


<PAGE>
<TABLE>
                                                         Year Ended December 31,
                                             -----------------------------------------------
                                               2006      2005      2004      2003      2002
                                             -------   -------   -------   -------   -------
<S>                                          <C>       <C>       <C>       <C>       <C>
Feedstock throughput:(1)
  Crude oil.............................      22,600    23,200    22,900    24,500    26,600
  Natural gas liquids and oxygenates....       4,900     6,200     5,400     6,100     6,200
                                             -------   -------   -------   -------   -------
    Total...............................      27,500    29,400    28,300    30,600    32,500
                                             =======   =======   =======   =======   =======
Crude oil throughput (as a % of total)..          82%       79%       81%       80%       82%
Rated crude oil capacity utilized.......          60%       62%       61%       67%       72%
Refinery margin ($ per barrel)..........     $ 15.72   $ 14.03   $  8.96   $  8.81   $  6.84
Products:(1)
  Gasoline..............................      18,300    20,100    18,600    20,900    21,400
  Diesel fuel...........................       6,200     6,500     6,600     6,900     8,100
  Other.................................       3,000     2,800     3,100     2,800     3,000
                                             -------   -------   -------   -------   -------
    Total...............................      27,500    29,400    28,300    30,600    32,500
                                             =======   =======   =======   =======   =======
High-Value Products (as a % of total):
  Gasoline..............................          66%       71%       67%       68%       66%
  Diesel fuel...........................          23%       22%       23%       23%       25%
                                             -------   -------   -------   -------   -------
    Total...............................          89%       93%       90%       91%       91%
                                             =======   =======   =======   =======   =======
-------
(1)  Average barrels per day.
</TABLE>

CINIZA REFINERY FIRE INCIDENT (OCTOBER 2006)

     On October 5, 2006, a pump failure in the alkylation unit at our
Ciniza refinery resulted in a fire at the refinery. The fire caused damage
to the alkylation unit and an associated unit. The alkylation unit
produces high octane blending stock for gasoline. Repairs to the affected
units cost approximately $6,400,000 and the unit was restarted in mid-
December of 2006. We have property insurance coverage with a $1,000,000
deductible that should cover a significant portion of the costs of
repairing the unit. We do not anticipate making a claim under our business
interruption insurance. As of December 31, 2006, we wrote-off
approximately $392,000 of property, plant and equipment to accounts
receivable in connection with the fire.

CINIZA REFINERY FIRE INCIDENT (DECEMBER 2006)

     On December 26, 2006, a fire occurred in a process heater in the
distillate hydrotreater ("DHT") unit. The DHT unit is used to manufacture
ultra low sulfur diesel fuel. Instrumentation and electrical cabling




                                     7


<PAGE>
associated with the DHT unit and other process units also were damaged.
All of the process units in the refinery were shutdown for safety reasons.
Repairs have been made that have enabled us to restart all of the units at
the refinery except for the portion of the DHT unit damaged in the fire.
We currently expect that the rest of the DHT unit will be returned to
service in early April.

     We currently expect that repairs to, and/or replacement of, the
units, instrumentation, and cabling damaged by the fire will cost
approximately $6,700,000. We do not anticipate receiving any insurance
proceeds related to these repairs as the cost of the repairs has not
exceeded the associated $10,000,000 deductible of our current property
insurance coverage. In addition, we do not anticipate making a claim under
our business interruption insurance. As of December 31, 2006, we wrote-off
approximately $875,000 of property, plant and equipment to loss on write-
down of assets.

     For a further discussion of these matters, see the discussion in our
Risk Factors section in 1A regarding significant interruptions to our
operations.

TURNAROUNDS

     In general, a turnaround is scheduled for each of our Four Corners
refineries approximately every five years. A typical turnaround takes
approximately 30 days. Our Ciniza refinery completed a turnaround in the
second quarter of 2004 and another turnaround in the third quarter of
2006. Our Bloomfield refinery had a turnaround in the first quarter of
2006. There are no turnarounds scheduled for 2007 or 2008 at either Ciniza
or Bloomfield. Shorter scheduled maintenance shutdowns and unscheduled
maintenance shutdowns may occur at the refineries from time to time. In
addition, one of the production units at each refinery must be shut down
approximately one or two times a year, for approximately 10 days at a
time, for catalyst regeneration or replacement, which is necessary to
improve the efficiency of the unit. During these short shutdowns,
equipment inspections also are made and maintenance is performed.

RAW MATERIAL SUPPLY

     The primary feedstock for our Four Corners refineries is Four Corners
Sweet, a locally produced, high quality crude oil. We supplement the crude
oil used at our refineries with other feedstocks. These other feedstocks
currently include locally produced natural gas liquids and condensate as
well as other feedstocks produced outside of the Four Corners area.

     Our Ciniza refinery is capable of processing approximately 6,000
barrels per day of natural gas liquids. An adequate supply of natural gas
liquids is available for delivery to our Ciniza refinery primarily through
a pipeline we own that connects the refinery to a natural gas liquids
processing plant.





                                     8


<PAGE>
     We purchase crude oil from a number of sources, including major oil
companies and independent producers, under arrangements that contain
market-responsive pricing provisions. Many of these arrangements are
subject to cancellation by either party or have terms of one year or less.
In addition, these arrangements are subject to periodic renegotiation,
which could result in our paying higher or lower relative prices for crude
oil.

     Our Ciniza and Bloomfield refineries continue to be affected by
reduced crude oil production in the Four Corners area. For a further
discussion of this matter, including our plans to transport crude oil
through a pipeline acquired in 2005, see the discussion in the
Transportation section below and in our Risk Factors section in Item 1A
regarding feedstocks at our Ciniza and Bloomfield refineries.

MARKETING AND DISTRIBUTION

     The Four Corners Markets. The majority of gasoline and diesel fuel
produced at our Four Corners refineries is distributed in New Mexico and
Arizona. The primary market area, which generally has the highest refining
margin potential, is the Four Corners area.

     Terminal Operations. We own a finished products terminal near
Flagstaff, Arizona, with a daily capacity of 6,000 barrels per day. This
terminal has approximately 65,000 barrels of finished product tankage and
a truck loading rack with three loading spots. Product deliveries to this
terminal are made by truck from our Four Corners refineries.

     We also own a finished products terminal in Albuquerque, New Mexico,
with a daily capacity of 10,000 barrels per day. This terminal has
approximately 170,000 barrels of finished product tankage and a truck
loading rack with two loading spots. Product deliveries to this terminal
are made by truck or by pipeline, including deliveries from our Ciniza and
Bloomfield refineries.

REFINED PRODUCT SALES

     Our refined products, including products our refining group acquires
from other sources, are sold through independent wholesalers and
retailers, commercial accounts, our own retail units, and sales and
exchanges with large oil companies. Refined products produced at the
refineries were distributed as follows:

<TABLE>
                                                                          2006     2005
                                                                         ------   ------
<S>                                                                      <C>      <C>
Direct sales to wholesalers, retailers and commercial customers......      54%      57%
Direct sales to our own retail units.................................      26%      23%
Sales and exchanges with large oil companies.........................      16%      17%
Other................................................................       4%       3%
</TABLE>



                                     9


<PAGE>
TRANSPORTATION

     Crude oil supply for our Four Corners refineries comes primarily from
the Four Corners area and is delivered by pipelines, including pipelines
we own, connected to our refineries, or delivered by our trucks to
pipeline injection points or refinery tankage. Our pipeline system reaches
into the San Juan Basin, located in the Four Corners area, and connects
with local common carrier pipelines. We currently own approximately 250
miles of pipeline for gathering and delivering crude oil to the
refineries. Our Ciniza refinery receives natural gas liquids primarily
through a 13-mile pipeline we own that is connected to a natural gas
liquids processing plant.

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

     Startup of the pipeline is subject to, among other things, a final
engineering evaluation of the system. The hydrotesting of the pipeline was
completed in July 2006, and we currently are continuing to do the work
necessary to re-commission the line. As a result of project delays, it
currently is anticipated that the pipeline will become operational in the
second quarter of 2007 with crude oil arriving at the refineries before
the end of the second quarter.

     The majority of our Four Corners gasoline and diesel fuel production
is distributed in New Mexico and Arizona. Our refining group operates a
fleet of finished product trucks that we use to deliver finished products
as needed by our customers.

RETAIL GROUP

     On December 31, 2006, our retail group operated 158 total operating
units, including 155 service stations, one A&W restaurant, one Party Time
Pizza restaurant, and one full service car wash. These operating units are
located in New Mexico, Arizona, and Colorado. Service station count
represents an increase of 32 units since December 31, 2005.

     On December 31, 2006, our retail group had 61 units branded Conoco
pursuant to a strategic branding/licensing agreement. In addition, 37
units were branded Giant, 38 units were branded Mustang, eight units were
branded Phillips 66, seven units were branded Shell, two units were
branded Mobil, one unit was branded Thriftway, and one unit was branded
Sundial.







                                     10


<PAGE>
     Many of our service stations are modern, high-volume self-service
operations. Our service stations are augmented with convenience stores at
most locations, which provide items such as general merchandise, tobacco
products, alcoholic and nonalcoholic beverages, fast food, and automotive
products. In addition, most locations offer services such as automated
teller machines, free air, and pre-paid financial products, including
phone cards, gift cards, and Visa and MasterCard cards. These stores offer
a mix of our own branded foodservice/delicatessen items and some of the
stores offer nationally franchised products. Service stations with kiosks
offer limited merchandise, primarily tobacco products, but also candy and
other snacks, and some automotive products.

     Until June 19, 2003, when it was sold, we also owned and operated a
travel center adjacent to our Ciniza refinery near Gallup, New Mexico. The
travel center provided a direct market for a portion of the Ciniza
refinery's production. In connection with the sale, the refinery group
entered into a long-term product supply agreement with the purchaser.

     Below is data with respect to our retail operations:

<TABLE>
                                                            Year Ended December 31,
                                             ----------------------------------------------------
                                              2006(1)    2005(2)    2004(3)    2003(3)    2002(3)
                                             --------   --------   --------   --------   --------
<S>                                          <C>        <C>        <C>        <C>        <C>
Retail Group
  Service Stations (Continuing operations)
    Fuel gallons sold (in thousands).......   200,590    174,510    156,917    148,605    148,469
    Fuel margin ($/gallon).................  $   0.19   $   0.20   $   0.18   $   0.20   $   0.15
    Merchandise sold ($ in thousands)......  $159,513   $144,968   $134,013   $127,009   $123,630
    Merchandise margin.....................        27%        27%        24%        29%        27%
    Number of outlets at year end..........       155        135        123        123        123
  Travel Center(3)
    Fuel gallons sold (in thousands).......         -          -          -     10,227     24,906
    Fuel margin ($/gallon).................         -          -          -   $   0.07   $   0.09
    Merchandise sold ($ in thousands)......         -          -          -   $  2,703   $  6,103
    Merchandise margin.....................         -          -          -         42%        44%
    Number of outlets at year end..........         -          -          -          -          1
-------
(1) Includes statistics from 21 operating stores acquired from Amigo in August 2006 and 12 retail
    stores acquired from Dial in July 2005.
(2) Includes statistics from 12 retail stores acquired from Dial in July 2005.
(3) 2003 figures are from January 1 to June 19 when our travel center was sold.
</TABLE>

WHOLESALE GROUP

     Our wholesale group primarily distributes commercial wholesale
petroleum products that include diesel fuel, gasoline, jet fuel, kerosene,
motor oil, hydraulic oil, gear oil, cutting oil, grease and various




                                     11


<PAGE>
chemicals and solvents. Our wholesale group owns several lubricant and
bulk petroleum distribution plants, commercial fleet fueling cardlock
operations, a bulk lubricant terminal facility, and a fleet of finished
product and lubricant delivery trucks. These operations are located
primarily throughout Arizona and New Mexico, and we sell products in
Arizona, California, Colorado, Nevada, New Mexico, Wyoming and Texas.

     In addition, we offer our customers a variety of related services,
including fuel management systems, tank level monitoring, and automated
dispatch. We sell under the trade names Phoenix Fuel, Firebird Fuel,
Tucson Fuel, Mesa Fuel, PFC Lubricants, Dial Oil and Empire Oil. Our
principal customers are in the mining, construction, utility,
manufacturing, transportation, aviation, and agriculture industries. We
purchase petroleum products for resale from other refiners and marketers
as well as from our refining group.

     Below is data with respect to the operations of our wholesale group:

<TABLE>
                                                            Year Ended December 31,
                                             ----------------------------------------------------
                                              2006(1)    2005(2)    2004(3)    2003(3)    2002(3)
                                             --------   --------   --------   --------   --------
<S>                                          <C>        <C>        <C>        <C>        <C>
Wholesale Group
  Fuel gallons sold (in thousands)(4).....    595,710    520,664    473,009    429,198    376,711
  Fuel margin ($/gallon)(5)...............   $   0.06   $   0.07   $   0.05   $   0.05   $   0.05
  Lubricant sales ($ in thousands)........   $ 71,635   $ 46,309   $ 30,597   $ 24,475   $ 21,544
  Lubricant margin........................         14%        16%        13%        15%        17%
-------
(1) Includes statistics for wholesale operations of Dial and Amigo, which were acquired in July
    2005 and August 2006, respectively.
(2) Includes statistics from wholesale operations of Dial, which was acquired in July 2005.
(3) Includes Phoenix Fuel only.
(4) Includes fuel gallons supplied to our retail group at no margin.
(5) Calculated as fuel revenues, including delivery charges billed to the customer, less
    cost of fuel products sold, divided by fuel gallons sold.
</TABLE>

EMPLOYEES

     On February 14, 2007, we had approximately 3,011 employees.

     The United Steel, Paper and Forestry, Rubber, Manufacturing, Energy,
Allied Industrial and Service Workers International Union, formerly the
Paper, Allied - Industrial, Chemical and Energy Workers International
Union, Local 2-10, represents the hourly workforce at our Yorktown
refinery. Our agreement with the union is scheduled to expire in 2009. At
February 14, 2007, there were 122 employees represented by this union.






                                     12


<PAGE>
OTHER MATTERS

     COMPETITIVE CONDITIONS

     We operate in a highly competitive industry. Many of our competitors
are large, integrated oil companies which, because of their more diverse
operations, stronger capitalization and better brand name recognition, are
better able to withstand volatile industry conditions than we are,
including shortages or excesses of crude oil or refined products, or
intense price competition. The refineries operated by our competitors are
typically larger and more efficient than our refineries. As a result,
these refineries may have lower per barrel processing costs. Furthermore,
mergers between large integrated oil companies, upgrades to competitors'
refineries, and pipeline projects have resulted and, in the future, may
result in increased competition for our refineries.

     The principal competitive factors affecting our refining operations
are:

     -  the quality, quantity and delivered costs of crude oil, natural
        gas liquids, and other refinery feedstocks and blendstocks;

     -  refinery throughput and processing efficiencies;

     -  refined product mix;

     -  refined product selling prices;

     -  refinery processing costs per barrel;

     -  the cost of delivering refined products to markets; and

     -  the ability of competitors to deliver refined products into our
        market areas by pipeline or other means.

     The principal competitive factors affecting our retail marketing
business are:

     -  the level of customer service provided;

     -  the location of our service stations;

     -  product selling prices;

     -  product availability and cost, including prices being offered for
        refined products by major oil companies to our competitors in
        certain markets;

     -  the appearance and cleanliness of our service stations;

     -  brand acceptance; and

     -  the development of gasoline retail operations by non-traditional
        marketers, such as supermarkets and club membership warehouses.

                                     13


<PAGE>
     The principal competitive factors affecting our wholesale operations
are:

     -  product availability and cost, including prices being offered for
        refined products by major oil companies to our competitors in
        certain markets;

     -  the level of customer service provided;

     -  product selling prices; and

     -  business integration of new technology.

COMPETITORS IN THE YORKTOWN REFINERY'S MARKET

     We compete with major and larger integrated oil companies as well as
independent refiners. Among others, we compete with refineries in the Gulf
Coast via the Colonial Pipeline, which runs from the Gulf Coast area to
New Jersey. We also compete with offshore refiners that deliver product by
water transport.

COMPETITORS IN THE FOUR CORNERS REFINERIES' MARKET

     We compete with major and larger integrated oil companies and with
independent refiners that have refineries located outside the Four Corners
area. Refined products can be shipped to Albuquerque, New Mexico through
pipelines originating in El Paso, Texas, Amarillo, Texas, and southeastern
New Mexico. Furthermore, a pipeline originating in southeastern New Mexico
also can deliver refined products to the Four Corners area. Additionally,
the Longhorn Pipeline, which runs from Houston, Texas to El Paso, Texas,
began operations in August 2004. Refined product transported through this
pipeline can be brought into our marketing area by pipeline or truck.

     For more information concerning pipeline projects that could bring
additional refined products into our Four Corners market, see the
discussion in our Risk Factors section in Item 1A regarding pipeline
projects.

COMPETITORS WITH OUR RETAIL GROUP

     Our retail group competes against service stations operated by major
oil companies as well as independent operators. We also compete against
nontraditional marketers, such as supermarkets and club membership
warehouses.

COMPETITORS WITH OUR WHOLESALE GROUP

     Our wholesale group competes with traditional large and small
wholesale distributors. In addition, our cardlock operations compete with
national fleet fueling networks.

     For a further discussion of the competitive risks we face, see the
discussions in Risk Factors in Item 1A regarding pipeline projects and
refinery improvements.

                                     14


<PAGE>
REGULATORY AND ENVIRONMENTAL MATTERS

     Our operations are subject to a variety of federal, state and local
environmental laws. These laws apply to, among other things:

     -  the discharge of pollutants into the soil, air and water;

     -  product specifications;

     -  the generation, treatment, storage, transportation, and disposal
        of solid and hazardous wastes; and

     -  employee health and safety.

     We believe that all of our business units are operating in
substantial compliance with current environmental, health and safety laws.
Despite our efforts, actual or potential claims and lawsuits involving
alleged violations of law have been asserted against us from time to time
and, despite our efforts to comply with applicable laws, may be asserted
in the future.

     ENVIRONMENTAL COMPLIANCE

     We spend amounts each year to comply with environmental laws,
including laws regulating the discharge of materials into the environment.
We have set out below those environmental compliance matters that we
believe are the most significant to our operations, either because of the
potential size of associated capital or operating expenditures or the
potential impact on our competitive position. Our earnings are affected to
the extent that we must make expenditures for environmental compliance
purposes.

     In budgeting for capital expenditures, we do not specifically
differentiate between environmental projects and non-environmental
projects, as environmental projects may be integrally related to our
operations or to operationally required projects. Nevertheless, capital
projects that we will either undertake this year or are planning to take
in the future, and that will involve significant expenditures for
environmental purposes, are referenced in our Risk Factors section in Item
1A, in our discussion of Capital Expenditures in our Management's
Discussion and Analysis of Financial Condition and Results of Operations
section in Item 7, and in Note 17 to our Consolidated Financial Statements
in Item 8. Certain of these projects are also described below.

     We anticipate that, like us, our competitors also are spending
amounts for environmental compliance purposes. The financial impact of
certain regulatory programs, however, may not be as significant for
certain of our competitors as a result of economies of scale, differences
in compliance strategies, differences in laws applicable to market areas
in which they or we compete, and other factors. Additionally, our
competitive position may be affected by the potential impact of company-
specific litigation and enforcement actions.



                                     15


<PAGE>
     Motor Fuel Programs. Various federal and state programs relating to
the composition of motor fuels apply to our operations. Significant
programs affecting the composition of our motor fuels are described below.
It is possible that additional laws affecting motor fuel specifications
may be adopted that would impact geographic areas in which we sell our
products.

     -  Low Sulfur Fuels. Rules issued by the federal Environmental
        Protection Agency ("EPA") require refiners to reduce the sulfur
        content in gasoline and diesel fuels. Some refiners began
        producing gasoline that satisfies low sulfur gasoline standards in
        2004, with most refiners achieving full compliance for all
        production in 2006. Most refiners also began producing highway
        diesel fuel that satisfies low sulfur diesel standards in June
        2006. All refiners and importers must be in full compliance with
        the new gasoline and diesel standards by the end of 2010 without
        exception.

        For a discussion of how these low sulfur fuels rules affect our
        operations, see the discussion in our Risk Factors section in Item
        1A regarding compliance with various regulatory and environmental
        laws and regulations, and the discussion in our Management's
        Discussion and Analysis of Financial Condition and Results of
        Operations in Item 7 captioned Capital Expenditures.

     -  Reformulated Gasoline. Federal law requires the sale of specially
        formulated gasoline in designated areas of the country, including
        some market areas serviced by the Yorktown refinery. The Yorktown
        refinery manufactures gasoline that satisfies the requirements of
        its markets. Motor fuels produced by our Four Corners refineries
        are not sold in any areas where federal law requires specially
        formulated gasoline. Arizona, however, has adopted a cleaner
        burning gasoline program that is applicable to gasolines sold or
        used in Maricopa County, Arizona, which includes the Phoenix
        metropolitan area. We do not presently manufacture gasolines that
        satisfy the Maricopa County, Arizona specifications, but we do
        produce gasolines that meet the specifications applicable to other
        areas of Arizona. We are able to purchase or exchange for cleaner
        burning gasolines to supply our needs in the Maricopa County area.

     -  MTBE. Methyl tertiary butyl ether ("MTBE") is a gasoline blending
        component used by many refiners in producing specially formulated
        gasoline. We discontinued the use of MTBE at our refineries in
        2006. Some other refiners also discontinued the use of MTBE as a
        blending component in 2006.

     -  Oxygenates. The use of gasoline containing oxygenates has been
        government-mandated in some areas in which we sell motor vehicle
        fuel. Oxygenates are oxygen-containing compounds that can be used
        as a supplement to reduce carbon monoxide emissions. Beginning in
        May 2006, federal law no longer requires a minimum oxygen content




                                     16


<PAGE>
        in specially formulated gasoline. Some states and localities may
        continue to require that gasoline contain oxygenates. We currently
        anticipate that we will be able to purchase sufficient quantities
        of oxygenates at acceptable prices for the foreseeable future.

     -  Benzene. EPA adopted rules in the first quarter of 2007 requiring
        the benzene content of gasoline to be reduced beginning in 2011.
        For a discussion of how these new rules may affect our operations,
        see the discussion in our Risk Factors section in Item 1A
        regarding compliance with various regulatory and environmental
        laws and regulations.

     MTBE Litigation. Lawsuits have been filed in numerous states alleging
that MTBE has contaminated, or threatens to contaminate, water supplies.
We are a defendant, along with numerous other refiners and suppliers of
gasoline containing MTBE, in approximately 30 MTBE lawsuits pending in
Virginia, Connecticut, Massachusetts, New Hampshire, New York, New Jersey,
Pennsylvania, and New Mexico. For a further discussion of this matter, see
the discussion in our Risk Factors section in Item 1A regarding discharges
or other releases, and Note 17, "Commitments and Contingencies", to our
Consolidated Financial Statements in Item 8.

     Alleged Regulatory Violations. Governmental authorities issue notices
of violations, compliance orders, and similar notices that allege, among
other things, violations of environmental requirements. They also may
attempt to assess fines or require corrective action for the alleged
violations. We enter into various settlements, consent decrees and other
agreements with government authorities to resolve allegations of non-
compliance with environmental laws and obligations. We currently are
engaged in negotiations with the New Mexico Environment Department
concerning a draft compliance order that asserts that we may have violated
hazardous waste regulations at our Bloomfield refinery. See Note 17,
"Commitments and Contingencies", to our Consolidated Financial Statements
in Item 8 for a further discussion of the draft Bloomfield compliance
order. Additionally, see Note 17, as well as the portion of our Risk
Factors section in Item 1A dealing with the acquisition of our Yorktown
refinery, for a discussion of: (i) other regulatory requirements that we
have allegedly violated; (ii)actions we are taking in connection with the
resolution of alleged regulatory violations; and (iii) obligations we have
assumed under agreements entered into by others to resolve alleged
regulatory violations.

     We have received other allegations of environmental and other
regulatory violations from governmental authorities from time to time. We
have responded or intend to respond in a timely manner to all such
matters. Despite our ongoing efforts to comply with environmental laws and
regulations, we may receive allegations of violations from governmental
authorities in the future. For a further discussion of risks associated
with our compliance with various regulatory and environmental laws and
regulations, see our Risk Factors section in Item 1A.





                                     17


<PAGE>
     Discharges, Releases and Cleanup Activities. By their very nature,
our operations are inherently subject to accidental spills, discharges or
other releases of petroleum or hazardous substances. These events may give
rise to liability for us. Accidental discharges of contaminants have
occurred from time to time during the normal course of our operations. We
have undertaken, intend to undertake, or have completed all investigative
or remedial work thus far required by governmental agencies to address
potential contamination by us. For a discussion of risks associated with
discharges and other releases, see the discussion in our Risk Factors
section in Item 1A regarding the risk of discharges and releases
associated with our operations, and for a discussion of significant
cleanup activities in which we are involved, see Note 17, "Commitments and
Contingencies", to our Consolidated Financial Statements in Item 8,
captioned "Commitments and Contingencies."

     We are incurring, and anticipate that we will continue to incur from
time to time, remedial costs in connection with current and former
gasoline service stations operated by us. Our experience has been that
these costs generally do not exceed $250,000 per incident, and may be
substantially less. Some of these costs may be reimbursed from state
environmental funds.

     Although we have invested substantial resources to prevent and
minimize future accidental discharges and to remedy contamination
resulting from prior discharges, any of the following may occur in the
future:

     -  new accidental discharges;

     -  we may fail to adequately remedy past discharges;

     -  governmental agencies may impose fines for past or future
        contamination;

     -  we may not receive anticipated levels of reimbursement from third
        parties, including state environmental agencies; or

     -  third parties may assert claims against us for damages allegedly
        arising out of past or future contamination.

     HEALTH AND SAFETY

     Our operations also are subject to a variety of federal, state, and
local laws relating to occupational health and safety. We have ongoing
safety and training programs to assist us in complying with health and
safety requirements. Our goal is to achieve compliance and to protect our
employees and the public. Despite our efforts to comply with health and
safety requirements, there can be no assurance that governmental
authorities will not allege in the future that violations of law have
occurred.





                                     18


<PAGE>
     CHANGES IN ENVIRONMENTAL, HEALTH AND SAFETY LAWS

     We cannot predict what new environmental, health and safety laws will
be enacted or become effective in the future. We also cannot predict how
existing or future laws will be administered or interpreted with respect
to products or activities to which they have not been previously applied.
In addition, environmental, health and safety laws are becoming
increasingly stringent. Compliance with more stringent laws, as well as
more vigorous enforcement by 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 equipment we currently do not possess;

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

     -  the initiation or modification of cleanup activities.

RIGHTS-OF-WAY

     In connection with our 16" and 6" crude oil pipeline systems, we have
obtained various rights-of-way from various third parties. Irregularities
in title may exist with respect to a limited number of these rights-of-
way. We have, however, continued our use of the entirety of our pipeline
system. As of this date, no claim stemming from any right-of-way matter
has been brought against us. We do not believe that any right-of-way
matters or irregularities in title will adversely affect our use of our
pipeline system.

     Certain rights-of-way for our crude oil pipeline systems must be
renewed periodically, including some that have expired, which are in the
process of renewal, and others that expire in the next few years. We
expect that substantial lead time will be required to negotiate and
complete renewal of these rights-of-way and that the costs of renewal for
certain of the rights-of-way may be significant.

     Certain obligations may arise from the non-renewal of these rights-
of-way. See Note 7, "Asset Retirement Obligations', to our Consolidated
Financial Statements in Item 8 related to asset retirement obligations
associated with our crude pipeline system.

NYSE MATTERS

     In 2006, our chief executive officer submitted to the New York Stock
Exchange (the "NYSE") the required CEO certification regarding compliance
with the NYSE corporate governance listing standards. In addition,
attached as Exhibits 31.1 and 31.2 to this Form 10-K are the
certifications required by Sarbanes-Oxley Section 302.





                                     19


<PAGE>
ADDITIONAL INFORMATION

     Our annual report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and amendments to those reports are available
on our website at www.Giant.com and the SEC website at www.sec.gov as soon
as reasonably practicable after they are electronically filed or furnished
to the SEC. Additional copies of these reports are available without
charge to stockholders by calling (480) 585-8888 or by writing to: Mark
Cox, Executive Vice President and Chief Financial Officer, at our
corporate headquarters.

ITEM 1A. RISK FACTORS.

     An investment in our common shares involves risk. You should
carefully consider the specific factors described below, together with the
cautionary statements under the caption "Forward - Looking Statements" in
Item 7 of this Report and the other information included in this report,
before purchasing our common shares. The risks described below are not the
only ones that we face. Additional risks that are not yet known to us or
that we currently think are immaterial could also impair our business,
financial condition, or results of operations. If any of the following
risks actually occurs, our business, financial condition, or results of
operations could be adversely affected. Further, it is possible that
certain of the risks, if they occur, could provide Western with the
ability to terminate our merger agreement. In either case, the trading
price of our common shares could decline, and you may lose all or part of
your investment.

WE HAVE DEBT THAT COULD ADVERSELY AFFECT OUR OPERATIONS.

     As of December 31, 2006, our total debt was approximately
$325,000,000 and our stockholders' equity was approximately $484,000,000.
We currently have a $175,000,000 revolving credit facility. At December
31, 2006, we had approximately $50,000,000 of direct borrowings and
$28,000,000 of letters of credit outstanding and $97,000,000 of
availability, subject to borrowing base limitations. Our level of debt may
have important consequences to you. Among other things, it may:

     -  limit our ability to use our cash flow, or obtain additional
        financing, for future working capital, capital expenditures,
        acquisitions or other general corporate purposes;

     -  restrict our ability to pay dividends;

     -  require a substantial portion of our cash flow from operations to
        make debt service payments;

     -  limit our flexibility to plan for, or react to, changes in our
        business and industry conditions;

     -  place us at a competitive disadvantage compared to our less
        leveraged competitors; and



                                     20


<PAGE>
     -  increase our vulnerability to the impact of adverse economic and
        industry conditions and, to the extent of our outstanding debt
        under our floating rate debt facilities, the impact of increases
        in interest rates.

     We cannot assure you that we will continue to generate sufficient
cash flow or that we will be able to borrow funds under our senior secured
revolving credit facility in amounts sufficient to enable us to service
our debt or meet our working capital and capital expenditure requirements.
If we cannot do so, due to borrowing base restrictions or otherwise, we
may be required to sell assets, reduce capital expenditures, refinance all
or a portion of our existing debt or obtain additional financing. We
cannot assure you that we will be able to refinance our debt, sell assets
or borrow more money on terms acceptable to us, if at all. In addition,
our ability to incur additional debt will be restricted under the
covenants contained in our senior credit facilities and our senior
subordinated note indentures.

OUR DEBT INSTRUMENTS IMPOSE RESTRICTIONS ON US THAT MAY ADVERSELY AFFECT
OUR ABILITY TO OPERATE OUR BUSINESS.

     The indentures governing our existing debt securities contain
covenants that, among other things, restrict our ability to:

     -  create liens;

     -  incur or guarantee debt;

     -  pay dividends;

     -  repurchase shares of our common stock;

     -  sell certain assets or subsidiary stock;

     -  engage in certain mergers;

     -  engage in certain transactions with affiliates; or

     -  alter our current line of business.

     In addition, our senior secured credit facility contains other and
more restrictive covenants. We also must comply with specified financial
covenants in our senior secured credit facility, including maintaining a
minimum consolidated net worth, a minimum consolidated interest coverage
ratio, and a maximum consolidated funded indebtedness to total
capitalization percentage. Our ability to comply with these covenants may
be affected by events beyond our control, and we cannot assure you that
our future operating results will be sufficient to comply with the
covenants. Our failure to comply with the financial covenants or the other
restrictions contained in our senior credit facility could result in a
default, which could cause that debt (and by reason of cross-default



                                     21


<PAGE>
provisions, debt under our indentures) to become immediately due and
payable. If we cannot repay those amounts, the lenders under our senior
secured credit facility could proceed against the collateral granted to
them to secure that debt. If those lenders accelerate the payment of the
senior secured credit facility, we cannot assure you that our assets would
be sufficient to pay that debt and our debt under our indentures.

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

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

     Environmental obligations assumed by us include BP's responsibilities
related to the Yorktown refinery under a consent decree among various
parties covering many locations (the "Consent Decree"). As applicable to
the Yorktown refinery, the Consent Decree requires, among other things, a
reduction of nitrous oxides, sulfur dioxide, and particulate matter
emissions and upgrades to the refinery's leak detection and repair program.
We have substantially completed the modifications required by the Consent
Decree, and have expended approximately $24,000,000 through the end of
2006. We expect to expend approximately $1,000,000 through 2008 for the
remaining equipment modifications.

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

     Our most current estimate of expenses associated with the EPA order
is between approximately $30,000,000 ($22,500,000 of which we believe is
subject to reimbursement by BP) and $40,000,000 ($32,500,000 of which we
believe is subject to reimbursement by BP). We anticipate that these
expenses will be incurred over a period of approximately 35 years from
August 2006. We believe that between approximately $12,000,000 and
$16,000,000 of this amount will be incurred over an initial four-year
period, and additional expenditures of between approximately $12,000,000
and $16,000,000 will be incurred over the following four-year period, with
the remainder thereafter. These estimates assume that EPA will agree with
the design and specifications of our cleanup plan. These estimates also
could change as a result of factors such as changes in costs of labor and
materials. We currently have $2,755,000 recorded as an environmental



                                     22


<PAGE>
liability for this project, which reflects our belief that BP is
responsible for reimbursing us for expenditures on this project that
exceed this amount and also reflects expenditures previously incurred in
connection with this matter. BP's total liability for reimbursement under
the refinery purchase agreement, including liability for environmental
claims, is limited to $35,000,000.

     As part of the consent order cleanup plan, the facility's underground
sewer system will be cleaned, inspected and repaired as needed. This sewer
work is scheduled to begin during the construction of the corrective
action management unit and related remediation work and is included in our
associated cost estimate. We anticipate that construction of the
corrective action management unit and related remediation work, as well as
sewer system inspection and repair, will be completed approximately seven
to eight years after EPA approves our cleanup plan and authorizes its
implementation.

IF WE CANNOT MAINTAIN AN ADEQUATE SUPPLY OF FEEDSTOCKS AT OUR CINIZA AND
BLOOMFIELD REFINERIES, OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED.

     The primary feedstock for our Four Corners refineries is Four Corners
Sweet, a locally produced, high quality crude oil. We supplement the crude
oil used at our refineries with other feedstocks. These other feedstocks
currently include locally produced natural gas liquids and condensate as
well as other feedstocks produced outside of the Four Corners area.

     These 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 partially offset 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 declined from approximately 72% in 2002 to
approximately 60% in 2006. Our current projections of Four Corners crude
oil production indicate that our crude oil demand will exceed the crude
oil supply that is available from local sources for the foreseeable future
and that our crude oil capacity utilization rates at our Four Corners
refineries will continue to decline unless circumstances change.

     On August 1, 2005, we acquired an idle crude oil pipeline system that
originates near Jal, New Mexico and is connected to a company-owned
pipeline network that directly supplies crude oil to the Bloomfield and
Ciniza refineries. When operational, the pipeline will have sufficient
crude oil transportation capacity to allow us to again operate both
refineries at maximum rates. We have begun testing the pipeline and taking
other actions related to placing it in service. Unless currently



                                     23


<PAGE>
unanticipated obstacles are encountered, we anticipate that the pipeline
will become operational in the second quarter of 2007 with crude oil
arriving at the refineries before the end of the second quarter.

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

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

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

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

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

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

     We have pipeline systems for gathering and delivering crude oil to
our refineries and for natural gas liquids. If we cannot use either the
crude oil pipeline system or the natural gas liquids pipeline, this could
have a material adverse effect on our business, financial condition or
results of operation. Certain rights-of-way for our crude oil pipeline
system must be renewed periodically, including some that have expired,
which are in the process of renewal, and others that expire in the next
few years. We expect that substantial lead time will be required to
negotiate and complete renewal of these rights-of-way and that the costs
of renewal for certain of the rights-of-way may be significant. Our
inability to successfully renew these rights-of-way would negatively
impact our ability to use the crude oil pipeline system, which could have
a material adverse effect on our business.



                                     24


<PAGE>
THE VOLATILITY OF CRUDE OIL PRICES AND REFINED PRODUCT PRICES MAY
ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND OPERATING RESULTS.

     Our cash flow from operations depends primarily on producing and
selling quantities of refined products at refinery margins sufficient to
cover fixed and variable expenses. In recent years, crude oil costs and
prices of refined products have fluctuated substantially. These costs and
prices depend on numerous factors beyond our control, including:

     -  the supply of and demand for crude oil, gasoline and other refined
        products;

     -  changes in the economy;

     -  changes in the level of foreign and domestic production of crude
        oil and refined products;

     -  worldwide political conditions;

     -  the extent of government regulations; and

     -  local factors, including market conditions, pipeline capacity, and
        the level of operations of other refineries in our markets.

     Our crude oil requirements are supplied from sources that include
major oil companies, large independent producers, and smaller local
producers. In February 2004, we entered into a long-term crude oil supply
agreement with Statoil Marketing and Trading (USA), Inc., which we believe
will provide a significant proportion of our Yorktown refinery's crude oil
needs. We began taking supplies of acidic crude oil at our Yorktown
refinery beginning in February 2004. Following various upgrades at the
refinery, which took place in the third quarter of 2004, the volumes
processed have increased. The term of this agreement expires when we have
received the total volumes of crude oil committed to be provided by
Statoil, which we believe will be in approximately 2009. Except for this
long-term supply agreement with Statoil, our crude oil supply contracts
are generally relatively short-term contracts with market-responsive
pricing provisions. An increase in crude oil prices would adversely affect
our operating margins if we cannot pass along the increased cost of raw
materials to our customers.

     Our sale prices for refined products are influenced by the commodity
price of crude oil. Generally, an increase or decrease in the price of
crude oil results in a corresponding increase or decrease in the price of
gasoline and other refined products. The timing of the relative movement
of the prices, however, as well as the overall change in product prices,
could reduce profit margins and could have a significant impact on our
refining and marketing operations, earnings and cash flows. In addition,
we maintain inventories of crude oil, intermediate products, and refined
products, the values of which are subject to rapid fluctuation in market
prices. Price level changes during the period between purchasing




                                     25


<PAGE>
feedstocks and selling the manufactured refined products could have a
significant effect on our operating results. Any long-term adverse
relationships between costs and prices could impact our ability to
generate sufficient operating cash flows to meet our working capital
needs. Furthermore, because of the significantly greater volume of
products produced and sold by our Yorktown refinery, as compared to our
other operations, we have a much larger exposure to volatile refining
margins than we had in the past.

OUR INDUSTRY IS HIGHLY COMPETITIVE, AND WE MAY NOT BE ABLE TO COMPETE
EFFECTIVELY AGAINST LARGER COMPETITORS WITH GREATER RESOURCES.

     We operate in a highly competitive industry. Many of our competitors
are large, integrated oil companies that, because of their more diverse
operations, larger refineries, stronger capitalization and better brand
name recognition, are better able to withstand volatile industry
conditions than we are, including shortages or excesses of crude oil or
refined products or intense price competition. The refineries operated by
our competitors are typically larger and more efficient than our
refineries. As a result, these refineries may have lower per barrel
processing costs. Mergers between large integrated oil companies, and
upgrades to competitors' refineries have resulted, and in the future may
result, in increased competition for our refineries.

THE COMPLETION OF CERTAIN PIPELINE PROJECTS COULD RESULT IN INCREASED
COMPETITION BY INCREASING THE AMOUNT OF REFINED PRODUCTS AVAILABLE IN THE
ALBUQUERQUE, EL PASO, TUCSON, AND PHOENIX MARKET AREAS AND OTHER MARKET
AREAS.

     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 Longhorn pipeline, which began operations in
August 2004, runs from Houston, Texas to El Paso, Texas. In El Paso, the
Longhorn pipeline connects to the Plains pipeline that delivers to
Albuquerque, New Mexico and to the Kinder-Morgan pipeline that delivers to
Phoenix and Tucson, Arizona. In addition, product transported through the
Longhorn pipeline can be brought to our Four Corners refineries' markets
by truck. Further, there is a proposal to increase the volume of product
that can be transported from El Paso to Albuquerque on the Plains
pipeline, and there are plans to increase the volume of product that can
be transported from El Paso to Phoenix and Tucson on the Kinder-Morgan
pipeline. The Longhorn pipeline and the completion of some or all of these
other projects could result in increased competition by increasing the
amount of refined products potentially available in these 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.







                                     26


<PAGE>
THE COMPLETION OF CERTAIN PROJECTS AND REFINERY IMPROVEMENTS COULD RESULT
IN INCREASED COMPETITION IN THE FOUR CORNERS AREA.

     Portions of our marketing area may be impacted by competitors' plans,
as well as plans of our own, for expansion projects and refinery
improvements that could increase the production of refined products in New
Mexico. In addition, we anticipate that lower quality crude oils, which
are typically less expensive to acquire, can and will be processed by our
competitors as a result of refinery improvements. These developments could
result in increased competition in our market areas.

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

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

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

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

     On September 30, 2006, a fire occurred at our Yorktown refinery in
the processing unit required to produce ultra low sulfur diesel fuel.
Repairs to the unit cost approximately $12,000,000 and were completed in
January 2007. The unit was returned to operation in February 2007. Until
the unit became operational, we sold more heating oil than otherwise would
be the case, which was a less profitable product than ultra low sulfur
diesel.

     We have property insurance coverage with a $1,000,000 deductible that
should cover a significant portion of the costs of repairing the ultra low
sulfur diesel unit. We also have business interruption insurance coverage



                                     27


<PAGE>
that should cover a significant portion of the financial impact of the
fire after the policy's 45-day waiting period is exceeded.

     On October 5, 2006, a pump failure in the alkylation unit at our
Ciniza refinery resulted in a fire at the refinery. The fire caused damage
to the alkylation unit and an associated unit. The alkylation unit
produces high octane blending stock for gasoline. Repairs to the affected
units cost approximately $6,400,000 and the unit was restarted in mid-
December of 2006. We have property insurance coverage with a $1,000,000
deductible that should cover a significant portion of the costs of
repairing the unit. We do not anticipate making a claim under our business
interruption insurance.

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

     We currently expect that repairs to, and/or replacement of, the
units, instrumentation and cabling damaged by the fire will cost
approximately $6,700,000. We do not anticipate receiving any insurance
proceeds related to these repairs as the cost of the repairs has not
exceeded the associated $10,000,000 deductible of our current property
insurance coverage. In addition, we do not anticipate making a claim under
our business interruption insurance.

OUR OPERATIONS ARE SUBJECT TO VARIOUS HAZARDS THAT ARE NOT FULLY INSURED,
AND OUR INSURANCE PREMIUMS COULD INCREASE.

     Our operations are subject to normal hazards of operations, including
fire, explosion and weather-related perils. We maintain various insurance
coverages, including business interruption insurance, which are subject to
certain deductibles. We are not fully insured against certain risks
because such risks are not fully insurable, coverage is unavailable or
premium costs, in our judgment, do not justify the expenditures. Any such
event that causes a loss for which we are not fully insured could have a
material and adverse effect on our business, financial condition and
operating results.

     In November 2006, we renewed our property insurance coverage and our
business interruption insurance coverage. Primarily due to the fires
experienced at our refineries in 2005 and 2006, the cost of such coverage
increased by approximately $12,000,000 per year. In addition, our
deductible for property insurance was increased to $10,000,000. Our
deductible for business interruption insurance also was increased to
$10,000,000 and the waiting period was lengthened to a minimum of 90 days.



