UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549


FORM
10-K









ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d)þ
            OF THE
      SECURITIES EXCHANGE ACT OF 1934For
      the Fiscal Year Ended:  December 31, 2007OR
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d)o
            OF THE
      SECURITIES EXCHANGE ACT OF 1934For
      the transition period from . . . . to . . . .




Commission
File Number:  1-7627


FRONTIER
OIL CORPORATION


(Exact
name of registrant as specified in its charter)





Wyoming
            
            74-1895085(State or
      other jurisdiction of
            
            (I.R.S.
      Employerincorporation
      or organization)
            
            Identification
      No.)10000 Memorial Drive, Suite
      600
            
            77024-3411Houston,
      Texas
            
            (Zip
      Code)(Address of
      principal executive offices)





Registrant’s
telephone number, including area code:  (713)
688-9600


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




Name of Each
      ExchangeTitle of Each
      Class
            
            on
      Which RegisteredCommon
      Stock
            
            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  þ  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  þ


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


Yes  þ  No   ̈


Indicate
by check mark if disclosure of delinquent filers pursuant to rule 405 of
Regulation S-K 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 to this
Form 10-K.  ü


Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.


(Check
one)


Large
accelerated filer  þ       Accelerated
filer   ̈                       Non-accelerated
filer   ̈                       Smaller
reporting company   ̈





(Do not
check if a smaller reporting company)




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


Yes   ̈   No  þ


The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold as of June 29, 2007 was $4.5 billion.


The
number of shares of common stock outstanding as of February 22, 2008 was
103,521,366.


DOCUMENTS
INCORPORATED BY REFERENCE


Portions
of the Annual Proxy Statement for the registrant’s 2008 annual meeting of
shareholders are incorporated by reference into Items 10 through 14 of Part
III.










TABLE
OF CONTENTS


Part I


Item
1.                Business


Summary and
Overview


Refining
Operations


Marketing and
Distribution


Competition


Crude Oil
Supply


Government
Regulation


Safety


Employees


Item 1A.     
       Risk Factors
Relating to Our Business


Item
1B.             Unresolved Staff Comments


Item
2.                 Properties


Item
3.                 Legal Proceedings


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





Available
Information




Part II


Item
5.                Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchasers of Equity
Securities


Item
6.               Selected Financial Data


Item
7.                Management’s Discussion and Analysis of Financial Condition
and Results of Operations


Item
7A.             Quantitative and Qualitative Disclosures About Market
Risk


Item
8.                Financial Statements and Supplementary Data


Item
9.                Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure


Item
9A.             Controls and Procedures


Item
9B.            
 Other Information





Part
III





Part IV


Item
15                 Exhibits and Financial Statement Schedules




Forward-Looking
Statements


This Form
10-K contains “forward-looking statements” as defined by the Securities and
Exchange Commission (“SEC”).  Such statements are those concerning
contemplated transactions and strategic plans, expectations and objectives for
future operations.  These include, without limitation:


·
            statements,
      other than statements of historical fact, that address activities, events
      or developments that we expect, believe or anticipate will or may occur in
      the future;


·
            statements
      relating to future financial performance, future capital sources and other
      matters; and


·
            any
      other statements preceded by, followed by or that include the words
      “anticipates,” “believes,” “expects,” “plans,” “intends,” “estimates,”
      “projects,” “could,” “should,” “may,” or similar
    expressions.


Although
we believe that our plans, intentions and expectations reflected in or suggested
by the forward-looking statements we make in this Form 10-K are reasonable, we
can give no assurance that such plans, intentions or expectations will be
achieved. These statements are based on assumptions made by us based on our
experience and perception of historical trends, current conditions, expected
future developments and other factors that we believe are appropriate in the
circumstances. Such statements are subject to a number of risks and
uncertainties, many of which are beyond our control. You are cautioned that any
such statements are not guarantees of future performance and that actual results
or developments may differ materially from those projected in the
forward-looking statements.


All
forward-looking statements contained in this Form 10-K only speak as of the date
of this document.  We undertake no obligation to update or revise
publicly any revisions to any such forward-looking statements that may be made
to reflect events or circumstances after the date of this Form 10-K, or to
reflect the occurrence of unanticipated events.











PART I


Item 1.
            Business




Summary


The terms
“Frontier,” “we,” “us” and “our” as used in this Form 10-K refer to Frontier Oil
Corporation and its subsidiaries, except where it is clear that those terms mean
only the parent company.  When we use the term “Rocky Mountain
region,” we refer to the states of Colorado, Wyoming, Montana and Utah, and when
we use the term “Plains States,” we refer to the states of Kansas, Oklahoma,
eastern Nebraska, Iowa, Missouri, North Dakota and South Dakota.




Overview


We are an
independent energy company, organized in the State of Wyoming in 1977, engaged
in crude oil refining and the wholesale marketing of refined petroleum
products.  We operate refineries (the “Refineries”) in Cheyenne,
Wyoming and El Dorado, Kansas with a total annual average crude oil capacity of
approximately 162,000 barrels per day (“bpd”).  Both of our Refineries
are complex refineries, which means that they can process heavier, less
expensive types of crude oil and still produce a high percentage of gasoline,
diesel fuel and other high value refined products.  We focus our
marketing efforts in the Rocky Mountain region and the Plains States, which we
believe are among the most attractive refined products markets in the United
States.  The operations of refining and marketing of petroleum
products are considered part of one reporting segment.