                                     28


<PAGE>
We also agreed with our insurance carriers that the maximum amount that we
can recover for the fires that occurred at Yorktown and Ciniza in
September and October of 2006 is an aggregate of $30,000,000 unless we
agree to an additional increase in our recently revised insurance
premiums.

     If we experience any more insurable events, our annual premiums could
increase further or insurance may not be available at all. Such increases
or the unavailability of coverage could have a material and adverse effect
on our business, financial condition and operating results.

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

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

     EPA has issued rules pursuant to the Clean Air Act that require
refiners to reduce the sulfur content of gasoline and highway diesel fuel,
and to reduce the benzene content of gasoline. We are incurring
substantial costs to comply with EPA's sulfur rules and may incur
substantial costs to comply with the benzene rules. Some refiners began
producing gasoline that satisfies low sulfur gasoline standards, known as
Tier II standards, in 2004, with most refiners required to be in full
compliance for all production in 2006. Most refiners also were required to
begin producing highway diesel fuel that satisfies ultra low sulfur diesel
standards by June 2006. All refiners and importers must be in full
compliance with the new diesel standards by the end of 2010.

     We currently anticipate that we will spend between approximately
$195,000,000 to $220,000,000 to comply with EPA's low sulfur standards at
our Yorktown refinery, excluding costs related to the damage to the
refinery's ultra low sulfur diesel unit caused by the September 30, 2006
fire at the refinery. Through December 31, 2006, we have spent
approximately $90,000,000 at Yorktown for equipment modifications to




                                     29


<PAGE>
comply with these low sulfur standards. There are a number of factors that
could affect our cost of compliance with the low sulfur standards. In
particular, engineering and construction companies are busy and are
charging a premium for their services. Additionally, costs of materials,
such as steel and concrete, have increased as a result of demand. These
factors could continue to impact our compliance costs.

     We currently anticipate that we will spend between approximately
$50,000,000 to $60,000,000 to comply with EPA's low sulfur standards at
our Four Corners refineries, with the exception of costs associated with
the production of diesel fuel sold for certain non-highway purposes and
any additional costs associated with the crude oil we will be obtaining
when the 16" pipeline is operational. Through December 31, 2006, we have
spent approximately $43,000,000 at our Four Corners refineries. There are
a number of factors that could affect our cost of compliance with the low
sulfur standards. In particular, the quality and quantity of the
additional crude oil we will be obtaining from the 16-inch pipeline may
impact these costs. As a result of this factor alone, the costs that we
actually incur to comply with the low sulfur standards at our Four Corners
refineries may be substantially different from our estimates. Furthermore,
engineering and construction companies are busy and are charging a premium
for their services. Additionally, costs of materials, such as steel and
concrete, have increased as a result of demand. These factors could
continue to impact our compliance costs.

     ULTRA LOW SULFUR DIESEL PRODUCTION

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

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

     In March 2003, EPA approved a compliance plan for our Yorktown
refinery that provided us with temporary relief from the low sulfur
gasoline standards at this refinery. The compliance plan allowed us to
postpone certain capital expenditures for up to three years from the date
when they otherwise would have been made. In return, under the original
compliance plan, we were to produce 100% ultra low sulfur diesel for
highway use by June 1, 2006, and to comply with the Tier II gasoline
standards by January 1, 2008.



                                     30


<PAGE>
     Our Yorktown refinery was not able to meet the June 1, 2006 date
specified in the compliance plan for the production of 100% ultra low
sulfur diesel for highway use as a result of: (1) the combined effects of
Hurricanes Katrina and Rita on the availability of contractors and
hardware as well as other similar effects; and (2) the time and effort
required to repair damage resulting from the 2005 fire. Accordingly, we
applied for temporary relief from the ultra low sulfur diesel standards,
which EPA granted. EPA imposed a number of conditions on us in return for
relieving us from the June 1, 2006 deadline. These conditions include a
requirement that we must produce specified volumes of ultra low sulfur
highway diesel at the refinery. Additionally, we have purchased diesel
credits in connection with diesel fuel production that does not satisfy
the ultra low sulfur diesel standards. We have spent approximately
$1,000,000 on credits to date.

     Although we began producing ultra low sulfur diesel fuel at our
Yorktown refinery in early August, on September 30, 2006, a fire occurred
in the Yorktown ultra low sulfur diesel processing unit. The affected unit
was shut down. Following repair, the ultra low sulfur diesel processing
unit resumed production in February 2007. This temporary closure of the
ultra low sulfur diesel processing unit will affect our ability to satisfy
the EPA condition that we produce specified volumes of ultra low sulfur
diesel fuel which, among other things, could require that we purchase more
diesel credits for use at Yorktown in the future. At this time we cannot
estimate whether we will be required by EPA to purchase additional diesel
credits or whether EPA will impose any new or modified conditions.

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

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

     LOW SULFUR GASOLINE PRODUCTION

     We are in the process of making modifications to our refineries to
comply with the standards required for the production of Tier II gasoline.




                                     31


<PAGE>
Under the compliance plan for our Yorktown refinery, we must comply with
the Tier II gasoline standards by January 1, 2008. Although the project
timetable is tight, we believe that we are on schedule to produce Tier II
gasoline at Yorktown by that date. Our Ciniza and Bloomfield refineries
are already subject to the Tier II gasoline standards and will need to use
gasoline credits until refinery modifications are completed that would
enable their gasoline production to satisfy the Tier II standards. These
modifications are currently planned to be completed in 2007. If our
planned refinery modifications do not reduce gasoline sulfur levels to the
required standards, it is possible that some credits would have to be used
even after such modifications are completed. Furthermore, we may decide
not to incur the expense of producing only Tier II gasoline at these
refineries, which would also require us to use credits in order to comply
with the Tier II standards.

     Both our Ciniza and Bloomfield refineries have generated gasoline
credits in connection with 2005 and 2006 operations. While our credits
generated in 2005 expired at the end of 2006, we may be able to use the
2006 credits to satisfy the Tier II gasoline standards until the planned
refinery modifications at these refineries are completed. If these credits
are insufficient, we would need to purchase gasoline credits from third
parties. We may also need to purchase gasoline credits once our credits
are used up for any gasoline that we produce after our refinery
modifications are completed that does not satisfy the Tier II gasoline
standards.

     We anticipate that, beginning in 2008, we should be able to generate
sufficient gasoline credits at our Yorktown refinery to cover any need to
acquire credits for our Ciniza and Bloomfield refineries. There can be no
assurance, however, that this will be the case as, among other things, we
currently are uncertain of the amount of gasoline that will be produced at
our Ciniza and Bloomfield refineries that will not satisfy the Tier II
gasoline standards. This uncertainty is caused by, among other things, our
lack of knowledge regarding how efficient our planned modifications to the
refineries will be in reducing the sulfur content of gasoline and how the
quality and quantity of any crude oil transported to these refineries
through our new 16-inch pipeline will affect our ability to manufacture
Tier II gasoline.

     BENZENE REGULATIONS

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








                                     32


<PAGE>
OUR OPERATIONS ARE INHERENTLY SUBJECT TO DISCHARGES OR OTHER RELEASES OF
PETROLEUM OR HAZARDOUS SUBSTANCES FOR WHICH WE MAY FACE SIGNIFICANT
LIABILITIES.

     Our operations, as with others in the businesses in which we operate,
are inherently subject to spills, discharges or other releases of
petroleum or hazardous substances that may give rise to liability to
governmental entities or private parties under federal, state or local
environmental laws, as well as under common law. Spills, discharges or
other releases of contaminants have occurred from time to time during the
normal course of our operations, including releases associated with our
refineries, pipeline and trucking operations, as well as releases at
gasoline service stations and other petroleum product distribution
facilities we have operated and are operating. We cannot assure you that
additional spills, discharges and other releases will not occur in the
future, that future action will not be taken in connection with past
incidents (including at the Yorktown refinery), that governmental agencies
will not assess penalties against us in connection with any past or future
discharges or incidents, or that third parties will not assert claims
against us for damages allegedly arising out of any such past or future
discharges or incidents.

WE ARE INVOLVED IN A NUMBER OF MTBE LAWSUITS.

     Lawsuits have been filed in numerous states alleging that MTBE, a
blendstock used by many refiners in producing specially formulated
gasoline, has contaminated water supplies. MTBE contamination primarily
results from leaking underground or aboveground storage tanks. The suits
allege MTBE contamination of water supplies owned and operated by the
plaintiffs, who are generally water providers or governmental entities.
The plaintiffs assert that numerous refiners, distributors, or sellers of
MTBE and/or gasoline containing MTBE are responsible for the
contamination. The plaintiffs also claim that the defendants are jointly
and severally liable for compensatory and punitive damages, costs, and
interest. Joint and several liability means that each defendant may be
liable for all of the damages even though that party was responsible for
only a small part of the damages. We are a defendant in approximately 30
of these MTBE lawsuits pending in Virginia, Connecticut, Massachusetts,
New Hampshire, New York, New Jersey, Pennsylvania, and New Mexico. Due to
our historical operations in New Mexico, including retail sites, we
potentially have greater risk in connection with the New Mexico litigation
than in the litigation in the Eastern states where we have only operated
since 2002 and have no retail operations. We intend to vigorously defend
these lawsuits. If, however, we are found liable in any of these lawsuits,
such determination could have a material and adverse effect on our
business, financial condition and operating results.

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

     On August 26, 2006, we entered into an Agreement and Plan of Merger
(the "Plan of Merger") with Western and New Acquisition Corporation




                                     33


<PAGE>
("Merger Sub"). On November 12, 2006, we entered into an Amendment No. 1
to Agreement and Plan of Merger (the "Amendment") with Western and Merger
Sub. The Plan of Merger and Amendment are collectively referred to as the
"Agreement". If the transaction closes, Western will acquire all of our
outstanding shares of common stock for $77.00 per share and we will be
merged with Merger Sub and become a wholly-owned subsidiary of Western.
The transaction has been approved by our Board of Directors and the Board
of Directors of Western. The closing of the transaction is subject to
various conditions, including compliance with the pre-merger notification
requirements of the Hart-Scott-Rodino Act (the "HSR Act"), and approval by
our stockholders. Our stockholders approved the transaction on February
27, 2007. The transaction is not subject to any financing conditions.

     We and Western filed pre-merger notifications with the U.S. antitrust
authorities pursuant to the HSR Act on September 7, 2006 and, in
accordance with the original merger agreement, requested "early
termination" of the required waiting period. We were not granted early
termination, and on or about October 10, 2006, the Federal Trade
Commission requested additional information concerning the merger from us
and Western. On December 26 and December 28, 2006, respectively, Western
and we certified to the Federal Trade Commission substantial compliance
with the request for additional information. The Federal Trade Commission
subsequently took the position that there was an omission in Western's
original HSR Act filing and advised that it would take the position that
the initial HSR Act 30-day waiting period had not yet commenced unless we
and Western entered into an agreement to provide additional information
pursuant to a letter request from the Federal Trade Commission staff. We
and Western entered into such an agreement with the Federal Trade
Commission on February 20, 2007 in which we agreed: (i) to respond to
additional information requests; (ii) not to certify substantial
compliance with the information requests until March 13, 2007; and (iii)
not to close our merger with Western until 30 days after we and Western
certify substantial compliance.

     On November 22, 2006, Timothy Bisset filed a class action complaint
in Arizona state court against us, our directors and Western in connection
with our merger. Among other things, Mr. Bisset alleges that we and our
directors breached our fiduciary duty in voting to amend the Plan of
Merger on November 12, 2006 to provide for, among other things, a lower
acquisition price of $77.00 per share. Mr. Bisset also alleges that
Western aided and abetted this breach of fiduciary duty. Among other
things, Mr. Bisset alleges that he and other public stockholders of our
common stock are entitled to enjoin the proposed amended transaction or,
alternatively, to recover damages in the event the transaction is
completed.

     We believe that amending our merger agreement was in the best
interest of our stockholders. Since the original merger was announced on
August 28, 2006, a number of unanticipated events occurred that resulted
in a dispute between us and Western regarding the merger. Western asserted
that fires at our refineries, changes in our insurance program, increases



                                     34


<PAGE>
in our anticipated capital expenditures, other regulatory issues and
related costs of compliance, and other events and changes constituted a
"material adverse effect" under the merger agreement and also violated
various representations, warranties and covenants in the merger agreement,
thereby giving Western the right to terminate the merger transaction in
its entirety. After extensive consideration, we concluded that the
interests of our stockholders were best served by avoiding litigation over
this dispute by amending the merger agreement in a way that reduced the
merger consideration but at the same time eliminated virtually all of
Western's closing conditions and allowed us a 30-day "go-shop" period to
see if we could obtain a better price for our stockholders. Accordingly,
we think Mr. Bisset's lawsuit is without merit and intend to vigorously
defend it.

     We expect to complete our merger with Western during the second
quarter of 2007. We cannot specify when, or assure you that, we and
Western will satisfy or waive all conditions to the merger. Further, there
can be no assurance that the Federal Trade Commission, state antitrust
authorities, or Mr. Bisset, will not seek injunctive relief to prevent the
merger from taking place.

ITEM 1B.  UNRESOLVED STAFF COMMENTS.

     Not applicable.

ITEM 3. LEGAL PROCEEDINGS.

     We are a party to ordinary routine litigation incidental to our
business. We also incorporate by reference the discussion of legal
proceedings contained in Items 1 and 2 under the headings "Regulatory and
Environmental Matters" and "Rights-of-Way", the discussion contained in
Item 1A, the discussions regarding "Low Sulfur Fuels and Settlement
Agreements Expenditures" and "Environmental, Health and Safety" contained
in Item 7, and the information in Note 17, "Commitments and
Contingencies", to the Company's Consolidated Financial Statements in Item
8.

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

     We held a special meeting of stockholders on February 27, 2007.
Proxies for the meeting were solicited under Regulation 14A. Our
stockholders were asked to vote on a proposal to adopt the Agreement and
Plan of Merger dated as of August 26, 2006, by and among Western Refining,
Inc., New Acquisition Corporation and Giant Industries, Inc., as amended
by Amendment No. 1 to Agreement and Plan of Merger dated as of November
12, 2006, and approve the merger.

     The proposal was approved. The vote was as follows:

Shares Voted "For"    Shares Voted "Against"    Shares Voted "Abstaining"
------------------    ----------------------    -------------------------
    10,636,636               199,101                     140,216



                                     35


<PAGE>
                                 PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

     Our common stock is traded on the New York Stock Exchange. The high
and low sales prices for our common stock for each full quarterly period
as reported on the New York Stock Exchange Composite Tape for the last two
fiscal years are as follows:

Quarter Ended                                          High      Low
-------------                                        -------   -------
December 31, 2006..............................      $ 81.45   $ 74.20
September 30, 2006.............................      $ 82.30   $ 64.49
June 30, 2006..................................      $ 76.97   $ 56.09
March 31, 2006.................................      $ 71.00   $ 52.44
December 31, 2005..............................      $ 60.50   $ 47.80
September 30, 2005.............................      $ 59.74   $ 35.90
June 30, 2005..................................      $ 36.49   $ 25.52
March 31, 2005.................................      $ 31.81   $ 23.54

     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, as described below.

     We have issued 8% Senior Subordinated Notes due 2014 (the "8% Notes")
and 11% Senior Subordinated Notes due 2012 (the "11% Notes"). The 8% Notes
were issued under an Indenture dated May 3, 2004 (the "8% Indenture") and
the 11% Notes were issued under an Indenture dated May 14, 2002 (the "11%
Indenture", and collectively with the 8% Indenture, the "Indentures").
Both Indentures are among the Company, its subsidiaries, as guarantors,
and The Bank of New York, as trustee. The Indentures contain a number of
covenants, one of which governs our ability to pay dividends and to
purchase our common stock.

     Also see the Capital Structure discussion in Management's Discussion
and Analysis of Financial Condition and Results of Operations included in
Item 7.

     On February 27, 2007, there were 208 stockholders of record for our
common stock.

     At December 31, 2006, retained earnings available for dividends under
the most restrictive terms of the Indentures were approximately
$119,827,000.








                                     36


<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.

     The following table summarizes our recent financial information. This
selected financial data should be read with Management's Discussion and
Analysis of Financial Condition and Results of Operations in Item 7, and
the Consolidated Financial Statements and related notes thereto, included
in Item 8:
















































                                     37


<PAGE>
<TABLE>
<CAPTION>
                                  FINANCIAL AND OPERATING HIGHLIGHTS

                                                          Year Ended December 31,
                                      -------------------------------------------------------------
                                        2006         2005         2004         2003         2002
                                      ---------    ---------    ---------    ---------    ---------
                                     (In thousands, except percentages, per share and operating data)
<S>                                   <C>          <C>          <C>          <C>          <C>
Financial Statement Data
Continuing Operations:
  Net Revenues.....................   $4,198,203   $3,581,246   $2,511,589   $1,808,818   $1,251,335
  Operating Income.................      150,359      199,642       78,480       63,859       20,014
  Earnings (Loss)..................       82,751      103,931       16,338       12,364      (11,486)
  Earnings (Loss) Per Common
    Share - Basic..................   $     5.67   $     7.71   $     1.47   $     1.41   $    (1.34)
  Earnings (Loss) Per Common
    Share - Diluted................   $     5.64   $     7.63   $     1.43   $     1.40   $    (1.34)
Discontinued Operations:
  Net Revenues.....................   $        -   $        -   $    1,269   $   27,620   $   61,727
  Operating Earnings (Loss)........            -           24         (190)        (715)       3,596
  Earnings (Loss)..................            -           15         (117)        (441)       2,219
  (Loss) Earnings Per Common
    Share - Basic..................   $        -   $        -   $    (0.01)  $    (0.05)  $     0.26
  (Loss) Earnings Per Common
    Share - Diluted................            -            -        (0.01)       (0.05)        0.26
Cumulative Effect of Change in
  Accounting Principle.............   $        -   $      (68)           -   $     (704)           -
  Loss Per Common Share - Basic....   $        -   $    (0.01)           -   $    (0.08)           -
  Loss Per Common Share - Diluted..   $        -   $    (0.01)           -   $    (0.08)           -
Weighted Average Common Shares
  Outstanding - Basic..............       14,597       13,486       11,105        8,732        8,566
Weighted Average Common Shares
  Outstanding - Diluted............       14,680       13,629       11,358        8,830        8,566
Working Capital....................   $  207,152   $  233,847   $  103,172   $   97,294   $   91,333
Total Assets.......................    1,176,177      984,472      702,406      699,654      702,286
Long-Term Debt.....................      325,387      274,864      292,759      355,601      398,069
Stockholders' Equity...............      484,368      399,836      216,439      139,436      127,317
Long-Term Debt as a Percentage
  of Total Capitalization(a).......         40.2%        40.7%        57.5%        71.8%        75.8%
Book Value Per Common Share
  Outstanding(b)...................   $    33.08   $    27.36   $    17.55   $    15.87   $    14.85
Return on Average Stockholders'
  Equity(c)........................        18.72%        33.7%         9.1%         8.4%           -
Operating Data
Refining Group:
Four Corners Operations:
  Rated Crude Oil Capacity
    Utilized.......................           60%          62%          61%          67%         72%
  Refinery Sourced Sales Barrels
    (Bbls/Day).....................       26,945       28,516       27,355       29,900      31,907
  Average Crude Oil Costs ($/Bbl)..   $    65.28   $    55.01   $    39.31   $    29.32   $   23.62
  Refinery Margin ($/Bbl)..........   $    15.72   $    14.03   $     8.96   $     8.81   $    6.84


                                     38


<PAGE>
-------
(a) Total Capitalization is defined as Long-Term Debt, net of current
    portion plus Total Stockholders' Equity.
(b) Book value per common share is defined as Total Stockholders' Equity
    divided by number of common shares outstanding, net of treasury
    shares.
(c) Return on Average Stockholders' Equity is defined as Net Earnings
    divided by the average of Total Stockholders' Equity at the beginning
    of each year and Total Stockholders' Equity at the end of each year.
</TABLE>













































                                     39


<PAGE>
<TABLE>
                                                             Year Ended December 31,
                                         -------------------------------------------------------------
                                           2006         2005         2004         2003         2002
                                         ---------    ---------    ---------    ---------    ---------
                                        (In thousands, except percentages, per share and operating data)
<S>                                      <C>          <C>          <C>          <C>          <C>
Yorktown Operations:(1)
  Rated Crude Oil Capacity Utilized..           84%          88%          84%          83%          86%
  Refinery Sourced Sales Barrels
    (Bbls/Day).......................       59,264       62,667       60,999       58,931       58,771
  Average Crude Oil Costs ($/Bbl)....    $   64.00    $   51.95    $   37.39    $   29.79    $   27.01
  Refinery Margin ($/Bbl)(2).........    $    3.95    $    8.72    $    5.60    $    4.07    $    2.32
Retail Group:
  Service Stations:(3)
  (Continuing Operations)
    Fuel Gallons Sold (In Thousands).      200,590      174,510      156,917      148,605      148,469
    Fuel Margin ($/Gallon)...........     $   0.19    $    0.20    $    0.18    $    0.20    $    0.15
    Merchandise Sold ($ In Thousands)     $159,513    $ 144,968    $ 134,012    $ 127,009    $ 123,630
    Merchandise Margin...............           27%          27%          24%          29%          27%
Operating Retail Outlets at Year End:
  Continuing Operations..............          155          135          123          123          123
Travel Center:(4)
  Fuel Gallons Sold (In Thousands)...            -            -            -       10,227       24,906
  Fuel Margin ($/Gallon).............    $       -    $       -    $       -    $    0.07    $    0.09
  Merchandise Sold ($ In Thousands)..    $       -    $       -    $       -    $   2,703    $   6,103
  Merchandise Margin.................            -            -            -           42%          44%
  Number of Outlets at Year End......            -            -            -            -            1
Wholesale Group:(5)
    Fuel Gallons Sold (In Thousands).      595,710      520,664      473,009      429,198      376,711
    Fuel Margin ($/Gallon)...........    $    0.06    $    0.07    $    0.05    $    0.05    $    0.05
    Lubricant Sales ($ In Thousands).    $  71,635    $  46,309    $  30,597    $  24,475    $  21,544
    Lubricant Margin.................           14%          16%          13%          15%          17%
-------
(1) Acquired on May 14, 2002.
(2) Refinery margin decreased from $8.72 per barrel in 2005 to $3.95 per barrel in 2006 as a result
    of the fires that occurred in November 2005 and September 2006.
(3) For the year ended December 31, 2006, statistics from 21 retail stores acquired from
    Amigo in August 2006 and 12 retail stores acquired from Dial in July 2005 were included. For the
    year ended December 31, 2005, statistics from 12 retail stores acquired from Dial in July 2005
    were included.
(4) Sold June 19, 2003.
(5) For the year ended December 31, 2006, statistics from Dial and Amigo's wholesale operations that
    were acquired in July 2005 and August 2006, respectively, were included. For the year ended
    December 31, 2005, statistics from Dial's wholesale operations that were acquired in July 2005
    were included.
</TABLE>








                                     40


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

REFINING GROUP

REFINING MARGIN

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












































                                     41


<PAGE>
<TABLE>
                                                               December 31,
                                      --------------------------------------------------------------
                                         2006         2005         2004         2003         2002
                                      ----------   ----------   ----------   ----------   ----------
<S>                                   <C>          <C>          <C>          <C>          <C>
Average Per Barrel
Four Corners Operations
  Net sales.........................  $    84.19   $    72.42   $    52.15   $    40.43   $    32.60
  Less cost of products.............       68.47        58.39        43.19        31.62        25.76
                                      ----------   ----------   ----------   ----------   ----------
  Refining margin...................  $    15.72   $    14.03   $     8.96   $     8.81   $     6.84
                                      ==========   ==========   ==========   ==========   ==========
Yorktown Operations*
  Net sales.........................  $    70.43   $    62.66   $    45.11   $    34.69   $    29.99
  Less cost of products.............       66.48        53.94        39.51        30.62        27.67
                                      ----------   ----------   ----------   ----------   ----------
  Refining margin**.................  $     3.95   $     8.72   $     5.60   $     4.07   $     2.32
                                      ==========   ==========   ==========   ==========   ==========
Consolidated
  Net sales.........................  $    74.73   $    65.71   $    47.29   $    36.62   $    31.19
  Less cost of products.............       67.10        55.33        40.65        30.96        26.79
                                      ----------   ----------   ----------   ----------   ----------
  Refining margin...................  $     7.63   $    10.38   $     6.64   $     5.66   $     4.40
                                      ==========   ==========   ==========   ==========   ==========
Reconciliations of refined product
sales from produced products sold
per barrel to net revenues

Four Corners Operations
  Average sales price per
    produced barrel sold............  $    84.19   $    72.42   $    52.15   $    40.43   $    32.60
  Times refinery sourced sales
    barrels per day.................      26,945       28,516       27,355       29,900       31,907
  Times number of days in period....         365          365          366          365          365
                                      ----------   ----------   ----------   ----------   ----------
  Refined product sales from
    produced products sold (000's)..  $  828,002   $  753,772   $  522,122   $  441,233   $  379,661
                                      ==========   ==========   ==========   ==========   ==========
Yorktown Operations
  Average sales price per
    produced barrel sold............  $    70.43   $    62.66   $    45.11   $    34.69   $    29.99
  Times refinery sourced sales
    barrels per day.................      59,264       62,667       60,999       58,931       58,771
  Times number of days in period....         365          365          366          365          232
                                      ----------   ----------   ----------   ----------   ----------
  Refined product sales from
    produced products sold (000's)..  $1,523,497   $1,433,251   $1,007,109   $  746,175   $  408,910
                                      ==========   ==========   ==========   ==========   ==========
Consolidated (000's)
  Sum of refined product sales
    from produced products sold..... $2,351,499   $2,187,023   $1,529,231   $1,187,408   $  788,571
  Purchased product, transportation
    and other revenues..............     523,161      266,484      202,039       64,552       49,958
                                      ----------   ----------   ----------   ----------   ----------
  Net revenues***...................  $2,874,660   $2,453,507   $1,731,270   $1,251,960   $  838,529
                                      ==========   ==========   ==========   ==========   ==========
  * Acquired in May, 2002.
 ** Refinery margins decreased from $8.72 per barrel to $3.95 per barrel as a result of the fires that
    occurred in November 2005 and September 2006.
*** Includes intersegment net revenues.
</TABLE>
                                     42


<PAGE>
<TABLE>
                                                               December 31,
                                      --------------------------------------------------------------
                                         2006         2005         2004         2003         2002
                                      ----------   ----------   ----------   ----------   ----------
<S>                                   <C>          <C>          <C>          <C>          <C>
Reconciliation of average cost
of products per produced barrel
sold to total cost of products
sold (excluding depreciation and
amortization)

Four Corners Operation
  Average cost of products per
    produced barrel sold............  $    68.47   $    58.39   $    43.19   $    31.62   $    25.76
  Times refinery sourced sales
    barrels per day.................      26,945       28,516       27,355       29,900       31,907
  Times number of days in period....         365          365          366          365          365
                                      ----------   ----------   ----------   ----------   ----------
  Cost of products for produced
    products sold (000's)...........  $  673,397   $  607,743   $  432,415   $  345,085   $  300,002
                                      ==========   ==========   ==========   ==========   ==========
Yorktown Operations
  Average cost of products per
    produced barrel sold............  $    66.48   $    53.94   $    39.51   $    30.62   $    27.67
  Times refinery sourced sales
    barrels per day.................      59,264       62,667       60,999       58,931       58,771
  Times number of days in period*...         365          365          366          365          232
                                      ----------   ----------   ----------   ----------   ----------
  Cost of products for produced
    products sold (000's)...........  $1,438,053   $1,233,794   $  882,086   $  658,631   $  377,277
                                      ==========   ==========   ==========   ==========   ==========
Consolidated (000's)
  Sum of refined cost of produced
    products sold...................  $2,111,450   $1,841,537   $1,314,501   $1,003,716   $  677,279
  Purchased product, transportation
    and other cost of products sold.     491,733      236,363      175,706       38,663       24,185
                                      ----------   ----------   ----------   ----------   ----------
  Total cost of products sold
  (excluding depreciation and
  amortization).....................  $2,603,183   $2,077,900   $1,490,207   $1,042,379   $  701,464
                                      ==========   ==========   ==========   ==========   ==========
*Acquired in May, 2002.
</TABLE>












                                     43


<PAGE>
RETAIL GROUP

FUEL MARGIN

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

<TABLE>
                                                               December 31,
                                      --------------------------------------------------------------
                                         2006         2005         2004         2003         2002
                                      ----------   ----------   ----------   ----------   ----------
<S>                                   <C>          <C>          <C>          <C>          <C>
(in 000's except fuel margin
per gallon)

Fuel sales..........................  $  526,623   $  408,687   $  291,923   $  242,451   $  219,662
Less cost of fuel sold..............     489,345      374,071      263,484      213,312      196,693
                                      ----------   ----------   ----------   ----------   ----------
Fuel margin.........................  $   37,278   $   34,616   $   28,439   $   29,139   $   22,969
Number of gallons sold..............     200,590      174,510      156,917      148,605      148,469
Fuel margin per gallon..............  $     0.19   $     0.20   $     0.18   $     0.20   $     0.15

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

Fuel sales..........................  $  526,623   $  408,687   $  291,923   $  242,451   $  219,662
Excise taxes included in sales......     (74,178)     (62,671)     (58,867)     (62,296)     (73,146)
                                      ----------   ----------   ----------   ----------   ----------
Fuel sales, net of excise taxes.....     452,445      346,016      233,056      180,155      146,516
Merchandise sales...................     159,513      144,968      134,012      127,009      123,630
Other sales.........................      20,809       17,133       15,119       15,717       14,795
                                      ----------   ----------   ----------   ----------   ----------
Net revenues........................  $  632,767   $  508,117   $  382,187   $  322,881   $  284,941
                                      ==========   ==========   ==========   ==========   ==========
Reconciliation of fuel cost of
products sold to total cost of
products sold (excluding depreciation
and amortization) (000's)

Fuel cost of products sold..........  $  489,345   $  374,071   $  263,484   $  213,312   $  196,693
Excise taxes included in cost
  of products sold..................     (74,178)     (62,671)     (58,867)     (62,296)     (73,146)
                                      ----------   ----------   ----------   ----------   ----------
Fuel cost of products sold, net
  of excise taxes...................     415,167      311,400      204,617      151,016      123,547
Merchandise cost of products sold...     115,723      105,391      101,891       90,161       90,149
Other cost of products sold.........      16,046       13,466       12,044       12,385       12,065
                                      ----------   ----------   ----------   ----------   ----------
Total cost of products sold
  (excluding depreciation and
  amortization).....................  $  546,936   $  430,257   $  318,552   $  253,562   $  225,761
                                      ==========   ==========   ==========   ==========   ==========
</TABLE>



                                     44


<PAGE>
WHOLESALE GROUP(1)

FUEL MARGIN

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

<TABLE>
                                                               December 31,
                                      --------------------------------------------------------------
                                         2006(2)      2005(3)      2004         2003         2002
                                      ----------   ----------   ----------   ----------   ----------
<S>                                   <C>          <C>          <C>          <C>          <C>
(in 000's except fuel margin
per gallon)

Fuel sales..........................  $1,435,243   $1,118,796   $  807,158   $  585,091   $  444,621
Less cost of fuel sold..............   1,396,957    1,080,618      781,223      562,557      424,318
                                      ----------   ----------   ----------   ----------   ----------
Fuel margin.........................  $   38,286   $   38,178   $   25,935   $   22,534   $   20,303
Number of gallons sold..............     595,910      520,664      473,009      429,198      376,711
Fuel margin per gallon..............  $     0.06   $     0.07   $     0.05   $     0.05   $     0.05

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

Fuel sales..........................  $1,435,243   $1,118,796   $  807,158   $  585,091   $  444,621
Excise taxes included in sales......    (192,798)    (162,780)    (160,776)    (140,625)    (120,596)
                                      ----------   ----------   ----------   ----------   ----------
Fuel sales, net of excise taxes.....   1,242,445      956,016      646,382      444,466      324,025
Lubricant sales.....................      71,635       46,309       30,597       24,475       21,544
Other sales.........................      14,199        5,087        3,596        3,563        4,365
                                      ----------   ----------   ----------   ----------   ----------
Net revenues(4).....................  $1,328,279   $1,007,412   $  680,575   $  472,504   $  349,934
                                      ==========   ==========   ==========   ==========   ==========
Reconciliation of fuel cost of
products sold to total cost of
products sold (excluding depreciation
and amortization) (000's)

Fuel cost of products sold..........  $1,396 957   $1,080,618   $  781,223   $  562,557   $  424,318
Excise taxes included in cost of
  products sold.....................    (192,798)    (162,780)    (160,776)    (140,625)    (120,596)
                                      ----------   ----------   ----------   ----------   ----------
Fuel cost of products sold, net
  of excise taxes...................   1,204,159      917,838      620,447      421,932      303,722
Lubricant cost of products sold.....      61,912       38,962       26,633       20,716       17,940
Other cost of products sold.........       5,247        1,308          605          603        1,864
                                      ----------   ----------   ----------   ----------   ----------
Total cost of products sold
  (excluding depreciation and
  amortization).....................  $1,271,318   $  958,108   $  647,685   $  443,251   $  323,526
                                      ==========   ==========   ==========   ==========   ==========

 (1) Dial presents sales and cost of sales, net of excise taxes.
 (2) Includes Phoenix Fuel and Dial's and Amigo's wholesale operations acquired in July 2005 and
     August 2006, respectively.
 (3) Includes Phoenix Fuel and Dial's wholesale operations that were acquired in July 2005.
 (4) Includes intersegment net revenues.
</TABLE>
                                     45


<PAGE>
<TABLE>
                                                               December 31,
                                      --------------------------------------------------------------
                                         2006         2005         2004         2003         2002
                                      ----------   ----------   ----------   ----------   ----------
<S>                                   <C>          <C>          <C>          <C>          <C>
Consolidated
Reconciliation to net revenues
reported in Consolidated
Statement of Earnings (000's)

Net revenues - Refinery Group......   $2,874,660   $2,453,507   $1,731,270   $1,251,960   $  838,529
Net revenues - Retail Group........      632,767      508,117      382,187      322,881      284,941
Net revenues - Wholesale Group.....    1,328,279    1,007,412      680,575      472,504      349,934
Net revenues - Other...............          296          455          529          537          181
Eliminations.......................     (637,799)    (388,245)    (282,972)    (239,064)    (222,250)
                                      ----------   ----------   ----------   ----------   ----------
Total net revenues reported in
  Consolidated Statement
  Earnings.........................   $4,198,203   $3,581,246   $2,511,589   $1,808,818   $1,251,335
                                      ==========   ==========   ==========   ==========   ==========
Reconciliation to cost of
products sold (excluding
depreciation and amortization)
in Consolidated Statement
of Earnings (000's)

Cost of products sold -
  Refinery Group (excluding
  depreciation and amortization)...   $2,603,183   $2,077,900   $1,490,207   $1,042,379   $  701,464
Cost of products sold -
  Retail Group (excluding
  depreciation and amortization)...      546,936      430,257      318,552      253,562      225,761
Cost of products sold -
  Wholesale Group (excluding
  depreciation and amortization)...    1,271,318      958,108      647,685      443,251      323,526
Eliminations.......................     (637,799)    (388,245)    (282,972)    (239,064)    (222,250)
Other..............................       17,924       15,171       12,598       11,482       16,076
                                      ----------   ----------   ----------   ----------   ----------
Total cost of products sold
  (excluding depreciation and
  amortization) reported in
  Consolidated Statement of
  Earnings.........................   $3,801,562   $3,093,191   $2,186,070   $1,511,610   $1,044,577
                                      ==========   ==========   ==========   ==========   ==========
</TABLE>










                                     46


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

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

COMPANY OVERVIEW

     We refine and sell petroleum products and operate service stations
and convenience stores. Our operations are divided into three strategic
business units, the refining group, the retail group and the wholesale
group. Our refining group operates two refineries in the Four Corners area
of New Mexico and one refinery in Yorktown, Virginia. Our refining group
sells its products to numerous wholesale distributors and retail chains.
Our retail group operated 155 service stations at December 31, 2006. This
includes 12 service stations acquired in the Dial Oil Co. ("Dial")
transaction on July 12, 2005, whose results of operations had previously
been included in the wholesale group from the date of the acquisition, and
21 operating convenience stores acquired from Amigo Petroleum Company
("Amigo") in August 2006. Our retail group sells petroleum products and
merchandise in New Mexico, Arizona, and southern Colorado. Our wholesale
group distributes commercial wholesale petroleum products primarily in
Arizona and New Mexico.

     In order to maintain and improve our financial performance, we are
focused on several critical and challenging objectives. We will be
addressing these objectives in the short-term as well as over the next
three to five years in the event our merger with Western does not close.
Until the merger closes, however, we are subject to the terms of our
agreement with Western discussed below. In our view, the most important of
these objectives are:

     -  improving the operating reliability of our refineries;

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

     -  minimizing operating expenses and capital expenditures;

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


                                     47


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

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

     -  evaluating opportunities for internal growth and growth by
        acquisition.

     On August 26, 2006, we entered into an Agreement and Plan of Merger
(the "Plan of Merger") with Western and New Acquisition Corporation
("Merger Sub"). On November 12, 2006, we entered into an Amendment No. 1
to Agreement and Plan of Merger (the "Amendment") with Western and Merger
Sub. The Plan of Merger and Amendment are collectively referred to as the
"Agreement". If the transaction closes, Western will acquire all of our
outstanding shares of common stock for $77.00 per share and we will be
merged with Merger Sub and become a wholly-owned subsidiary of Western.
The transaction has been approved by our board of directors and the board
of directors of Western. The closing of the transaction is subject to
various conditions, including compliance with the pre-merger notification
requirements of the Hart-Scott-Rodino Act (the "HSR Act"), and approval by
our stockholders. Our stockholders approved the transaction on February
27, 2007. The transaction is not subject to any financing conditions.

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

     We and Western filed pre-merger notifications with the U.S. antitrust
authorities pursuant to the HSR Act on September 7, 2006. We and Western
subsequently entered into an agreement with the Federal Trade Commission
on February 20, 2007 in which we agreed: (i) to respond to additional
information requests; (ii) not to certify substantial compliance with the
information requests until March 13, 2007; and (iii) not to close our
merger with Western until 30 days after we and Western certify substantial
compliance. Additionally, on November 22, 2006, Timothy Bisset filed a
class action complaint against us, our directors and Western in connection
with our merger. Among other things, Mr. Bisset alleges that he and other
public stockholders of our common stock are entitled to enjoin the
proposed amended transaction or, alternatively, to recover damages in the
event the transaction is completed. For a further discussion of these
matters, see the discussion in our Risk Factors section in Item 1A
regarding the possibility that our merger may not occur or could be set
aside.




                                     48


<PAGE>
     We expect to complete our merger with Western during the second
quarter of 2007. We cannot specify when, or assure you that, we and
Western will satisfy or waive all conditions to the merger. Further, there
can be no assurance that the Federal Trade Commission, state antitrust
authorities, or Mr. Bisset, will not seek injunctive relief to prevent the
merger from taking place.

CRITICAL ACCOUNTING POLICIES

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

     Our significant accounting policies, including revenue recognition,
inventory valuation, and maintenance costs, are described in Note 1,
"Organization and Significant Accounting Policies", to our Consolidated
Financial Statements included in Item 8. 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 (see Note 17);

     -  assessing the possible impairment of long-lived assets (see Notes
        4 and 5);

     -  accounting for asset retirement obligations (see Note 7);

     -  accounting for our pension and post-retirement benefit plans (see
        Note 13); and

     -  accounting for inventories (see Note 2).

CONTINGENCIES, INCLUDING ENVIRONMENTAL REMEDIATION AND LITIGATION
LIABILITIES

     We have recorded various environmental remediation liabilities
described in more detail in Note 17, "Commitments and Contingencies", to
our Consolidated Financial Statements in Item 8. For the most part, these
liabilities result from:

     -  past operations, including liabilities arising out of changes in
        environmental laws; and


                                     49


<PAGE>
     -  liabilities assumed in connection with acquired assets.

     We record liabilities if environmental assessments and/or remedial
efforts are probable and the costs can be reasonably estimated. We do not
discount environmental liabilities to their present value. In general, we
record environmental liabilities without consideration of potential
recoveries from third parties, although we do take into account amounts
that others are contractually obligated to pay us. We employ independent
consultants or our internal environmental personnel to investigate and
assemble pertinent facts, recommend an appropriate remediation plan in
light of regulatory standards, assist in estimating remediation costs
based on existing technologies, and complete remediation according to
approved plans. If we do not use consultants, we estimate remediation
costs based on the knowledge and experience of our employees having
responsibility for the remediation project. Because of the uncertainty
involved in our various remediation efforts and the period of time our
efforts may take to complete, estimates are based on current regulatory
standards. We update our estimates as needed to reflect changes in the
facts known to us, available technology, or applicable laws. We often make
subsequent adjustments to estimates, which may be significant, as more
information becomes available to us, as the requirements of government
agencies are changed or clarified, or as other circumstances change.

     We record liabilities for litigation matters when it is probable that
the outcome of litigation will be adverse and damages can be reasonably
estimated. We estimate damages based on the facts and circumstances of
each case, our knowledge and experience, and the knowledge and experience
of others with whom we may consult.

IMPAIRMENT OF LONG-LIVED ASSETS

     We review the carrying values of our long-lived assets, including
goodwill and other intangibles, for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets
may not be recoverable. For assets held for sale, we report long-lived
assets at the lower of the carrying amount or fair value less cost to
sell. For assets held and used, we use an undiscounted cash flow
methodology to assess their recoverability. If the sum of the expected
future cash flows for these assets is less than their carrying value, we
record impairment losses. Goodwill and certain intangible assets with
indefinite lives are also subject to an annual impairment test. Changes in
current economic conditions, assumptions regarding the timing and amounts
of cash flows, or fair market value estimates could result in additional
write-downs of these assets in the future. For a discussion of our
impairment of long-lived assets, see Notes 4, "Goodwill and Other
Intangible Assets", and 5, "Assets Held for Sale, Discontinued Operations
and Asset Disposals", to our Consolidated Financial Statements in Item 8.

ASSET RETIREMENT OBLIGATIONS

     We have legal obligations associated with the retirement of some of
our long-lived assets. These obligations are related to:



                                     50


<PAGE>
     -  some of our solid waste management facilities;

     -  some of our crude pipeline right-of-way agreements;

     -  some of our underground and above-ground storage tanks; and

     -  some of our refinery piping and heaters, that are wrapped in
        material containing asbestos.

     We use a discounted cash flow model to calculate the fair value of
the asset retirement obligations. Key assumptions we use in estimating the
fair value of these obligations are:

     -  settlement date occurs at the end of the economic useful life; and

     -  settlement prices are estimated using consultant proposals and
        third-party contractor invoices for substantially equivalent work
        and a market risk premium to cover uncertainties and unforeseeable
        circumstances.

     Changes in current economic conditions, assumptions regarding the
timing and amounts of cash flows, or fair market value estimates could
result in a change in the obligation in the future.

     For a discussion of our asset retirement obligations, see Note 7,
"Asset Retirement Obligations", to our Consolidated Financial Statements
in Item 8.

PENSION AND POST-RETIREMENT PLANS

     We have a defined benefit retirement plan ("Cash Balance Plan") and a
post-retirement medical plan ("Retiree Medical Plan") for our Yorktown
employees.

     The plan obligations and related assets of our pension and post-
retirement plans are presented in Note 13, "Pension and Post-retirement
Benefits", to our Consolidated Financial Statements. Plan assets, which
consist of equity and debt securities, are valued using market prices.
Plan obligations and the annual pension and post-retirement medical
expense are determined by independent actuaries and are based on a number
of assumptions. The key assumptions used in measuring the plan obligations
include:

     -  discount rate;

     -  long-term rate of return on plan assets; and

     -  healthcare cost trend rates.

     Changes in our actuarial assumptions used in calculating our pension
and other post-retirement benefit liability and expense can have a
significant impact on our earnings and financial position. We review these
assumptions on an annual basis and adjust them as necessary.


                                     51


<PAGE>
     The following chart reflects the sensitivities that a change in
certain actuarial assumptions for our Cash Balance Plan would have had on
the 2006 projected benefit obligation, our 2006 reported pension liability
on our Consolidated Balance Sheet, and our 2006 reported pension expense
on our Consolidated Statement of Operations:

                                             Increase/(Decrease)
                                   --------------------------------------
                                   Impact on Projected       Impact on
Actuarial Assumption(a)            Benefit Obligation     Pension Expense
-----------------------            -------------------    ---------------
Discount rate:
Increase 1%..................          $(2,560,000)          $(390,000)
Decrease 1%..................            2,710,000             290,000
Expected long-term rate
  of return on plan assets:
Increase 1%..................                    -             (54,000)
Decrease 1%..................                    -              54,000
-------
(a) Each fluctuation assumes that the other components of the calculation
    are held constant.

     The following chart reflects the sensitivities that a change in
certain actuarial assumptions for our Retiree Medical Plan would have had
on the 2006 accumulated post-retirement benefit obligation on our
Consolidated Balance Sheet and our 2006 reported post-retirement benefit
expense on our Consolidated Statement of Operation:

                                              Increase/(Decrease)
                                     -------------------------------------
                                         Impact on           Impact on
                                        Accumulated            Other
                                       Post-retirement     Post-retirement
                                     Benefit Obligation    Benefit Expense
                                     ------------------    ---------------
Actuarial Assumption(a)
-----------------------
Discount rate:
  Increase 1%.....................      $ (810,000)          $(120,000)
  Decrease 1%.....................       1,020,000             150,000
Health care cost trend rate(b):
  Increase 1%.....................         470,000              90,000
  Decrease 1%.....................        (420,000)            (80,000)
-------
(a) Each fluctuation assumes that the other components of the calculation
    are held constant.
(b) This assumes a 1% change in the initial and ultimate health care cost
    trend rate.







                                     52


<PAGE>
INVENTORIES

     Our inventories are stated at the lower of cost or market. Costs for
crude oil and refined products produced by the refineries are determined
by the last-in, first-out ("LIFO") method. Under this method, the most
recent acquisition costs are charged to cost of sales, and inventories are
valued at the earliest acquisition costs. We selected this method because
we believe it more accurately reflects the cost of our current sales. The
use of this method results in reported earnings that can differ
significantly from those that might be reported under a different
inventory method such as the first-in, first-out ("FIFO") method. Under
the FIFO method, the earliest acquisition costs are charged to cost of
sales and inventories are valued at the latest acquisition costs. In
addition, the use of the LIFO inventory method may result in increases or
decreases to cost of sales in years that inventory volumes decline as the
result of charging cost of sales with LIFO inventory costs generated in
prior periods. In periods of rapidly declining prices, LIFO inventories
may have to be written down to market value due to the higher costs
assigned to LIFO volumes in prior periods. Market value is determined
based on estimated selling prices less applicable refining, transportation
and other selling costs, generally for the month subsequent to the end of
the reporting period. This topic is further discussed in Note 2,
"Inventories", to our Consolidated Financial Statements included in Item
8.

     The Emerging Issues Task Force (EITF) of the Financial Accounting
Standards Board ("FASB"), under Issue No. 04-13, "Accounting for Purchases
and Sales of Inventory with the Same Counterparty", reached a consensus in
September 2005 that some or all of such buy/sell arrangements should be
accounted for at historical cost pursuant to the guidance in paragraph
21(a) of Accounting Principles Board ("APB") Opinion No. 29, "Accounting
for Nonmonetary Transactions". Our buy/sell arrangements with a
counterparty are reported on a net basis and, accordingly, we believe we
are in compliance with this EITF. The net proceeds for these type of
transactions were approximately $9,000,000, $11,000,000 and $7,000,000 in
2006, 2005, and 2004, respectively.

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

     In December 2004, the FASB issued SFAS 153, "Exchanges of Nonmonetary
Assets - An Amendment of APB Opinion 29". The basic principle in Opinion
29 provides that nonmonetary exchanges should be measured based on the



                                     53


<PAGE>
fair value of the assets exchanged. The guidance in that opinion, however,
provides an exception to this principle if the exchange involves similar
productive assets. This statement amends Opinion 29 to eliminate the
exception for nonmonetary exchanges of similar productive assets and
replaces it with a general exception for exchanges of nonmonetary assets
that do not have commercial substance. A nonmonetary exchange has
commercial substance if the future cash flows of the entity are expected
to change significantly as a result of the exchange. The adoption of SFAS
153 on January 1, 2006 did not have a material impact on our financial
statements.

RESULTS OF OPERATIONS

     Our recent financial information is summarized in Selected Financial
Data in Item 6. The following discussion of our Results of Operations
should be read in conjunction with the Consolidated Financial Statements
and related notes thereto included in Item 8, primarily Note 16.

     Below is operating data for our operations:

<TABLE>
                                                           Year Ended December 31,
                                                     ------------------------------------
                                                        2006         2005         2004
                                                     ----------   ----------   ----------
<S>                                                   <C>         <C>          <C>
Refining Group Operating Data:
  Four Corners Operations:
    Crude Oil/NGL Throughput (BPD).............          27,546       29,382       28,281
    Refinery Sourced Sales Barrels (BPD).......          26,945       28,516       27,355
    Average Crude Oil Costs ($/Bbl)............       $   65.28   $    55.01   $    39.31
    Refining Margin ($/Bbl)....................       $   15.72   $    14.03   $     8.96
  Yorktown Operations:
    Crude Oil Throughput (BPD).................          59,505       60,973       58,913
    Refinery Sourced Sales Barrels (BPD).......          59,264       62,667       60,999
    Average Crude Oil Costs ($/Bbl)............       $   64.00   $    51.95   $    37.39
    Refining Margin ($/Bbl)(1).................       $    3.95   $     8.72   $     5.60
Retail Group Operating Data:(2)
(Continuing operations only)
  Fuel Gallons Sold (000's)....................         200,590      174,510      156,917
  Fuel Margin ($/gal)..........................       $    0.19   $     0.20   $     0.18
  Merchandise Sales ($ in 000's)...............       $ 159,513   $  144,968   $  134,012
  Merchandise Margin...........................              27%          27%          24%
  Operating Retail Outlets at Year End.........             155          135          123
Wholesale Group Operating Data:(3)
    Fuel Gallons Sold (000's)..................         595,710      520,664      473,009
    Fuel Margin ($/gal)........................       $    0.06   $     0.07   $     0.05
    Lubricant Sales ($ in 000's)...............       $  71,635   $   46,309   $   30,957
    Lubricant Margin...........................              14%          16%          13%
-------
</TABLE>
(1) Refinery margin decreased from $8.72 per barrel in 2005 to $3.95 per
    barrel in 2006 as a result of the fires that occurred in November 2005
    and September 2006.


                                     54


<PAGE>
(2) For the year ended December 31, 2006, includes statistics from 21
    retail stores acquired from Amigo in August 2006 and 12 retail stores
    acquired from Dial in July 2005. For the year ended December 31, 2005,
    includes statistics from 12 retail stores acquired from Dial in July
    2005.
(3) For the year ended December 31, 2006, includes statistics from Dial
    and Amigo's wholesale operations that were acquired in July 2005 and
    August 2006, respectively. For the year ended December 31, 2005,
    includes statistics from Dial's wholesale operations that were
    acquired in July 2005.

     The comparability of our continuing results of operations for the
year ended December 31, 2006 with the year ended December 31, 2005 is
affected by, among others, the following factors:

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

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

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

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

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

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

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

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

        -  the Yorktown fire on September 30, 2006 that resulted in a
           shutdown of the processing unit required to produce ULSD;

     -  the Ciniza fire on October 5, 2006 that resulted in a temporary
        shutdown of the alkylation unit and an associated unit; and

     -  the Ciniza fire on December 26, 2006 that damaged the DHT unit and
        various instrumentation and cabling at the refinery.




                                     55


<PAGE>
     These factors were partially offset by the following positive
factors:

     -  stronger net refining margins for our Four Corners refineries for
        the year ended December 31, 2006, due to, among other things:

        -  increased sales in our higher margin markets; and

        -  favorable market conditions in certain of our market areas;

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

COMPARISON OF THE YEARS ENDED DECEMBER 31, 2006 AND DECEMBER 31, 2005

EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

     Our earnings from continuing operations before income taxes decreased
$38,932,000 for the year ended December 31, 2006. This decrease was
primarily due to the following:

     -  a $124,164,000 decrease in operating income before corporate
        allocations recorded by our Yorktown refinery operations;

     -  a $3,688,000 decrease in operating income before corporate
        allocations at our Four Corners refinery operations due
        to lower sales volume as a result of the fires mentioned above and
        higher operating costs, partially offset by higher margins; and

     -  a $27,209,000 increase in operating expenses primarily due to
        higher employee, maintenance and insurance costs at our
        refineries, the addition of Amigo's operations in August 2006 and
        the inclusion of Dial's operations for the full year in 2006
        versus a partial year in 2005.

     These factors were partially offset by the following:

     -  higher operating income before corporate allocations of $3,420,000
        from our retail segment as a result of certain acquisitions;

     -  a $78,315,000 increase in gain recorded as a result of the 2005
        Yorktown fire;

     -  lower interest expense due to an increase in interest capitalized
        to our long-term constructions projects, and a refinancing of a
        portion of our long-term debt that occurred in the second quarter
        of 2005; and

     -  a $2,082,000 decrease in costs associated with early debt
        extinguishment that occurred in 2005.




                                     56


<PAGE>
YORKTOWN REFINERY

     Our Yorktown refinery operated at an average throughput rate of
approximately 59,500 barrels per day in 2006, compared to 61,000 barrels
per day in 2005.

     Revenues for our Yorktown refinery increased in 2006 primarily due to
an increase in finished product prices.

     Refining margins for 2006 were $3.95 per barrel as compared to $8.72
per barrel for the same period in 2005. This decrease in refining margins
was primarily due to the following:

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

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

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

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

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

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

     -  delays in initially putting the ULSD unit into operation; and

     -  the September 2006 fire in the ULSD unit.

     Operating expenses for our Yorktown refinery increased in 2006 due to
higher purchased fuel costs, insurance costs, maintenance and employee
costs, partially offset by decreases in utilities and costs for chemicals
and catalyst.

     Depreciation and amortization expense increased in 2006 primarily due
to depreciation of additional assets that were put into service in 2006.

FOUR CORNERS REFINERIES

     Our Four Corners refineries operated at an average throughput rate of
approximately 27,500 barrels per day in 2006 and 29,400 barrels per day in
2005.




                                     57


<PAGE>
     Revenues increased in 2006 primarily due to an increase in finished
product prices.

     Refining margins in 2006 were $15.72 per barrel as compared to $14.03
per barrel for the same period in 2005. The increase in 2006 was primarily
due to favorable market conditions.

     Operating expenses increased in 2006 primarily due to increased
employee costs, and higher rental costs, maintenance costs, chemical and
catalyst costs, and insurance costs in connection with our operations.

RETAIL GROUP

     Revenues for our retail group increased in 2006 primarily due to (i)
an increase in finished product selling prices, (ii) an increase in fuel
volumes sold, (iii) the addition of Amigo's 21 convenience stores, and
(iv) the inclusion of Dial's 12 convenience stores for the full year in
2006 versus a partial year in 2005.

     Average fuel margin was $0.19 per gallon in 2006 and $0.20 per gallon
in 2005. Fuel volumes sold in 2006 increased by 15% as compared to the
same period a year ago due to improved market conditions and the inclusion
of Amigo's 21 convenience stores and Dial's 12 convenience stores.

     Average merchandise margin remained constant at 27% in 2006 and 2005.

     Operating expenses increased in 2006 as compared with the same period
in 2005, primarily due to the addition of Amigo's 21 operating convenience
stores in August 2006, the inclusion of Dial's 12 convenience stores for
the full year in 2006 versus a partial year in 2005 as a result of the
July 2005 acquisition, and higher bank charges as a result of higher fuel
volumes and prices.

     Depreciation and amortization expense decreased in 2006 as compared
to the same period in 2005 due to a reduction in amortization for our
leasehold improvements and due to certain assets being fully depreciated
in 2006.

WHOLESALE GROUP

     Gasoline and diesel fuel volumes sold by our wholesale group
increased in 2006 as compared to the same period in 2005 primarily due to
the addition of Dial's and Amigo's businesses to our operations and
favorable market conditions. Average gasoline and diesel fuel margins were
$0.06 per gallon and $0.07 per gallon in 2006 and 2005, respectively. The
decrease in average fuel and diesel fuel margins was primarily due to
higher costs of products.

     Revenues for our wholesale group increased in 2006 primarily due to
higher price per gallon sold, the addition of Dial's business and Amigo's
assets to our operations, and favorable market conditions.
Operating expenses for our wholesale group increased in 2006 primarily due
to higher fuel costs, higher employee payroll and benefit costs, and the
addition of Dial's and Amigo's businesses to our operations.

                                     58


<PAGE>
     Depreciation and amortization expense for our wholesale group
increased in 2006 primarily due to the addition of Dial's and Amigo's
businesses to our operations.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A)

     For the year ended December 31, 2006, SG&A expenses increased
approximately $4,348,000 or 10% to $49,521,000 from $45,173,000 in the
comparable 2005 period. The increase was primarily due to higher employee
and outside services costs and the addition of Dial's operations to our
business, partially offset by lower management incentive bonus accruals.

INTEREST EXPENSE

     For the year ended December 31, 2006, interest expense decreased
approximately $5,313,000 or 22% to $19,172,000 from $24,485,000 in the
comparable 2005 period. This decrease was primarily due to a $4,891,000
increase in interest capitalized to our long-term construction projects.

NET LOSS ON THE DISPOSAL/WRITE-DOWN OF ASSETS

     For the year ended December 31, 2006, we recorded a net loss of
$723,000 on the disposal and write-down of assets. This loss was primarily
due to a write-down of $877,000 of assets at Ciniza that was related to
the December 2006 fire. We do not anticipate receiving any insurance
proceeds related to this fire because the deductible threshold was not
met. This loss was partially offset by net gains of $154,000 on sales of
assets in the ordinary course of business. For the year ended December 31,
2005, we recorded a net loss of $1,009,000 on the disposal of assets. This
loss was primarily due to a write-down of $1,284,000 relating to our
secondary crude tower at Ciniza, partially offset by gains of $275,000 on
sales of assets in the ordinary course of business.

INCOME TAXES FROM CONTINUING OPERATIONS

     The effective tax rate for the year ended December 31, 2006 was
approximately 38.3%. The effective tax rate for the year ended December
31, 2005 was approximately 39.9%. The decrease in effective tax rate was
primarily due to tax credits for small business refiners that were
recognized in 2006.

DISCONTINUED OPERATIONS

     Discontinued operations include the operations of some of our retail
service station/convenience stores. See Note 5, "Assets held for Sale,
Discontinued Operations and Asset Disposals", to our Consolidated
Financial Statements included in Item 8 for additional information
relating to these operations.







                                     59


<PAGE>
OUTLOOK

     We believe that our current refining margins are stronger than the
same time last year, as demand for gasoline and diesel has been strong at
Yorktown and in our Four Corners' market. In our retail operations, we are
continuing to achieve growth in both fuel volumes and merchandise sales on
a comparable store basis. While fuel margins started the year stronger
than typically seen in the winter months, recent increases in fuel costs
have eroded fuel margins to lower levels than we realized at the same time
last year. Merchandise margins are, however, comparable to the prior year
level. In our wholesale operations, we are continuing to experience growth
in fuel volumes in our historical business as well as from the recent
acquisition of Empire. Margins, so far, are slightly lower compared to the
same time last year. Our businesses are very volatile and there can be no
assurance that currently existing conditions will continue for any of our
business segments.

COMPARISON OF THE YEARS ENDED DECEMBER 31, 2005 AND DECEMBER 31, 2004

EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

     Our earnings from continuing operations before income taxes increased
$146,055,000 for the year ended December 31, 2005. This increase was
primarily due to the following:

     -  an increase in operating earnings before corporate allocations
        from our refinery operations of $111,634,000 primarily due to
        higher margins;

     -  a $8,422,000 decrease in interest expense due to our refinancing
        transactions in 2005;

     -  a decrease of $8,482,000 in costs associated with early debt
        extinguishment; and

     -  an increase in our retail and wholesale operations fuel volumes
        and margin as a result of improved market conditions.

     This increase was partially offset by the following:

     -  a $29,793,000 increase in operating expenses primarily due to
        higher purchased fuel costs and increased repairs and maintenance
        expenditures at our refineries.

YORKTOWN REFINERY

     Our Yorktown refinery operated at an average throughput rate of
approximately 61,000 barrels per day in 2005, compared to 58,900 barrels
per day in 2004.

     Revenues for our Yorktown refinery increased in 2005 primarily due to
higher finished product prices as a result of favorable market conditions
and an increase in volumes sold.


                                     60


<PAGE>
     Refining margins for 2005 were $8.72 per barrel as compared to $5.60
per barrel for the same period in 2004. This increase was primarily due to
increased demand, lower imports of finished products into the East Coast,
lower nationwide production due to the damage to refineries done by
Hurricanes Katrina and Rita, and limited refining capacity in the United
States.

     Operating expenses increased in 2005 primarily due to the following:

     -  increased maintenance costs primarily related to tank inspections
        and repairs and coker unit repairs;

     -  increased operating costs due to higher volumes, higher electrical
        costs, and higher purchased costs of natural gas; and

     -  increased chemical and catalyst costs, primarily related to higher
        cost catalyst required to meet more stringent sulfur reduction
        requirements.

     Depreciation and amortization expense increased in 2005 primarily due
to the amortization of certain refinery turnaround costs and depreciation
of additional capitalized costs incurred in 2004.

     As discussed more fully under the heading Raw Material Supply in
Items 1 and 2 of Part I, in February 2004, we entered into a long-term
crude oil supply agreement with Statoil. We believe our ability to process
this higher acid crude oil will reduce our crude oil costs, improve our
high-value product output, and contribute significantly to higher
earnings. We believe this agreement will improve our competitiveness and
reduce the impact of pricing volatility on our refinery margins.

FOUR CORNERS REFINERIES

     Our Four Corners refineries operated at an average throughput rate of
approximately 29,400 barrels per day in 2005 and 28,300 barrels per day in
2004.

     Revenues increased in 2005 primarily due to significantly higher
finished product prices as a result of favorable market conditions and an
increase in volumes sold.

     Refining margins in 2005 were $14.03 per barrel as compared to $8.96
per barrel for the same period in 2004. The increase in 2005 was primarily
due to increased demand, lower imports of finished products into the West
Coast, lower nationwide production due to the damage to refineries done by
Hurricanes Katrina and Rita, and limited refining capacity in the United
States.

     Operating expenses increased in 2005 primarily due to increased
employee costs, higher purchased fuel costs, and increased repairs and
maintenance expenditures.




                                     61


<PAGE>
     Depreciation and amortization expense for our Four Corners refineries
increased in 2005 primarily due to additional depreciable assets that were
placed in service during the fourth quarter of 2004.

RETAIL GROUP

     Revenues for our retail group increased in 2005 primarily due to an
increase in finished product selling prices and an increase in fuel
volumes sold.

     Average fuel margin was $0.19 per gallon in 2005 as compared to $0.18
per gallon for the same period in 2004 primarily due to improved market
conditions. Fuel volumes sold in 2005 increased by 4% as compared to the
same period a year ago due to improved market conditions.

     Average merchandise margin was 27% in 2005 as compared to 24% in
2004. The increase in merchandise margins was primarily due to, among
other factors, lower rebates in 2004.

     Operating expenses for our retail group increased in 2005 primarily
due to an increase in higher employee costs, bank charges and additional
rent expenses incurred in our operations.

     Depreciation and amortization expense for our retail group increased
in 2005 primarily due to additional amortization of our leasehold
improvements.

WHOLESALE GROUP

     Gasoline and diesel fuel volumes sold by our wholesale group
increased due to the addition of Dial's operations in July 2005. Average
gasoline and diesel fuel margins for wholesale group were $0.07 per gallon
for 2005 and were $0.05 per gallon for 2004 due to favorable market
conditions.

     Revenues for our wholesale group increased in 2005 primarily due to
an increase in finished product selling prices as a result of improved
market conditions.

     Our wholesale group finished product margins increased in 2005 as
compared to 2004 primarily due to improved market conditions.

     Operating expenses for our wholesale group increased in 2005 as
compared to 2004 primarily as a result of higher transportation costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A)

     For the year ended December 31, 2005, SG&A expenses increased
approximately $7,339,000 or 19% to $45,173,000 from $37,834,000 in the
comparable 2004 period. The increase was primarily due to:

     -  higher management incentive bonuses associated with improved
        company financial performance; and


                                     62


<PAGE>
     -  additional expenses incurred in relation to our 401(k) plan.

     These increases were partially offset by:

     -  a reduction in costs related to our self-insured health plan due
        to improved claims experience; and

     -  lower legal costs as a result of legal expense reimbursements from
        our insurance carriers.

INTEREST EXPENSE

     For the year ended December 31, 2005, interest expense decreased
approximately $8,422,000 or 26% to $24,485,000 from $32,907,000 in the
comparable 2004 period as a result of our refinancing transactions in
2005. See Note 8 to our Consolidated Financial Statements included in Item
8 for a further description of these transactions.

NET LOSS ON THE DISPOSAL/WRITE-DOWN OF ASSETS

     For the year ended December 31, 2005, we recorded a net loss of
$1,009,000 on the disposal of assets. This loss was primarily due to a
write-down of $1,284,000 relating to our secondary crude tower at Ciniza,
partially offset by gains of $275,000 on sales of assets in the ordinary
course of business. For the year ended December 31, 2004, we recorded a
net loss of $161,000 on the disposal of assets. This included losses
totaling $65,000 on the sale of vacant land and losses totaling $96,000
incurred as a result of sales and write-downs of other assets in the
ordinary course of business.

INCOME TAXES FROM CONTINUING OPERATIONS

     The effective tax rate for the year ended December 31, 2005 was
approximately 39.9%. The effective tax rate for the year ended December
31, 2004 was approximately 39.5%.

DISCONTINUED OPERATIONS

     Discontinued operations include the operations of some of our retail
service station/convenience stores. See Note 5 to our Consolidated
Financial Statements included in Item 8 for additional information
relating to these operations.


LIQUIDITY AND CAPITAL RESOURCES

CAPITAL STRUCTURE

     At December 31, 2006 we had long-term debt of $325,387,000. At
December 31, 2005 our long-term debt was $274,864,000.

     The amount at December 31, 2006 includes:



                                     63


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

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

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

     The amount at December 31, 2005 includes:

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

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

     At December 31, 2006, our long-term debt was 40.2% of total capital.
At December 31, 2005, it was 40.7%. Our net debt (long-term debt, net of
current portion less cash and cash equivalents) to total capitalization
(long-term debt, net of current portion less cash and cash equivalents
plus total stockholders' equity) percentage at December 31, 2006, was
38.8%. At December 31, 2005, this percentage was 21.7%. The increase is
primarily due to lower cash and cash equivalent balances and higher long-
term debt outstanding at December 31, 2006.

     At December 31, 2006, we had a $175,000,000 revolving credit facility
that we entered into on June 27, 2005. This facility matures in 2010 and
the maximum amount that we may borrow is $175,000,000. In connection with
this facility, we incurred financing costs that have been deferred and are
being amortized over the term of the facility. For a further discussion of
this matter, see Note 8 to our Consolidated Financial Statements included
in Item 8.

     The credit facility is primarily a working capital and letter of
credit facility. At December 31, 2006, we had borrowings of $50,000,000
under the facility and $27,832,000 of letters of credit outstanding. At
December 31, 2005, we had no direct borrowings outstanding under the
previous facility and $66,771,000 of letters of credit outstanding.

     As described in more detail in Note 8 to our Consolidated Financial
Statements included in Item 8, the indentures governing our notes and our
credit facility contain restrictive covenants and other terms and
conditions that if not maintained, if violated, or if certain conditions
are met, could result in default, affect our ability to borrow funds, make
certain payments, or engage in certain activities. A default under any of
the notes or the credit facility could cause such debt, and by reason of
cross-default provisions, our other debt to become immediately due and
payable. If we are unable to repay such amounts, the lenders under our
credit facility could proceed against the collateral granted to them to
secure that debt. If our lenders accelerate the payment of the credit
facility, we cannot provide assurance that our assets would be sufficient



                                     64


<PAGE>
to pay that debt and other debt or that we would be able to refinance such
debt or borrow more money on terms acceptable to us, if at all. Our
ability to comply with the covenants, and other terms and conditions, of
the indentures and the credit facility may be affected by many events
beyond our control. For example, higher than anticipated capital
expenditures or a prolonged period of low refining margins could have a
negative impact on our ability to borrow funds and to make expenditures
and could have an adverse impact on compliance with our covenants. We
cannot provide assurance that our operating results will be sufficient to
allow us to comply with the covenants.

     Our level of debt and these covenants may, among other things:

     -  limit our ability to use cash flow, or obtain additional
        financing, for future working capital needs, capital expenditures,
        acquisitions or other general corporate purposes;

     -  restrict our ability to pay dividends or purchase shares of our
        common stock;

     -  require a substantial portion of our cash flow from operations to
        make interest payments;

     -  limit our flexibility to plan for, or react to, changes in
        business and industry conditions;

     -  place us at a competitive disadvantage compared to less leveraged
        competitors; and

     -  increase our vulnerability to the impact of adverse economic and
        industry conditions and, to the extent of our outstanding debt
        under our floating rate debt facilities, the impact of increases
        in interest rates.

     If we are unable to:

     -  generate sufficient cash flow from operations;

     -  borrow sufficient funds to service our debt; or

     -  meet our working capital and capital expenditure requirements,

then, due to borrowing base restrictions, increased letter of credit
requirements, or otherwise, we may be required to:

     -  sell assets;

     -  reduce capital expenditures;

     -  refinance all or a portion of our existing debt; or

     -  obtain additional financing.



                                     65


<PAGE>
     We cannot provide assurance that we will be able to do any of these
things on terms acceptable to us, or at all.

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

CASH FLOW FROM OPERATIONS

     Our cash flow from operations depends primarily on producing and
selling quantities of refined products at margins sufficient to cover
fixed and variable expenses. In recent years, crude oil costs and prices
of refined products have fluctuated substantially. These costs and prices
depend on numerous factors, including:

     -  the supply of and demand for crude oil, gasoline and other refined
        products;

     -  changes in the U.S. economy;

     -  changes in the level of foreign and domestic production of crude
        oil and refined products;

     -  worldwide political conditions;

     -  the extent of government laws; and

     -  local factors, including market conditions, pipeline capacity, and
        the level of operations of other refineries in our markets.

     Our crude oil requirements are supplied from sources that include
major oil companies, large independent producers, and smaller local
producers. Except for our long-term supply agreement with Statoil, our
crude oil supply contracts are generally relatively short-term contracts.
These contracts generally contain market-responsive pricing provisions. An
increase in crude oil prices could adversely affect our operating margins
if we are unable to pass along the increased cost of raw materials to our
customers.

     Our sale prices for refined products are influenced by the commodity
price of crude oil. Generally, an increase or decrease in the price of
crude oil results in a corresponding increase or decrease in the price of
gasoline and other refined products. The timing of the relative movement
of the prices, however, as well as the overall change in product prices,
could reduce profit margins and could have a significant impact on our
refining and marketing operations, earnings, and cash flows. In addition,
we maintain inventories of crude oil, intermediate products, and refined
products, the values of which are subject to rapid fluctuation in market
prices. Price level changes during the period between purchasing
feedstocks and selling the manufactured refined products could have a
significant effect on our operating results. Any long-term adverse
relationships between costs and prices could impact our ability to
generate sufficient operating cash flows to meet our working capital
needs.


                                     66


<PAGE>
     Moreover, the industry is highly competitive. Many of our competitors
are large, integrated oil companies which, because of their more diverse
operations, larger refineries, stronger capitalization and better brand
name recognition, may be better able than we are to withstand volatile
industry conditions, including shortages or excesses of crude oil or
refined products or intense price competition at the wholesale and retail
levels. Because some of our competitors' refineries are larger and more
efficient than our refineries, these refineries may have lower per barrel
crude oil refinery processing costs. Further, in 2007, our operating costs
will be increasing reflecting, among other things, increased insurance
premiums, anticipated increases in refinery personnel, and potential
increases in utility costs for our Four Corners refineries.

     Our ability to borrow funds under our current revolving credit
facility could be adversely impacted by low product prices that could
reduce our borrowing base related to eligible accounts receivable and
inventories. In addition, the structuring of the Statoil supply agreement
results in a lower availability of funds under the borrowing base
calculation of our credit facility. Because of the terms of the Statoil
agreement, however, our borrowing needs have been reduced. Our debt
instruments also contain restrictive covenants that limit our ability to
borrow funds if certain thresholds are not maintained. See the discussion
above in Capital Structure for further information relating to these loan
covenants.

     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 and our anticipated borrowing capacity, we believe that we will
have sufficient working capital to meet our needs over the next 12-month
period. As previously discussed, however, we expect to complete our merger
with Western during the second quarter of 2007. We cannot specify when, or
assure you that, we and Western will satisfy or waive all conditions to
the merger. Further, there can be no assurance that a third party will not
seek injunctive relief to prevent the merger from taking place.

WORKING CAPITAL

     Working capital at December 31, 2006 consisted of current assets of
$429,287,000 and current liabilities of $222,135,000, or a current ratio
of 1.93:1. At December 31, 2005, the current ratio was 2.12:1, with
current assets of $442,355,000 and current liabilities of $208,508,000. 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




                                     67


<PAGE>
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,
including available funds from our revolving line of credit, to meet our
needs over the next 12-month period. As noted above, however, we expect to
complete our merger with Western during the second quarter of 2007. We
cannot specify when, or assure you that, we and Western will satisfy or
waive all conditions to the merger. Further, there can be no assurance
that a third party will not seek injunctive relief to prevent the merger
from taking place.

CAPITAL EXPENDITURES AND RESOURCES

     Cash used for capital expenditures totaled approximately $232,964,000
for the year ended December 31, 2006 and $70,659,000 for the year ended
December 31, 2005. Expenditures for 2006 were primarily for building and
revamping our refinery units to comply with the low sulfur fuel regulatory
requirements, the Yorktown consent decree, rebuilding the various affected
units due to the fires discussed above, and various projects in
conjunction with the re-commissioning of the crude oil pipeline running
from Jal, New Mexico to Bisti, New Mexico that we acquired in 2005. For a
further discussion of these matters, see the related discussions in Risk
Factors in Item 1A and in Note 17 to our Consolidated Financial Statements
in Item 8. Expenditures for 2005 were primarily for building and revamping
our refinery units to comply with the low sulfur fuel regulatory
requirements and the Yorktown consent decree.

     We received proceeds of approximately $4,069,000 from the sale of
property, plant and equipment and other assets in 2006 and $4,526,000 in
2005. Proceeds received in 2006 primarily were from the sale of property
in the ordinary course of business and the sale of four stores that were
classified as asset held for sale. We also received $89,000,000 of
insurance proceeds in 2006 due to the November 2005 fire incident at
Yorktown and $3,688,000 of insurance proceeds in 2005 due to the March
2004 fire incident at Ciniza.

     On August 1, 2005, we acquired an idle crude oil pipeline running
from Jal, New Mexico to Bisti, New Mexico and related assets from Texas-
New Mexico Pipe Line Company. This pipeline is connected to our existing
pipeline network that directly supplies crude oil to the Bloomfield and
Ciniza refineries. We have begun testing the pipeline and taking other
actions related to placing it in service. Unless currently unanticipated
obstacles are encountered, we anticipate the pipeline will become
operational before the end of the second quarter of 2007. In order to
operate the pipeline, we will have to obtain approximately 750,000 barrels
of linefill.

     On July 12, 2005, we acquired 100% of the common shares of Dial Oil
Co. ("Dial"). We funded this acquisition with cash on hand. Dial is a



                                     68


<PAGE>
wholesale distributor of gasoline, diesel and lubricants in the Four
Corners area of the Southwest. Dial also owns and operates 12 service
stations/convenience stores. Dial's assets include bulk petroleum
distribution plants, cardlock fueling locations, and a fleet of truck
transports.

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

     In August 2006, we acquired certain assets from Amigo. We funded this
acquisition with cash on hand. These acquired assets include 25
convenience stores, two bulk petroleum distribution plants, and a
transportation fleet. The acquisition was accounted for using the purchase
method of accounting whereby the total purchase price has been
preliminarily allocated to tangible and intangible assets acquired based
on the fair market values on the date of acquisition.

     On January 2, 2007, we acquired 100% of the common shares of Empire
Oil Co. ("Empire"). We funded this acquisition with cash on hand. Empire
is a wholesale distributor of gasoline, diesel, and lubricants in Southern
California. Empire's assets include a bulk petroleum distribution plant,
cardlock fueling locations, and a fleet of truck transports.

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

     We have budgeted up to approximately $250,000,000 for capital
expenditures in 2007 excluding any potential acquisitions. Of this amount,
approximately $136,000,000 is for the completion of projects that were
started in 2006. Approximately $110,000,000 of the $136,000,000 is
budgeted for capital projects to produce motor fuel that will comply with
low sulfur standard, approximately $7,000,000 is budgeted for capital
projects due to the September 2006 Yorktown refinery fire incident and
approximately $1,200,000 is budgeted for capital projects due to the
October 2006 Ciniza fire incident. We believe a significant amount of the
fire-related expenditures will be reimbursed by insurance. We also have
budgeted $6,700,000 for capital projects related to the December 2006
Ciniza fire. We do not anticipate receiving any insurance proceeds from
this fire. In addition, approximately $48,000,000 is budgeted for non-
discretionary projects that are required by law or regulation or to
maintain the physical integrity of existing assets. Another $54,000,000 is
budgeted for discretionary projects to sustain or enhance the current
level of operations, increase earnings associated with existing or new
businesses, and to expand existing operations. Our budget also includes
$6,000,000 for capital expenditure contingencies.

                                     69


<PAGE>
     Much of the capital currently budgeted for environmental compliance
is integrally related to operations or to operationally required projects.
We do not specifically identify capital expenditures on the basis of
whether they are for environmental as opposed to economic purposes. With
respect to our operating expenses for environmental compliance, while
records are not kept specifically identifying or allocating such
expenditures, we believe that we incur significant operating expense for
such purposes. For further discussion of projects that we will be
undertaking in order to comply with environmental requirements and
associated capital expenditures, including our plans to comply with the
previously discussed low sulfur standards, see the related discussions
under the caption Regulatory and Environmental Matters included in Items 1
and 2, in Risk Factors in Item 1A, below under the caption Low Sulfur
Fuels and Settlement Agreements Expenditures, and in Note 17 to our
Consolidated Financial Statements in Item 8.

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

     Changes in the tax laws and changes in federal and state
environmental laws also may increase future capital and operating
expenditure levels.

     We intend to fund the projects described above through our operating
cash flows, cash on hand, and if necessary, our revolving credit facility.
If these sources are insufficient, we may need to secure additional
financing, access the public debt and equity markets, or sell assets. We
cannot assure you that these sources will be available.

LONG-TERM COMMITMENTS

     Included in the table below is a list of our obligations to make
future payments under contracts and other agreements, as well as certain
other contingent commitments.


















                                     70


<PAGE>
<TABLE>
                                                                   Payments Due
                                      -----------------------------------------------------------------------
                                                                                                       All
                                                                                                    Remaining
                                         Total       2007       2008      2009      2010      2011    Years
                                      ----------  ----------  --------  --------  --------  -------  --------
                                                                  (In thousands)
<S>                                   <C>         <C>         <C>       <C>       <C>       <C>      <C>
Long-Term Debt*.....................  $  330,001  $        -  $      -  $      -  $ 50,000  $     -  $280,001
Operating Leases....................      65,455      10,553     9,079     7,161     5,698    4,858    28,106
Purchase Obligations:
  Raw material purchases............   2,178,011   1,086,111   863,420   228,480         -        -         -
  Services..........................      14,935      14,434       141       141       141       78         -
                                      ----------  ----------  --------  --------  --------  -------  --------
    Total...........................   2,588,402   1,111,098   872,640   235,782    55,839    4,936   308,107
                                      ----------  ----------  --------  --------  --------  -------  --------
Other Long-Term Obligations:
  Aggregate environmental
    reserves (gross)**..............      37,136       1,100     3,100     3,100     3,100    3,100    23,636
  Pension obligations...............       2,001       2,001         -         -         -        -         -
  Aggregate litigation reserves.....         185         185         -         -         -        -         -
  Interest obligations..............     180,813      29,775    29,775    29,775    28,038   26,300    37,150
                                      ----------  ----------  --------  --------  --------  -------  --------
    Total...........................     220,135      33,061    32,875    32,875    31,138   29,400    60,786
                                      ----------  ----------  --------  --------  --------  -------  --------
Total Obligations...................  $2,808,537  $1,144,159  $905,515  $268,657  $ 86,977  $34,336  $368,893
                                      ==========  ==========  ========  ========  ========  =======  ========
-------
 * Excluding original issue discount.
** The amount reflected in the table consists of the aggregate amount of our environmental accruals except the
   Yorktown Refinery accrual. In the case of the Yorktown Refinery, we have included the entire amount that we
   currently estimate will be spent in connection with the Yorktown 1991 Order, without regard to amounts that
   we believe are subject to reimbursement by others. Such reimbursable amounts are approximately $28,400,000.
</TABLE>

     The amounts set out in the table, including payment dates, are our
best estimates at this time, but may vary as circumstances change or we
become aware of additional facts. The table does not include anticipated
capital expenditures related to environmental compliance or anticipated
environmental expenditures that are expensed when incurred. For a
discussion of matters related to our identification of environmental
expenditures, refer to the section of this Item 7 captioned "Capital
Expenditures and Resources".

     Raw material and finished product purchases were determined by
multiplying contract volumes by the price determined under the contract as
of December 31, 2006. The contracts underlying these calculations all have
variable pricing arrangements.

     The above table does not include amounts for outstanding purchase
orders at December 31, 2006, amounts under contracts that are cancelable
by either party upon giving notice, and amounts under agreements that are
based on a percentage of sales, such as credit card processing fees.


                                     71


<PAGE>
     We cannot precisely determine our future pension expenditures beyond
2007. We are obligated to make payments to the pension retirement plan
each year. Not included in the table are certain retiree medical and asset
retirement obligations for which annual funding is not required. Our asset
retirement obligations are discussed in more detail in Note 7 to our
Consolidated Financial Statements in Item 8 and our pension plan and
retiree medical plan obligations are described in more detail in Note 13.

     Included in the table below is a list of our commitments under our
revolving credit facility.

<TABLE>
                                                           Amount of Commitment Expiration
                                      -----------------------------------------------------------------------
                                                                                                       All
                                                                                                    Remaining
                                         Total       2007       2008      2009      2010      2011    Years
                                      ----------  ----------  --------  --------  --------  -------  --------
                                                                  (In thousands)
<S>                                   <C>         <C>         <C>       <C>       <C>       <C>      <C>
Line of Credit.....................   $50,000     $     -     $      -  $      -  $ 50,000  $     -  $      -
Standby Letters of Credit*.........    27,832      27,832            -         -         -        -         -
-------
* Standby letters of credit reduce the availability of funds for direct borrowings under the line of credit.
</TABLE>

     The availability of letters of credit under our credit facility is
$100,000,000. Our inability to post satisfactory letters of credit could
constrain our ability to purchase feedstocks on the most beneficial terms.

LOW SULFUR FUELS AND SETTLEMENT AGREEMENTS EXPENDITURES

     The following table shows amounts we anticipate spending to meet,
among other things, certain low sulfur fuel regulations and to comply with
environmental settlements, consent decrees, and other agreements with
government authorities that require certain actions to be taken at our
Yorktown and Four Corners refineries. The table does not include amounts
for which environmental accruals have been established, which are instead
included in the long-term commitments table above. For a further
discussion of these environmental accruals, see Note 17, "Commitment and
Contingencies", to our Consolidated Financial Statements in Item 8. These
amounts are our best estimates at this time, but may vary as circumstances
change or we become aware of additional facts.













                                     72
<PAGE>
<TABLE>
                                                               Capital         Remaining
                                                             Expenditures      Projected
                                                               Through          Capital
Projected Capital Expenditures(1)               Amount    December 31, 2006   Expenditures
---------------------------------              --------   -----------------   ------------
                                                            (In thousands)
<S>                                            <C>            <C>             <C>
Yorktown - Low Sulfur Fuels................    $ 220,000      $  90,000       $ 130,000
Four Corners - Low Sulfur Fuels............       60,000         42,000          18,000
Yorktown Consent Decree....................       25,000         24,000           1,000
Four Corners Settlement Agreements.........       18,000            600          17,400
Bloomfield - Compliance Order..............        3,500            100           3,400
                                               ---------      ---------       ---------
Total Anticipated Cash Obligations.........    $ 326,500      $ 156,700       $ 169,800
                                               =========      =========       =========
-------
(1) Excluding accrued amounts.
</TABLE>

     The amounts shown in the above table are the high end of our
estimated costs for these projects. We anticipate that the costs could be
between the following ranges:

     -  Yorktown - Low Sulfur Fuels - $195,000,000 to $220,000,000 of
        which approximately $90,000,000 was spent through 2006;

     -  Four Corners - Low Sulfur Fuels - $50,000,000 to $60,000,000 of
        which approximately $43,000,000 was spent through 2006;

     -  Yorktown Consent Decree - $24,000,000 to $25,000,000 of which
        approximately $24,000,000 was spent through 2006;

     -  Four Corners Settlement Agreements - $10,000,000 to $18,000,000,
        of which approximately $600,000 was spent through 2006; and

     -  Bloomfield EPA Compliance Order - $3,200,000 to $3,500,000, of
        which approximately $100,000 was spent through 2006.

     During 2006, our estimate of the costs associated with the low sulfur
fuels projects increased primarily as a result of the following:

     -  increased costs for contractors and manufactured products as a
        result of increased demand arising from, among other things, the
        fact that the low sulfur fuels regulations apply to the entire
        industry, and the need to repair damage in the Gulf Coast caused
        by Hurricanes Katrina and Rita;

     -  the scope of the projects at each of the refineries increasing,
        including the decision to use a higher capacity gasoline treating
        unit with a higher sulfur removal capability at our Yorktown
        refinery; and







                                     73
<PAGE>
     -  an increase in the cost of steel and concrete.

     For a more detailed description of these matters, including further
information regarding our estimates and associated risks and the
anticipated timing of the expenditures, please see the related discussions
under the caption Regulatory, Environmental and Other Matters included in
Items 1 and 2, in Risk Factors in Item 1A, and in Note 17, "Commitment and
Contingencies", to our Consolidated Financial Statements in Item 8.

CASH REQUIREMENTS

     We believe we will have sufficient resources to meet our working
capital requirements, including that necessary for capital expenditures
and debt service, over the next 12-month period because of:

     -  the current operating environment for all of our operations;

     -  current cash balances; and

     -  availability of funds under our revolving credit facility.

     As noted above, however, we expect to complete our merger with
Western during the second quarter of 2007. We cannot specify when, or
assure you that, we and Western will satisfy or waive all conditions to
the merger. Further, there can be no assurance that a third party will not
seek injunctive relief to prevent the merger from taking place.

DIVIDENDS

     We currently do not pay dividends on our common stock. Our 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 our board of directors, existing debt
covenants, and the terms of the Western Agreement. The Western Agreement
prohibits us from paying dividends without the consent of Western.

RISK MANAGEMENT

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

     Our credit facility is floating-rate debt tied to various short-term
indices. As a result, our annual interest costs associated with this debt
may fluctuate. At December 31, 2006, there were $50,000,000 in direct
borrowings outstanding under this facility.


                                     74
<PAGE>
     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.

     In November 2006, we renewed our property insurance coverage and our
business interruption insurance coverage. Primarily due to the fires
experienced at our refineries in 2005 and 2006, the cost of such coverage
increased by approximately $12,000,000. In addition, our deductible for
property insurance was increased to $10,000,000. Our deductible for
business interruption insurance also was increased to $10,000,000 and the
waiting period was lengthened to a minimum of 90 days. We also agreed with
our insurance carriers that the maximum amount that we can recover for the
fires that occurred at Yorktown and Ciniza in September and October of
2006 is an aggregate of $30,000,000 unless we agree to an additional
increase in our recently revised insurance premiums.

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

ENVIRONMENTAL, HEALTH AND SAFETY

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

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






                                     75
<PAGE>
     Future expenditures related to compliance with environmental, health
and safety laws and regulations, the investigation and remediation of
contamination, and the defense or settlement of governmental or private
party claims and lawsuits cannot be reasonably quantified in many
circumstances for various reasons. These reasons include the uncertain
nature of remediation and cleanup cost estimates and methods, imprecise
and conflicting data regarding the hazardous nature of various substances,
the number of other potentially responsible parties involved, various
defenses that may be available to us, and changing environmental, health
and safety laws and regulations, and their respective interpretations. We
cannot give assurance that compliance with such laws or regulations, such
investigations or cleanups, or such enforcement proceedings, or private-
party claims will not have a material adverse effect on our business,
financial condition or results of operations. For a further discussion of
environmental, health and safety matters affecting our operations, see the
discussion of these matters contained in Items 1 and 2 under the heading
Regulatory and Environmental Matters, in Risk Factors in Item 1A, and in
Note 17, "Commitment and Contingencies", to our Consolidated Financial
Statements.

     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 cleanup activities.

     In March 2006, we entered into a consent order with the New Mexico
Oil Conservation Division and paid a civil penalty of $30,000 to settle an
Administrative Compliance Order related to our Bloomfield refinery. For a
further discussion of this settlement, see Note 17, "Commitment and
Contingencies", to our Consolidated Financial Statements.

     In May 2006, we entered into a consent order with the Environmental
Protection Agency and paid a civil penalty of $75,000 to settle an
Administrative Compliance Order related to our Bloomfield refinery. For a
further discussion of this settlement, see Note 17, "Commitments and
Contingencies", to our Consolidated Financial Statements.




                                     76
<PAGE>
     In June 2006, we received a draft administrative compliance order
from the New Mexico Environment Department related to soil and groundwater
contamination at our Bloomfield refinery. For a further discussion of this
draft order, see Note 17, "Commitments and Contingencies", to our
Consolidated Financial Statements.

     In August 2006, we entered into a final administrative consent order
with EPA, pursuant to which we will implement the agreed-upon corrective
action measures to address certain contaminants at our Yorktown refinery.
For a further discussion of this matter, see Note 17, "Commitments and
Contingencies", to our Consolidated Financial Statements.

     As of December 31, 2006 and 2005, we had environmental liability
accruals of approximately $3,991,000 and $4,941,000, respectively, and
litigation accruals in the aggregate of approximately $185,000 and
$990,000, respectively. The environmental liability accruals summarized in
the table below are recorded in the current and long-term sections of our
Consolidated Balance Sheets. Environmental accruals are recorded in the
current and long-term sections of our Consolidated Balance Sheets. See
Note 17, "Commitments and Contingencies", to our Consolidated Financial
Statements in Item 8 for: (i) a more detailed discussion of the more
significant of these projects, as well as of other significant
environmental commitments and contingencies; and (ii) how we record
environmental liabilities.

<TABLE>
<CAPTION>
                             SUMMARY OF ACCRUED ENVIRONMENTAL CONTINGENCIES

                                As of                         As of    Increase/              As of
                               12/31/04  Increase  Payments  12/31/05  (Decrease)  Payments  12/31/06
                               --------  --------  --------  --------  ----------  --------  --------
                                                         (In thousands)
<S>                            <C>       <C>       <C>       <C>        <C>        <C>        <C>
Yorktown Refinery............  $  4,531  $     57  $ (1,048) $  3,540   $      -   $   (785)  $ 2,755
Farmington Refinery..........       570         -         -       570          -          -       570
Bloomfield Refinery..........       251         -       (22)      229          -          -       229
Bloomfield - River Terrace...         -       259      (213)       46         (6)       (40)        -
West Outfall - Bloomfield....        44         -       (44)        -          -          -         -
Bloomfield Tank Farm
  (Old Terminal).............        53         -       (11)       42          -        (12)       30
Other Projects...............       707       306      (499)      514         88       (195)      407
                               --------  --------  --------  --------   --------   --------   -------
Totals.......................  $  6,156  $    622  $ (1,837) $  4,941   $     82   $ (1,032)  $ 3,991
                               ========  ========  ========  ========   ========   ========   =======
</TABLE>

OTHER

     In October 2004, the President of the United States signed the
American Jobs Creation Act of 2004 (the "Act"), which includes energy
related tax provisions that are available to small refiners, including us.
Under the Act, small refiners are allowed to deduct for tax purposes up to



                                     77


<PAGE>
75% of capital expenditures incurred to comply with the highway diesel
ultra low sulfur regulations adopted by the Environmental Protection
Agency. The deduction is taken in the year the capital expenditure is
made. We were able to use this deduction in 2006 and expect to be able to
use it in future years. Small refiners also are allowed to claim a credit
against income tax of five cents on each gallon of ultra low sulfur diesel
fuel they produce, up to a maximum of 25% of the capital costs incurred to
comply with the regulations. We were able to use this credit in 2006 and
expect to be able to use it in future years.

     In August 2005, the President signed the Energy Policy Act of 2005
(the "Energy Act"). Under the Energy Act, refiners are allowed to deduct
for tax purposes 50% of the cost of capital expenditures that increase the
capacity of an existing refinery by at least 5%. The deduction is taken in
the year the capital expenditure is made. We may be able to take this
deduction in future years if we have refinery projects that increase
capacity. The Energy Act also requires that most refiners, blenders, and
importers use more ethanol in their fuels, with an industry-wide target of
4 billion gallons in 2006 that increases to 7.5 billion gallons in 2012.
Each refinery that has less than 75,000 barrels per day of crude oil
capacity, however, is exempted from participation in this requirement
until 2011. All of our refineries qualify for the exemption.

     In August 2006, the President signed the Pension Protection Act of
2006 (the "Pension Act"). We currently believe the Pension Act will have
minimal impact on our benefit programs.

FORWARD-LOOKING STATEMENTS

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

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

     These important factors include the following:


                                     78
<PAGE>
     - the risk that the Western transaction will not close on schedule
       or at all, including the risk that the Federal Trade Commission or
       state antitrust authorities will enjoin our merger transaction or
       take other action that will prevent the merger from occurring and
       the risk that we will be precluded from merging as a result of the
       class action lawsuit that has been filed against us;

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

     - our ability to negotiate new crude oil supply contracts;

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

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

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

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

     - our ability to adequately control capital and operating expenses;

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

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

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

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



                                     79
<PAGE>
       windfall profit, price gouging, or other legislation that may be
       adopted in reaction to the price of motor fuel at the retail level,
       the impact of any legislation that may restrict our ability to sell
       alcoholic beverages at our convenience stores, and the impact of
       any minimum wage legislation that may be adopted;

     - unplanned or extended shutdowns in refinery operations;

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

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

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

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

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

     - unexpected environmental remediation costs;

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

     - the risk we will be found to have substantial liability in
       connection with existing or pending litigation, including liability
       for which we do not have insurance coverage;

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

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

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




                                     80
<PAGE>
     - the risk that our current plans for the production of low sulfur
       fuels at our refineries (including the possible use of catalyst)
       may not work as anticipated, requiring us to spend more money to
       produce these fuels than currently anticipated;

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

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

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

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

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

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

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

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

     - the risk that tax authorities will challenge the positions we have
       taken in preparing our tax returns or that we will determine that
       we have not properly calculated our tax liability;

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

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

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





                                     81
<PAGE>
     - the risk that the timetable for placing the Pipeline in service
       will be different than anticipated, or that it will not be
       possible to place the Pipeline in service at all;

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

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

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

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

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

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

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

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

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





                                     82
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Commodity Price Risk

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

     Interest Rate Risk

     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 December 31, 2006, there were $50,000,000 in direct
borrowings outstanding under this facility. If this balance of $50,000,000
is outstanding for the entire year, an increase of 1.0% in the interest
rate related to this credit facility would result in an increase in our
interest expense of $500,000.































                                     83
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Giant Industries, Inc.
Scottsdale, Arizona

We have audited the accompanying consolidated balance sheets of Giant
Industries, Inc. and subsidiaries (the "Company") as of December 31, 2006
and 2005, and the related consolidated statements of operations,
comprehensive income, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 2006. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Giant Industries, Inc.
and subsidiaries as of December 31, 2006 and 2005 and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2006, in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note 7 to the financial statements, in 2005 the Company
changed its method of accounting for conditional asset retirement
obligations to comply with Financial Accounting Standards Board ("FASB")
Interpretation 47, Accounting for Conditional Asset Retirement
Obligations, and as discussed in Note 13 to the financial statements in
2006 the Company changed its method of accounting for pension and post-
retirement obligations to comply with Statement of Financial Accounting
Standards No. 158, Employer's Accounting for Defined Benefit Plans and
Other Post-retirement Benefits, an Amendment of FASB Statements No. 87,
88, 106, and 132(R).

We have also audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the effectiveness of
the Company's internal control over financial reporting as of December 31,
2006, based on the criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the




                                     84


<PAGE>
Treadway Commission and our report dated March 1, 2007 expressed an
unqualified opinion on management's assessment of the effectiveness of the
Company's internal control over financial reporting and an unqualified
opinion on the effectiveness of the Company's internal control over
financial reporting.


/s/ Deloitte & Touche LLP

Phoenix, Arizona
March 1, 2007












































                                     85


<PAGE>
<TABLE>
                           GIANT INDUSTRIES, INC. AND SUBSIDIARIES

                                 CONSOLIDATED BALANCE SHEETS
                                                                           December 31,
                                                                     -----------------------
                                                                        2006          2005
                                                                     ---------     ---------
                                                                  (In thousands, except share
                                                                       and per share data)
                                           ASSETS
<S>                                                                  <C>           <C>
Current assets:
  Cash and cash equivalents.......................................   $   18,112    $ 164,280
  Receivables:
    Trade, less allowance for doubtful accounts of $496 and $611..      177,341      129,283
    Tax refunds...................................................       13,523          774
    Other.........................................................       22,706       12,068
                                                                     ----------    ---------
                                                                        213,570      142,125
                                                                     ----------    ---------
  Inventories.....................................................      175,436      124,105
  Prepaid expenses and other......................................       22,169       10,449
  Deferred income taxes...........................................            -        1,396
                                                                     ----------    ---------
    Total current assets..........................................      429,287      442,355
                                                                     ----------    ---------
Property, plant and equipment.....................................      995,710      764,788
  Less accumulated depreciation and amortization..................     (327,460)    (297,962)
                                                                     ----------    ---------
                                                                        668,250      466,826
                                                                     ----------    ---------
Goodwill..........................................................       50,432       50,607
Other assets......................................................       28,208       24,684
                                                                     ----------    ---------
                                                                     $1,176,177    $ 984,472
                                                                     ==========    =========
                             LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable................................................   $  143,586    $ 139,710
  Accrued expenses................................................       67,590       68,798
  Deferred income taxes...........................................       10,959            -
                                                                     ----------    ---------
    Total current liabilities.....................................      222,135      208,508
                                                                     ----------    ---------
Long-term debt....................................................      325,387      274,864
Deferred income taxes.............................................      117,149       76,834
Other liabilities.................................................       27,138       24,430
Commitments and contingencies (Notes 7, 11, 12, 13, 17)
Stockholders' equity:
  Preferred stock, par value $.01 per share, 10,000,000
    shares authorized, none issued
  Common stock, par value $.01 per share, 50,000,000 shares
    authorized, 18,391,292 and 18,366,077 shares issued...........          184          184
  Additional paid-in capital......................................      218,364      216,917
  Retained earnings...............................................      303,954      221,203
  Unearned compensation related to restricted stock...............       (1,511)      (2,014)
  Accumulated other comprehensive loss............................         (169)           -
  Less common stock in treasury - at cost, 3,751,980 shares.......      (36,454)     (36,454)
                                                                     ----------    ---------
    Total stockholders' equity....................................      484,368      399,836
                                                                     ----------    ---------
                                                                     $1,176,177    $ 984,472
                                                                     ==========    =========

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                     86


<PAGE>
<TABLE>
                             GIANT INDUSTRIES, INC. AND SUBSIDIARIES

                              CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                    Year Ended December 31,
                                                              ------------------------------------
                                                                 2006         2005         2004
                                                              ----------   ----------   ----------
                                                              (In thousands, except per share data)
<S>                                                           <C>          <C>          <C>
Net revenues...............................................   $4,198,203   $3,581,246   $2,511,589
                                                              ----------   ----------   ----------
Cost of products sold (excluding depreciation
  and amortization)........................................    3,801,562    3,093,191    2,186,070
Operating expenses.........................................      232,848      205,639      175,846
Depreciation and amortization..............................       45,193       40,280       37,105
Selling, general and administrative expenses...............       49,521       45,173       37,834
Net loss on the disposal/write-down of assets,
  including assets held for sale...........................          723        1,009          161
Gain from insurance settlement due to 2004 Ciniza fire.....            -       (3,688)      (3,907)
Gain from insurance settlement due to 2005 Yorktown fire...      (82,003)           -            -
                                                              ----------   ----------   ----------
Operating income...........................................      150,359      199,642       78,480
Interest expense...........................................      (19,172)     (24,485)     (32,907)
Costs associated with early debt extinguishment............            -       (2,082)     (10,564)
Amortization/write-off of financing costs..................       (1,597)      (2,797)      (8,341)
Investment and other income................................        4,555        2,799          354
                                                              ----------   ----------   ----------
Earnings from continuing operations before income taxes....      134,145      173,077       27,022
Provision for income taxes.................................       51,394       69,146       10,684
                                                              ----------   ----------   ----------
Earnings from continuing operations........................       82,751      103,931       16,338
                                                              ----------   ----------   ----------
Discontinued operations
Income (loss) from operations of discontinued retail units.            -            2         (218)
Gain on disposal...........................................            -           22          525
Net loss on asset sales/write-downs........................            -            -         (497)
                                                              ----------   ----------   ----------
                                                                       -           24         (190)
Provision (benefit) for income taxes.......................            -            9          (73)
                                                              ----------   ----------   ----------
Net earnings (loss) from discontinued operations...........            -           15         (117)
                                                              ----------   ----------   ----------
Cumulative effect of change in accounting principle,
  net of income tax benefit of $46.........................            -          (68)           -
                                                              ----------   ----------   ----------
Net earnings...............................................   $   82,751   $  103,878   $   16,221
                                                              ==========   ==========   ==========
Earnings (loss) per common share:
  Basic
    Continuing operations..................................   $     5.67   $     7.71   $     1.47
    Discontinued operations................................            -            -        (0.01)
    Cumulative effect of change in accounting principle....            -        (0.01)           -
                                                              ----------   ----------   ----------
                                                              $     5.67   $     7.70   $     1.46
                                                              ==========   ==========   ==========
  Diluted
    Continuing operations..................................   $     5.64   $     7.63   $     1.43
    Discontinued operations................................            -            -        (0.01)
    Cumulative effect of change in accounting principle....            -        (0.01)           -
                                                              ----------   ----------   ----------
                                                              $     5.64   $     7.62   $     1.42
                                                              ==========   ==========   ==========

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                     87


<PAGE>
<TABLE>
                             GIANT INDUSTRIES, INC. AND SUBSIDIARIES

                         CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


                                                              Year Ended December 31,
                                                          ------------------------------
                                                            2006       2005       2004
                                                          --------   --------   --------
<S>                                                       <C>        <C>        <C>
Net income.............................................   $ 82,751   $103,878   $ 16,221
                                                          --------   --------   --------
Other comprehensive income (loss), net of tax
  Cash Balance Plan adjustment to initially
    apply SFAS 158:
    Actuarial gain, net of tax.........................        552          -          -
    Prior service cost, net of tax.....................        (72)         -          -

  Retiree Medical Plan adjustment to initially
    apply SFAS 158:
    Actuarial loss, net of tax.........................       (649)         -          -
                                                          --------   --------   --------
Other comprehensive loss, net of tax...................       (169)         -          -
                                                          --------   --------   --------
Total comprehensive income.............................   $ 82,582   $103,878   $ 16,221
                                                          ========   ========   ========

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

























                                     88


<PAGE>
<TABLE>
                                                GIANT INDUSTRIES, INC. AND SUBSIDIARIES

                                            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


                                                                       Unearned
                               Common Stock                          Compensation   Accumulated
                             -----------------  Additional            Related to       Other        Treasury Stock        Total
                               Shares     Par    Paid-In   Retained   Restricted   Comprehensive  -------------------  Stockholders'
                               Issued    Value   Capital   Earnings      Stock     Income/(Loss)    Shares     Cost       Equity
                             ----------  -----  ---------  --------  ------------  -------------  ---------  --------  ------------
                                                  (In thousands, except number of shares)
<S>                             <C>         <C>    <C>        <C>          <C>        <C>         <C>        <C>         <C>
Balances, January 1, 2004    12,537,535  $ 126  $  74,660  $101,104     $     -       $     -     3,751,980  $(36,454)   $139,436
401(k) plan contribution...      49,046      1        899         -           -             -             -         -         900
Stock options exercised....     215,750      2      1,447         -           -             -             -         -       1,449
Tax benefit of stock
  options exercised........           -      -      1,059         -           -             -             -         -       1,059
Stock issued...............   3,283,300     32     57,342         -           -             -             -         -      57,374
Net earnings...............           -      -          -    16,221           -             -             -         -      16,221
                             ----------  -----  ---------  --------     -------       -------     ---------  --------    --------
Balances, December 31, 2004  16,085,631    161    135,407   117,325           -             -     3,751,980   (36,454)    216,439
401(k) plan contribution...      34,196      -        971         -           -             -             -         -         971
Stock options exercised....     205,250      2      1,927         -           -             -             -         -       1,929
Tax benefit of stock
  options exercised........           -      -      2,167         -           -             -             -         -       2,167
Stock issued...............   2,000,000     20     74,402         -           -             -             -         -      74,422
Restricted shares granted..      41,000      1      2,043         -           -             -             -         -       2,044
Unearned compensation
  related to restricted
  shares granted...........           -      -          -         -      (2,014)            -             -         -      (2,014)
Net earnings...............           -      -          -   103,878           -             -             -         -     103,878
                             ----------  -----  ---------  --------     -------       -------     ---------  --------    --------
Balances, December 31, 2005  18,366,077    184    216,917   221,203      (2,014)            -     3,751,980   (36,454)    399,836
401(k) plan contribution...      25,115      -      1,465         -           -             -             -         -       1,465
Stock options exercised....       3,000      -          9         -           -             -             -         -           9
Tax benefit related to
  vesting of restricted
  shares...................           -      -         68         -           -             -             -         -          68
Restricted shares forfeited      (2,900)     -        (95)        -          95             -             -         -           -
Compensation expense
  related to restricted
  shares granted...........           -      -          -         -         408             -             -         -         408
Adjustment to initially
  apply SFAS 158, net
  of tax...................           -      -          -         -           -          (169)            -         -        (169)
Net earnings...............           -      -          -    82,751           -             -             -         -      82,751
                             ----------  -----  ---------  --------     -------       -------     ---------  --------    --------
Balances, December 31, 2006  18,391,292  $ 184  $ 218,364  $303,954     $(1,511)      $  (169)    3,751,980  $(36,454)   $484,368
                             ==========  =====  =========  ========     =======       =======     =========  ========    ========

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>



                                     89


<PAGE>
<TABLE>
                                GIANT INDUSTRIES, INC. AND SUBSIDIARIES

                                 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                          Year Ended December 31,
                                                                   ------------------------------------
                                                                      2006         2005         2004
                                                                   ----------   ----------   ----------
                                                                              (In thousands)
<S>                                                                <C>          <C>          <C>
Cash flows from operating activities:
  Net earnings...................................................  $   82,751   $  103,878   $   16,221
Adjustments to reconcile net earnings to
  net cash provided by operating activities:
  Cumulative effect of change in accounting principle, net.......           -           68            -
  Depreciation and amortization from continuing operations.......      45,193       40,280       37,105
  Depreciation and amortization from discontinued operations.....           -            -           93
  Amortization/write-off of financing costs......................       1,597        2,797        8,341
  Compensation expense related to restricted stock award.........         408           30            -
  Deferred income taxes..........................................      53,041       32,541        8,565
  Deferred crude oil purchase discounts..........................       1,110        1,120        2,296
  Net loss on the disposal/write-down of assets from
    continuing operations, including assets held for sale........         723        1,009          161
  Net (gain) on the disposal/write-down of assets from
    discontinued operations, including assets held for sale......           -          (22)         (28)
  (Gain) from insurance settlement of fire incident at Ciniza....           -       (3,688)      (4,538)
  (Gain) from insurance settlement of fire incident at Yorktown..     (82,003)           -            -
  Proceeds from insurance settlement for business interruption
    due to fire incident at Yorktown.............................      61,273            -            -
  Income tax benefit from exercise of stock options..............           -        2,167        1,059
  Excess tax benefits from vesting of restricted stock awards....         (68)           -            -
  Defined benefit retirement plan contribution...................      (3,078)      (2,039)      (1,828)
  Long-term retiree medical plan contribution....................         (16)          (7)           -
  Deferred compensation plan contribution........................      (1,714)        (357)           -
  Changes in operating assets and liabilities
    (Increase) in receivables....................................     (72,748)     (26,085)     (18,830)
    (Increase) decrease in inventories...........................     (47,879)     (25,562)      39,859
    (Increase) decrease in prepaid expenses......................     (11,788)       1,360       (3,823)
    (Increase) in other assets...................................      (2,178)        (809)         (45)
    Increase (decrease) in accounts payable......................       3,674       59,173      (11,096)
    (Decrease) increase in accrued expenses......................      (4,869)         615          451
    Increase in other liabilities................................       4,401        2,339        2,551
                                                                   ----------   ----------   ----------
Net cash provided by operating activities........................      27,830      188,808       76,514
                                                                   ----------   ----------   ----------
Cash flows from investing activities:
  Purchase of property, plant and equipment......................    (232,964)     (70,659)     (58,671)
  Acquisition activities.........................................     (22,907)     (39,405)           -
  Proceeds from assets held for sale.............................       3,166        1,948        9,977
  Yorktown refinery acquisition contingent payment...............           -            -      (16,146)
  Funding of restricted cash escrow funds........................           -      (21,902)           -
  Release of restricted cash escrow funds........................           -       21,883            -
  Net proceeds from insurance settlement of fire incident........      27,727        3,688        6,612
  Proceeds from sale of property, plant and
    equipment and other assets...................................         903        2,578        1,846
                                                                   ----------   ----------   ----------
Net cash used in investing activities............................    (224,075)    (101,869)     (56,382)
                                                                   ----------   ----------   ----------
                                     90


<PAGE>
  Cash flows from financing activities:
  Payments of long-term debt.....................................           -      (18,828)    (212,060)
  Payments on short-term debt....................................           -            -      (11,128)
  Proceeds from line of credit...................................      60,000       51,245            -
  Payments on line of credit.....................................     (10,000)     (53,959)           -
  Proceeds from issuance of long-term debt.......................           -            -      147,467
  Net proceeds from issuance of common stock.....................           -       74,422       57,374
  Proceeds from exercise of stock options........................           9        1,929        1,449
  Excess tax benefits from vesting of restricted stock awards....          68            -            -
  Long-term debt issuance costs..................................           -            -       (3,000)
  Deferred financing costs.......................................           -       (1,182)      (3,783)
                                                                   ----------   ----------   ----------
Net cash used in financing activities............................      50,077       53,627      (23,681)
                                                                   ----------   ----------   ----------
Net (decrease) increase in cash and cash equivalents............     (146,168)     140,566       (3,549)
  Cash and cash equivalents:
    Beginning of year...........................................      164,280       23,714       27,263
                                                                   ----------   ----------   ----------
    End of year.................................................   $   18,112   $  164,280   $   23,714
                                                                   ==========   ==========   ==========
Income taxes paid...............................................   $    9,680   $   30,180   $    1,797
                                                                   ==========   ==========   ==========
Interest paid...................................................   $   26,325   $   27,278   $   35,285
                                                                   ==========   ==========   ==========
</TABLE>

     Significant Noncash Investing and Financing Activities by year.

     In March 2006, we contributed 25,115 newly issued shares of our
common stock, valued at $1,465,000, to our 401(k) plan as a supplemental
contribution for the year 2005. We also capitalized approximately
$8,152,000 of interest as part of construction in progress. At December
31, 2006, approximately $15,293,000 of purchases of property, plant and
equipment had not been paid and, accordingly, were recorded in accounts
payable and accrued liabilities. In accordance with the provisions of SFAS
158, "Employers' Accounting for Defined Benefit Pension and Other Post-
retirement Plans", we reduced our long-term pension liability for our cash
balance plan by $894,000 ($552,000 net-of-tax) as a result of a net
actuarial gain with a corresponding credit to other comprehensive income.
We also recorded an increase in our long-term pension liability by
$117,000 ($72,000 net-of-tax) with a corresponding charge to other
comprehensive income as a result of recognizing prior service costs
related to our cash balance plan. We increased our long-term retiree
medical plan liability by $1,308,000 ($649,000 net-of-tax) as a result of
net actuarial losses with a corresponding charge to other comprehensive
income.

     In the first quarter of 2005, we transferred $118,000 of property,
plant and equipment to other assets. In the second quarter of 2005, we
contributed 34,196 newly issued shares of our common stock, valued at
$971,000, to our 401(k) plan as a discretionary contribution for the year




                                     91


<PAGE>
2004. In connection with our acquisition activity, we assumed
approximately $18,377,000 of liabilities. In the fourth quarter of 2005,
we granted 41,000 shares of restricted stock to our employees. These
awards are recorded as unearned compensation in stockholders' equity. See
Note 10 for further information. At December 31, 2005, approximately
$10,636,000 of purchases of property, plant and equipment had not been
paid and, accordingly, were accrued in accounts payable and accrued
liabilities. In accordance with Financial Interpretation 47, "Accounting
for Conditional Asset Retirement Obligations", we recorded an ARO
liability of $147,000, and assets of $64,000 and related accumulated
depreciation of $30,000. We also recorded a cumulative adjustment of
$68,000, net of tax. During 2005, we also capitalized approximately
$3,261,000 of interest as part of construction in progress.

     In the first quarter of 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. During 2004, we reclassed
approximately $2,774,000 from assets held for sale to inventory and
property, plant and equipment. We also capitalized approximately $161,000
of interest as part of construction in progress in 2004. In the second
quarter of 2004, we issued $150,000,000 of 8% Senior Subordinated Notes at
a discount of $2,435,000.

     The accompanying notes are an integral part of these consolidated
financial statements.






























                                     92


<PAGE>
                 GIANT INDUSTRIES, INC. AND SUBSIDIARIES

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:

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 wholesale group distributes commercial wholesale
petroleum products primarily in Arizona and New Mexico.

     We have three business units:

     -  our refining group;

     -  our retail group; and

     -  our wholesale group.

     See Note 16 for a further discussion of business segments and Notes 5
and 19 for recent dispositions and acquisitions.

     On August 26, 2006, we entered into an Agreement and Plan of Merger
(the "Plan of Merger") with Western Refining, Inc. ("Western") and New
Acquisition Corporation ("Merger Sub"). On November 12, 2006, we entered
into an Amendment No. 1 to Agreement and Plan of Merger (the "Amendment")
with Western and Merger Sub. The Plan of Merger and Amendment are
collectively referred to as the "Agreement". If the transaction closes,
Western will acquire all of our outstanding shares of common stock for
$77.00 per share, and we will be merged with Merger Sub and became a
wholly-owned subsidiary of Western. The closing of the transaction is
subject to various conditions, including compliance with the pre-merger
notification requirements of the Hart-Scott-Rodino Act, and approval by
our stockholders. Our stockholders approved the transaction on February
27, 2007.
PRINCIPLES OF CONSOLIDATION

     Our consolidated financial statements include the accounts of Giant
Industries, Inc. and all of its subsidiaries. All intercompany accounts
and transactions have been eliminated.



                                     93


<PAGE>
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

     The preparation of our consolidated financial statements, in
conformity with accounting principles generally accepted in the United
States of America, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

NET REVENUES

     Our business units recognize revenues when realized and earned with
all of the following criteria being met:

     -  persuasive evidence of an arrangement exists;

     -  delivery has occurred or services have been rendered;

     -  the seller's price to the buyer is fixed or determinable; and

     -  collectibility is reasonably assured.

     Excise and other similar taxes are excluded from net revenues.

     The Emerging Issues Task Force (EITF) of the Financial Accounting
Standards Board ('FASB"), under Issue No. 04-13, Accounting for Purchases
and Sales of Inventory with the Same Counterparty, reached a consensus in
September 2005 that some or all of such buy/sell arrangements should be
accounted for at historical cost pursuant to the guidance in paragraph
21(a) of Accounting Principles Board ("APB") Opinion No. 29, "Accounting
for Nonmonetary Transactions". Our buy/sell arrangements with a
counterparty are reported on a net basis and, accordingly, we believe we
are in compliance with this EITF. The net proceeds for these type of
transactions were approximately $9,000,000, $11,000,000 and $7,000,000 in
2006, 2005, and 2004, respectively.

STATEMENTS OF CASH FLOWS

     We consider all highly liquid instruments with an original maturity
of three months or less to be cash equivalents.

DERIVATIVES

     Our policies for the use of derivative financial instruments set
limits on quantities, require various levels of approval, and require
review and reporting procedures.

     We are exposed to various market risks, including changes in certain
commodity prices and interest rates. To manage the volatility relating to




                                     94


<PAGE>
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.
For purposes of the Statement of Cash Flows, such transactions are
considered to be operating activities.

     Gains and losses on all transactions that do not qualify for hedge
accounting are reflected in earnings in the period that they occur.

     We had no open commodity futures or options contracts at December 31,
2006 and December 31, 2005.

     We have entered into purchase and supply arrangements which qualify
as normal purchases and sales and are exempt from fair value recognition
in the financial statements.

CONCENTRATION OF CREDIT RISK

     Our 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.
We maintain our cash and cash equivalents with federally insured banking
institutions or other financial service providers. From time to time,
balances maintained in these institutions may exceed amounts that are
federally insured. All of the financial institutions we use are major
banking institutions and reputable financial service providers.

TRADE RECEIVABLES

     Our trade receivables result primarily from the sale of refined
products, various grades of gasoline and diesel fuel, lubricants, and
merchandise from our three refineries and our wholesale group. These sales
are made to independent wholesalers and retailers, industrial/commercial
accounts and major oil companies. In addition, our service
station/convenience stores sell refined products, merchandise, and food
products, some of which are purchased by the customer by use of a credit
card.

     We extend credit to our refining and wholesales group customers based
on criteria established by our management, including ongoing credit
evaluations. We usually extend credit on an unsecured basis, but we may
require collateral, such as letters of credit, in some circumstances. An
allowance for doubtful accounts is provided based on a number of factors
that include, but are not limited to, the current evaluation of each
customer's credit risk; the delinquent status of a customer's account;
collection efforts made; current economic conditions; past experience and
other available information. Uncollectible trade receivables are charged
against the allowance for doubtful accounts when we have exhausted all




                                     95


<PAGE>
reasonable efforts to collect the amounts due, including litigation if the
amounts and circumstances warrant such action. The allowance for doubtful
accounts is reflected in our Consolidated Balance Sheets as a reduction of
trade receivables.

     Our trade receivables are pledged as collateral for borrowings under
our revolving credit facility. At December 31, 2006, we had $50,000,000 of
direct borrowings outstanding under the facility in place at that time.

     Our major categories of trade receivables are as follows:

                                                       December 31,
                                                 ----------------------
                                                   2006          2005
                                                 --------      --------
                                                     (In thousands)

Trade...................................         $171,669      $125,229
Credit cards............................            5,672         4,054
                                                 --------      --------
                                                 $177,341      $129,283
                                                 ========      ========
INVENTORIES

     Our inventories are stated at the lower of cost or market. Costs for
crude oil and refined products produced by our refineries are determined
by the last-in, first-out ("LIFO") method. Costs for our retail,
wholesale, exchange and terminal refined products inventories and shop
supplies are determined by the first-in, first-out ("FIFO") method. Costs
for merchandise inventories at our retail locations are determined by the
retail inventory method. See Note 2 for additional information.

PROPERTY, PLANT AND EQUIPMENT

     Our property, plant and equipment are stated at cost and are
depreciated on the straight-line method over the following estimated
useful lives.

Buildings and improvements...............................   7-30 years
Machinery and equipment..................................   3-24 years
Pipelines................................................     30 years
Furniture and fixtures...................................   2-15 years
Vehicles.................................................    3-7 years

     Our leasehold improvements are depreciated on the straight-line
method over the shorter of the contractual lease terms or the estimated
useful lives.

     Routine maintenance, repairs and replacement costs are charged
against earnings as incurred. Turnaround costs, which consist of complete
shutdown and inspection of significant units of the refineries at




                                     96


<PAGE>
intervals of two or more years for necessary repairs and replacements, are
deferred and amortized over the period until the next expected shutdown,
which generally ranges from 24 to 60 months depending on the type of
shutdown and the unit involved. For turnaround purposes, we divide the
operating units at our Yorktown refinery into three major groups. Each of
these major groups has a major turnaround approximately every five years.
For our Four Corners refineries, major turnarounds are generally scheduled
approximately every five years, but may be more frequent for some units.
Unscheduled maintenance shutdowns also may occur at the refineries from
time to time. Expenditures that materially increase values, expand
capacities, or extend useful lives are capitalized. Interest expense is
capitalized as part of the cost of constructing major facilities and
equipment.

GOODWILL

     SFAS No. 142, "Goodwill and Other Intangible Assets" requires, among
other things, that goodwill not be amortized, but be tested for impairment
annually, or as events and circumstances indicate. See Note 4 for
applicable disclosures.

     Goodwill, which results from business acquisitions, represents the
excess of the purchase price over the fair value of the net assets
acquired and is carried at cost less accumulated amortization and write-
offs.

LONG-LIVED ASSETS

     In accordance with SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", we review the carrying values of our long-
lived assets for possible impairment whenever events or changes in
circumstances indicate that the carrying amount of assets to be held and
used may not be recoverable. For assets to be disposed of, we report long-
lived assets and certain identifiable intangibles at the lower of carrying
amount or fair value less cost to sell. See Note 5 for information
relating to the impairment of certain assets.

ASSET RETIREMENT OBLIGATIONS

     SFAS No. 143, "Accounting for Asset Retirement Obligations" ("SFAS
No. 143") 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 costs ("ARC") are capitalized as part of the
carrying amount of the long-lived asset. In March 2005, the FASB issued
Interpretation 47, "Accounting for Conditional Asset Retirement
Obligations" (FIN 47). This interpretation clarifies the term conditional
asset retirement obligation as used in SFAS No. 143. Conditional asset
retirement obligation refers to a legal obligation to perform an asset
retirement activity in which the timing and/or method of settlement are
conditional on a future event that may or may not be within the control of




                                     97


<PAGE>
the entity. Accordingly, an entity is required to recognize a liability
for the fair value of a conditional asset retirement obligation if the
fair value of the liability can be reasonably estimated. Clarity is also
provided regarding when an entity would have sufficient information to
reasonably estimate the fair value of an asset retirement obligation. In
conjunction with FIN 47, we reviewed our operations in the fourth quarter
of 2005 and for the year ended December 31, 2005, we recorded an ARO
liability of $147,000, ARC assets of $64,000 and related accumulated
depreciation of $30,000. We also recorded a cumulative adjustment of
$114,000 ($68,000 net of tax). See Note 7 for additional disclosures.

TREASURY STOCK

     We have 3,751,980 shares of our common stock classified as treasury
stock. These shares were acquired under a stock repurchase program and an
issuer tender offer at a weighted average cost of approximately $9.72 per
share. These shares are available for a number of corporate purposes
including, among others, for options, bonuses, and other employee stock
benefit plans.

ENVIRONMENTAL EXPENDITURES

     Environmental expenditures that relate to current operations are
expensed or capitalized depending on the circumstances. Expenditures that
relate to an existing condition caused by past operations, and which do
not result in an asset with an economic life greater than one year, are
expensed. Liabilities are recorded when environmental assessments and/or
remedial efforts are probable and the costs can be reasonably estimated.
Environmental liabilities are not discounted to their present value and
are recorded without consideration of potential recoveries from third
parties, although we do take into account amounts that others are
contractually obligated to pay us. Subsequent adjustments to estimates,
which may be significant, may be made as more information becomes
available or as circumstances change. See Note 17 for disclosures relating
to environmental expenditures.

INCOME TAXES

     The provision for income taxes is based on earnings reported in the
financial statements. Deferred income taxes are provided to reflect
temporary differences between the basis of assets and liabilities for
financial reporting purposes and income tax purposes, as well as the
effects of tax credits. We file consolidated federal and state income tax
returns for the states in which we operate, except in states that are not
unitary. See Note 14 for disclosures relating to income taxes.

EARNINGS PER COMMON SHARE

     Earnings per share are calculated in accordance with SFAS No. 128,
"Earnings Per Share." Basic earnings per common share are computed by
dividing consolidated net earnings by the weighted average number of




                                     98


<PAGE>
shares of common stock outstanding during each period. Earnings per common
share assuming dilution are computed by dividing consolidated net earnings
by the sum of the weighted average number of shares of common stock
outstanding plus additional shares representing the exercise of
outstanding common stock options and restricted stock awards issued using
the treasury stock method, unless such calculation is antidilutive. See
Note 15 for disclosures relating to earnings per share.

OTHER COMPREHENSIVE INCOME

     Our components of other comprehensive income for the year ended
December 31, 2006 include, on a net of tax basis, the net actuarial gain
and unamortized prior service cost related to our cash balance plan and
net actuarial loss related to our retiree medical plan.  These components
were recorded in accordance with the provisions of SFAS 158, "Employers'
Accounting for Defined Benefit Pension and Other Post-retirement Plans -
an amendment of FASB Statements No. 87, 88, 106, and 132(R)". We do not
have any component of other comprehensive income for the years ended
December 31, 2005 and December 31, 2004. See Note 13, "Pension and Post-
Retirement Benefits", for further discussions on this topic.

GUARANTEES

     We have analyzed the guarantee provided in certain of our lease
arrangements under the provisions of FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others" ("Interpretation
No. 45"). As of December 31, 2006 the liability of the guarantee
obligation undertaken under these arrangements was not material.

STOCK-BASED EMPLOYEE COMPENSATION

     We have a stock-based employee compensation plan that is more fully
described in Note 10. We account for this plan under the recognition and
measurement principles of SFAS 123R, "Share-Based Payments", which we
adopted on January 1, 2006. SFAS 123R requires us to measure the cost of
employee services received in exchange for stock options granted using the
fair value method as of the beginning of 2006. There was no material
impact on our financial statements as all our stock options outstanding
had vested prior to the date of adoption.

     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 for all periods presented.










                                     99


<PAGE>
<TABLE>
                                                                Year Ended December 31,
                                                                -----------------------
                                                                   2005         2004
                                                                ----------   ----------
                                                         (In thousands, except per share data)
<S>                                                             <C>          <C>
Net earnings, as reported....................................   $  103,878   $   16,221
Deduct: Total stock-based employee compensation expense
  determined under the fair value based method for all
  awards, net of related tax effect..........................          (24)        (143)
                                                                ----------   ----------
Pro forma net earnings.......................................   $  103,854   $   16,078
                                                                ==========   ==========
Net earnings per share:
Basic - as reported..........................................   $     7.70   $     1.46
                                                                ==========   ==========
Basic - pro forma............................................   $     7.70   $     1.45
                                                                ==========   ==========
Diluted - as reported........................................   $     7.62   $     1.42
                                                                ==========   ==========
Diluted - pro forma..........................................   $     7.62   $     1.41
                                                                ==========   ==========
</TABLE>

     On December 6, 2005, 41,000 shares of restricted stock were granted
to 39 employees. These awards vest ratably over five years. In accordance
with APB 25, "Accounting for Stock Issued to Employees", we recorded these
awards as deferred compensation to stockholders' equity and we will
amortize the deferred compensation balance over five years using the
straight-line method. See Note 10 for further information.

NEW ACCOUNTING PRONOUNCEMENTS

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

     In March 2006, the Emerging Issues Task Force ("EITF") reached a
conclusion in EITF Issue No. 06-3, "How Taxes Collected From Customers and
Remitted to Governmental Authorities Should Be Presented in the Income
Statement (That is, Gross Versus Net Presentation)", that the presentation
of taxes on either a gross or net basis within the scope of this EITF
Issue is an accounting policy decision requiring disclosure pursuant to




                                     100


<PAGE>
APB Opinion No. 22, "Disclosure of Accounting Policies". If a reporting
entity reports revenue on a gross basis, then the amount of taxes included
must be disclosed. This EITF Issue applies to financial reports for
interim and annual reporting periods beginning after December 15, 2006. We
currently report consolidated revenues and cost of products sold on a net
basis and, as such, no further disclosures are necessary in our financial
statements.

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

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

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

     In September 2006, FASB issued SFAS 158, "Employers' Accounting for
Defined Benefit Pension and Other Post-retirement Plans", which requires
an employer to recognize the overfunded or underfunded position of a
defined benefit post-retirement plan (other than a multiemployer plan) as
an asset or a liability in its statement of financial position and to
recognize changes in the funded status in the year in which the changes
occur through other comprehensive income. With limited exceptions, this
statement also requires an employer to measure the funded status of a plan
as of the date of its year-end statement of financial position. We adopted
this statement in 2006. Under the provisions of SFAS 158, we reduced our
long-term pension liability for our cash balance plan by $894,000
($552,000 net-of-tax) as a result of a net actuarial gain with a
corresponding credit to other comprehensive income. We also recorded an
increase in our long-term pension liability by $117,000 ($72,000 net-of-
tax) with a corresponding charge to other comprehensive income as a result




                                     101


<PAGE>
of recognizing prior service costs related to our cash balance plan. We
increased our long-term retiree medical plan liability by $1,307,000
($807,000 net-of-tax) as a result of net actuarial losses with a
corresponding charge to other comprehensive income.

NOTE 2 - INVENTORIES:

     Our inventories consist of the following:

<TABLE>
                                                                          December 31,
                                                                     ----------------------
                                                                        2006         2005
                                                                     ---------    ---------
                                                                         (In thousands)
<S>                                                                  <C>          <C>
First-in, first-out ("FIFO") method:
  Crude oil.......................................................   $  81,998    $  77,188
  Refined products................................................     131,364       97,150
  Refinery and shop supplies......................................      16,296       13,790
  Merchandise.....................................................      10,190        7,259
Retail method:
  Merchandise.....................................................      10,676        8,982
                                                                     ---------    ---------
    Subtotal......................................................     250,524      204,369
Adjustment for last-in, first-out ("LIFO") method.................     (75,088)     (80,264)
                                                                     ---------    ---------
    Total.........................................................   $ 175,436    $ 124,105
                                                                     =========    =========
</TABLE>

     The portion of inventories valued on a LIFO basis totaled
$117,933,000 and $76,299,000 at December 31, 2006 and 2005, 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 December
31, 2006, 2005 and 2004, net earnings and diluted earnings per share would
have been (lower)/higher as follows:

                                          Year Ended December 31,
                                ------------------------------------------
                                    2006           2005           2004
                                ------------   ------------   ------------
Net earnings..................  $(3,193,000)    $21,393,000   $17,619,000
Diluted earnings per share....  $     (0.22)    $      1.57   $      1.55

     We liquidated certain lower cost refinery LIFO inventory layers in
2006, 2005 and 2004, which resulted in an increase in our net earnings and
related diluted earnings per share as follows:




                                     102


<PAGE>
                                          Year Ended December 31,
                                ------------------------------------------
                                    2006           2005           2004
                                ------------   ------------   ------------
Net earnings..................  $  2,686,000   $  2,468,000   $  9,505,000
Diluted earnings per share....  $       0.18   $       0.18   $       0.84


NOTE 3 - PROPERTY, PLANT AND EQUIPMENT:

     Our property, plant and equipment, at cost, consist of the following:

<TABLE>
                                                                          December 31,
                                                                     ----------------------
                                                                        2006         2005
                                                                     ---------    ---------
                                                                         (In thousands)
<S>                                                                  <C>          <C>
Land and improvements...........................................     $  50,622    $  42,058
Buildings and improvements......................................       128,967      115,955
Machinery and equipment (including turnarounds).................       667,759      475,385
Pipelines.......................................................        10,894       10,894
Furniture and fixtures..........................................        22,541       23,325
Vehicles........................................................        14,715       13,535
Construction in progress........................................       100,212       83,636
                                                                     ---------    ---------
  Subtotal......................................................       995,710      764,788
Accumulated depreciation and amortization.......................      (327,460)    (297,962)
                                                                     ---------    ---------
  Total.........................................................     $ 668,250    $ 466,826
                                                                     =========    =========
</TABLE>


NOTE 4 - GOODWILL AND OTHER INTANGIBLE ASSETS:

     SFAS No. 142, "Goodwill and Other Intangible Assets," addresses
financial accounting and reporting for intangible assets acquired
individually or with a group of other assets (but not those acquired in a
business combination) at acquisition. This statement also addresses
financial accounting and reporting for goodwill and other intangible
assets subsequent to their acquisition. SFAS No. 142, among other things,
specifies that goodwill and certain intangible assets with indefinite
lives should no longer be amortized, but instead be subject to periodic
impairment testing.

     We elected to conduct our annual goodwill impairment test as of the
first day of each fourth fiscal quarter (October 1). For 2006, we
identified six reporting units for the purpose of the annual impairment
test. The reporting units consisted of two units from our refining




                                     103


<PAGE>
segment, two units from our retail segment and two units from our
wholesale segment. The fair value of each reporting unit was determined
using a discounted cash flow model based on assumptions applicable to each
reporting unit. The fair value of the reporting units exceeded their
respective carrying amounts, including goodwill. As a result, the goodwill
of each reporting unit was considered not impaired.

     In addition to the annual goodwill impairment test, if events and
circumstances indicate that goodwill of a reporting unit might be
impaired, then goodwill also will be tested for impairment when the
impairment indicator arises.

     The changes in the carrying amount of goodwill for the years ended
December 31, 2006 and December 31, 2005 are as follows:

<TABLE>
                                                                 Retail   Wholesale
                                               Refining Group    Group      Group      Total
                                              -----------------  ------   ---------   -------
                                                         Four
                                              Yorktown  Corners
                                              --------  -------
                                                                 (In thousands)
<S>                                            <C>      <C>      <C>        <C>       <C>
Balance as of January 1, 2005...............   $21,028  $   125  $ 4,414    $14,736   $40,303
Goodwill related to Dial acquisition........         -        -        -     10,304    10,304
                                               -------  -------  -------    -------   -------
Balance as of December 31, 2005.............    21,028      125    4,414     25,040    50,607
Goodwill written-off related to the
  sale of retail unit.......................         -        -      (77)         -       (77)
Goodwill associated with purchase of
  lubricating business*.....................         -        -        -        500       500
Goodwill reduction associated with
  Dial purchase**...........................         -        -        -       (598)     (598)
                                               -------  -------  -------    -------   -------
Balance as of December 31, 2006.............   $21,028  $   125  $ 4,337    $24,942   $50,432
                                               =======  =======  =======    =======   =======

 * See Note 18, "Acquisitions", for additional information regarding the lubricating business
   purchase.
** Reduction to goodwill for Dial Oil Co. ("Dial") was recorded at the conclusion of the
   allocation period provided for by SFAS 141, "Business Combinations".
</TABLE>

     Certain of our retail units classified as held for sale or held and
used are tested for impairment when circumstances change. No impairments
were recorded in 2006 and 2005 as a result of these tests.

     Liquor licenses, which are our only indefinite life intangible
assets, were evaluated for impairment as required by SFAS No. 142. We
believe that there are no legal, regulatory, contractual, competitive,
economic or other factors limiting the useful life of our liquor licenses.
If events and circumstances indicate that our liquor licenses might not be
recoverable, then an impairment loss would be recognized if the carrying
amount of the liquor licenses exceeds their fair value.


                                     104


<PAGE>
     Intangible assets with finite lives will continue to be amortized
over their respective useful lives and will be tested for impairment in
accordance with SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets."

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

<TABLE>
                                          December 31, 2006                  December 31, 2005
                                  --------------------------------   --------------------------------
                                                                                                         Weighted
                                   Gross                     Net      Gross                     Net      Average
                                  Carrying  Amortization  Carrying   Carrying  Accumulated   Carrying  Amortization
                                   Value    Accumulated     Value     Value    Amortization   Value       Period
                                  --------  ------------  --------   --------  ------------  --------  ------------
                                                             (In thousands)                             (In years)
<S>                               <C>         <C>         <C>        <C>         <C>         <C>           <C>
Amortized intangible assets:
  Rights-of-way...............    $  3,748    $ 2,933     $   815    $  3,729    $ 2,870     $   859       22
  Contracts...................       1,376      1,346          30       1,376      1,227         149       12
  Licenses and permits........       1,096        625         471       1,096        503         593       13
                                  --------    -------     -------    --------    -------     -------
                                     6,220      4,904       1,316       6,201      4,600       1,601
                                  --------    -------     -------    --------    -------     -------
Intangible assets not
  subject to amortization:
  Liquor licenses.............       9,614          -       9,614       8,335          -       8,335
                                  --------    -------     -------    --------    -------     -------
Total intangible assets.......    $ 15,834    $ 4,904     $10,930    $ 14,536    $ 4,600     $ 9,936
                                  ========    =======     =======    ========    =======     =======
</TABLE>

     Intangible asset amortization expense for the years ended December
31, 2006, December 31, 2005 and December 31, 2004 were $409,000, $405,000,
and $451,000, respectively. Estimated amortization expense for the next
five years is as follows:

                                                          (In thousands)
2007...................................................       $260,000
2008...................................................       $218,000
2009...................................................       $216,000
2010...................................................       $ 91,000
2011...................................................       $ 42,000

NOTE 5 - ASSETS HELD FOR SALE, DISCONTINUED OPERATIONS, AND ASSET
DISPOSALS:

     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.




                                     105


<PAGE>
<TABLE>
                                                                  Year Ended December 31,
                                                           ------------------------------------
                                                              2006         2005         2004
                                                           ----------   ----------   ----------
                                                                      (In thousands)
<S>                                                        <C>          <C>          <C>
Net revenues............................................   $        -   $        -   $    1,269
                                                           ----------   ----------   ----------

Net operating gain/(loss) on retail units...............   $        -   $        2   $     (218)
Gain on disposal of retail units........................            -           22          525
Impairment and other write-downs on retail units........            -            -         (497)
                                                           ----------   ----------   ----------
Earnings (loss) before income taxes.....................   $        -   $       24   $     (190)
                                                           ----------   ----------   ----------
Net (loss) earnings.....................................   $        -   $       15   $     (117)
Allocated goodwill included in gain on disposal.........   $        -   $        -   $       38
</TABLE>

     We disposed of several of our retail units in 2005 and 2004 and
recorded a gain on disposal of $22,000 and $525,000, respectively. There
were no impairment losses and write-downs in 2006. For 2004, we also
recorded impairment losses and write-downs that were classified as
discontinued operations of $497,000 on our retail units that were
classified as discontinued operations. In 2004, certain retail properties
and a vacant land-industrial site were reclassified to inventory and
property, plant and equipment because we were unable to dispose of these
properties within twelve months. We did not have assets held for sale at
December 31, 2006 or December 31, 2005.

     We received proceeds of $149,000 and $9,977,000 in 2005 and 2004,
respectively, from the sale of our assets held for sale and retail units
that were classified as discontinued operations. We also received proceeds
of $3,166,000 from the sale of various properties and $1,799,000 from the
sale of land that was classified as assets held for sale in 2006 and 2005,
respectively.

NOTE 6 - ACCRUED EXPENSES:

     Our accrued expenses are comprised of the following:

                                                      December 31,
                                                 ----------------------
                                                    2006         2005
                                                 ---------    ---------
Excise taxes.................................    $  26,058    $  23,330
Payroll and related costs....................       12,569       11,231
Bonus, profit sharing and retirement
  plan contributions.........................       12,303       14,608
Interest.....................................        3,513        3,321
Other taxes..................................        4,152        5,901
Other........................................        8,995       10,407
                                                 ---------    ---------
Total........................................    $  67,590    $  68,798
                                                 =========    =========

                                     106


<PAGE>
NOTE 7 - ASSET RETIREMENT OBLIGATIONS:

     SFAS No. 143, "Accounting for Asset Retirement Obligations",
addresses financial accounting and reporting obligations associated with
the retirement of tangible long-lived assets and the associated asset
retirement costs. This statement requires that the fair value of a
liability for an ARO be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made. The associated ARC is
capitalized as part of the carrying amount of the long-lived asset. Our
legally restricted assets that are set aside for purposes of settling ARO
liabilities are approximately $373,000 as of December 31, 2006 and are
included in "Other Assets" on our Consolidated Balance Sheets. These
assets are set aside to fund costs associated with the closure of certain
solid waste management facilities.

     In March 2005, the FASB issued Interpretation 47, "Accounting for
Conditional Asset Retirement Obligations" (FIN 47). This interpretation
clarifies the term conditional asset retirement obligation as used in SFAS
No. 143. Conditional asset retirement obligation refers to a legal
obligation to perform an asset retirement activity in which the timing
and/or method of settlement are conditional on a future event that may or
may not be within the control of the entity. Accordingly, an entity is
required to recognize a liability for the fair value of a conditional
asset retirement obligation if the fair value of the liability can be
reasonably estimated. Clarity is also provided regarding when an entity
would have sufficient information to reasonably estimate the fair value of
an asset retirement obligation. FIN 47 is to be applied no later than the
end of fiscal years ending after December 15, 2005. In conjunction with
FIN 47, we reviewed our operations in the fourth quarter of 2005 and for
the year ended December 31, 2005, we recorded an ARO liability of
$147,000, ARC assets of $64,000 and related accumulated depreciation of
$30,000. We also recorded a cumulative adjustment of $114,000 ($68,000 net
of tax).

     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.







                                     107


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

     We identified the following conditional ARO:

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

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

                                                      December 31,
                                                 ----------------------
                                                    2006         2005
                                                 ---------    ---------
                                                     (In thousands)
Liability beginning of year....................  $   2,625    $   2,272
Liabilities incurred...........................        200          322
Liabilities settled............................       (133)        (150)
Accretion expense..............................         28          181
                                                 ---------    ---------
Liability end of period........................  $   2,720    $   2,625
                                                 =========    =========

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

NOTE 8 - LONG-TERM DEBT:

     Our long-term debt consists of the following:
                                                      December 31,
                                                 ----------------------
                                                    2006         2005
                                                 ---------    ---------
                                                     (In thousands)
11% senior subordinated notes, due
  2012, net of unamortized discount of
  $2,554 and $2,882, interest payable
  semi-annually................................  $ 127,447    $ 127,119
8% senior subordinated notes, due
  2014, net of unamortized discount of
  $2,060 and $2,255, interest payable
  semi-annually................................    147,940      147,745
Senior secured revolving credit facility,
  due 2010, floating interest rate, principal
  and interest payable monthly.................     50,000            -
                                                 ---------    ---------
Total..........................................  $ 325,387    $ 274,864
                                                 =========    =========

                                     108


<PAGE>
     In March 2005, we issued 1,000,000 shares of our common stock and
received approximately $22,349,000, net of expenses. On May 5, 2005, we
used $21,888,000 of these proceeds to redeem approximately $18,828,000 of
our outstanding 11% senior subordinated notes. The amount paid to redeem
the notes included interest of $978,000 to the date of redemption and
redemption costs of $2,082,000. In conjunction with this transaction, we
also wrote off $563,000 of deferred financing costs and $446,000 of
unamortized original issue discount.

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

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

     -  create liens;

     -  incur or guarantee debt;

     -  pay dividends;

     -  repurchase shares of our common stock;

     -  sell certain assets or subsidiary stock;

     -  engage in certain mergers;

     -  engage in certain transactions with affiliates; or

     -  alter our current line of business.

     In addition, subject to certain conditions, we are obligated to offer
to repurchase a portion of the notes at a price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
date of repurchase, with the net cash proceeds of certain sales or other
dispositions of assets. Upon a change of control, we would be required to
offer to repurchase all of the notes at 101% of the principal amount
thereof, plus accrued interest, if any, to the date of purchase. As
discussed in Note 1, "Organization and Significant Accounting Policies",
we have entered into a merger Agreement with Western. We believe that the
closing of the transaction contemplated by the Agreement will constitute a
change in control under the indentures. In addition, pursuant to the
agreement, Western has the right to require us to tender for the notes.



                                     109


<PAGE>
Western has, however, informed us that they do not intend to request that
we commence a cash tender offer for these notes, but that they intend to
call the 8% senior subordinated notes for redemption pursuant to their
terms, including the payment of the make-whole premium, promptly after the
effective time of the merger, and that they intend to call the 11% senior
subordinated notes for redemption pursuant to their terms, including the
payment of a scheduled prepayment premium, promptly after May 15, 2007.

     At December 31, 2006, retained earnings available for dividends under
the most restrictive terms of the indentures were approximately
$119,827,000.

     On June 27, 2005, we amended and restated our revolving credit
facility (the "Credit Facility"). The Credit Facility is a $175,000,000
revolving credit facility and is for, among other things, working capital,
acquisitions, and other general corporate purposes.

     Under the Credit Facility, our existing borrowing costs are reduced,
certain of the covenants have been eased, and the term was extended to
2010. The availability of funds under this facility is the lesser of (i)
$175,000,000, or (ii) the amount determined under a borrowing base
calculation tied to eligible accounts receivables and inventory. We also
have options to increase the size of the facility to up to $250,000,000.
At December 31, 2006, there were $50,000,000 in direct borrowings
outstanding under the Credit Facility and there were approximately
$27,832,000 of irrevocable letters of credit outstanding, primarily to
crude oil suppliers, insurance companies, and regulatory agencies. At
December 31, 2005, there were no direct borrowings and $66,771,000 of
irrevocable letters of credit outstanding primarily to crude oil
suppliers. At December 31, 2006, the availability of funds under the
Credit Facility was $97,168,000, subject to borrowing base limitations.

     The interest rate applicable to the Credit Facility is based on
various short-term indices. At December 31, 2006, this rate was
approximately 6.95% per annum. We are required to pay a quarterly
commitment fee of 0.25% per annum of the unused amount of the facility.

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

     -  accounts receivable;

     -  inventory;

     -  contracts;

     -  chattel paper;

     -  trademarks;

     -  copyrights;



                                     110


<PAGE>
     -  patents;

     -  license rights;

     -  deposits; and

     -  investment accounts and general intangibles.

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

     -  incur additional indebtedness;

     -  create liens;

     -  dispose of assets;

     -  consolidate or merge;

     -  make loans and investments;

     -  enter into transactions with affiliates;

     -  use loan proceeds for certain purposes;

     -  guarantee obligations and incur contingent obligations;

     -  enter into agreements restricting the ability of subsidiaries to
        pay dividends to us;

     -  make distributions or stock repurchases;

     -  make significant changes in accounting practices or change our
        fiscal year; and

     -  prepay or modify subordinated indebtedness.

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

     Our failure to satisfy any of the covenants in the Credit Facility is
an event of default under the Credit Facility. The Credit Facility also
includes other customary events of default, including, among other things,
a cross-default to our other material indebtedness and certain changes of
control. We do not anticipate that any of the terms of the Credit Facility
will prevent us from completing the transaction with Western described in
Note 1, "Organization and Significant Accounting Policies".





                                     111


<PAGE>
     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.

NOTE 9 - FINANCIAL INSTRUMENTS AND HEDGING ACTIVITY:

     The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments". Using available
market information and the valuation methodologies described below, we
determined the estimated fair value amounts. Considerable judgment is
required, however, in interpreting market data to develop the estimates of
fair value. Accordingly, the estimates presented herein may not be
indicative of the amounts that we could realize in a current market
exchange. The use of different market assumptions or valuation
methodologies may have a material effect on the estimated fair value
amounts.

     The carrying amounts and estimated fair values of our financial
instruments are as follows:

<TABLE>
                                                             December 31,
                                            ----------------------------------------------
                                                    2006                     2005
                                            ---------------------    ---------------------
                                            Carrying   Estimated     Carrying   Estimated
                                             Amount    Fair Value     Amount    Fair Value
                                            --------   ----------    --------   ----------
                                                              (In thousands)
<S>                                         <C>        <C>           <C>        <C>
Balance Sheet - Financial Instruments:
Fixed rate long-term debt.................  $275,387   $299,539      $274,864   $299,695
</TABLE>

     We determined the fair value of fixed rate long-term debt by using
quoted market prices, where applicable, or by discounting future cash
flows using rates estimated to be currently available for debt of similar
terms and remaining maturities.

     We believe the carrying values of our cash and cash equivalents,
receivables, accounts payable and accrued expenses approximate fair values
due to the short-term maturities of these instruments. We believe the
carrying value of our variable rate short-term debt instrument
approximates fair value because the rate is tied to a short-term index.






                                     112


<PAGE>
HEDGING ACTIVITIES

     We are exposed to various market risks, including changes in
commodity prices and interest rates. To manage the volatility relating to
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.

     At December 31, 2006 and 2005, we had no open crude oil futures
contracts or other commodity derivatives.

NOTE 10 - STOCK INCENTIVE PLANS:

     Under our 1998 Stock Incentive Plan (the "1998 Plan"), shares of our
common stock are authorized to be issued to deserving employees in
connection with awards of options, appreciation rights, restricted shares,
performance shares or performance units, all as defined in the 1998 Plan.
Appreciation rights, performance shares and performance units may be
settled in cash, our common shares or any combination thereof.

     The total number of shares available for grant under the 1998 Plan is
2% of the total number of common shares outstanding as of the first day of
each calendar year, which amount was 292,786 shares for 2007, 292,282
shares for 2006, 246,673 shares for 2005, and 175,711 shares for 2004.
Grants also are subject to a 400,000 share annual limitation on the number
of common shares available for the grant of options that are intended to
qualify as "incentive stock options" under Section 422 of the Internal
Revenue Code. Common shares available for grant in any particular calendar
year that are not, in fact, granted in such year cannot be added to the
common shares available for grant in any subsequent calendar year.

     On December 6, 2005, 41,000 shares of restricted stock were granted
to 39 employees. These awards vest ratably over a five-year period. The
fair value on the date of grant was approximately $2,214,000. In
accordance with APB 25, "Accounting for Stock Issued to Employees", we
recorded unearned compensation in stockholders' equity on the balance
sheet. This balance was computed using an assumed forfeiture rate of one
employee per year, and is amortized using the straight-line method over
the vesting period. In 2006 and 2005, the amounts amortized to expense
were $408,000 and $30,000, respectively. In addition, in 2006, 2,900
shares of restricted stock were forfeited due to termination while 7,620
shares vested in 2006. The fair value of these vested shares on the
vesting date was approximately $585,000. The fair value of the remaining
30,480 non-vested shares of restricted stock at December 31, 2006 was
approximately $2,284,000.

     On May 9, 2003, 140,500 incentive stock options were granted to 15
employees under the 1998 Plan. The exercise price for all of the options
was $5.24, which was the closing price of our common stock on the New York
Stock Exchange on the date of grant. One-half of each grant vested on May
9, 2004 and the remaining one-half vested on May 9, 2005. All of the
options expire on May 8, 2013.


                                     113


<PAGE>
     The 1998 Plan provides that all grants are subject to restrictions,
conditions and terms more specifically described in the 1998 Plan,
including, but not limited to, the exercise price for stock options and
appreciation rights and time vesting requirements for all awards. In
general, the 1998 Plan provides that grants of stock options and
appreciation rights must expire no more than 10 years from the date of
grant. In addition, all grants under the 1998 Plan are subject to
forfeiture under certain circumstances, and all unvested awards may vest
immediately under various circumstances defined in the 1998 Plan.

     Under our 1989 Stock Incentive Plan (the "1989 Plan"), 500,000 shares
of our common stock were authorized to be issued to deserving employees in
the form of options and/or restricted stock. At December 31, 2006, no
shares were available for future grants under the 1989 Plan because, by
its terms, no new awards may be made after December 11, 1999. All of the
remaining options or restricted stock granted under the 1989 Plan expired
in 2003.

     The following summarizes stock option transactions under the 1989 and
1998 Plans:

                                                        Weighted Average
Options Outstanding At                        Shares     Exercise Price
----------------------                       --------   ----------------
January 1, 2004........................       524,000        $  7.83
  Exercised............................      (215,750)       $  6.72
  Forfeited............................        (2,500)       $  2.85
                                             --------
December 31, 2004......................       305,750        $  8.65
  Exercised............................      (205,250)       $  9.40
                                             --------
December 31, 2005......................       100,500        $  7.12
  Exercised............................        (3,000)       $  2.85
                                             --------
                                               97,500
                                             ========
Options exercisable at December 31:
  2006.................................        97,500        $  7.26
  2005.................................       100,500        $  7.12
  2004.................................       235,500        $  9.67

     The following summarizes information about stock options outstanding
under the 1998 Plan at December 31, 2006:

<TABLE>
               Options Outstanding
------------------------------------------------------       Options Exercisable
                                          Weighted       ----------------------------
                                          Average                        Weighted
                           Number        Remaining         Number         Average
Exercise Prices         Outstanding   Contractual Life   Exercisable   Exercise Price
---------------         -----------   ----------------   -----------   --------------
<S>                       <C>              <C>             <C>            <C>
$9.95.............        44,000           4.4             44,000         $ 9.95
$2.85.............         4,500           5.9              4,500         $ 2.85
$5.24.............        49,000           6.4             49,000         $ 5.24
</TABLE>

                                     114


<PAGE>
     In December 2004, the FASB issued SFAS No. 123R, "Share-Based
Payment" that requires us to measure the cost of employee services
received in exchange for stock options granted using the fair value method
for reporting periods that begin after December 31, 2005. We adopted SFAS
123R on January 1, 2006. We were not required to record any compensation
expense, however, because all outstanding stock options had vested prior
to the adoption of SFAS 123R. The intrinsic value of stock options
outstanding at December 31, 2006 was $6,600,000. The intrinsic value of
stock options exercised in 2006 was approximately $166,000.

     No options were granted in 2006, 2005 and 2004.

NOTE 11 - INTEREST, OPERATING LEASES AND RENT EXPENSE:

     We paid interest of $26,325,000, $27,278,000, and $35,285,000 in
2006, 2005, and 2004, respectively. In accordance with SFAS 34
"Capitalization of Interest Cost", we capitalized approximately $8,152,000
and $3,261,000 of interest as part of construction in progress in 2006 and
2005, respectively.

     In connection with the sale of approximately 8.5 acres of land in
North Scottsdale, Arizona that included our corporate headquarters
building, we entered into a ten-year agreement to lease back our corporate
headquarters building in 2003.

     We are committed to annual minimum rentals under noncancelable
operating leases that have initial or remaining lease terms in excess of
one year as of December 31, 2006 as follows:

                                                        Land, Building,
                                                         Machinery and
                                                       Equipment Leases
                                                       -----------------
                                                        (In thousands)
2007.................................................       $ 10,553
2008.................................................          9,079
2009.................................................          7,161
2010.................................................          5,698
2011.................................................          4,858
2012 - 2027..........................................         28,106
                                                            --------
Total minimum payments required......................       $ 65,455
                                                            ========

     Our total rent expense was $12,649,000, $10,655,000, and $7,813,000
for 2006, 2005, and 2004, respectively.

     Our operating leases are for buildings, warehouses, cardlocks and
facilities, and can contain one of the following options: (a) we can,
after the initial lease term, purchase the property at the then fair value
of the property or (b) we can, at the end of the initial lease term, renew




                                     115


<PAGE>
its lease at the then fair rental value for periods of 5 to 15 years.
These options enable the Company to retain use of facilities in desirable
operating areas. Certain of our leases contain escalation clauses that are
accounted for on a straight-line basis.

NOTE 12 - 401(K) AND DEFERRED COMPENSATION PLANS:

     The Company sponsors the Giant Industries, Inc. and Affiliated
Companies 401(k) Plan (the "Giant 401(k)") for the benefit of our
employees. In connection with the acquisition of the Yorktown refinery, on
May 14, 2002, we adopted the Giant Yorktown 401(k) Retirement Savings Plan
("Yorktown 401(k)") for our Yorktown employees who met plan eligibility
requirements. For purposes of eligibility and vesting, anyone who was
employed by the Yorktown refinery on or before December 31, 2002, received
credit for time worked for the refinery's previous owners and certain
other prior employers. In March 2004, the assets in the Yorktown 401(k)
were transferred into the Giant 401(k) and the plans were combined into
the Giant 401(k) for administrative convenience and to reduce costs. The
benefits available to Yorktown and non-Yorktown employees did not
materially change as a result of this combination.

     Subject to approval from our board of directors each year, we match
the Yorktown employee's contributions to the Giant 401(k), subject to
certain limitations and a per participant maximum contribution amount. For
the years ended December 31, 2006, 2005 and 2004, we expensed $1,215,000,
$1,128,000 and $1,031,000, respectively, for matching contributions to the
Yorktown participants.

     Subject to approval from our board of directors each year and
beginning in 2005, we also match the non-Yorktown employee's contributions
to the Giant 401(k), subject to certain limitations and a per participant
maximum contribution amount. For the years ended December 31, 2006, 2005,
and 2004, we expensed $2,913,000, $2,848,000, and $1,675,000,
respectively, for matching contributions to the non-Yorktown participants.

     Our matching contribution can be invested in available investment
choices at the discretion of the participant.

     Supplemental contributions to the Giant 401(k) on behalf of non-
Yorktown employees are made at the discretion of our board of directors.
For the year ended December 31, 2005, our board of directors changed the
supplemental contribution from a discretionary contribution in an amount
to be determined each year to a fixed contribution equal to 3% of eligible
wages. Yorktown employees currently do not receive this supplemental
contribution. The amounts accrued for the 2006 and 2005 supplemental
contributions were $1,615,000 and $1,622,000, respectively. The 2005
supplemental contribution was funded with 25,115 newly issued shares of
our common stock in March 2006. The 2006 supplemental contribution also
may be funded with newly issued shares of our common stock in 2007.






                                     116


<PAGE>
     For the year ended December 31, 2004, we accrued $900,000 for a
discretionary contribution to the Giant 401(k), which was funded in 2005
with 34,196 newly issued shares of our common stock. All shares are
allocated to eligible employees' accounts in the manner set forth in the
Giant 401(k).

     At December 31, 2006, the assets of the Giant 401(k) include 445,892
shares of our common stock valued at approximately $33,420,000 on December
31, 2006.

     In July 2005, we acquired Dial and Dial employees immediately became
eligible to participate in the Giant 401(k). Dial employees were permitted
to carry over their prior years of service with Dial for eligibility and
vesting purposes. The 401(k) plan sponsored by Dial was terminated prior
to the acquisition. Giant is responsible for administration of the
terminated Dial 401(k) plan until IRS approves the termination and the
assets are distributed to the participants.

     In January 2007, we acquired Empire Oil Co. ("Empire") and Empire
employees immediately became eligible to participate in the Giant 401(k).
Empire employees were permitted to carry over their prior years of service
with Empire for eligibility and vesting purposes. The 401(k) plan
sponsored by Empire was terminated prior to the acquisition. Giant is
responsible for administration of the terminated Empire 401(k) plan until
IRS approves the termination and the assets are distributed to the
participants.

     On October 31, 2005, we adopted a deferred compensation plan. The
plan is an unfunded retirement restoration plan that provides for
additional payments from us so that total retirement benefits for certain
executives will be maintained at the levels provided in the 401(k) plan
before the application of Internal Revenue Code limitations. Directors are
also eligible for the plan. Participants in the plan may defer a portion
of their annual salary and/or bonus to future years, and we will match a
portion of the amounts deferred on a basis similar to matches in our
401(k) plan, but without regard to the annual caps applicable to the
401(k) plan. We expensed $678,000 and $264,000 in 2006 and 2005,
respectively, in connection with this plan. At December 31, 2006, and
December 31, 2005 the accrued liability was $2,754,000 and $621,000,
respectively, and is recorded in "Other liabilities and deferred income"
on our Consolidated Balance Sheets.

NOTE 13 - PENSION AND POST-RETIREMENT BENEFITS:

     In connection with the acquisition of the Yorktown refinery, in 2002,
we established the Giant Yorktown Cash Balance Plan ("CB Plan"). The CB
Plan is a defined benefit plan for our Yorktown employees. The CB Plan is
a "cash balance" retirement plan fully funded by us without employee
contributions. All Yorktown employees meeting the eligibility requirements
are automatically included in the CB Plan. Under the CB Plan, an account
is established for each eligible employee that in general reflects pay



                                     117


<PAGE>
credits, based on a percentage of eligible pay determined by age or years
of service, whichever yields the greater percentage, plus regular interest
credits. Interest credits are generally equal to the greater of 5% or the
12-month average of the one-year U.S. Treasury constant maturity rates
plus 1%. Yorktown employees who were covered by the BP retirement plan on
July 1, 2000, are generally eligible for a grandfather provision that
affects the calculation of the benefit under the plan.

     We have established an investment strategy for the CB Plan that
targets allocation percentages among various asset classes. This
investment strategy is designed to reach long-term return goals, while
mitigating against downside risk and considering expected cash flows. The
current weighted average target for asset allocation is:

     -  equity securities: 50-70%; and

     -  debt securities: 30-50%

     Our investment strategy is reviewed from time to time to ensure
consistency with our objectives. Equity securities do not include any of
our common stock.

     We must pay into the CB Plan each year. The amount of our payment is
based on various factors, including actuarial calculations linked to the
potential retirement ages of Yorktown employees. Our payment to the CB
Plan for the plan year ending December 31, 2005 was $3,078,000 and was
made in September 2006. We expect to contribute approximately $2,001,000
to the CB Plan in 2007 for the plan year ending December 31, 2006.

     In connection with the acquisition of the Yorktown refinery, in 2002,
we established the Giant Yorktown Retiree Medical Plan (the "RM Plan"),
which is a post-retirement benefit plan for Yorktown employees. The RM
Plan will pay a percentage of the medical premium for coverage under the
plan. Coverage is generally available to full-time employees who are age
50 or older with 10 or more years of service. We will pay from 50% to 80%
of the premium cost, depending on age and years of service. Unlike the CB
Plan, we are not required to fund the RM Plan annually, and currently we
do not plan to do so.

     In September 2006, FASB issued SFAS 158, "Employers' Accounting for
Defined Benefit Pension and Other Post-retirement Plans", which requires
an employer to recognize the overfunded or underfunded position of a
defined benefit post-retirement plan (other than a multiemployer plan) as
an asset or a liability in its statement of financial position and to
recognize changes in the funded status in the year in which the changes
occur through other comprehensive income. With limited exceptions, this
statement also requires an employer to measure the funded status of a plan
as of the date of its year-end statement of financial position. We adopted
this statement in 2006. Under the provisions of SFAS 158, we reduced our
long-term pension liability for our cash balance plan by $894,000
($552,000 net-of-tax) as a result of a net actuarial gain with a




                                     118


<PAGE>
corresponding credit to other comprehensive income. We also recorded an
increase in our long-term pension liability by $117,000 ($72,000 net-of-
tax) with a corresponding charge to other comprehensive income as a result
of recognizing prior service costs related to our cash balance plan. We
increased our long-term retiree medical plan liability by $1,308,000
($649,000 net-of-tax) as a result of net actuarial losses with a
corresponding charge to other comprehensive income.

     The following table contains certain disclosures for our CB Plan and
RM Plan for 2006 and 2005:

<TABLE>
                                              Cash Balance Plan    Retiree Medical Plan
                                             -------------------   --------------------
                                               2006       2005       2006       2005
                                             --------   --------   --------   --------
(In thousands)
<S>                                          <C>        <C>        <C>        <C>
Reconciliation of benefit obligation:
Benefit obligation at beginning of year..    $ 15,082   $ 11,741   $  4,281   $  3,654
Service cost.............................       1,504      1,357        314        220
Interest cost............................         693        671        300        221
Benefit paid.............................        (473)      (307)       (16)        (7)
Actuarial (gain)/loss....................      (2,212)     1,366        712        193
Plan amendments..........................           -        254          -          -
                                             --------   --------   --------   --------
Benefit obligation at year end...........    $ 14,594   $ 15,082   $  5,591   $  4,281
                                             ========   ========   ========   ========
Reconciliation of plan assets:
Fair value of plan assets at
  beginning of year......................    $  5,026   $  3,083   $      -   $      -
Actual return on plan assets.............         727        210          -          -
Employer contributions...................       3,078      2,039         16          7
Benefits paid............................        (473)      (307)       (16)        (7)
                                             --------   --------   --------   --------
Fair value of plan assets at
  end of year............................    $  8,358   $  5,025   $      -   $      -
                                             ========   ========   ========   ========
Unfunded status..........................    $ (6,236)  $(10,057)  $ (5,591)  $ (4,281)
Unrecognized net prior service cost......           -        361          -          -
Unrecognized net loss (gain).............           -      1,341          -        695
                                             --------   --------   --------   --------
Accrued benefit cost(a)..................    $ (6,236)  $ (8,355)  $ (5,591)  4 (3,586)
                                             ========   ========   ========   ========
(a) The amounts are reflected in "Other
    Liabilities" in the accompanying
    Consolidated Balance Sheets

Net periodic benefit cost included
  the following:
Service cost..............................   $  1,504   $  1,357   $    314   $    220
Interest cost.............................        693        671        300        221
Expected return on assets.................       (461)      (278)         -          -
Amortization of prior service cost........          -       (106)         -          -
Recognized net actuarial loss (gain)......          -         60        100         16
                                             --------   --------   --------   --------
Net periodic benefit cost.................   $  1,736   $  1,704   $    714   $    457
                                             ========   ========   ========   ========
</TABLE>

                                     119


<PAGE>
     The accumulated benefit obligation for the CB Plan was $11,791,000
and $10,769,000 at December 31, 2006 and December 31, 2005, respectively.
The estimated net loss that will be amortized from accumulated other
comprehensive income into net periodic benefit cost over the next fiscal
year is $68,000 (net of tax $42,000) for our RM Plan. No other items are
expected to be amortized from accumulated other comprehensive income for
both plans into net periodic benefit cost over the next fiscal year.

     The following table depicts the incremental effect of applying SFAS
158 on individual line items in the Statement of Financial Position at
December 31, 2006:

<TABLE>
                                           Before Application    Increase/     After Application
                                               of SFAS 158      (Decrease)       of SFAS 158
                                           ------------------   -----------    -----------------
                                                               (In thousands)
<S>                                           <C>                  <C>              <C>
Cash Balance Plan liability.............      $  7,013             $ (777)          $  6,236
Retiree Medical Plan liability..........         4,283              1,308              5,591
Deferred income taxes...................       117,509               (362)           117,147
Total liabilities.......................       691,640                169            691,809
Accumulated other comprehensive income..             -               (169)              (169)
Total stockholders' equity..............      $484,537             $ (169)          $484,368
</TABLE>

WEIGHTED AVERAGE PLAN ASSUMPTIONS

<TABLE>
                                                Cash Balance Plan       Retiree Medical Plan
                                             -----------------------   -----------------------
                                                2006         2005         2006         2005
                                             ----------   ----------   ----------   ----------
<S>                                          <C>          <C>          <C>          <C>
Weighted average assumptions used
to determine benefit obligations
at December 31:
  Measurement date.......................    12/31/2006   12/31/2005   12/31/2006   12/31/2005
  Discount rate..........................          5.75%        5.50%        6.00%        5.75%
  Rate of compensation increase*.........          3.70%        3.70%           -            -
Weighted average assumptions used
  to determine net periodic benefit
  cost for years ended December 31:
  Discount rate.........................           5.50%        5.50%        5.75%        6.00%
  Expected return on assets.............           8.50%        8.50%           -            -
  Rate of compensation increase*........           3.70%        4.00%           -            -
-------
* Salary increases are assumed to increase at a rate of 3.7% for determining benefit obligations
  at December 31, 2006 and 4% for determining net periodic benefit cost for 2006. An additional
  5% increase is added to the ultimate rate for those with less than one year of service grading
  down to 0% once a participant has five years of service.
</TABLE>





                                     120


<PAGE>
     We based our expected long-term rate of return on a review of the
anticipated long-term performance of individual asset classes and
consideration of the appropriate asset allocation strategy, given the
anticipated requirements of the CB Plan, to determine the average rate of
earnings expected on the funds invested to provide benefits. Although we
consider recent fund performance and historical returns, the assumption is
primarily a long-term, prospective rate. We expect the long-term return
assumption for the CB Plan will remain at 8.5% per year.

     PLAN ASSETS

     Our CB Plan asset allocations at December 31, 2006, and 2005, by
asset category are as follows:

                                                       Percentage of
                                                       Plan Assets at
                                                        December 31,
                                                     -----------------
Asset Category                                       2006         2005
--------------                                       ----         ----
Equity securities...............................      71%          70%
Debt securities.................................      26%          27%
Other...........................................       3%           3%
                                                     ----         ----
Total...........................................     100%         100%
                                                     ====         ====

ASSUMED HEALTH CARE COST TREND RATES
                                                        Retiree Medical
                                                              Plan
                                                        ---------------
                                                         2006     2005
                                                        ------   ------
Assumed health care cost trend rates at December 31:
  Health care cost trend rate assumed for
    next year:
    HMO...............................................    7.50%   8.50%
    Pre-65 Non-HMO....................................    9.50%  10.50%
    Post-65 Non-HMO...................................   10.00%  11.50%
  Rate to which the cost trend rate is
    assumed to decline (the ultimate trend rate)......    4.50%   4.50%
  Year that the rate reaches the ultimate trend rate..    2012    2012

     Assumed health care cost trend rates have a significant effect on the
amounts reported for the RM Plan. A 1%-point change in assumed health care
cost trend rates would have the following effect:
                                                           1%-Point
                                                     ---------------------
                                                     Increase    Decrease
                                                     --------   ----------
Effect on total of service and interest
  cost components..................................  $ 58,000   $ (52,000)
Effect on post-retirement benefit obligation.......  $466,000   $(420,000)


                                     121


<PAGE>
     On December 8, 2003, the President signed the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 (The "Act"). The Act
provides a federal subsidy to employers whose prescription drug benefits
are actuarially equivalent to certain benefits provided by Medicare. The
RM Plan is currently deemed to provide an actuarially equivalent benefit
to the Medicare Part D benefit based on the current guidance for
determining actuarial equivalency provided by the Centers for Medicare and
Medicaid Services. As a result of the Part D subsidy, our accumulated
post-retirement benefit obligation was reduced by approximately $400,000
at December 31, 2006. The following table depicts the impact of Part D
subsidy on net periodic benefit cost:

<TABLE>
                                              Before Part D   After Part D   Decrease
                                                 Subsidy         Subsidy     in Cost
                                              -------------   ------------   --------
<S>                                             <C>             <C>          <C>
Service Cost...............................     $333,083        $314,555     $(18,528)
Interest Cost..............................      322,100         299,656      (22,444)
Amortization of Prior Service Costs Loss...      130,858          99,548      (31,310)
                                                --------        --------     --------
Net Periodic Benefit Cost..................     $786,041        $713,759     $(72,282)
                                                ========        ========     ========
</TABLE>

NOTE 14 - INCOME TAXES:

     Our provision (benefit) for income taxes from continuing operations
is comprised of the following:

                                                Year Ended December 31,
                                              ---------------------------
                                               2006      2005      2004
                                              -------   -------   -------
                                                    (In thousands)
Current:
  Federal...................................  $(1,021)  $31,423   $ 3,198
  State.....................................     (626)    5,182    (1,079)
                                              -------   -------   -------
                                               (1,647)   36,605     2,119
                                              -------   -------   -------
Deferred:
  Federal...................................   42,871    24,274     6,001
  State.....................................   10,170     8,267     2,564
                                              -------   -------   -------
                                               53,041    32,541     8,565
                                              -------   -------   -------
Total provision from continuing operations..  $51,394   $69,146   $10,684
                                              =======   =======   =======






                                     122


<PAGE>
     Net income taxes paid in 2006 2005 and 2004 were $9,680,000;
$30,180,000; and $1,797,000 respectively.

     We reconcile the difference between our provision (benefit) for
income taxes and income taxes calculated using the statutory U.S. federal
income tax rate for continuing operations as follows:

                                                Year Ended December 31,
                                              ---------------------------
                                               2006      2005      2004
                                              -------   -------   -------
                                                    (In thousands)
Income taxes at the statutory U.S.
  federal income tax rate of 35%............  $46,951   $60,577   $ 9,458
Increase (decrease) in taxes
  resulting from:
State taxes, net............................    6,204     8,742       965
Ultra low sulfur diesel credit, net.........   (2,064)        -         -
Other, net..................................      303      (173)      261
                                              -------   -------   -------
Total provision from continuing operations..  $51,394   $69,146   $10,684
                                              =======   =======   =======

     We record deferred income taxes to reflect temporary differences in
the basis of our assets and liabilities for income tax and financial
reporting purposes, as well as available tax credit carryforwards. These
temporary differences result in amounts that will be taxable or deductible
in future years on our tax returns. The tax effected temporary differences
and credit carryforwards which comprise our deferred taxes on our balance
sheet are as follows:

























                                     123


<PAGE>
<TABLE>
                                            December 31, 2006                December 31, 2005
                                     ------------------------------    ------------------------------
                                      Assets  Liabilities   Total       Assets  Liabilities   Total
                                     -------- -----------  --------    -------- -----------  --------
                                                                (In thousands)
<S>                                  <C>       <C>         <C>          <C>        <C>       <C>
Deferred Tax Assets and Liabilities:
Current Assets and Liabilities:
  Accounts receivable.............   $   134   $       -   $     134    $   175   $     -    $    175
  Insurance accruals..............     1,517           -       1,517      1,534        -        1,534
  Vacation accruals...............     1,661           -       1,661      1,635         -       1,635
  Other reserves..................       215           -         215        456         -         456
  Other accruals..................         -      (7,473)     (7,473)        39     (3,445)    (3,406)
    Inventory adjustments.........         -      (7,013)     (7,013)     1,002          -      1,002
                                     -------   ---------   ---------    -------   --------   --------
    Total current.................     3,527     (14,486)    (10,959)     4,841     (3,445)     1,396
                                     -------   ---------   ---------    -------   --------   --------
Noncurrent Assets and
  Liabilities:
  Other accruals..................     2,085        (105)      1,980      1,090       (135)       955
  Accrued retirement..............     4,271           -       4,271      4,453          -      4,453
  Deductible repairs..............         -      (7,493)     (7,493)         -     (1,868)    (1,868)
  Accelerated depreciation........         -    (130,316)   (130,316)         -    (86,549)   (86,549)
Net operating loss carryforward...     3,078           -       3,078        162          -        162
Tax credit carryforwards..........    11,331           -      11,331      6,013          -      6,013
                                     -------   ---------   ---------    -------   --------   --------
    Total noncurrent..............    20,765    (137,914)   (117,149)    11,718    (88,552)   (76,834)
                                     -------   ---------   ---------    -------   --------   --------
    Total.........................   $24,292   $(152,400)  $(128,108)   $16,559   $(91,997)  $(75,438)
                                     =======   =========   =========    =======   ========   ========
</TABLE>

     At December 31, 2006, we had an alternative minimum tax credit
carryforward of $8,003,000 and general business credit carryforwards of
$3,275,000. Alternative minimum tax credits can be carried forward
indefinitely to offset future regular tax liabilities.

     Federal net operating loss ("NOL") carryovers are $4,078,000 and will
begin to expire in the year 2026. State net operating loss carryforwards
are $39,840,000 and will begin to expire in the year 2022.

  In accordance with SFAS 109, deferred tax assets should be reduced by a
valuation allowance if it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The realization of
deferred tax assets can be affected by, among other things, future company
performance and market conditions. In making the determination of whether
or not a valuation allowance was required, we considered all available
positive and negative evidence and made certain assumptions. We considered
the overall business environment, historical earnings, and the outlook for
future years. We performed this analysis as of December 31, 2006 and





                                     124


<PAGE>
determined that there was sufficient positive evidence to conclude that it
is more likely than not that our net deferred tax assets will be realized.
We will assess the need for a deferred tax asset valuation allowance on an
ongoing basis.

   FIN 48 provides guidance on derecognition, classification, interest,
penalties, interim period reporting and disclosure for uncertain tax
positions. It provides that the benefit of an uncertain tax position
cannot be recognized unless it is more likely than not that the position
will be sustained if audited. The amount recognized is the largest amount
of benefit that is greater than 50 percent likely of being realized upon
ultimate settlement. We are currently evaluating the impact of FIN 48
which will be effective for years beginning after December 15, 2006. Any
material effects will be reported as a separate cumulative adjustment to
beginning retained earnings.

NOTE 15 - EARNINGS PER SHARE:

     The following is a reconciliation of the numerators and denominators
of the basic and diluted earnings per share computations as required by
SFAS No. 128:

<TABLE>
                                                             Year Ended December 31,
                                                       ------------------------------------
                                                          2006         2005         2004
Numerator                                              ----------   ----------   ----------
                                                                   (In thousands)
<S>                                                    <C>          <C>          <C>
Earnings from continuing operations..................  $   82,751   $  103,931   $   16,338
Earnings (loss) from discontinued operations.........           -           15         (117)
Cumulative effect of change in accounting principle..           -          (68)           -
                                                       ----------   ----------   ----------
Net earnings.........................................  $   82,751   $  103,878   $   16,221
                                                       ==========   ==========   ==========
</TABLE>

<TABLE>
                                                             Year Ended December 31,
                                                       ------------------------------------
                                                          2006         2005         2004
Denominator                                            ----------   ----------   ----------
<S>                                                    <C>          <C>          <C>
Basic - weighted average shares outstanding..........  14,597,074   13,485,702   11,104,938
Effective of dilutive stock options..................      73,142      143,271      253,360
Effective of dilutive restricted stock grants........      10,227          159            -
                                                       ----------   ----------   ----------
Diluted - weighted average shares outstanding........  14,680,443   13,629,132   11,358,298
                                                       ==========   ==========   ==========
</TABLE>








                                     125


<PAGE>
<TABLE>
                                                             Year Ended December 31,
                                                       ------------------------------------
                                                          2006         2005         2004
Basic Earnings Per Share                               ----------   ----------   ----------
<S>                                                    <C>          <C>          <C>
Earnings from continuing operations..................  $     5.67   $     7.71   $     1.47
Earnings (loss) from discontinued operations.........           -            -        (0.01)
Cumulative effect of change in accounting principle..           -        (0.01)           -
                                                       ----------   ----------   ----------
Net earnings.........................................  $     5.67   $     7.70   $     1.46
                                                       ==========   ==========   ==========
</TABLE>

<TABLE>
                                                             Year Ended December 31,
                                                       ------------------------------------
                                                          2006         2005         2004
Diluted Earnings Per Share                             ----------   ----------   ----------
<S>                                                    <C>          <C>          <C>
Earnings from continuing operations..................  $     5.64   $     7.63   $     1.43
Earnings (loss) from discontinued operations.........           -            -        (0.01)
Cumulative effect of change in accounting principle..           -        (0.01)           -
                                                       ----------   ----------   ----------
Net earnings.........................................  $     5.64   $     7.62   $     1.42
                                                       ==========   ==========   ==========
</TABLE>

     At December 31, 2006 and 2005, there were 14,639,312 and 14,614,097
shares, respectively, of our common stock outstanding.

     In 2007, we may contribute newly issued shares of our common stock to
fund our 401(k) plan supplemental contribution for the year ended December
31, 2006. We have not yet determined if we will make this contribution in
shares of our stock and, if we do, the number of shares to contribute. In
March 2006, we contributed 25,115 newly issued shares of our common stock
to fund our 401(k) plan discretionary contribution for the year ended
December 31, 2005.

     As discussed in Note 8, we issued 1,000,000 shares in the first
quarter of 2005 to redeem a portion of our outstanding debt. We also
issued 1,000,000 shares in September 2005. The proceeds from these shares
were used for general corporate purposes.

     On December 6, 2005, we awarded 41,000 restricted shares to 39
employees, of which 2,900 restricted shares were forfeited in 2006 as a
result of employees terminating their employment with us. See Note 10 for
further information.

NOTE 16 - BUSINESS SEGMENTS:

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

                                     126


<PAGE>
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. We also operated a travel center in New Mexico until
June 19, 2003, when the travel center was sold. Our service stations sell
various grades of gasoline, diesel fuel, general merchandise, including
tobacco and alcoholic and nonalcoholic beverages, and food products to the
general public. Our refining group or our wholesale group supplies the
gasoline and diesel fuel our retail group sells. We purchase general
merchandise and food products from various suppliers. At December 31,
2006, our retail group operated 155 service stations with convenience
stores or kiosks.

WHOLESALE GROUP

     Our wholesale group consists of Phoenix Fuel and the wholesale
operations of Dial and the wholesale assets acquired from Amigo Petroleum
Company ("Amigo"). (See Note 18 for further information). Our wholesale
group primarily distributes commercial wholesale petroleum products. Our
wholesale group includes several lubricant and bulk petroleum distribution
plants, unmanned commercial fleet fueling cardlock operations, a bulk
lubricant terminal facility and a fleet of finished product and lubricant
delivery trucks. We purchase petroleum products for resale from other
refiners and marketers as well as our refining group.

OTHER

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

     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.




                                     127


<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.

     We have also restated the tables pertaining to the years ended
December 31, 2005 to conform to the current year presentation because the
results of 12 service stations that were part of the Dial acquisition are
currently reported in the results of operations pertaining to our retail
segment but were previously reported in our wholesale segment. These
restatements had no affect on our results of operations.

     Disclosures regarding our reportable segments with reconciliations to
consolidated totals are presented below.






































                                     128


<PAGE>
<TABLE>
                                                      As of and for the Year Ended December 31, 2006
                                            -------------------------------------------------------------------
                                            Refining     Retail   Wholesale           Reconciling
                                             Group       Group      Group    Other      Items     Consolidated
                                            -------------------------------------------------------------------
                                                                     (In thousands)
<S>                                         <C>         <C>       <C>         <C>       <C>         <C>
Customer net revenues:
  Finished products:
    Four Corners operations..............   $  642,099
    Yorktown operations..................    1,708,159
                                            ----------
      Total..............................   $2,350,258  $452,445  $1,109,308  $      -  $       -   $3,912,011
  Merchandise and lubricants.............            -   159,513      80,078         -          -      239,591
  Other..................................       20,569    20,809       4,927       296          -       46,601
                                            ----------  --------  ----------  --------  ---------   ----------
      Total..............................    2,370,827   632,767   1,194,313       296          -    4,198,203
                                            ----------  --------  ----------  --------  ---------   ----------
Intersegment net revenues:
  Finished products......................      482,387         -     133,137         -   (615,524)(1)        -
  Merchandise and lubricants.............            -         -         148         -       (148)(1)        -
  Other..................................       21,446         -         681         -    (22,127)(1)        -
                                            ----------  --------  ----------  --------  ---------   ----------
      Total..............................      503,833         -     133,966         -   (637,799)           -
                                            ----------  --------  ----------  --------  ---------   ----------
Total net revenues from
  continuing operations..................   $2,874,660  $632,767  $1,328,279  $    296  $(637,799)  $4,198,203
                                            ==========  ========  ==========  ========  =========   ==========
Operating income/(loss):
  Four Corners operations................   $   77,829
  Yorktown operations(2).................      (10,381)
                                            ----------
      Total operating (loss)/income
        before corporate allocation......   $   67,448  $ 16,983  $   16,805  $(32,157) $  81,280 (3)  150,359
Corporate allocation.....................      (14,758)  (10,116)     (3,724)   28,598          -            -
                                            ----------  --------  ----------  --------  ---------   ----------
  Operating income/(loss) from
    continuing operations................   $   52,690  $  6,867  $   13,081  $ (3,559) $  81,280      150,359
                                            ==========  ========  ==========  ========  =========
Interest expense.........................                                                              (19,172)
Amortization of financing costs..........                                                               (1,597)
Investment and other income..............                                                                4,555
                                                                                                    ----------
Earnings from continuing operations
  before income taxes....................                                                           $  134,145
                                                                                                    ==========
Depreciation and amortization:
  Four Corners operations................   $   16,441
  Yorktown operations....................       16,226
                                            ----------
  Depreciation and amortization from
   continuing operations.................   $   32,667  $  8,073  $    3,275  $  1,178  $      -    $   45,193
                                            ==========  ========  ==========  ========  ========    ==========
Total assets.............................   $  829,850  $141,252  $  157,513  $ 47,562  $      -    $1,176,177
Capital expenditures.....................   $  219,351  $  8,062  $    4,482  $  1,069  $      -    $  232,964

(1) These pertain to intersegment revenues that are eliminated.
(2) Excludes $82,003 of gain from insurance settlement due to the 2005 fire.
(3) Includes $82,003 of gain from insurance settlement due to the 2005 fire.
</TABLE>

                                     129


<PAGE>
<TABLE>
                                                        As of and for the Year Ended December 31, 2005 (Restated)
                                            -------------------------------------------------------------------
                                            Refining     Retail   Wholesale           Reconciling
                                             Group       Group      Group    Other      Items     Consolidated
                                            -------------------------------------------------------------------
                                                                     (In thousands)
<S>                                         <C>         <C>       <C>         <C>       <C>         <C>
Customer net revenues:
  Finished products:
    Four Corners operations..............   $  559,765
    Yorktown operations..................    1,569,057
                                            ----------
      Total..............................   $2,128,822  $346,016  $  880,474  $      -  $       -   $3,355,312
  Merchandise and lubricants.............            -   144,968      48,805         -          -      193,773
  Other..................................       12,578    17,133       1,995       455          -       32,161
                                            ----------  --------  ----------  --------  ---------   ----------
      Total..............................    2,141,400   508,117     931,274       455          -    3,581,246
                                            ----------  --------  ----------  --------  ---------   ----------
Intersegment net revenues:
  Finished products......................      292,706         -      75,541         -   (368,247)(1)        -
  Merchandise and lubricants.............            -         -          19         -        (19)(1)        -
  Other..................................       19,401         -         578         -    (19,979)(1)        -
                                            ----------  --------  ----------  --------  ---------   ----------
      Total..............................      312,107         -      76,138         -   (388,245)           -
                                            ----------  --------  ----------  --------  ---------   ----------
Net revenues of continuing operations....   $2,453,507  $508,117  $1,007,412  $    455  $(388,245)  $3,581,246
                                            ==========  ========  ==========  ========  =========   ==========
Operating income (loss):
  Four Corners operations................   $   81,517
  Yorktown operations....................      113,783
                                            ----------
    Total operating income (loss)
      before corporate allocation........   $  195,300  $ 13,563  $   19,200  $(31,098) $   2,701   $  199,666
Corporate allocation.....................      (14,941)   (9,807)     (4,157)   28,905          -            -
                                            ----------  --------  ----------  --------  ---------   ----------
Total operating income (loss)
  after corporate allocation.............      180,359     3,756      15,043    (2,193)     2,701      199,666
Discontinued operations loss/(gain)......            -        (2)          -         -        (22)         (24
                                            ----------  --------  ----------  --------  ---------   ----------
Operating income (loss) from
  continuing operations..................   $  180,359  $  3,754  $   15,043  $ (2,193) $   2,679      199,642
                                            ==========  ========  ==========  ========  =========
Interest expense.........................                                                              (24,485)
Costs associated with early
  debt extinguishment....................                                                               (2,082)
Amortization and write-offs of
  financing costs........................                                                               (2,797)
Interest and investment income...........                                                                2,799
                                                                                                    ----------
Earnings from continuing operations
  before income taxes....................                                                           $  173,077
                                                                                                    ==========
Depreciation and amortization:
  Four Corners operations................   $   16,534
  Yorktown operations....................       10,513
                                            ----------
  Depreciation and amortization from
   continuing operations.................   $   27,047  $ 10,171  $    2,265  $    797  $       -   $   40,280
Total assets.............................   $  553,051  $103,297  $  150,545  $177,579  $       -   $  984,472
Capital expenditures.....................   $   62,293  $  4,719  $    2,091  $  1,556  $       -   $   70,659

(1) These pertain to intersegment revenues that are eliminated.
</TABLE>

                                     130


<PAGE>
<TABLE>
                                                      As of and for the Year Ended December 31, 2004
                                            -------------------------------------------------------------------
                                            Refining     Retail   Wholesale           Reconciling
                                             Group       Group      Group    Other      Items     Consolidated
                                            -------------------------------------------------------------------
                                                                     (In thousands)
<S>                                         <C>         <C>       <C>       <C>       <C>         <C>
Customer net revenues:
  Finished products:
    Four Corners operations..............   $  423,397
    Yorktown operations..................    1,074,536
                                            ----------
      Total..............................   $1,497,933  $233,056  $584,903  $      -  $       -   $2,315,892
  Merchandise and lubricants.............            -   134,012    32,510         -          -      166,522
  Other..................................       11,843    15,119     1,684       529          -       29,175
                                            ----------  --------  --------  --------  ---------   ----------
      Total..............................    1,509,776   382,187   619,097       529          -    2,511,589
                                            ----------  --------  --------  --------  ---------   ----------
Intersegment net revenues:
  Finished products......................      205,842         -    61,478         -   (267,320)(1)        -
  Other..................................       15,652         -         -         -    (15,652)(1)        -
                                            ----------  --------  --------  --------  ---------   ----------
      Total..............................      221,494         -    61,478         -   (282,972)           -
                                            ----------  --------  --------  --------  ---------   ----------
Net revenues of continuing operations....   $1,731,270  $382,187  $680,575  $    529  $(282,972)  $2,511,589
                                            ==========  ========  ========  ========  =========   ==========
Operating income (loss):
  Four Corners operations................   $   30,914
  Yorktown operations....................       52,752
                                            ----------
    Total operating income (loss)
      before corporate allocation........   $   83,666  $  6,688  $ 10,486  $(26,325) $   3,775   $   78,290
Corporate allocation.....................      (13,069)   (7,804)   (2,388)   23,261          -            -
                                            ----------  --------  --------  --------  ---------   ----------
Total operating income (loss)
  after corporate allocation.............       70,597    (1,116)    8,098    (3,064)     3,775       78,290
Discontinued operations loss/(gain)......            -       218         -         -        (28)         190
                                            ----------  --------  --------  --------  ---------   ----------
Operating income (loss) from
  continuing operations..................   $   70,597  $   (898) $  8,098  $ (3,064) $   3,747       78,480
                                            ==========  ========  ========  ========  =========
Interest expense.........................                                                            (32,907)
Costs associated with early
  debt extinguishment....................                                                            (10,564)
Amortization and write-offs of
  financing costs........................                                                             (8,341)
Interest and investment income...........                                                                354
                                                                                                  ----------
Earnings from continuing operations
  before income taxes....................                                                         $   27,022
                                                                                                  ==========
Depreciation and amortization:
  Four Corners operations................   $   16,191
  Yorktown operations....................        9,328
                                            ----------
    Total................................   $   25,519  $  9,186  $  1,614  $    879  $       -   $   37,198
  Less discontinued operations...........            -       (93)        -         -          -          (93)
                                            ----------  --------  --------  --------  ---------   ----------
  Depreciation and amortization from
   continuing operations.................   $   25,519  $  9,093  $  1,614  $    879  $       -   $   37,105
Total assets.............................   $  474,984  $103,786  $ 73,467  $ 50,169  $       -   $  702,406
Capital expenditures.....................   $   50,609  $  5,835  $  1,707  $    520  $       -   $   58,671
Yorktown refinery acquisition
  contingent payment.....................   $   16,146  $      -  $      -  $      -  $       -   $   16,146

(1) These pertain to intersegment revenues that are eliminated.
</TABLE>

                                     131
<PAGE>
NOTE 17 - COMMITMENTS AND CONTINGENCIES:

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

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

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

ENVIRONMENTAL AND LITIGATION ACCRUALS

     We expense or capitalize environmental expenditures depending on the
circumstances:

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

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

     Under circumstances in which environmental assessments and/or
remedial efforts are anticipated and related to past events, we accrue for




                                     132


<PAGE>
the liability if associated costs are probable and can be reasonably
estimated. We record liabilities for litigation matters when it is
probable that the outcome of litigation will be adverse and damages can be
reasonably estimated.

     We do not accrue for future environmental expenditures associated
with:

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

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

     -  groundwater monitoring; or

     -  capital projects.

     Expenditures for these matters are capitalized or expensed when
incurred.

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

     As of December 31, 2006 and 2005, we had environmental liability
accruals of approximately $3,991,000 and $4,941,000, respectively, which
are summarized below, and litigation accruals in the aggregate of
approximately $185,000 and $990,000, respectively. Environmental accruals
are recorded in the current and long-term sections of our Consolidated
Balance Sheets. Litigation accruals are recorded in the current section of
our Consolidated Balance Sheets.

<TABLE>
                                As of                         As of    Increase/              As of
                               12/31/04  Increase  Payments  12/31/05  (Decrease)  Payments  12/31/06
                               --------  --------  --------  --------  ----------  --------  --------
                                                         (In thousands)
<S>                            <C>       <C>       <C>       <C>        <C>        <C>        <C>
Yorktown Refinery............  $  4,531  $     57  $ (1,048) $  3,540   $      -   $   (785)  $ 2,755
Farmington Refinery..........       570         -         -       570          -          -       570
Bloomfield Refinery..........       251         -       (22)      229          -          -       229
Bloomfield - River Terrace...         -       259      (213)       46         (6)       (40)        -
West Outfall - Bloomfield....        44         -       (44)        -          -          -         -
Bloomfield Tank Farm
  (Old Terminal).............        53         -       (11)       42          -        (12)       30
Other Projects...............       707       306      (499)      514         88       (195)      407
                               --------  --------  --------  --------   --------   --------   -------
Totals.......................  $  6,156  $    622  $ (1,837) $  4,941   $     82   $ (1,032)  $ 3,991
                               ========  ========  ========  ========   ========   ========   =======
</TABLE>

                                     133


<PAGE>
     Approximately $3,584,000 of the December 31, 2006 accrual is for the
following projects discussed below:

     -  $2,755,000 and $229,000, respectively, for environmental
        obligations assumed in connection with our acquisitions of the
        Yorktown refinery and the Bloomfield refinery;

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

     -  $30,000 for remediation of hydrocarbon contamination on and
        adjacent to the 5.5 acres that we own in Bloomfield, New Mexico.

     The remaining $407,000 of the accrual relates to:

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

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

     -  amounts for smaller remediation projects.

YORKTOWN ENVIRONMENTAL LIABILITIES

     We assumed certain liabilities and obligations in connection with our
purchase of the Yorktown refinery from BP Corporation North America Inc.
and BP Products North America Inc. (collectively "BP"). BP 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. We only have limited
indemnification rights against BP. Certain environmental matters relating
to the Yorktown refinery are discussed below.

     BP 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



                                     134


<PAGE>
when the $5,000,000 or $10,000,000 has been reached. After the $5,000,000
or $10,000,000 thresholds have 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 were
required to 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.

YORKTOWN 1991 ORDER

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

     Our most current estimate of expenditures associated with the EPA
order is between $30,000,000 ($22,500,000 of which we believe is subject
to reimbursement by BP) and $40,000,000 ($32,500,000 of which we believe
is subject to reimbursement by BP). We anticipate that these expenditures
will be incurred over a period of approximately 35 years from August 2006.
We believe that between approximately $12,000,000 and $16,000,000 of this
amount will be incurred over an initial four-year period, and additional
expenditures of between approximately $12,000,000 and $16,000,000 will be
incurred over the following four-year period, with the remainder
thereafter. These estimates assume that EPA will agree with the design and
specifications of our cleanup plan. These estimates also could change as a
result of factors such as changes in costs of labor and materials. We
currently have $2,755,000 recorded as an environmental liability for this
project, which reflects our belief that BP is responsible for reimbursing
us for expenditures on this project that exceed this amount and also
reflects expenditures previously incurred in connection with this matter.
BP's total liability for reimbursement under the refinery purchase
agreement, including liability for environmental claims, is limited to
$35,000,000.

     As part of the consent order cleanup plan, the facility's underground
sewer system will be cleaned, inspected and repaired as needed. This sewer
work is scheduled to begin during the construction of the corrective
action management unit and related remediation work and is included in our
associated cost estimate. We anticipate that construction of the
corrective action management unit and related remediation work, as well as
sewer system inspection and repair, will be completed approximately seven
to eight years after EPA approves our cleanup plan and authorizes its
implementation.

FARMINGTON REFINERY MATTERS

     In 1973, we constructed the Farmington refinery that we operated
until 1982. In 1985, we became aware of soil and shallow groundwater


                                     135


<PAGE>
contamination at this property. Our environmental consulting firms
identified several areas of contamination in the soils and shallow
groundwater underlying the Farmington property. One of our consultants
indicated that contamination attributable to past operations at the
Farmington property has migrated off the refinery property, including a
hydrocarbon plume that appears to extend no more than 1,800 feet south of
the refinery property. Our remediation activities are ongoing under the
supervision of the New Mexico Oil Conservation Division ("OCD"), although
OCD has not issued a cleanup order. As of December 31, 2006, we had
$570,000 recorded as an environmental liability for this project.

BLOOMFIELD REFINERY ENVIRONMENTAL OBLIGATIONS

     In connection with the acquisition of the Bloomfield refinery, we
assumed certain environmental obligations including the seller's
obligations under an administrative order issued by EPA in 1992 pursuant
to the Resource Conservation and Recovery Act. The order required the
seller 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 the
Hazardous Waste Bureau of the New Mexico Environment Department ("NMED").
In December 2002, NMED and OCD approved a cleanup plan for the refinery,
subject to various actions to be taken by us to implement the plan. We
believe some of the requirements of the draft NMED order discussed below
under the caption "Bloomfield Refinery - NMED Draft Order" may duplicate
some of the requirements of the 1992 order. We further believe EPA will
withdraw the 1992 order at the time NMED issues a final order. We
currently estimate that remaining remediation expenses associated with the
cleanup plan will be approximately $229,000, and that these expenses will
be incurred through approximately 2018. As of December 31, 2006, we had
$229,000 recorded as an environmental liability for this project.

BLOOMFIELD REFINERY - WEST OUTFALL AND RIVER TERRACE

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

     With the approval of OCD, we installed sheet piling in an area of the
Bloomfield refinery known as the river terrace in 1999 to block migration
of groundwater contaminants. Monitoring wells also were installed, with
annual sampling results submitted to OCD. In connection with the
construction of the underground barrier at the west outfall, OCD required
more investigation of elevated hydrocarbon levels in the river terrace
area. As a result of this investigation, in August 2005, OCD approved a



                                     136


<PAGE>
bioventing plan to reduce hydrocarbon levels in this area. Bioventing
involves pumping air into the soil to stimulate bacterial activity, which
in turn consumes hydrocarbons. Construction of the bioventing system was
completed in January 2006. Since all planned capital improvements have
been completed, we currently do not have any amount recorded as an
environmental liability for this project.

BLOOMFIELD TANK FARM (OLD TERMINAL)

     We have discovered hydrocarbon contamination adjacent to a 55,000
barrel crude oil storage tank that was located in Bloomfield, New Mexico.
We believe that all or a portion of the tank and the 5.5 acres we own on
which the tank was located may have been a part of a refinery, owned by
various other parties, that, to our knowledge, ceased operations in the
early 1960s. Our remediation plan was approved by OCD in 2002. We will
continue remediation until natural attenuation has completed the process
of groundwater remediation. As of December 31, 2006, we had $30,000
recorded as an environmental liability for this project.

FOUR CORNERS REFINERIES - SETTLEMENT AGREEMENTS

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

     In August 2005, we paid fines of $100,000 to EPA and $150,000 to
NMED. We also agreed to undertake certain environmentally beneficial
projects known as supplemental environmental projects at a cost of up to
$600,000.

     The administrative settlement is similar to the judicial consent
decrees EPA has entered with other refiners as part of its national
refinery enforcement program and requires that we do the following:

     -  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

     -  adopt strategies to ensure compliance with benzene waste
        requirements.

     At the time of this settlement in July 2005, we estimated the
compliance costs necessary for satisfying the requirements of the
equipment modifications to our Four Corners refineries as between
approximately $10,000,000 and $18,000,000, spread over a period of four to
seven years following the date of the settlement. We have spent




                                     137


<PAGE>
approximately $600,000 through 2006 for equipment modifications required
by this settlement. We anticipate that the majority of the remaining costs
will be incurred in the latter portion of the four to seven year phase-in
period. In addition, we estimated that on-going annual operating costs
associated with these modifications could cost approximately $4,000,000
per year. These amounts were the estimated upper limits for both capital
expenditures and annual operating costs. Undertaking the upper limit for
one type of expenditure could result in our having to spend less than the
upper limit for the other.

     These estimated compliance costs were the best estimates available at
the time of the July 2005 settlement. The costs that we actually incur,
however, may be substantially higher than the estimates due to, among
other things, changes in costs of labor, materials, and chemical
additives, and changes in cost efficiencies of technologies. In light of
these factors, we believe more accurate estimates of compliance costs will
not be available until we are closer in time to implementation of the
required projects and have further considered all operational options. The
costs associated with our settlement also could be subject to reduction in
the event of the temporary, partial or permanent discontinuance of
operations at one or both facilities. Our settlement does not require us
to undertake soil removal or similar cleanup activities, and accordingly,
we have not recorded an environmental liability for this matter and will
capitalize or expense expenditures when incurred.

BLOOMFIELD REFINERY - OCD COMPLIANCE ORDER

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

BLOOMFIELD REFINERY - EPA COMPLIANCE ORDER

     In October 2005, we received an Administrative Compliance Order from
EPA in connection with a compliance evaluation inspection at the
Bloomfield refinery in 2000 and a follow-up inspection in early 2001. We
send waste water from the refinery's process units through an oil-water




                                     138


<PAGE>
separator, a series of aeration ponds that continue the treatment and
processing of oily water, and a series of evaporation ponds, before the
water is injected into a permitted deep well. EPA alleged that benzene
levels in the aeration ponds exceed permissible RCRA levels. EPA also
alleged that we failed to make a RCRA hazardous waste determination in
connection with wastewater going into the aeration ponds. In May 2006, we
reached a settlement with EPA in the form of a consent agreement and paid
a civil penalty of $75,000. The settlement requires that we make equipment
modifications to reduce benzene levels in the wastewater coming from the
refinery's process units. We currently estimate that we will incur capital
expenditures of between approximately $3,200,000 and $3,500,000 to comply
with the settlement. We spent approximately $100,000 for this project in
2006, with the remainder of the expenditures to be incurred in 2007. Since
the settlement does not require us to undertake any cleanup activities, we
have not recorded an environmental liability for this matter.

BLOOMFIELD REFINERY - NMED DRAFT ORDER

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

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

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

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

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

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

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

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



                                     139


<PAGE>
MTBE LITIGATION

     Lawsuits have been filed in numerous states alleging that MTBE, a
blendstock used by many refiners in producing specially formulated
gasoline, has contaminated water supplies. MTBE contamination primarily
results from leaking underground or aboveground storage tanks. The suits
allege MTBE contamination of water supplies owned and operated by the
plaintiffs, who are generally water providers or governmental entities.
The plaintiffs assert that numerous refiners, distributors, or sellers of
MTBE and/or gasoline containing MTBE are responsible for the
contamination. The plaintiffs also claim that the defendants are jointly
and severally liable for compensatory and punitive damages, costs, and
interest. Joint and several liability means that each defendant may be
liable for all of the damages even though that party was responsible for
only a small part of the damages. We are a defendant in approximately 30
of these MTBE lawsuits pending in Virginia, Connecticut, Massachusetts,
New Hampshire, New York, New Jersey, Pennsylvania, and New Mexico. Due to
our historical operations in New Mexico, including retail sites, we
potentially have greater risk in connection with the New Mexico litigation
than in the litigation in the Eastern states where we have only operated
since 2002 and have no retail operations. We intend to vigorously defend
these lawsuits. Since we have yet to determine if a liability is probable,
and we cannot reasonably estimate the amount of any loss associated with
this matter, we have not recorded a liability for these lawsuits.

CINIZA REFINERY FIRE INCIDENT (DECEMBER 2006)

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

     We currently expect that repairs to, and/or replacement of, the
units, instrumentation, and cabling damaged by the fire will cost
approximately $6,700,000. We do not anticipate receiving any insurance
proceeds related to these repairs as the cost of the repairs has not
exceeded the associated $10,000,000 deductible of our current property
insurance coverage. In addition, we do not anticipate making a claim under
our business interruption insurance. As of December 31, 2006, we wrote-off
approximately $875,000 of property, plant and equipment to loss on write-
down of assets.

CINIZA REFINERY FIRE INCIDENT (OCTOBER 2006)

     On October 5, 2006, a pump failure in the alkylation unit at our
Ciniza refinery resulted in a fire at the refinery. The fire caused damage




                                     140


<PAGE>
to the alkylation unit and an associated unit. The alkylation unit
produces high octane blending stock for gasoline. Repairs to the affected
units cost approximately $6,400,000 and the unit was restarted in mid-
December of 2006. We have property insurance coverage with a $1,000,000
deductible that should cover a significant portion of the costs of
repairing the unit. We do not anticipate making a claim under our business
interruption insurance. As of December 31, 2006, we wrote-off
approximately $392,000 of property, plant and equipment to accounts
receivable in connection with the fire.

YORKTOWN REFINERY INCIDENT (2006)

     On September 30, 2006, a fire occurred at our Yorktown refinery in
the processing unit required to produce ultra low sulfur diesel fuel.
Repairs to the unit cost approximately $12,000,000 and were completed in
January 2007. The unit was returned to operation in February 2007. Until
the unit became operational, we sold more heating oil than otherwise would
be the case, which was a less profitable product than ultra low sulfur
diesel.

     We have property insurance coverage with a $1,000,000 deductible that
should cover a significant portion of the costs of repairing the ultra low
sulfur diesel unit. We also have business interruption insurance coverage
that should cover a significant portion of the financial impact of the
fire after the policy's 45-day waiting period is exceeded. As of December
31, 2006, we wrote-off approximately $5,000,000 of property, plant and
equipment to accounts receivable in connection with the fire.

YORKTOWN REFINERY INCIDENT (2005)

     On November 25, 2005, a fire occurred at our Yorktown refinery.
Damage was primarily done to the gas plant that supports the fluid
catalytic converter ("FCC"), a unit that alters the molecular composition
of materials sent into the unit in order to produce gasoline, diesel, fuel
oil, heating oil, and other products. Some piping and instrumentation
cables for other operating units in the refinery were also damaged by the
fire. Repairs related to this fire were completed in April 2006.

     Our property insurance covered a significant portion of the costs of
repairing the Yorktown refinery and our business interruption insurance
reimbursed us for a portion of the financial impact of the fire. We
received $89,000,000 of insurance proceeds consisting of $27,700,000 for
property claims and $61,300,000 for business interruption claims. For the
year ended December 31, 2006, we recorded a gain of $82,003,000 as a
result of insurance recoveries related to the fire. No more proceeds will
be received as all of our claims have been resolved with our insurance
carriers.

CLASS ACTION COMPLAINT

     On November 22, 2006, Timothy Bisset filed a class action complaint
in Arizona state court against us, our directors and Western in connection



                                     141


<PAGE>
with our merger. Among other things, Mr. Bisset alleges that we and our
directors breached our fiduciary duty in voting to amend the Plan of
Merger on November 12, 2006 to provide for, among other things, a lower
acquisition price of $77.00 per share. Mr. Bisset also alleges that
Western aided and abetted this breach of fiduciary duty. Among other
things, Mr. Bisset alleges that he and other public stockholders of our
common stock are entitled to enjoin the proposed amended transaction or,
alternatively, to recover damages in the event the transaction is
completed.

     We believe that amending our merger agreement was in the best
interest of our stockholders. Since the original merger was announced on
August 28, 2006, a number of unanticipated events occurred that resulted
in a dispute between us and Western regarding the merger. Western asserted
that fires at our refineries, changes in our insurance program, increases
in our anticipated capital expenditures, other regulatory issues and
related costs of compliance, and other events and changes constituted a
"material adverse effect" under the merger agreement and also violated
various representations, warranties and covenants in the merger agreement,
thereby giving Western the right to terminate the merger transaction in
its entirety. After extensive consideration, we concluded that the
interests of our stockholders were best served by avoiding litigation over
this dispute by amending the merger agreement in a way that reduced the
merger consideration but at the same time eliminated virtually all of
Western's closing conditions and allowed us a 30-day "go-shop" period to
see if we could obtain a better price for our stockholders. Accordingly,
we think Mr. Bisset's lawsuit is without merit and intend to vigorously
defend it.

NOTE 18 - ACQUISITIONS:

     On August 1, 2005, we acquired an idle crude oil pipeline running
from Jal, New Mexico to Bisti, New Mexico and related assets from Texas-
New Mexico Pipe Line Company. This pipeline is connected to our existing
pipeline network that directly supplies crude oil to the Bloomfield and
Ciniza refineries. We have begun testing the pipeline and taking other
actions related to placing it in service. Unless currently unanticipated
obstacles are encountered, we anticipate the pipeline will become
operational in the second quarter of 2007 with crude oil arriving at the
refineries before the end of the second quarter.

     On July 12, 2005, we acquired 100% of the common shares of Dial. We
funded this acquisition with cash on hand. Dial is a wholesale distributor
of gasoline, diesel and lubricants in the Four Corners area of the
Southwest. Dial also owns and operates 12 service stations/convenience
stores. Dial's assets include bulk petroleum distribution plants, cardlock
fueling locations and a fleet of truck transports. The acquisition has
been accounted for using the purchase method of accounting whereby the
total purchase price has been allocated to tangible and intangible assets
acquired and liabilities assumed based on the fair market values on the
date of acquisition, and goodwill of $9,707,000 was recorded as a result
of this acquisition. The pro forma effect of the acquisition on Giant's
results of operations is immaterial.


                                     142


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

     In August 2006, we acquired certain assets from Amigo. We funded this
acquisition with cash on hand. These acquired assets include 25
convenience stores, two bulk petroleum distribution plants, and a
transportation fleet. The acquisition is accounted for using the purchase
method of accounting whereby the total purchase price is preliminarily
allocated to tangible and intangible assets acquired based on the fair
market values on the date of acquisition. The pro forma effect of the
acquisition on Giant's results of operations is immaterial.

     On January 2, 2007, we acquired 100% of the common shares of Empire
Oil Co. ("Empire"). We funded this acquisition with cash on hand. Empire
is a wholesale distributor of gasoline, diesel, and lubricants in Southern
California. Empire's assets include a bulk petroleum distribution plant,
cardlock fueling locations, and a fleet of truck transports. The
acquisition has been accounted for using the purchase method of accounting
whereby the total purchase price has been allocated to tangible and
intangible assets acquired and liabilities assumed based on the fair
market values on the date of acquisition. The pro forma effect of the
acquisition on Giant's results of operations in immaterial.



























                                     143


<PAGE>
NOTE 19 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
                                                      Year Ended December 31, 2006
                                           -------------------------------------------------
                                                               Quarter
                                           -------------------------------------------------
                                             First        Second       Third        Fourth
                                           ----------   ----------   ----------   ----------
                                                  (In thousands, except per share data)
<S>                                        <C>          <C>          <C>          <C>
Continuing Operations:

Net revenues............................   $  863,025   $1,145,279   $1,165,948   $1,023,951
                                           ----------   ----------   ----------   ----------
Cost of products sold (excluding
  depreciation and amortization)........      810,552    1,016,706    1,052,131      922,173
Operating expenses......................       52,688       55,322       60,609       64,229
Depreciation and amortization...........        9,567       10,969       11,972       12,685
Selling, general and administrative
  expenses..............................       10,006       13,205       12,836       13,474
(Gain) loss on the disposal/write-
  down of assets........................         (640)          49         (450)       1,764
Gain from insurance settlement due to
  2005 Yorktown fire....................       (2,853)     (33,100)     (46,050)           -
                                           ----------   ----------   ----------   ----------
Operating (loss)/income.................   $  (16,295)  $   82,128   $   74,900   $    9,626
                                           ==========   ==========   ==========   ==========
Net (loss)/earnings.....................   $  (12,350)  $   49,238   $   44,043   $    1,820
                                           ==========   ==========   ==========   ==========
Net earnings per common share
  - basic...............................   $    (0.85)  $     3.37   $     3.02   $     0.12
                                           ==========   ==========   ==========   ==========
Net earnings per common share
  - assuming dilution...................   $    (0.85)  $     3.35   $     3.00   $     0.12
                                           ==========   ==========   ==========   ==========
</TABLE>

















                                     144


<PAGE>
<TABLE>
<CAPTION>
                                                      Year Ended December 31, 2005
                                           -------------------------------------------------
                                                               Quarter
                                           -------------------------------------------------
                                             First        Second       Third        Fourth
                                           ----------   ----------   ----------   ----------
                                                  (In thousands, except per share data)
<S>                                        <C>          <C>          <C>          <C>
Continuing Operations:

Net revenues............................   $  711,726   $  863,357   $1,085,225   $  920,938
                                           ----------   ----------   ----------   ----------
Cost of products sold (excluding
  depreciation and amortization)........      625,790      748,883      920,408      798,110
Operating expenses......................       46,244       48,744       53,901       56,750
Depreciation and amortization...........       10,970        9,492        9,973        9,845
Selling, general and administrative
  expenses..............................        7,799       11,843       15,431       10,000
(Gain) loss on the disposal/write-
  down of assets........................          (13)        (207)       1,055          174
Gain from insurance settlement
  of fire incident......................       (3,492)        (196)           -            -
                                           ----------   ----------   ----------   ----------
Operating income........................   $   24,428   $   44,798   $   84,457   $   45,959
                                           ==========   ==========   ==========   ==========
Net earnings............................   $   10,058   $   20,538   $   46,640   $   26,695
Net earnings per common share
  - basic...............................   $     0.81   $     1.53   $     3.43   $     1.84
Net earnings per common share
  - assuming dilution...................   $     0.80   $     1.51   $     3.38   $     1.83

Discontinued Operations:
Net revenues............................   $        -   $        -   $        -   $        -
                                           ==========   ==========   ==========   ==========
(Loss) income from operations...........   $      (11)  $       13   $        -   $        -
Gain (loss) on disposal.................            -           22            -            -
Loss on asset write-downs...............            -            -            -            -
                                           ----------   ----------   ----------   ----------
Operating earnings (loss)...............   $      (11)  $       35   $        -   $        -
                                           ==========   ==========   ==========   ==========
Net (loss) earnings.....................   $       (7)  $       22   $        -   $        -
Net earnings (loss) per common share
  - basic...............................   $        -   $        -   $        -   $        -
Net earnings (loss) per common share
  - assuming dilution...................   $        -   $        -   $        -   $        -

Cumulative effect of change in
accounting principle:
Net loss................................   $        -   $        -   $        -   $      (68)
Net loss per common share
  - basic...............................   $        -   $        -   $        -   $    (0.01)
Net loss per common share
  - assuming dilution...................   $        -   $        -   $        -   $    (0.01)
</TABLE>


                                     145


<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

(a)  Evaluation of Disclosure Controls and Procedures

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

(b)  Change in Internal Control Over Financial Reporting

     No change in our internal control over financial reporting occurred
during our most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over
financial reporting.

(c)  Management Report on Internal Control Over Financial Reporting

     Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Our internal control
system was designed to provide reasonable assurance to our management and
board of directors regarding the preparation and fair presentation of
published financial statements.

     All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.

     Our management assessed the effectiveness of our internal control
over financial reporting as of December 31, 2006. In making this
assessment, we used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO") in Internal Control-
Integrated Framework. Based on our assessment, we believe that, as of
December 31, 2006, our internal control over financial reporting is
effective based on those criteria.

     Our registered public accounting firm, Deloitte & Touche LLP has
issued a report on our assessment of our internal control over financial
reporting.







                                     146


<PAGE>
(d)  INDEPENDENT AUDITORS REPORT ON OUR ASSESSMENT OF OUR INTERNAL CONTROL
     OVER FINANCIAL REPORTING.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Giant Industries, Inc.
Scottsdale, Arizona

We have audited management's assessment, included in the accompanying
Management Report on Internal Control over Financial Reporting, that Giant
Industries, Inc. and subsidiaries (the "Company") maintained effective
internal control over financial reporting as of December 31, 2006, based
on criteria established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission. The
Company's management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on management's assessment and an
opinion on the effectiveness of the Company's internal control over
financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, evaluating
management's assessment, testing and evaluating the design and operating
effectiveness of internal control, and performing such other procedures as
we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a process
designed by, or under the supervision of, the company's principal
executive and principal financial officers, or persons performing similar
functions, and effected by the company's board of directors, management,
and other personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles. A company's internal control over financial
reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company's assets that
could have a material effect on the financial statements.



                                     147


<PAGE>
Because of the inherent limitations of internal control over financial
reporting, including the possibility of collusion or improper management
override of controls, material misstatements due to error or fraud may not
be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial
reporting to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

In our opinion, management's assessment that the Company maintained
effective internal control over financial reporting as of December 31,
2006, is fairly stated, in all material respects, based on the criteria
established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Also in
our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2006, based
on the criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway
Commission.

We have also audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated
financial statements and financial statement schedule as of and for the
year ended December 31, 2006 of the Company and our reports dated March 1,
2007 expressed an unqualified opinion on those financial statements and
financial statement schedule and included an explanatory paragraph
regarding the Company's 2005 change in its method of accounting for
conditional asset retirement obligations to comply with Financial
Accounting Standards Board ("FASB") Interpretation 47, Accounting for
Conditional Asset Retirement Obligations, and the Company's 2006 change in
its method of accounting for pension and post-retirement obligations to
comply with Statement of Financial Accounting Standards No. 158,
Employer's Accounting for Defined Benefit Plans and Other Post-retirement
Benefits, an Amendment of FASB Statements No. 87, 88, 106, and 132(R).

/s/ Deloitte & Touche LLP

Phoenix, Arizona
March 1, 2007


ITEM 9B.  OTHER INFORMATION.

     Not applicable.











                                     148


<PAGE>
                                 PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

     Our directors and executive officers as of March 1, 2007 are listed
below:

<TABLE>
                                                           Executive
                                                           Officer or
Name                  Age   Position                     Director Since   Term(1)
----                  ---   --------                     --------------   -------
<S>                   <C>   <C>                          <C>              <C>
Fred L. Holliger....  59    Director, Chairman and       October 1989      II 2009
                            Chief Executive Officer

Brooks J. Klimley...  49    Director                     August 2002       II 2009

George M. Rapport...  63    Director                     September 2001     I 2008

Donald M. Wilkinson.  69    Director                     September 2003     I 2008

Larry L. DeRoin.....  65    Director                     June 2002        III 2007

Morgan Gust.........  59    President and President      August 1990
                            of Refining Strategic
                            Business Unit

Mark B. Cox.........  48    Executive Vice President,    February 1999
                            Treasurer, Chief Financial
                            Officer, and Assistant
                            Secretary

Kim H. Bullerdick...  53    Senior Vice President,       February 1999
                            General Counsel, and
                            Secretary

Jack W. Keller......  62    President of Wholesale       February 1999
                            Strategic Business Unit

Robert C. Sprouse...  50    Executive Vice President     April 2003
                            of our Retail Strategic
                            Business Unit

S. Leland Gould.....  50    Executive Vice President,    March 2002
                            Governmental Affairs and
                            Real Estate

Natalie R. Dopp.....  35    Vice President, Human        April 2004
                            Resources

Jeff D. Perry.......  51    Chief Information Officer    April 2006
</TABLE>




                                     149


<PAGE>
-------
(1) Each director's term of office expires in the year set forth opposite
    his name above. Each officer serves until his or her successor is
    chosen and qualified or until his or her earlier resignation or
    removal.

     Fred L. Holliger has served as one of our directors since we went
public in October 1989 and as our chairman of the board and chief
executive officer since March 2002. From October 1989 to March 2002, Mr.
Holliger was our executive vice president and chief operating officer. Mr.
Holliger joined us as senior vice president, and president of our refining
division, in February 1989.

     Brooks J. Klimley has served as one of our directors since August
2002. Mr. Klimley also serves as a member of the audit committee and the
compensation committee and is chairman of the corporate governance and
nominating committee. Since 2005, Mr. Klimley has served as the President
of CIT Energy, an energy finance and advisory business. In this role, Mr.
Klimley is responsible for refining CIT's strategy to expand client
relationships and product offerings to support the global financing needs
of companies throughout the energy sector. From 2001 to 2004, Mr. Klimley
was a managing director at Citigroup Global Markets Inc. and its
predecessor firm Salomon Smith Barney, Inc., and he was the co-head of the
diversified industrials group. From 1998 to 2001, Mr. Klimley was senior
managing director and co-head of the natural resources group for Bear,
Stearns & Co., Inc., where he led origination and execution teams covering
a broad range of natural resources companies.

     George M. Rapport has served as one of our directors since September
2001. Mr. Rapport also serves as chairman of the audit committee and as a
member of the compensation committee and the corporate governance and
nominating committee. He currently is a director and the chief financial
officer for Knightsbridge Petroleum (UK) Ltd., an international oil and
gas exploration and production company, and the finance director for
Knightsbridge Chemicals Limited, an international chemicals manufacturing
company. Both of these companies are subsidiaries of Knightsbridge
Investments Limited ("Knightsbridge"), of which Mr. Rapport is a
shareholder. In August 2004, Knightsbridge acquired Nimir Petroleum
Limited ("Nimir"), an international oil and gas exploration and production
company. From August 2001 to October 2004, Mr. Rapport was the senior vice
president and chief financial officer of Nimir. From May 2001 to August
2001, Mr. Rapport was a financial advisor to Nimir. From 1993 to May 2001,
he was a managing director - private banking for Chase Manhattan Bank in
New York.

     Donald M. Wilkinson has served as one of our directors since
September 2003. Mr. Wilkinson also serves as a member of the audit
committee, the compensation committee, and the corporate governance and
nominating committee. Since 1984, Mr. Wilkinson has been the chairman and
chief investment officer of Wilkinson O'Grady & Co., Inc., a global asset
management firm located in New York City that he co-founded in 1972. Mr.
Wilkinson is a member of the Board of Visitors of the Virginia Military
Institute and is a former chairman of the Board of Trustees for the Darden
School of Business Management at the University of Virginia.

                                     150


<PAGE>
     Larry L. DeRoin has served as one of our directors since June 2002.
Mr. DeRoin also serves as a member of the audit committee and the
corporate governance and nominating committee and is chairman of the
compensation committee. Since September 2000, Mr. DeRoin has been the
president of DeRoin Management, Inc., which provides investment,
management and consulting services. From 1993 to September 2000, Mr.
DeRoin was chairman and chief executive officer of Northern Border
Partners, L.P., chairman of the management committee for Northern Border
Pipeline Co., and president of Northern Plains Natural Gas Co.

     Morgan Gust has served as our president since March 2002 and as the
president of our refining strategic business unit since May 2006. From
February 1999 to March 2002, Mr. Gust served as our executive vice
president. Mr. Gust joined the company in August 1990, and over the years
served in various senior management positions for us, including vice
president, vice president administration, general counsel, and corporate
secretary.

     Mark B. Cox has served as our vice president, treasurer, financial
officer and assistant secretary since December 1998. In March 2002, Mr.
Cox was named chief financial officer and in April 2004, Mr. Cox was made
executive vice president.

     Kim H. Bullerdick has served as our vice president and corporate
secretary since December 1998 and our general counsel since May 2000. In
April 2004, Mr. Bullerdick was made senior vice president. From December
1998 to May 2000, Mr. Bullerdick was our legal department director.

     Jack W. Keller has served as the president of our wholesale strategic
business unit since its formation in July 2005 following the acquisition
of Dial Oil Co. ("Dial"). The wholesale group combines the operations of
Phoenix Fuel and Dial. He also has served as the president of Phoenix Fuel
since we acquired it in June 1997 and as chief operating officer of
Phoenix Fuel since May 1998. Mr. Keller also has served as president and
chief operating officer of Dial since its acquisition.

     Robert C. Sprouse has served as executive vice president of our
retail strategic business unit since April 2003. From January 2000 to
April 2003, Mr. Sprouse served as our director of retail operations. From
1996 to January 2000, Mr. Sprouse held several management positions with
Strasburger Enterprises, Inc., a retail management consulting company.

     S. Leland Gould has served as our executive vice president,
governmental affairs and real estate since June 2002. From March 2002 to
June 2002, Mr. Gould served as our executive vice president of retail
operations. Mr. Gould joined us in August 2000 as vice president,
strategic business development. Prior to August 2000, Mr. Gould was vice
president and national sales manager for Wolf Camera, a photo retail store
chain with 800 stores nationwide. Mr. Gould also is a director and the
treasurer for the New Mexico Oil and Gas Association and is a director for
the New Mexico Petroleum Marketers Association.




                                     151


<PAGE>
     Natalie R. Dopp has served as our vice president, human resources
since September 2002. Prior to that, Ms. Dopp was responsible for our
recruiting and compensation functions. Ms. Dopp joined us in April 2000
and prior to that she was employed by Scottsdale Insurance Company, a
subsidiary of Nationwide Insurance.

     Jeff D. Perry joined us in August 2005 and initially was responsible
for all of our information technology products and services. He was named
our chief information officer in April 2006. Prior to joining us, he was
chief information officer for Three-Five Systems, Inc.


ABOUT THE BOARD OF DIRECTORS

     We currently have five members on our board of directors. In June
2006, we reduced the size of our board from six to five following the
retirement of Anthony J. Bernitsky.

     Our board of directors is divided into three classes. As of March 1,
2007, there were two class I directors (George M. Rapport and Donald M.
Wilkinson), two class II directors (Fred L. Holliger and Brooks J.
Klimley), and one class III director (Larry L. DeRoin). The term of each
class of director is three years, with the term of one class expiring at
each of our annual meetings of stockholders. The term of office of the
class III director expires at the 2007 annual meeting of stockholders.

     Our board of directors meets throughout the year on a set schedule.
The board also holds special meetings and acts by unanimous written
consent from time to time as appropriate. The non-management members of
the board and, when different individuals, the independent members of the
board periodically meet in executive session without management present.
As provided in the corporate governance guidelines adopted by the board,
the non-management directors designate the director who will preside at
the executive sessions. The non-management directors have designated Mr.
Klimley as the presiding director. He will continue to serve in that role
until such time as the non-management directors designate someone else to
serve in that role. It is anticipated that the non-management directors
will consider the designation at least once a year.

     Our board held 13 meetings during 2006. The board has established an
audit committee, a compensation committee, and a corporate governance and
nominating committee. During 2006, all incumbent directors attended 75% or
more of the aggregate of: (1) the total number of meetings of the board,
and (2) the total number of meetings of all committees on which the
director served.

     It is our policy that our board of directors should make every effort
to attend the annual meeting. Last year, all but one of our members of the
board attended the annual meeting.





                                     152


<PAGE>
INDEPENDENT DIRECTORS

     Our board has determined that it is comprised of a majority of
individuals who are independent under the rules of the New York Stock
Exchange and applicable federal law. The board has determined that the
following directors are independent: George M. Rapport, Donald M.
Wilkinson, Brooks J. Klimley and Larry L. DeRoin.

     In reaching that determination, the board affirmatively determined
that the individuals it considers independent have no material
relationship with us, either directly or as a partner, shareholder or
officer of a company that has a relationship with us. In particular, the
board determined that these individuals satisfied all of the following
standards:

     -  Neither they, nor any immediate member of their family, have ever
        been employed by us.

     -  Neither they, nor any immediate member of their family, has
        received any direct compensation from us (director and committee
        fees and pensions or other forms of deferred compensation for
        prior service were not considered compensation for this purpose;
        provided such compensation was not contingent in any way on
        continued service) in any twelve-month period within the last
        three years.

     -  Neither the director, nor any immediate family member, is employed
        by another company that makes payments to, or receives payments
        from, us for property or services in an amount which, in any of
        the last three fiscal years, exceeds $60,000.

     -  They satisfy each of the bright-line standards of the New York
        Stock Exchange that must be met if a director is to be considered
        independent.

     Our directors on the audit committee meet the following additional
two standards:

     -  They have not accepted, directly or indirectly, any consulting,
        advisory or other compensatory fee from us other than (1)
        compensation for board or committee service, or (2) fixed amounts
        of compensation under a retirement plan for prior service that is
        not contingent on continued service.

     -  They are not affiliated with us. By this we mean that the director
        does not directly, or indirectly through one or more
        intermediaries, control us, and is not controlled by, or under
        common control with, us. The director is not considered to be in
        control of us if (1) he is not the beneficial owner, directly or
        indirectly, of more than 10% of any class of our voting equity
        securities, and (2) he is not one of our executive officers.




                                     153


<PAGE>
ABOUT THE COMMITTEES OF THE BOARD OF DIRECTORS

     Our board has an audit committee, a compensation committee, and a
corporate governance and nominating committee. Each of the committees has
a written charter that may be found on our website at www.giant.com. In
addition, copies of the charters are available to all stockholders by
calling (480) 585-8888 or by writing to: Kim H. Bullerdick, Corporate
Secretary, at our corporate headquarters located at 23733 N. Scottsdale
Road, Scottsdale, AZ 85255. All of the members of each of our committees
are independent directors as required by the New York Stock Exchange
listing standards and applicable federal law. The following table presents
information about each committee.

AUDIT COMMITTEE

     The members of the committee are George M. Rapport (Chairman), Larry
L. DeRoin, Brooks J. Klimley, and Donald M. Wilkinson. The committee met
six times, either in person or by telephone, in 2006. Our board has
determined that Mr. Rapport qualifies as an "audit committee financial
expert" as that term is defined in the rules of the Securities and
Exchange Commission. Among other matters, the committee:

     -  Directly hires and replaces the independent auditors as
        appropriate.

     -  Evaluates the performance of, independence of, and pre-approves
        the services provided by, the independent auditors.

     -  Discusses the quality of our accounting principles and financial
        reporting procedures with management and our independent auditors.

     -  Reviews with management and our independent auditors our annual
        and quarterly financial statements and recommends to the board
        whether the annual financial statements should be included in our
        annual report.

     -  Oversees the internal auditing functions and controls.

     -  Established procedures for handling complaints regarding
        accounting, internal accounting controls and auditing matters,
        including procedures for the confidential, anonymous submission of
        concerns by employees regarding accounting and auditing matters.

     -  Prepares the audit committee report required by the rules of the
        Securities and Exchange Commission.

COMPENSATION COMMITTEE

     The members of the committee are Larry L. DeRoin (Chairman), Brooks
J. Klimley, George M. Rapport, and Donald M. Wilkinson. The committee met
twice, either in person or by telephone, in 2006. Among other matters, the
committee:



                                     154


<PAGE>
     -  Oversees the administration of our compensation programs.

     -  Sets the compensation for our chief executive officer and our
        president.

     -  Reviews the compensation of our executive officers.

     -  Prepares the report on executive compensation required by the
        rules of the Securities and Exchange Commission.

CORPORATE GOVERNANCE AND NOMINATING COMMITTEE

     The members of the committee are Brooks J. Klimley (Chairman), Larry
L. DeRoin, George M. Rapport, and Donald J. Wilkinson. The committee met
once, either in person or by telephone, in 2006. Among other matters, the
committee:

     -  Identifies individuals believed to be qualified to become members
        of our board and recommends to the board the nominees to stand for
        election as directors at the annual meeting.

     -  Makes recommendations to the board as to changes that the
        committee believes to be desirable to the size of the board and
        any committee of the board and to the types of committees of the
        board.

     -  Makes recommendations to the board regarding the composition of
        board committees.

     -  Develops and recommends to the board a set of corporate governance
        guidelines and reviews those guidelines at least once a year.

     In identifying and nominating candidates to the board, the corporate
governance and nominating committee considers, among other factors, the
following:

     -  Personal qualities, including background and reputation,
        reflecting the highest personal and professional integrity. We
        seek individuals of exceptional talent and judgment. We also seek
        individuals with the ability to work with other directors and
        director nominees to build a board that is effective and
        responsive to the needs of the stockholders.

     -  Current knowledge of (1) the communities in which we do business,
        (2) our industry, (3) other industries relevant to our business,
        or (4) other organizations of similar size.

     -  Ability and willingness to commit adequate time to board and
        committee matters.

     -  Diversity of viewpoints, background, experience and other
        demographics.



                                     155


<PAGE>
     -  The individual's agreement with our corporate governance
        guidelines.

DIRECTOR CANDIDATES PROPOSED BY YOU

     The corporate governance and nominating committee may consider
candidates recommended by our stockholders. If a stockholder wishes to
propose a nominee for consideration by the committee, he or she may do so
by submitting name(s) and supporting information to:

                        Giant Industries, Inc.
                        23733 N. Scottsdale Rd.
                        Scottsdale, AZ 85255
                        Attention: Corporate Secretary

     When submitting nominees for consideration, a stockholder should
explain why the proposed nominee meets the factors that the corporate
governance and nominating committee considers important. All candidates
proposed will be evaluated by the same criteria regardless of who proposes
the candidate.

CORPORATE GOVERNANCE GUIDELINES

     We have adopted a set of corporate governance guidelines. A copy of
the corporate governance guidelines may be found on our website at
www.giant.com. In addition, copies of the corporate governance guidelines
are available to all stockholders by calling (480) 585-8888 or by writing
to: Kim H. Bullerdick, Corporate Secretary, at our corporate headquarters
located at 23733 N. Scottsdale Road, Scottsdale, AZ 85255. The guidelines
set out our thoughts on, among other things, the following:

     -  The role of our board and management.

     -  The functions of our board and its committees and the expectations
        we have for our directors.

     -  The selection of directors, the chairman of the board, and the
        chief executive officer.

     -  Election terms, retirement of directors, and management
        succession.

     -  Executive and board compensation.

     -  Evaluating board performance.

     -  Communications with the board.

CODE OF ETHICS

     We have adopted a code of ethics that applies to all of our
directors, executives and employees. We have filed a copy of our code of


                                     156


<PAGE>
ethics as Exhibit 14.1 to our annual report on Form 10-K for the year
ended December 31, 2003. The code of ethics also is posted on our website
at www.giant.com. In addition, copies of the code of ethics are available
to all stockholders by calling (480) 585-8888 or by writing to: Kim H.
Bullerdick, Corporate Secretary, at our corporate headquarters located at
23733 N. Scottsdale Road, Scottsdale, AZ 85255. We intend to report on
Form 8-K all amendments to or waivers from the code of ethics that are
required to be reported by the rules of the Securities and Exchange
Commission.

CONTACTING THE BOARD

     If you wish to contact the board, you may do so by writing the board
at:

                     Giant Industries, Inc.
                     23733 N. Scottsdale Rd.
                     Scottsdale, AZ 85255
                     Attention: Corporate Secretary (Board Matters)

     If you wish to contact the presiding director of the non-management
directors or the non-management directors as a group, you may do so by
sending your correspondence to the attention of the Corporate Secretary
(Presiding Director) or to the attention of the Corporate Secretary (Non-
Management Directors), as appropriate. Our corporate secretary will
forward your correspondence to the appropriate members of the board.

        SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     The federal securities laws require our officers and directors, and
persons who own more than 10% of our common stock, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission and the New York Stock Exchange. These individuals also are
required to furnish us with copies of all reports they file. Based solely
upon a review of the filings provided to us during 2006, or with respect
to 2006, or written representations that no filings were required, we
believe that each person who at any time during 2006 was a director,
officer, or greater than 10% beneficial owner filed the required reports
on a timely basis.

ITEM 11. EXECUTIVE COMPENSATION

                   COMPENSATION DISCUSSION AND ANALYSIS

OVERVIEW

     The purpose of this compensation discussion and analysis is to
present our overall compensation objectives, policies, and practices and
is intended to provide the material information necessary to understand
our compensation policies and decisions for our principal executive
officer, principal financial officer, and our three other most highly
compensated executive officers. We will refer to these five persons as our
named executive officers.


                                     157


<PAGE>
PURPOSE OF THE COMPENSATION COMMITTEE

     The compensation committee of the board of directors has
responsibility for (i) overseeing the administration of our compensation
programs (including our stock incentive plans, except as otherwise
specified by the board), (ii) setting the compensation for our chief
executive officer (the "CEO") and our president, (iii) reviewing and
approving the compensation of our executive officers, (iv) preparing any
reports on executive compensation required by the rules of the Securities
and Exchange Commission, and (v) addressing any further compensation
matters requested by the board.

COMPENSATION PHILOSOPHY AND OBJECTIVES

     The key principle behind our compensation program is to attract,
retain and motivate superior individuals to work for us. To that end, we
have designed compensation programs to:

     -  reward key personnel who, by the nature and scope of their
        positions, significantly impact our overall results and
        success,

     -  reward employees based on an evaluation of the participant's
        individual performance and accomplishments, and contributions
        to the achievement of business unit strategies and goals,

     -  reward commitment to our core values,

     -  reward contributions to the achievement of annual goals,

     -  provide incentives and rewards for superior performance linked
        to our profitability and increases in stockholder value, and

-	provide mechanisms for retirement savings as well as certain
        benefits in the event of death, disability, or termination of
        employment.

     In the case of our CEO, president, chief financial officer, and
general counsel, we also have entered into employment contracts with those
individuals. The terms of those employment contracts are discussed in more
detail below under the heading "Potential Payments Upon Termination or
Change-In-Control".

     Our general compensation philosophy is established by the
compensation committee of our board of directors in consultation with
senior management.

     In particular, we consider the following major elements in
establishing compensation for our executive officers:






                                     158


<PAGE>
     (1) The level of compensation paid to executive officers in similar
positions by other companies. To determine whether pay is competitive, our
compensation committee, from time to time, compares our total compensation
and benefits packages with those of other companies in the same or similar
industries or with other similar attributes such as size or
capitalization. Some, but not all, of these companies are included in the
S&P Industrials Index and the S&P Energy Composite Index. Many of the
companies used in these indexes are engaged in different businesses than
us and almost all are larger. The committee recognizes that our asset and
business mix is rather unique given our relatively smaller size, making
direct comparisons of compensation difficult. The committee also
recognizes, however, that total compensation for similar positions must be
competitive to attract and retain competent executives.

     (2) The individual performance of each executive officer. Individual
performance includes any specific accomplishments of the executive
officer, demonstration of job knowledge and skills, teamwork and
demonstration of our core values.

     (3) The responsibility and authority of each position relative to
other positions within our organization.

     (4) Corporate performance. Corporate performance is evaluated both
subjectively and objectively. Subjectively, the committee discusses and
makes its own determination of how we performed relative to the
opportunities and difficulties we encountered during the year and relative
to the performance of our competitors and business conditions.
Objectively, corporate performance is measured by earnings, cash flow, and
other financial results compared to budgeted results.

     (5) Incentives for executive officers to make decisions and take
actions that will increase the market value of our stock over the long-
term and that encourage our executives to remain with us as long-term
employees.

     We do not have a pre-established policy or target for the allocation
between either cash and non-cash or short-term and long-term incentive
compensation. In the case of base salary and awards granted under our
stock plan to executive officers, the application and weight given each of
these factors is not done mechanically or quantitatively, but rather the
committee uses its discretion, best judgment and the experience of its
members to examine the totality of all of the relevant factors. In
exercising this discretion, the committee believes that it generally tends
to give greater weight to factors (1), (2), and (3) above in fixing base
salary and any merit/cost of living increase and to factor (5) in making
awards under our stock plan. The committee believes that it considers
factor (4) equally in making all awards. In applying factor (1), the
committee believes that total compensation is similar to amounts paid to
equally competent employees in similar positions at other companies after
giving effect to the belief that we have historically granted fewer stock-
based awards than appears to be the historical practice at other
companies.



                                     159


<PAGE>
ROLE OF EXECUTIVE OFFICERS IN COMPENSATION DECISIONS

     The compensation committee makes all compensation decisions for our
CEO and our president. The committee also reviews and approves the
compensation of our executive officers other than our CEO and president,
including the individual elements of the total compensation for such
executive officers. Specific decisions regarding the compensation for
executive officers other than the CEO and president are made by the CEO
and president.

2006 EXECUTIVE COMPENSATION COMPONENTS

     For the fiscal year ended December 31, 2006, the principal components
of compensation for our named executive officers were:

     -  Base salary,
     -  Bonus,
     -  Long-term equity compensation,
     -  Retirement and other benefits, and
     -  Perquisites and other personal benefits.

Detailed information regarding the specific amounts of compensation paid
or earned by the named executive officers in 2006 is set forth in the
tables following this compensation discussion and analysis.

BASE SALARY

     We provide our named executive officers and other employees with base
salary to compensate them for services rendered during the fiscal year.
Increases in base salary are considered annually as part of our
performance review process as well as upon a promotion or other change in
job responsibility. In approving salary increases in 2006, the
compensation committee considered the elements and criteria discussed
above, information on executive compensation paid by other companies, the
terms of the employment agreements noted above, and various other
information relating to compensation.

BONUS

     For our executive officers, as well as for certain other key
management employees, we adopted the 2006 Management Discretionary Bonus
Plan. As to our CEO and president, the plan is administered by the
compensation committee. As to all other employees, the plan is
administered by an administrative committee consisting of our CEO and
president.

     The plan provided for the accrual during 2006 of a pool of money from
which bonuses could be paid. We generally had to meet a minimum pre-tax
level of earnings for 2006 before any bonuses could be paid. As our
performance exceeded this level during the year, the accrual was
increased. The accrual did not, however, reach the full amount budgeted
for management bonuses in the 2006 budget.



                                     160


<PAGE>
     Under the plan, executives were rewarded based on an evaluation of
the participant's individual performance and accomplishments, and
contributions to the achievement of business unit strategies and goals.
They also were rewarded based on an evaluation of the executive's
commitment to our core values and contributions to the achievement of our
2006 goals for: (i) pre-tax earnings, cash flow and capital expenditures;
(ii) renovating and placing into service the crude oil pipeline we
acquired in 2005; (iii) refinery utilization; (iv) compliance with low
sulfur diesel standards; (v) maximizing the synergies associated with the
Dial Oil acquisition; (vi) maintenance of our Sarbanes-Oxley 404
compliance status; and (vii) strategic growth.

     The compensation committee determined the bonus for our CEO and
president. The CEO and the president made recommendations to the committee
of the amount of bonuses to be paid to our other executive officers.
Subject to the review and approval of the compensation committee, the
amount of bonuses actually paid to these executive officers is within the
sole discretion of the administrative committee. To receive a bonus, the
participant had to be employed by us at the time the funds were awarded.

     In reviewing the administrative committee's proposed bonuses for our
executive officers, and determining the bonuses to be paid to our CEO and
president, the compensation committee reviewed and discussed information
on executive compensation paid by other companies as well as various other
materials and matters regarding the payment of bonuses to the
Corporation's executive officers. These included: (1) the elements and
criteria considered by the compensation committee in setting executive
compensation discussed above; (2) the application of the provisions of the
plan regarding the award of bonuses, including how our results of
operations for 2006 compared to our goals and objectives; (3) the
performance and contribution of the executive officers; (4) Section 162(m)
of the Internal Revenue Code; and (5) the terms of the employment
agreements with the individuals noted above. In looking at our
performance, the committee considered both our financial performance and
our operating performance. In particular, while year-end financial
performance was good, the committee also considered the fact that there
were unscheduled outages at the refineries during the year, delays in
completing certain projects, and cost overruns on several refinery
projects.

     In connection with the compensation committee's discussion of the
2006 performance and contribution of both our CEO and president, the
compensation committee took note of the leadership role that they had
played in the following: (1) year-end financial performance; (2) the
pending Western transaction; (3) the acquisition of the assets of Amigo
Petroleum in August 2006; and (4) the acquisition of Empire Oil Co.
effective January 1, 2007. The Committee also took into account the fact
that while not all of our identified goals for 2006 were completely met,
we made significant progress towards many of them as well as in other
areas.





                                     161


<PAGE>
LONG-TERM EQUITY COMPENSATION

     Although we occasionally make stock-based awards to employees, we do
not have any regular schedule for making such awards. Further, we
currently do not have any stock ownership guidelines for our executive
officers. If the pending transaction with Western does not close, we
expect to develop a regular schedule for making stock-based awards and
guidelines for stock ownership in the near-term.

     We last made a stock-based award on December 6, 2005, when certain of
our officers and key employees, including the CEO and the president, were
awarded restricted stock. In deciding to award restricted stock rather
than stock options as we had in the past, we took into account the
accounting rule for stock options requiring expensing. The restricted
shares vest in five equal annual installments beginning on December 6,
2006. If the Western transaction closes, the vesting of the shares will be
accelerated to the closing date of the transaction. The holders are
entitled to receive dividends on the restricted shares to the same extent
dividends are paid to all stockholders. We currently do not pay dividends.

     In making stock-based awards, including the 2005 award of restricted
stock, the compensation committee considers, among other things: (1) the
contributions of each of the recipients to our success, and (2) the
motivation that the awards may create for the recipients to make decisions
that will increase the market value of our stock over the long term and
encourage these individuals to remain with us as long-term employees.

RETIREMENT AND OTHER BENEFITS

     We have a 401(k) retirement savings plan for all employees, including
the named executive officers. The objective of the plan is to provide a
mechanism for employees to save for retirement as well as certain benefits
in the event of death, disability or termination of employment.

     Employees may make pre-tax and after-tax contributions to the plan.
Participants older than 50 also may make catch-up contributions to the
plan. We currently make matching contributions on the pre-tax and after-
tax contributions, but not for catch-up contributions. All of these
contributions are subject to limits set periodically by the Internal
Revenue Service ("IRS"). We currently also make a separate supplemental
contribution annually to certain of our employees, including the named
executive officers. Employees have a variety of mutual funds in which to
invest their accounts. The employees generally are fully vested in their
own contributions and our supplemental contributions when the
contributions are made. Our matching contributions are subject to a three
year cliff vesting schedule.

     During 2005, we adopted a Deferred Compensation Plan. Participation
in the Plan is limited to certain highly compensated members of our
management team, including the named executive officers, and the members
of our board of directors. The plan was adopted to provide our highly



                                     162


<PAGE>
compensated executives with a mechanism to defer compensation to future
years for tax and other financial planning purposes and to keep such
executives whole in view of the IRS limitations applicable to the 401(k)
plan.

     Under the plan, the participants may defer a portion of their annual
salary and/or bonus to future years. They effectively may invest the
deferred compensation in a variety of investment fund choices. At our
discretion, we also will match a portion of the amounts deferred on a
basis similar to matches in our 401(k) plan, but without regard to the
annual caps applicable to the 401(k) plan. The plan is discussed in more
detail below under the heading "Nonqualified Deferred Compensation".

     We also have various medical, dental and insurance programs available
for all employees, including the named executive officers. We bear a
portion of the costs of these programs for all employees on the same
basis. The objective of these programs is to provide competitive, cost-
effective benefits to all employees.

PERQUISITES AND OTHER PERSONAL BENEFITS

     We provide the named executive officers with perquisites and other
personal benefits that the we and the compensation committee believe are
reasonable and consistent with our overall compensation philosophy. We
believe this enables us to attract and retain superior employees for key
positions. We periodically review the levels and types of perquisites and
other personal benefits provided to the named executive officers.

     The perquisites and other personal benefits provided to the named
executive officers include an automobile allowance, use of the company
aircraft, use of company provided golf club memberships, use of company
event tickets, tax preparation services, and use of administrative
assistant services for personal matters. Although many of these activities
have a business component, the individuals also receive personal benefits.

TAX AND ACCOUNTING IMPLICATIONS

     Section 162 of the Internal Revenue Code includes a provision
limiting tax deductions for certain executive compensation in excess of
$1,000,000 for each executive. The committee has analyzed the impact of
this tax law on our compensation policies, and has decided for the present
to not modify our compensation policies based on this tax law. The
committee will periodically reconsider its decision as circumstances
dictate.

     In 2004, the American Jobs Creation Act of 2004 was enacted. The act
changed the tax rules applicable to nonqualified deferred compensation
arrangements. Although the final regulations have not become effective
yet, we believe we are operating in good faith compliance with the
statutory provisions that are currently effective.





                                     163


<PAGE>
     Beginning on January 1, 2006, we began accounting for stock-based
compensation awarded employees, including the named executive officers, in
accordance with the requirements of FASB Statement 123R. For more
information regarding this accounting requirement, please see Note 10 to
our Consolidated Financial Statements included in Part I of this Annual
Report on Form 10-K.

                      COMPENSATION COMMITTEE REPORT

     The following report of the compensation committee of the board on
executive compensation shall not be deemed to be "soliciting material" or
to be "filed" with the Securities and Exchange Commission nor shall this
information be incorporated by reference into any future filing made by us
with the Securities and Exchange Commission, except to the extent that we
specifically incorporate it by reference into any filing.

     Our compensation committee has reviewed and discussed with management
the Compensation Discussion and Analysis required by Item 402(b) of
Regulation S-K and, based on such review and discussion, the compensation
committee recommended to the board of directors that the Compensation
Discussion and Analysis be included in this Form 10-K.

                                   THE COMPENSATION COMMITTEE

                                   Larry L. DeRoin, Chairman
                                   Brooks J. Klimley
                                   Donald M. Wilkinson
                                   George M. Rapport


                       SUMMARY COMPENSATION TABLE

     The following table sets forth the total compensation paid or earned
by our named executive officers for the fiscal year ended December 31,
2006.




















                                     164


<PAGE>
<TABLE>
                                                                                  Change
                                                                                in Pension
                                                                                Value and
                                                                  Non-Equity   Nonqualified
                                                                  Incentive      Deferred
                                                 Stock   Option      Plan      Compensation   All Other
        Name and                 Salary   Bonus  Awards  Awards  Compensation    Earnings    Compensation
   Principal Position     Year   ($)(1)    ($)    ($)     ($)         ($)         ($)(2)        ($)(3)      Total($)
------------------------  ----  --------  -----  ------  ------  ------------  ------------  ------------  ----------
<S>                       <C>   <C>        <C>     <C>     <C>    <C>            <C>           <C>         <C>
Fred L. Holliger          2006  $630,769   $0      $0      $0     $1,300,000     $60,079       $167,873    $2,158,721
Chief Executive Officer

Morgan Gust               2006   430,769    0       0       0        675,000      33,490         94,251     1,233,510
President

Jack W. Keller            2006   218,404    0       0       0        440,000       9,467         46,265       714,136
President of the
Wholesale Strategic
Business Unit

Mark B. Cox               2006   253,462    0       0       0        375,000      17,351         56,800       702,613
Chief Financial Officer

Kim H. Bullerdick         2006   213,462    0       0       0        375,000       4,642         38,743       631,847
General Counsel
</TABLE>

-------
(1) Includes compensation deferred at the election of the named executive
    officer.

(2) The amounts disclosed in this column represent the earnings realized
    in 2006 by the named executive officers on compensation deferred in
    our Deferred Compensation Plan, a nonqualified defined contribution
    plan.

(3) The amounts disclosed in this column represent the following:


















                                     165


<PAGE>
        Description        Holliger   Gust     Keller     Cox    Bullerdick
    ---------------------  --------  -------   -------  -------  ----------
    401(k) match           $ 13,200  $13,200   $13,200  $13,200   $13,200

    Supplemental 401(k)
      contribution from
      us for 2005 made
      in 2006*             $  6,300  $ 6,300   $ 6,300  $ 6,300   $ 6,300

    Deferred compensation
      plan match           $106,366  $65,351   $17,365  $23,971   $12,243

    Auto allowance         $  9,400  $ 9,400   $ 9,400  $ 7,000   $ 7,000

    Personal use of
      company aircraft**   $ 22,409  $     0   $     0  $     0   $     0

    Personal use of golf
      club membership      $  4,263  $     0   $     0  $ 6,329   $     0

    Tax preparation
      services             $  5,935  $     0   $     0  $     0   $     0
                           --------  -------   -------  -------   -------
                           $167,873  $94,251   $46,265  $56,800   $38,743

     The named executive officers also used company tickets for various
events throughout the year and occasionally used their administrative
assistants for personal projects. No amounts are included in this column
for these benefits as there was no incremental cost to us associated with
these benefits.

     *The supplemental 401(k) contribution from us was made in the form
      of shares of our stock. The amount reported in the table above
      represents the value of the shares on the date of contribution.

    **The incremental cost to us of personal use of the corporate aircraft
      is determined on a per flight basis and includes the cost of actual
      fuel used, the hourly cost of aircraft maintenance for the
      applicable number of flight hours, landing fees and related costs,
      crew expenses, and other variable costs specifically incurred.


                       GRANTS OF PLAN-BASED AWARDS

     The following table summarizes the grants of plan-based awards to our
named executive officers in 2006.









                                     166


<PAGE>
                                          Estimated Future Payouts
                                         Under Non-Equity Incentive
      Name                                      Plan Awards
----------------                         --------------------------
Fred L. Holliger                                    (1)
Morgan Gust                                         (1)
Jack W. Keller                                      (1)
Mark B. Cox                                         (1)
Kim H. Bullerdick                                   (1)

(1) In 2006, we adopted the 2006 Management Discretionary Bonus Plan. The
    named executive officers, as well as certain other key employees,
    participated in the plan. The plan did not provide for threshold,
    target, or maximum payouts. For a detailed discussion of how the plan
    was implemented, please see the discussion under the heading "Bonus"
    in the "Compensation, Discussion and Analysis" section above.


               OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

     The following table provides information on outstanding equity awards
held by our named executive officers as of December 31, 2006.

<TABLE>
                                              Option Awards                                           Stock Awards
                   -----------------------------------------------------------------  --------------------------------------------
                                                                                                                         Equity
                                                                                                                        Incentive
                                                                                                              Equity       Plan
                                                                                                            Incentive     Awards:
                                                                                                               Plan      Market or
                                                                                                              Awards:     Payout
                                                 Equity                                           Market     Number of   Value of
                                                Incentive                             Number of    Value     Unearned    Unearned
                                               Plan Awards:                            Shares    of Shares    Shares,     Shares,
                   Number of      Number of     Number of                             or Units    or Units    Units       Units
                   Securities    Securities    Securities                             of Stock    of Stock   or Other    or Other
                   Underlying    Underlying    Underlying                             That Have  That Have    Rights      Rights
                   Unexercised   Unexercised   Unexercised   Option       Option        Not         Not      That Have   That Have
                   Options (#)   Options (#)    Unearned    Exercise    Expiration     Vested     Vested    Not Vested  Not Vested
      Name         Exercisable  Unexercisable  Options (#)  Price ($)      Date        (#)(1)     ($)(2)        (#)         ($)
-----------------  -----------  -------------  -----------  ---------  -------------  ---------  ---------  ----------  ----------
<S>                  <C>             <C>           <C>        <C>      <C>              <C>       <C>          <C>           <C>
Fred L. Holliger     29,000           0             0         $5.24    May 8, 2013      3,600     $269,820      0            $0
                     27,000           0             0         $9.95    May 16, 2011

Morgan Gust          20,000           0             0         $5.24    May 8, 2013      2,400     $179,880      0            $0
                     17,000           0             0         $9.95    May 16, 2011

Jack W. Keller            0           0             0           N/A        N/A          1,440     $107,928      0            $0

Mark B. Cox           4,500           0             0         $2.85    Dec. 10, 2012    1,440     $107,928      0            $0

Kim H. Bullerdick         0           0             0           N/A        N/A          1,440     $107,928      0            $0
</TABLE>


                                     167


<PAGE>
-------
(1) This column relates to awards of restricted shares made on December 6,
    2005. The restricted shares vest in five equal annual installments
    beginning December 6, 2006.

(2) Based on a price of $74.95 on December 29, 2006, which was the closing
    price of our stock on the last business day of 2006.


                    OPTION EXERCISES AND STOCK VESTED

     The following table provides information on option exercises during
2006 and the value of restricted stock that vested in 2006 for each of the
named executive officers.

                        Option Awards             Stock Awards
                    ----------------------   ----------------------
                     Number of     Value      Number of     Value
                      Shares      Realized     Shares      Realized
                    Acquired on      on      Acquired on      on
                     Exercise     Exercise    Exercise     Exercise
      Name              (#)         ($)          (#)        ($)(1)
----------------    -----------   --------   -----------   --------
Fred L. Holliger         0          $0           900       $69,111
Morgan Gust              0           0           600       $46,074
Jack W. Keller           0           0           360       $27,644
Mark B. Cox              0           0           360       $27,644
Kim H. Bullerdick        0           0           360       $27,644

(1) Based on a closing price of $76.79 for our stock on December 6, 2006,
    the date the restricted shares vested.


                             PENSION BENEFITS

     Our named executive officers do not participate in any pension plans.


                   NONQUALIFIED DEFERRED COMPENSATION

     The following table summarizes 2006 contributions, earnings and
balances under our Deferred Compensation Plan for each of our named
executive officers.

<TABLE>
                      Executive      Registrant     Aggregate     Aggregate     Aggregate
                    Contributions   Contributions   Earnings     Withdrawals/    Balance
                       in Last         in Last       in Last    Distributions    at Last
      Name             FY ($)          FY ($)        FY ($)         ($)          FYE ($)
-----------------   -------------   -------------   ---------   -------------   ---------
<S>                   <C>             <C>            <C>            <C>         <C>
Fred L. Holliger      $361,062        $106,366       $60,079        $0          $595,455
Morgan Gust           $181,942        $ 65,351       $33,490        $0          $326,865
Jack W. Keller        $ 67,219        $ 17,365       $ 9,467        $0          $125,137
Mark B. Cox           $133,218        $ 23,971       $17,351        $0          $201,680
Kim H. Bullerdick     $ 69,388        $ 12,243       $ 4,642        $0          $108,127
</TABLE>

                                     168


<PAGE>
     On October 31, 2005, we established the Giant Industries,  Inc. and
Affiliated Companies Deferred Compensation Plan (the  "Plan" or the
"DCP"). The plan was adopted to provide our highly compensated executives
with a mechanism to defer compensation to future years for tax and other
financial planning purposes and to keep such executives whole in view of
the IRS limitations applicable to the 401(k) plan.

     The Plan is administered by an administrative committee, appointed by
our Board, to perform the duties of the plan administrator.

     Participation in the Plan is limited to (a) non-employee members of
our board of directors, and (b) a select group of our management or highly
compensated employees selected by the board, or its designee, to be
participants.

     Effective October 31, 2005 (January 1, 2006 for non-employee members
of the board), employee participants may elect to defer into the Plan a
portion of their compensation for the plan year for services after the
deferral election. For employees, deferrals may not exceed sixty percent
(60%) of their compensation, and non-employee members of the board may
defer all of their compensation for services after their deferral
election. At our discretion, we also will match a portion of the amounts
deferred on a basis similar to matches in our 401(k) plan, but without
regard to the annual caps applicable to the 401(k) plan.

     The administrative committee for the Plan will open and maintain
separate accounts for each participant to which their deferrals and our
contributions will be credited. Amounts credited to the accounts will be
deemed invested according to investment directions made by the
participants in one or more hypothetical investment funds designated by
the administrative committee. The performance of the hypothetical
investment funds is measured by the performance of actual funds. The
amounts in the participants' accounts will be adjusted as if they had
actually been invested in the investment funds on which the hypothetical
funds were based.

     Participants must elect, no later than the time of their initial
deferral election, the form in which they will receive the remainder of
their vested account after their separation from service on or after
normal retirement age. Participants may choose a lump sum or annual
installments paid over a period they select up to twenty (20) years.
Unless the participant is a key employee (as defined in Internal Revenue
Code Section 409A), a lump sum benefit will be paid within sixty (60) days
of the date the participant separates from service, and distribution of
benefits in the form of installments will begin within sixty (60) days
after the close of the plan year in which the participant separates from
service. If the participant is a key employee, the distribution on account
of separation of service cannot begin until six (6) months after such
separation of service.






                                     169


<PAGE>
     Participants may make a subsequent election to further defer their
distribution date or change the form of benefit (except a change that
shortens the installment period), if (1) the election does not take effect
for at least twelve (12) months, and (2) the initial distribution date is
rescheduled at least five (5) years from the date the distribution would
have otherwise been made.

     Except in the case of death or disability, if a participant separates
from service before normal retirement age, the remainder of their vested
account will be paid in a lump sum within sixty (60) days after the
separation from service unless the participant is a key employee. If the
participant is a key employee, the distribution on account of separation
of service cannot begin until six (6) months after such separation of
service.

     If a participant is determined by the administrative committee to be
disabled, they will receive the remainder of their vested account balance
in the form of a lump sum within sixty (60) days after the administrative
committee determines that the participant has become disabled. If,
however, the participant has attained normal retirement age at the time
they are determined to be disabled, their vested account will be paid in
the same form and at the same time elected with respect to their normal
retirement benefit.

     If the participant dies before the commencement of distribution of
their benefits, the participant's beneficiary will receive a benefit equal
to the balance of the participant's vested account.

     If the administrative committee determines that our deduction for a
payment to a participant from the Plan will be limited or eliminated under
Section 162(m) of the Internal Revenue Code, the payment will be delayed
until the earliest date that the administrative committee determines that
payment would be permitted without the deduction's being limited or
eliminated.

     No benefit payable under the Plan to any person is subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of the
same shall be void. No benefit shall in any manner be subject to the
debts, contracts, liabilities, engagements or torts of any person, nor
shall it be subject to attachment or legal process for or against any
person, except to the extent as may be required by law and except with
respect to debts or liabilities of a participant to us.

     When a participant makes each annual deferral election, they may
elect to receive, before separation from service, the portion of their
vested account attributable to such annual deferrals in a plan year that
begins at least one full plan year after the close of the plan year of the
deferral. The distribution will be paid within sixty (60) days after the
beginning of the designated plan year. A participant may make a subsequent




                                     170


<PAGE>
election to further defer that distribution date, if (1) the election does
not take effect for at least twelve (12) months, (2) the election is made
at least one year before the plan year in which the distribution is
scheduled to take place, and (3) the distribution date is rescheduled at
least five (5) years from the date the distribution was previously
scheduled. Subsequent elections that accelerate the distribution are
prohibited. If the participant dies or separates from service, or there is
a change in control, before the scheduled payment, the distribution will
be made no later than it would under the Plan provisions governing these
events.

     In accordance with procedures established by the administrative
committee, a participant may receive a distribution upon the occurrence of
an "unforeseeable emergency" as defined in Section 409A of the Internal
Revenue Code and the regulations thereunder. If a distribution under the
Plan is made on account of an unforeseeable emergency, or a hardship
distribution is made under our 401(k) Plan, the participant's deferral
election for the remainder of the plan year is cancelled.

     In the event of a change in control as defined in Section 409A of the
Internal Revenue Code, a participant will receive the remaining amount in
their vested account in a lump sum within sixty (60) days after the change
in control, if and only if they made such an election at the time of their
initial deferral election.

     The portion of the account attributable to a participant's deferrals
is fully vested. The portions attributable to additional employer
contributions are subject to the same vesting schedules as they are in our
401(k) Plan. If a participant separates from service before becoming fully
vested, they will forfeit the unvested portion of their account.


         POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL

     We have entered into employment agreements with Mr. Holliger, Mr.
Gust, Mr. Cox and Mr. Bullerdick. The employment agreements expire on
December 11, 2007 but will automatically extend for successive one-year
periods unless we or the executive gives notice of termination.

     Pursuant to the agreements, Mr. Holliger, Mr. Gust, Mr. Cox, and Mr.
Bullerdick receive base salary at an annual rate as follows: Mr. Holliger
- $650,000, Mr. Gust - $450,000, Mr. Cox - $265,000, and Mr. Bullerdick -
$225,000. The amounts are subject to increase during the terms of the
agreements as the board deems appropriate with respect to Mr. Holliger and
Mr. Gust, and as the chief executive deems appropriate and the
compensation committee approves with respect to Mr. Cox and Mr.
Bullerdick. The base salary for each executive may only be reduced in
connection with an across-the-board reduction applicable to all of our
senior executives. Each agreement provides that the executive is entitled
to participate in any bonus or benefit plans that we make available to our
senior executives.




                                     171


<PAGE>
     The following is a summary of the amounts or benefits each executive
or his estate will receive from us if he is terminated under the
circumstance noted. The agreements and applicable amendments have been
filed as exhibits to our Annual Report on Form 10-K for the year ended
December 31, 2003 and our Quarterly Report on Form 10-Q for the quarter
ended June 30, 2006.

     (1) Employment of the executive is terminated (1) because of the
executive's death or disability, (2) by the executive without good reason,
or (3) by us with cause, in each case either prior to a change of control
or more than three years following a change in control:

     -  Any unpaid base salary as of the termination date.

     -  Reimbursement in accordance with our policies then in effect of
        any expenses incurred prior to termination.

     -  Accrued and vested benefits due under our benefit plans.

     -  Any discretionary bonus for a prior year that has been earned but
        not paid.

     -  The right for one year following termination to exercise all
        vested stock options outstanding on the termination date.

     (2) Employment of the executive is terminated (1) within three years
of a change of control or by the executive with good reason, or (2) upon
the expiration of the term of the agreement within three years of a change
of control:

     -  The amounts and benefits described in paragraph 1 above except the
        stock option benefit.

     -  An amount equal to three times the sum of: (1) the base salary in
        effect at the time of termination, and (2) the average annual
        bonuses paid to the executive for the last three years, but in no
        event less than 25% of the executive's base salary.

     -  Unless expressly prohibited under the terms of the plan(s)
        pursuant to which the awards were made, all unvested stock options
        or other stock awards owned by the executive shall vest on the
        termination date, and the executive shall have the right for one
        year following termination to exercise all stock options
        outstanding on the termination date.

     -  Reimbursement for certain taxes incurred by the executive as a
        result of receiving the above amounts.

     (3) Employment of the executive is terminated (1) by the executive
for good reason, (2) by us without cause, or (3) because we gave notice of
our intention not to renew the agreement when it expires, in each case
either prior to a change of control or more than three years following a
change of control:


                                     172


<PAGE>
     -  The amounts and benefits described in paragraph 1 above.

     -  A lump sum equal to the executive's base salary in effect at the
        time of termination.

     The agreements also contain restrictive covenants. In general, the
executives must maintain the confidentiality of company information and
may not compete with us for one year following termination.

     The pending transaction with Western will result in payments to our
named executive officers if the transaction closes. At the effective time
of the merger with Western, our executive officers are required to resign
their positions as officers of Giant. Western may, but is not required to,
offer employment to some or all of our executive officers on the same
basis as our other employees. As noted above, our employment agreements
with Fred Holliger, Morgan Gust, Mark Cox and Kim Bullerdick require us to
make severance payments to them if their employment is terminated within
three years following a change in control. The severance payments are
equal to three times the executive's base salary plus the average annual
bonus paid to the executive for the three years prior to the fiscal year
in which the termination occurs, but not less than 25% of the executive's
then base salary. In addition, if the severance payments are deemed to be
"excess parachute payments" under applicable income tax laws and therefore
subject to excise tax, we will pay the executive the amount of the excise
tax and any tax on the amount of the payment made. The following table
summarizes the severance payments payable to our executive officers under
their employment agreements:

                                                  Estimated
                  Base     Average    Severance    Excise       Total
Name             Salary     Bonus      Payment     Tax (1)     Payments
--------------  --------  ----------  ----------  ----------  ----------
Fred Holliger   $650,000  $1,258,333  $5,725,000  $2,300,013  $8,025,013
Morgan Gust     $450,000  $  725,000  $3,525,000  $1,289,912  $4,814,912
Mark Cox        $265,000  $  345,000  $1,830,000  $  738,933  $2,568,933
Kim Bullerdick  $225,000  $  290,000  $1,545,000  $  664,735  $2,209,735
-------
(1) Estimated excise tax includes only the tax on the severance payments
    and the tax on proceeds from the restricted stock held by the
    individuals that is vesting on the effective date of the merger, but
    excludes any additional excise tax payable as a result of bonuses to
    be paid in connection with the transaction and other compensation or
    benefits (other than, in the case of Mr. Bullerdick, retiree medical
    benefits) to be received by the executive.











                                     173


<PAGE>
                          DIRECTOR COMPENSATION

     The following table summarizes the compensation received by our non-
employee directors in 2006.

<TABLE>
                                                               Change
                                                             in Pension
                      Fees                     Non-Equity    Value and
                     Earned                     Incentive   Nonqualified      All
                     or Paid  Stock   Option      Plan        Deferred       Other
                     in Cash  Awards  Awards  Compensation  Compensation  Compensation
       Name            ($)     ($)     ($)        ($)         Earnings        ($)       Total ($)
-------------------  -------  ------  ------  ------------  ------------  ------------  ---------
<S>                  <C>       <C>      <C>       <C>          <C>           <C>         <C>
Brooks J. Klimley    $60,500   $0       $0        $0           $0            $0          $60,500
Donald M. Wilkinson  $53,500   $0       $0        $0           $0            $0          $53,500
George M. Rapport    $62,500   $0       $0        $0           $0            $0          $62,500
Larry L. DeRoin      $61,500   $0       $0        $0           $0            $0          $61,500
</TABLE>

     Our non-employee directors receive the following compensation for
serving as a director for us:

     -  $2,500 per month or portion of a month served as a director.

     -  $1,500 for each in-person meeting of the board attended and $1,000
        for each telephonic meeting of the board in which the director
        participates.

     -  $1,250 for each in-person committee meeting attended and $1,000
        for each telephonic committee meeting in which the director
        participates.

     -  $1,000 for each in-person or telephonic meeting of any special
        committee in which the director participates.

     -  $750 per month or portion of a month served as chairman of the
        audit committee and $500 per month or portion of a month served as
        chairman of the compensation committee or the corporate governance
        and nominating committee.

     Our directors also are eligible to participate in our Deferred
Compensation Plan. We also reimburse all directors for reasonable,
out-of-pocket expenses that they incur to attend our board and committee
meetings.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS

     The following table includes information regarding securities
authorized for issuance under our equity compensation plans.




                                     174


<PAGE>
<TABLE>
                                                                                  Number of Securities
                                   Number of Securities                          Remaining Available for
                                    to be Issued Upon      Weighted-Average       Future Issuance Under
                                       Exercise of         Exercise Price of    Equity Compensation Plans
                                   Outstanding Options,   Outstanding Options,    (Excluding Securities
                                   Warrants and Rights    Warrants and Rights   Reflected in Column (a))
                                   --------------------   -------------------   -------------------------
                                           (a)                    (b)                      (c)
<S>                                      <C>                     <C>                        <C>
Plan Category
-------------
Equity compensation plans
  approved by security holders....        97,500                 $7.26                      *
Equity compensation plans not
  approved by security holders....             -                     -                      -
                                         -------
Total.............................        97,500                 $7.26                      *
-------
* The total number of shares available for grant is 2% of the total number of common shares
  outstanding as of the first day of each calendar year. Grants also are subject to a
  400,000 share annual limitation on the grant of options intended to qualify as "incentive
  stock options" under Section 422 of the Internal Revenue Code. Common shares available for
  grant in any particular calendar year that are not, in fact, granted in such year cannot
  be added to the common shares available for grant in any subsequent calendar year.
</TABLE>

     For a description of our equity compensation plans see Note 10 to our
Consolidated Financial Statements included in Item 8.


                      SECURITY OWNERSHIP OF MANAGEMENT

     The following table sets forth information concerning the beneficial
ownership of our common stock as of March 1, 2007 (unless otherwise noted)
by (1) each director and nominee for director, (2) each named executive
officer, and (3) all executive officers and directors as a group. Except
as otherwise indicated, to our knowledge, all persons listed below have
sole voting and investment power with respect to their shares, except to
the extent that authority is shared by spouses under applicable law. Our
only outstanding class of equity securities is our common stock.















                                     175


<PAGE>
<TABLE>
                                           Options
                                         Exercisable
                                           Within                       Total
                              Common     60 Days of                  Beneficially    Percent
                             Stock(1)    February 28    401(k)(2)       Owned        of Class
                             --------    -----------    ---------    ------------    --------
<S>                           <C>         <C>           <C>            <C>             <C>
Fred L. Holliger..........    38,427      56,000        11,440         105,867          *
Morgan Gust...............     8,500(3)   37,000           243          45,743          *
Jack W. Keller............     1,440           0           243           1,683          *
Mark B. Cox...............     1,800       4,500         2,843           9,143          *
Kim H. Bullerdick.........     2,200(4)        0         6,177           8,377          *
Donald M. Wilkinson.......     2,000           0(5)          0(5)        2,000          *
George Rapport............     1,000           0(5)          0(5)        1,000          *
Larry DeRoin..............     1,000           0(5)          0(5)        1,000          *
Brooks Klimley............         0           0(5)          0(5)            0          *
Executive Officers
 and Directors as a
 Group (15 Persons).......    60,497      97,500        24,475         182,472         1.24%
</TABLE>
-------
*Less than 1%

(1) Includes holdings of restricted stock, if any.

(2) The amount listed is the approximate number of our shares allocated to
    the Giant Stock Fund portion of the individual's account in the Giant
    Industries, Inc. and Affiliated Companies 401(k) Plan (the "401(k)")
    as of December 31, 2006. The Giant Stock Fund is composed primarily of
    our common stock and a small amount (approximately 5%) of short-term
    money market funds. Ownership in the Giant Stock Fund is measured in
    units rather than shares of common stock. Each 401(k) participant has
    the right to direct the 401(k) trustee to vote the participant's
    proportionate share of the common stock underlying the units in the
    Giant Stock Fund. We determine a participant's proportionate share by
    multiplying the total number of underlying shares held in the Giant
    Stock Fund by a fraction, the numerator of which is the number of
    underlying shares allocated to the participant and the denominator of
    which is the number of underlying shares allocated to all
    participants' accounts as of the record date. The 401(k) trustee and
    the participants have shared dispositive power with respect to the
    underlying shares allocated to a participant's account.

(3) 5,500 shares are held in a trust in which Mr. Gust and his spouse are
    settlors, co-trustees and beneficiaries.

(4) Shares are held in a living trust in which Mr. Bullerdick is the
    settlor, co-trustee and a beneficiary.

(5) To date, non-employee directors have not participated in our stock
    incentive plans or the 401(k).




                                     176


<PAGE>
                 SHARES OWNED BY CERTAIN SHAREHOLDERS

     The following table sets forth information concerning the beneficial
ownership of our common stock as of March 1, 2007 (unless otherwise noted)
by each stockholder who is known by us to own beneficially in excess of 5%
of our outstanding common stock. Except as set forth below, no other
person or entity is known by us to beneficially own more than 5% of our
outstanding common stock.

                                                 Amount and
                                                 Nature of
                                                 Beneficial     Percent
Name and Address of Beneficial Owners            Ownership      of Class
-------------------------------------           ------------    --------
Gabelli entities...........................     1,263,800(1)       8.6%

Barclays entities..........................     1,115,752(2)       7.6%
-------
(1) As reported on a Schedule 13D, dated September 8, 2006. In the 13D,
    the following entities reported ownership of our shares:

    GAMCO Asset Management Inc.............................    954,000
    One Corporate Center
    Rye, New York 10580

    Gabelli Funds, LLC.....................................    203,000
    One Corporate Center
    Rye, New York 10580

    Gabelli Securities, Inc................................     79,800
    One Corporate Center
    Rye, New York 10580

    MJG Associates, Inc....................................     12,000
    140 Greenwich Avenue
    Greenwich, Connecticut 06830

    Mario J. Gabelli.......................................     12,000
    One Corporate Center
    Rye, New York 10580

    Gabelli Foundation, Inc................................      3,000
    165 W. Liberty Street                                    ---------
    Reno, Nevada 89501                                       1,263,800
                                                             =========










                                     177


<PAGE>
(2) As reported on a Schedule 13G, dated January 31, 2007. In the Schedule
    13G, the following entities reported ownership of our shares:

    Barclays Global Investors, NA..........................    880,728
    45 Fremont Street
    San Francisco, California 94105

    Barclays Global Fund Advisors..........................    235,024
    45 Fremont Street                                        ---------
    San Francisco, California 94105

    Total..................................................  1,115,752
                                                             =========

    Each of the entities has sole voting and dispositive power with
    respect to the shares noted except that Barclays Global Investors, NA
    has sole voting power only as to 828,511 shares.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     We did not have any transactions with related persons during 2006,
nor do we currently anticipate having any transactions with related
persons in 2007.

     The information required by this item regarding "Director
Independence" is incorporated by reference to the information contained in
Item 10 under the caption "About the Board of Directors".


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The following table sets forth fees for services Deloitte & Touche
LLP provided to us during 2006 and 2005:

                                                    2006         2005
                                                 ----------   ----------
Audit fees (1)...............................    $1,307,500   $1,432,975
Audit-related fees(2)........................        61,070       42,450
Tax fees(3)..................................        20,870       13,000
All other fees(4)............................        22,400            0
                                                 ----------   ----------
  Total......................................    $1,411,840   $1,488,425
                                                 ==========   ==========
-------
(1) Represents aggregate fees for services in connection with the audit of
    our annual financial statements and review of our quarterly financial
    statements, attestation procedures on internal controls over financial
    reporting, and services related to Securities and Exchange Commission
    matters and filings.






                                     178


<PAGE>
(2) Represents aggregate fees for services in connection with employee
    benefit plan audits.

(3) Represents fees for services provided in connection with our tax
    returns and tax compliance and consulting.

(4) Represents fees for services related to our pending transaction with
    Western Refining, Inc.

     The audit committee has determined that the provision of certain non-
audit services by Deloitte & Touche LLP is compatible with maintaining
their independence. Except as noted below, the audit committee approves in
advance all audit and non-audit services provided by Deloitte & Touche
LLP. The chairman, or in his absence, any other member of the audit
committee also has delegated authority from the committee to pre-approve
services provided by Deloitte & Touche LLP. In this case, the member pre-
approving the services must report the pre-approval to the audit committee
at its next meeting. In addition, as permitted by SEC rules, our chief
financial officer, chief accounting officer, or controller may approve
permitted non-audit services having a value of less than $5,000 in certain
limited circumstances. During 2006, all services provided by Deloitte &
Touche LLP were pre-approved in accordance with this policy.

































                                     179


<PAGE>
                                  PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) The following financial statements are included in Item 8:

       (i)   Report of Independent Registered Public Accounting Firm

       (ii)  Consolidated Balance Sheets - December 31, 2006 and 2005

       (iii) Consolidated Statements of Operations - Years ended December
             31, 2006, 2005, and 2004

       (iv)  Consolidated Statements of Comprehensive Income - Years ended
             December 31, 2006, 2005 and 2004

       (v)   Consolidated Statements of Stockholders' Equity - Years ended
             December 31, 2006, 2005, and 2004

       (vi)  Consolidated Statements of Cash Flows - Years ended December
             31, 2006, 2005, and 2004

       (vii) Notes to Consolidated Financial Statements

    (2) Financial Statement Schedule. The following financial statement
schedule of Giant Industries, Inc. for the years ended December 31, 2006,
2005, and 2004 is filed as part of this report and should be read in
conjunction with the Consolidated Financial Statements of Giant
Industries, Inc.

          Report of Independent Registered Public Accounting Firm
             Schedule II - Valuation and Qualifying Accounts

     Schedules not listed above have been omitted because they are not
applicable or are not required or because the information required to be
set forth therein is included in the Consolidated Financial Statements or
Notes thereto.

    (3) Exhibits. The Exhibits listed on the accompanying Index to
Exhibits immediately following the financial statement schedule are filed
as part of, or incorporated by reference into, this Report.

     Except for plans generally available to all employees, contracts with
management and any compensatory plans or arrangements relating to
management are as follows:










                                     180


<PAGE>
Exhibit
   No.     Description
-------    ----------------------------------------------------------
10.15      Giant Industries, Inc. and Affiliated Companies Deferred
           Compensation Plan. Incorporated by reference to Exhibit 10.2 to
           the Company's Quarterly Report on Form 10-Q for the quarter
           ended September 30, 2005, File No. 1-10398.

10.16*     First Amendment to the Giant Industries, Inc. and Affiliated
           Companies Deferred Compensation Plan.

10.17      Giant Industries, Inc. 1998 Stock Incentive Plan. Incorporated
           by reference to Appendix H to the Joint Proxy
           Statement/Prospectus included in the Company's Registration
           Statement on Form S-4 under the Securities Act of 1933 as filed
           May 4, 1998, File No. 333-51785.

10.18      Amendment No. 1 to 1998 Stock Incentive Plan, dated September
           13, 2000. Incorporated by reference to Exhibit 10.8 to the
           Company's Annual Report on Form 10-K for the fiscal year ended
           December 31, 2002, File No 1-10398.

10.19      Amendment No. 2 to 1998 Stock Incentive Plan, dated March 27,
           2002. Incorporated by reference to Exhibit 10.9 to the
           Company's Annual Report on Form 10-K for the fiscal year ended
           December 31, 2002, File No 1-10398.

10.20      ESOP Substitute Excess Deferred Compensation Benefit Plan.
           Incorporated by reference to Exhibit 10.8 to the Company's
           Annual Report on Form 10-K for the fiscal year ended December
           31, 1992, File No. 1-10398.

10.21      2006 Management Discretionary Bonus Plan. Incorporated by
           reference to Exhibit 10.20 to the Company's Annual Report on
           Form 10-K for the fiscal year ended December 31, 2005, File No.
           1-10398.

10.22*     2007 Management Discretionary Bonus Plan.

10.23      Employment Agreement, dated as of December 12, 2003, between
           Fred L. Holliger and Giant Industries, Inc. Incorporated by
           reference to Exhibit 10.28 to the Company's Annual Report on
           Form 10-K for the fiscal year ended December 31, 2003, File No.
           1-10398.

10.24      Employment Agreement, dated as of December 12, 2003, between
           Morgan Gust and Giant Industries, Inc. Incorporated by
           reference to Exhibit 10.29 to the Company's Annual Report on
           Form 10-K for the fiscal year ended December 31, 2003, File No.
           1-10398.





                                     181


<PAGE>
10.25      Employment Agreement, dated as of December 12, 2003, between
           Mark B. Cox and Giant Industries, Inc. Incorporated by
           reference to Exhibit 10.30 to the Company's Annual Report on
           Form 10-K for the fiscal year ended December 31, 2003, File No.
           1-10398.

10.26      First Amendment to Employment Agreement, dated August 4, 2006,
           between Giant Industries, Inc. and Mark B. Cox. Incorporated by
           reference to Exhibit 10.1 to the Company's Quarterly Report on
           Form 10-Q for the quarter ended June 30, 2006, File No.
           1-10398.

10.27      Employment Agreement, dated as of December 12, 2003, between
           Kim H. Bullerdick and Giant Industries, Inc. Incorporated by
           reference to Exhibit 10.31 to the Company's Annual Report on
           Form 10-K for the fiscal year ended December 31, 2003, File No.
           1-10398.

10.28      First Amendment to Employment Agreement, dated August 6, 2006,
           between Giant Industries, Inc. and Kim H. Bullerdick.
           Incorporated by reference to Exhibit 10.2 to the Company's
           Quarterly Report on Form 10-Q for the quarter ended June 30,
           2006, File No. 1-10398.

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

10.30      Amendment No. 1 to Consulting Agreement, dated November 12,
           2006, between Fred L. Holliger and Western Refining, Inc.
           Incorporated by reference to Exhibit 10.1 to the Company's
           Current Report on Form 8-K dated November 13, 2006.
-------
*Filed herewith.

     (b) Reports on Form 8-K. We filed the following reports on Form 8-K
during the fourth quarter of 2006 and to date:

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

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

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







                                     182


<PAGE>
         (iv)  On January 19, 2007, we filed a Form 8-K, dated January 19,
2007, containing a press release relating to the Western transaction.

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

















































                                     183


<PAGE>
                                SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                          GIANT INDUSTRIES, INC.

                          By:   /s/ FRED L. HOLLIGER
                             ----------------------------
                             Fred L. Holliger
                             Chairman of the Board
                             and Chief Executive Officer

March 1, 2007

     Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the date indicated.

/s/ FRED L. HOLLIGER       Chairman of the Board, Chief     March 1, 2007
------------------------   Executive Officer and Director
Fred L. Holliger

/s/ MARK B. COX            Executive Vice President,        March 1, 2007
------------------------   Treasurer, Chief Financial
Mark B. Cox                Officer and Assistant
                           Secretary

/s/ LARRY L. DEROIN        Director                         March 1, 2007
------------------------
Larry L. DeRoin

/s/ BROOKS J. KLIMLEY      Director                         March 1, 2007
------------------------
Brooks J. Klimley

/s/ GEORGE M. RAPPORT      Director                         March 1, 2007
------------------------
George M. Rapport

/s/ DONALD M. WILKINSON    Director                         March 1, 2007
------------------------
Donald M. Wilkinson











                                     184


<PAGE>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Giant Industries, Inc.
Scottsdale, Arizona

We have audited the consolidated financial statements of Giant Industries
Inc. and subsidiaries ("the Company") as of December 31, 2006 and 2005,
and for each of the three years in the period ended December 31, 2006,
management's assessment of the effectiveness of the Company's internal
control over financial reporting as of December 31, 2006, and the
effectiveness of the Company's internal control over financial reporting
as of December 31, 2006, and have issued our reports thereon dated March
1, 2007 which express unqualified opinions and the financial statement
opinion includes an explanatory paragraph relating to a change in
accounting method for the adoption of Financial Accounting Standards Board
("FASB") Interpretation 47, Accounting for Conditional Asset Retirement
Obligations in 2005, and a change in accounting method for the adoption of
Statement of Financial Accounting Standards No. 158, Employer's Accounting
for Defined Benefit Plans and Other Post-retirement Benefits, an Amendment
of FASB Statements No. 87, 88, 106, and 132(R) in 2006; such financial
statements and reports are included elsewhere in this Annual Report on
Form 10-K. Our audits also included the consolidated financial statement
schedule of the Company listed in Item 15. This consolidated financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our
opinion, such consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set
forth therein.

/s/ Deloitte & Touche LLP

Phoenix, Arizona
March 1, 2007




















                                     185


<PAGE>
                                                             SCHEDULE II

                  GIANT INDUSTRIES, INC. AND SUBSIDIARIES

                     Valuation and Qualifying Accounts
                    Three Years Ended December 31, 2006


TRADE RECEIVABLES:

<TABLE>
                                      Balance at    Charged to                    Balance at
                                      Beginning     Costs and                       End of
                                      of Period      Expenses      Deduction(a)     Period
                                      ----------    ----------     ------------   ----------
                                                         (In thousands)
<S>                                      <C>           <C>            <C>           <C>
Year ended December 31, 2006:
Allowance for doubtful accounts....      $ 611         $ 140          $(255)        $ 496
                                         =====         =====          =====         =====
Year ended December 31, 2005:
Allowance for doubtful accounts....      $ 329         $ 483          $(201)        $ 611
                                         =====         =====          =====         =====
Year ended December 31, 2004:
Allowance for doubtful accounts....      $ 390         $ 167          $(228)        $ 329
                                         =====         =====          =====         =====
-------
(a) Deductions are primarily trade accounts determined to be uncollectible.


RELATED PARTY NOTE AND INTEREST RECEIVABLE:

                                      Balance at    Charged to                    Balance at
                                      Beginning     Costs and                       End of
                                      of Period      Expenses       Deduction       Period
                                      ----------    ----------     ------------   ----------
<S>                                      <C>           <C>            <C>           <C>
Year ended December 31, 2006:
Allowance for doubtful accounts....      $   -         $   -          $   -         $   -
                                         =====         =====          =====         =====
Year ended December 31, 2005:
Allowance for doubtful accounts....      $   -         $   -          $   -         $   -
                                         =====         =====          =====         =====
Year ended December 31, 2004:
Allowance for doubtful accounts....      $   -         $   -          $   -         $   -
                                         =====         =====          =====         =====

</TABLE>








                                     186


<PAGE>
                           GIANT INDUSTRIES, INC.

                         ANNUAL REPORT ON FORM 10-K
                        YEAR ENDED DECEMBER 31, 2005

                             INDEX TO EXHIBITS

DEFINITIONS:

Form S-1 - Refers to the Form S-1 Registration Statement under the
Securities Act of 1933 as filed October 16, 1989, File No. 33-31584.

Amendment No. 3 - Refers to the Amendment No. 3 to Form S-1 Registration
Statement under the Securities Act of 1933 as filed December 12, 1989,
File No. 33-31584.

Form S-3 - Refers to the Form S-3 Registration Statement under the
Securities Act of 1933 as filed September 22, 1993, File No. 33-69252.

Exhibit
   No.                          Description
-------    -----------------------------------------------------------
  2.1      Asset Purchase Agreement dated February 8, 2002, by and among,
           BP Corporation North America Inc., BP Products North America
           Inc., and Giant Industries, Inc. Incorporated by reference to
           Exhibit 2.3 to the Company's Annual Report on Form 10-K for the
           fiscal year ended December 31, 2001, File No. 1-10398.

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

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

  3.1      Restated Certificate of Incorporation of Giant Industries,
           Inc., a Delaware corporation. Incorporated by reference to
           Exhibit 3.1 to Amendment No. 3.

  3.2      Bylaws of Giant Industries, Inc., a Delaware corporation, as
           amended September 9, 1999. Incorporated by reference to Exhibit
           3.2 to the Company's Annual Report on Form 10-K for the fiscal
           year ended December 31, 1999, File No. 1-10398.

  3.3      Articles of Incorporation of Giant Industries Arizona, Inc., an
           Arizona corporation ("Giant Arizona") formerly Giant
           Acquisition Corp. Incorporated by reference to Exhibit 2.1,
           Annex V to Form S-1.


                                     187


<PAGE>
  3.4      Bylaws of Giant Arizona. Incorporated by reference to Exhibit
           2.1, Annex VI to Form S-1.

  3.5      Articles of Incorporation of Ciniza Production Company.
           Incorporated by reference to Exhibit 3.7 to Form S-3.

  3.6      Bylaws of Ciniza Production Company. Incorporated by reference
           to Exhibit 3.8 to Form S-3.

  3.7      Articles of Incorporation of Giant Stop-N-Go of New Mexico,
           Inc. Incorporated by reference to Exhibit 3.9 to Form S-3.

  3.8      Bylaws of Giant Stop-N-Go of New Mexico, Inc. Incorporated by
           reference to Exhibit 3.10 to Form S-3.

  3.9      Articles of Incorporation of Giant Four Corners, Inc.
           Incorporated by reference to Exhibit 3.11 to Form S-3.

 3.10      Bylaws of Giant Four Corners, Inc. Incorporated by reference to
           Exhibit 3.12 to Form S-3.

 3.11      Articles of Incorporation of Giant Mid-Continent, Inc.
           Incorporated by reference to Exhibit 3.13 to the Company's
           Annual Report on Form 10-K for the fiscal year ended December
           31, 1994, File No. 1-10398.

 3.12      Bylaws of Giant Mid-Continent, Inc. Incorporated by reference
           to Exhibit 3.14 to the Company's Annual Report on Form 10-K for
           the fiscal year ended December 31, 1994, File No. 1-10398.

 3.13      Articles of Incorporation of San Juan Refining Company.
           Incorporated by reference to Exhibit 3.15 to the Company's
           Annual Report on Form 10-K for the fiscal year ended December
           31, 1995, File No. 1-10398.

 3.14      Bylaws of San Juan Refining Company. Incorporated by reference
           to Exhibit 3.16 to the Company's Annual Report on Form 10-K for
           the fiscal year ended December 31, 1995, File No. 1-10398.

 3.15      Amended and Restated Articles of Incorporation of Phoenix Fuel
           Co., Inc. Incorporated by reference to Exhibit 3.15 to the
           Company's Registration Statement on Form S-4 under the
           Securities Act of 1933 as filed July 15, 2002, File No.
           333-92386.

 3.16      Amended Bylaws of Phoenix Fuel Co., Inc. Incorporated by
           reference to Exhibit 3.18 to the Company's Annual Report on
           Form 10-K for the fiscal year ended December 31, 1997, File No.
           1-10398.






                                     188


<PAGE>
 3.17      Articles of Incorporation of Giant Pipeline Company.
           Incorporated by reference to Exhibit 3.21 to the Company's
           Annual Report on Form 10-K for the fiscal year ended December
           31, 1999, File No. 1-10398.

 3.18      Bylaws of Giant Pipeline Company. Incorporated by reference to
           Exhibit 3.22 to the Company's Annual Report on Form 10-K for
           the fiscal year ended December 31, 1999, File No. 1-10398.

 3.19      Certificate of Incorporation of Giant Yorktown, Inc.
           Incorporated by reference to Exhibit 3.21 to the Company's
           Annual Report on Form 10-K for the year ended December 31,
           2001, File No. 1-10398.

 3.20      Bylaws of Giant Yorktown, Inc. Incorporated by reference to
           Exhibit 3.22 to the Company's Annual Report on Form 10-K for
           the year ended December 31, 2001, File No. 1-10398.

 3.21      Certificate of Incorporation of Giant Yorktown Holding Company.
           Incorporated by reference to Exhibit 3.23 to the Company's
           Registration Statement on Form S-4 under the Securities Act of
           1933 as filed July 15, 2002, File No. 333-92386.

 3.22      Bylaws of Giant Yorktown Holding Company. Incorporated by
           reference to Exhibit 3.24 to the Company's Registration
           Statement on Form S-4 under the Securities Act of 1933 as filed
           July 15, 2002, File No. 333-92386.

 3.23      Articles of Incorporation of Dial Oil Co. Incorporated by
           reference to Exhibit 3.23 to the Company's Annual Report on
           Form 10-K for the year ended December 31, 2005, File No.
           1-10398.

 3.24      Amended and Restated Bylaws of Dial Oil Co. Incorporated by
           reference to Exhibit 3.1 to the Company's Quarterly Report on
           Form 10-Q for the quarter ended June 20, 2005, File No.
           1-10398.

 3.25*     Articles of Incorporation of Empire Oil Co.

 3.26*     Amended and Restated Bylaws of Empire Oil co.

 4.1       Indenture, dated as of May 14, 2002, among the Company, as
           Issuer, the Subsidiary Guarantors, as guarantors, and The Bank
           of New York, as Trustee, relating to $200,000,000 of 11% Senior
           Subordinated Notes 2012. Incorporated by reference to Exhibit
           4.2 to the Company's Registration Statement on Form S-4 under
           the Securities Act of 1933 as filed July 15, 2002, File No.
           333-92386.






                                     189


<PAGE>
 4.2       Indenture, dated as of May 3, 2004, among the Company, as
           Issuer, the Subsidiary Guarantors, as Guarantors, and The Bank
           of New York, as Trustee, providing for Issuance of Notes in
           Series. Incorporated by reference to Exhibit 4.6 to the
           Company's Quarterly Report on Form 10-Q for the fiscal quarter
           ended March 31, 2004, File No. 1-10398.

 4.3       Supplemental Indenture, dated as of May 3, 2004, among the
           Company, 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. Incorporated by
           reference to Exhibit 4.7 to the Company's Quarterly Report on
           Form 10-Q for the fiscal quarter ended March 31, 2004, File No.
           1-10398.

10.1       Giant Industries, Inc. & Affiliated Companies 401(k) Basic Plan
           Document, effective October 9, 2003. Incorporated by reference
           to Exhibit 4.3 to the Company's Annual Report on Form 10-K for
           the fiscal year ended December 31, 2003, File No. 1-10398.

10.2       Addendum to Giant Industries, Inc. & Affiliated Companies
           401(k) Basic Plan Document, effective March 28, 2005.
           Incorporated by reference to Exhibit 4.1 to the Company's
           Quarterly Report on Form 10-Q for the quarter ended March 31,
           2005, File No. 1-10398.

10.3*      Addendum to Giant Industries, Inc. and Affiliated Companies
           401(k) Basic Plan Document, effective January 1, 2006.

10.4       Giant Industries, Inc. & Affiliated Companies 401(k) Plan
           Adoption Agreement, effective June 24, 2003. Incorporated by
           reference to Exhibit 4.1 to the Company's Quarterly Report on
           Form 10-K for the quarter ended June 30, 2003, File No 1-10398.

10.5       First Amendment to Giant Industries, Inc. & Affiliated
           Companies 401(k) Plan Adoption Agreement, effective June 24,
           2003. Incorporated by reference to Exhibit 4.2 to the Company's
           Quarterly Report on Form 10-K for the quarter ended June 30,
           2003, File No. 1-10398.

10.6       Second Amendment to Giant Industries, Inc. & Affiliated
           Companies 401(k) Plan Adoption Agreement, effective July 1,
           2003. Incorporated by reference to Exhibit 4.3 to the Company's
           Quarterly Report on Form 10-K for the quarter ended June 30,
           2003, File No. 1-10398.

10.7       Third Amendment to Giant Industries, Inc. & Affiliated
           Companies 401(k) Plan Adoption Agreement, effective January 1,
           2004. Incorporated by reference to Exhibit 4.7 to the Company's
           Annual Report on Form 10-K for the fiscal year ended December
           31, 2003, File No. 1-10398.




                                     190


<PAGE>
10.8       Fourth Amendment to Giant Industries, Inc. & Affiliated
           Companies 401(k) Plan Adoption Agreement, effective March 1,
           2004. Incorporated by reference to Exhibit 4.8 to the Company's
           Annual Report on Form 10-K for the fiscal year ended December
           31, 2003, File No. 1-10398.

10.9       Fifth Amendment to the Giant Industries, Inc. & Affiliated
           Companies 401(k) Plan Adoption Agreement. Incorporated by
           reference to Exhibit 4.2 to the Company's Quarterly Report on
           Form 10-Q for the quarter ended March 31, 2005, File No.
           1-10398.

10.10      Sixth Amendment to the Giant Industries, Inc. & Affiliated
           Companies 401(k) Plan Adoption Agreement. Incorporated by
           reference to Exhibit 4.1 to the Company's Quarterly Report on
           Form 10-Q for the quarter ended June 30, 2005, File No.
           1-10398.

10.11      Seventh Amendment to the Giant Industries, Inc. & Affiliated
           Companies 401(k) Plan Adoption Agreement. Incorporated by
           reference to Exhibit 10.1 to the Company's Quarterly Report on
           Form 10-Q for the quarter ended September 30, 2005, File No.
           1-10398.

10.12      Eighth Amendment to the Giant Industries, Inc. & Affiliated
           Companies 401(k) Plan Adoption Agreement. Incorporated by
           reference to Exhibit 10.11 to the Company's Annual Report on
           Form 10-K for the year ended December 31, 2005, File No.
           1-10398.

10.13      Ninth Amendment to the Giant Industries, Inc. & Affiliated
           Companies 401(k) Plan Adoption Agreement. Incorporated by
           reference to Exhibit 10.12 to the Company's Annual Report on
           Form 10-K for the year ended December 31, 2005, File No.
           1-10398.

10.14*     Tenth Amendment to the Giant Industries, Inc. & Affiliated
           Companies 401(k) Plan Adoption Agreement.

10.15      Giant Industries, Inc. and Affiliated Companies Deferred
           Compensation Plan. Incorporated by reference to Exhibit 10.2 to
           the Company's Quarterly Report on Form 10-Q for the quarter
           ended September 30, 2005, File No. 1-10398.

10.16*     First Amendment to the Giant Industries, Inc. and Affiliated
           Companies Deferred Compensation Plan.

10.17      Giant Industries, Inc. 1998 Stock Incentive Plan. Incorporated
           by reference to Appendix H to the Joint Proxy
           Statement/Prospectus included in the Company's Registration
           Statement on Form S-4 under the Securities Act of 1933 as filed
           May 4, 1998, File No. 333-51785.



                                     191


<PAGE>
10.18      Amendment No. 1 to 1998 Stock Incentive Plan, dated September
           13, 2000. Incorporated by reference to Exhibit 10.8 to the
           Company's Annual Report on Form 10-K for the fiscal year ended
           December 31, 2002, File No 1-10398.

10.19      Amendment No. 2 to 1998 Stock Incentive Plan, dated March 27,
           2002. Incorporated by reference to Exhibit 10.9 to the
           Company's Annual Report on Form 10-K for the fiscal year ended
           December 31, 2002, File No 1-10398.

10.20      ESOP Substitute Excess Deferred Compensation Benefit Plan.
           Incorporated by reference to Exhibit 10.8 to the Company's
           Annual Report on Form 10-K for the fiscal year ended December
           31, 1992, File No. 1-10398.

10.21      2006 Management Discretionary Bonus Plan. Incorporated by
           reference to Exhibit 10.20 to the Company's Annual Report on
           Form 10-K for the year ended December 31, 2005, File No.
           1-10398.

10.22*     2007 Management Discretionary Bonus Plan.

10.23      Employment Agreement, dated as of December 12, 2003, between
           Fred L. Holliger and Giant Industries, Inc. Incorporated by
           reference to Exhibit 10.28 to the Company's Annual Report on
           Form 10-K for the fiscal year ended December 31, 2003, File No.
           1-10398.

10.24      Employment Agreement, dated as of December 12, 2003, between
           Morgan Gust and Giant Industries, Inc. Incorporated by
           reference to Exhibit 10.29 to the Company's Annual Report on
           Form 10-K for the fiscal year ended December 31, 2003, File No.
           1-10398.

10.25      Employment Agreement, dated as of December 12, 2003, between
           Mark B. Cox and Giant Industries, Inc. Incorporated by
           reference to Exhibit 10.30 to the Company's Annual Report on
           Form 10-K for the fiscal year ended December 31, 2003, File No.
           1-10398.

10.26      First Amendment to Employment Agreement, dated August 4, 2006,
           between Giant Industries, Inc. and Mark B. Cox. Incorporated by
           reference to Exhibit 10.1 to the Company's Quarterly Report on
           Form 10-Q for the quarter ended June 30, 2006, File No.
           1-10398.

10.27      Employment Agreement, dated as of December 12, 2003, between
           Kim H. Bullerdick and Giant Industries, Inc. Incorporated by
           reference to Exhibit 10.31 to the Company's Annual Report on
           Form 10-K for the fiscal year ended December 31, 2003, File No.
           1-10398.




                                     192


<PAGE>
10.28      First Amendment to Employment Agreement, dated August 6, 2006,
           between Giant Industries, Inc. and Kim H. Bullerdick.
           Incorporated by reference to Exhibit 10.2 to the Company's
           Quarterly Report on Form 10-Q for the quarter ended June 30,
           2006, File No. 1-10398.

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

10.30      Amendment No. 1 to Consulting Agreement, dated November 12,
           2006, between Fred L. Holliger and Western Refining, Inc.
           Incorporated by reference to Exhibit 10.1 to the Company's
           Current Report on Form 8-K dated November 13, 2006.

10.31**    Crude Oil Purchase/Sale Agreement 2004-2008, effective as of
           February 9, 2004, between Giant Yorktown, Inc. and Statoil
           Marketing & Trading (US) Inc. Incorporated by reference to
           Exhibit 10.33 to the Company's Annual Report on Form 10-K for
           the fiscal year ended December 31, 2003, File No. 1-10398.

10.32      Fourth Amended and Restated Credit Agreement, dated as of June
           27, 2005, among Giant Industries, Inc., as Borrower, Bank of
           America, N.A., as Administrative Agent, Swing Line Lender, and
           as Issuing Bank, and the Lenders parties thereto. Incorporated
           by reference to Exhibit 10.1 to the Company's Current Report on
           Form 8-K filed July 1, 2005, File No. 1-10398.

10.33      First Amendment to Fourth Amended and Restated Credit
           Agreement, dated as of August 4, 2005, among Giant Industries,
           Inc., as Borrower, Bank of America, N.A., as Administrative
           Agent, Swing Line Lender, and as Issuing Bank, and the Lenders
           parties thereto. Incorporated by reference to Exhibit 10.2 to
           the Company's Quarterly Report on Form 10-Q for the quarter
           ended June 30, 2005, File No. 1-10398.

10.34      Purchase and Sale Agreement, dated as of June 21, 2005, between
           Texas-New Mexico Pipe Line Company and Giant Pipeline Company.
           Incorporated by reference to Exhibit 10.3 to the Company's
           Quarterly Report on Form 10-Q for the quarter ended June 30,
           2005, File No. 1-10398.

14.1       Code of Ethics. Incorporated by reference to Exhibit 14.1 to
           the Company's Annual Report on Form 10-K for the fiscal year
           ended December 31, 2003, File No. 1-10398.

18.1       Letter regarding change in accounting principles. Incorporated
           by reference to Exhibit 18.1 to the Company's Annual Report on
           Form 10-K for the fiscal year ended December 31, 1990, File No.
           1-10398.




                                     193


<PAGE>
21.1*      Subsidiaries of the Company.

23.1*      Consent of Deloitte & Touche LLP to incorporate report in
           previously filed Registration Statements.

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.
** Portions have been omitted pursuant to a request for confidential
   treatment filed by the Registrant with the Commission. The omitted
   portions have been filed separately with the Commission.































                                     194