Cheyenne
Refinery.  Our Cheyenne Refinery has a permitted crude oil
capacity of 52,000 bpd on a twelve-month average.  We market its
refined products primarily in the eastern slope of the Rocky Mountain region,
which encompasses eastern Colorado (including the Denver metropolitan area),
eastern Wyoming and western Nebraska (the “Eastern Slope”).  The
Cheyenne Refinery has a coking unit, which allows the refinery to process
extensive amounts of heavy crude oil for use as a feedstock. The ability to
process heavy crude oil lowers our raw material costs because heavy crude oil is
generally less expensive than lighter types of crude oil.  For the
year ended December 31, 2007, heavy crude oil constituted approximately 72% of
the Cheyenne Refinery’s total crude oil charge.  For the year ended
December 31, 2007, the Cheyenne Refinery’s product yield included gasoline
(42%), diesel fuel (30%) and asphalt and other refined petroleum products
(28%).


El Dorado
Refinery.  The El Dorado Refinery is one of the largest
refineries in the Plains States and the Rocky Mountain region with an average
crude oil capacity of 110,000 bpd.  The El Dorado Refinery can select
from many different types of crude oil because of its direct access to Cushing,
Oklahoma, which is connected by pipelines to the Gulf Coast and to
Canada.  This access, combined with the El Dorado Refinery’s
complexity (including a coking unit), gives it the flexibility to refine a wide
variety of crude oils.  In connection with our acquisition of the El
Dorado Refinery in 1999, we entered into a 15-year refined product offtake
agreement for gasoline and diesel production at this refinery with Shell Oil
Products US (“Shell”).  Shell has also agreed to purchase all jet fuel
production until the end of the product offtake agreement.  As our
deliveries to Shell have declined, per the terms of the refined product offtake
agreement, we have marketed an increasing portion of the El Dorado Refinery’s
gasoline and diesel in the same markets where Shell currently sells the El
Dorado Refinery’s products, primarily in Denver and throughout the Plains
States.  For the year ended December 31, 2007, the El Dorado
Refinery’s product yield included gasoline (50%), diesel and jet fuel (36%) and
chemicals and other refined petroleum products (14%).


Other Assets.  In
February 2007, the Company acquired Ethanol Management Company (“EMC”) for
approximately $3.1 million cash.  EMC’s primary assets are a 25,000
bpd products terminal and blending facility located near Denver,
Colorado.  The Company owned, until their sale in September 2007, a
34.72% interest in a crude oil pipeline in Wyoming and a 50% interest in two
crude oil tanks in Guernsey, Wyoming, both of which were accounted for as
undivided interests.  Each of these assets and the associated
liabilities, revenues and expenses were reported on a proportionate gross basis
until their sale in September 2007.




Refining Operations


Varieties of Crude Oil and
Products.  Traditionally, crude oil has been classified within
the following types:


·  sweet
(low sulfur content),


·  sour
(high sulfur content),


·  light
(high gravity),


·  heavy
(low gravity) and


·  intermediate
(if gravity or sulfur content is in between).


For the
most part, heavy crude oil tends to be sour and light crude oil tends to be
sweet.  When refined, light crude oil produces a higher proportion of
high value refined products such as gasoline, diesel and jet fuel and, as a
result, is more expensive than heavy crude oil.  In contrast, heavy
crude oil produces more low value by-products and heavy residual
oils.  The discount at which heavy crude oil sells compared to light
crude oil is known in the industry as the light/heavy spread or differential,
while the discount at which sour crude oil sells compared to light crude oil is
known as the sweet/sour, or WTI/WTS, spread or differential.  Coking
units, such as the ones at our Refineries, can process certain by-products and
heavy residual oils to produce additional volumes of gasoline and diesel, thus
increasing the aggregate yields of higher value refined products from the same
initial barrel of crude oil.


Refineries
are frequently classified according to their complexity, which refers to the
number, type and capacity of processing units at the refinery.  Each
of our Refineries possesses a coking unit, which provides substantial upgrading
capacity and generally increases a refinery’s complexity
rating.  Upgrading capacity refers to the ability of a refinery to
produce high yields of high value refined products such as gasoline and diesel
from heavy and intermediate crude oil.  In contrast, refiners with low
upgrading capacity must process primarily light, sweet crude oil to produce a
similar yield of gasoline and diesel.  Some low complexity refineries
may be capable of processing heavy and intermediate crude oil, but they will
produce large volumes of by-products, including heavy residual oils and
asphalt.  Because gasoline, diesel and jet fuel sales generally
achieve higher margins than are available on other refined products, we expect
that these products will continue to make up the majority of our
production.


Refinery
Maintenance.  Each of the processing units at our Refineries
requires scheduled significant maintenance and repair shutdowns (referred to as
“turnarounds”) during which the unit is not in operation.  Turnaround
cycles vary for different units but are generally required every one to five
years.  In general, turnarounds at our Refineries are managed so that
some units continue to operate while others are down for scheduled
maintenance.  We also coordinate operations by staggering turnarounds
between our two Refineries.  Turnarounds are implemented using our
regular personnel as well as additional contract labor.  Once started,
turnaround work typically proceeds 24 hours per day to minimize unit
downtime.  We defer the costs of turnarounds, reflected as “Deferred
turnaround costs” on the Consolidated Balance Sheets, and subsequently amortize
them on a straight-line basis over the period of time estimated to lapse until
the next turnaround occurs.  We normally schedule our turnaround work
during the spring or fall of each year.  When we perform a turnaround,
we may increase product inventories prior to the turnaround to minimize the
impact of the turnaround on our sales of refined products.


During
2007, the only major turnaround work at the El Dorado Refinery involved the
alkylation unit.  For 2008, major turnaround work planned at the El
Dorado Refinery is on the crude unit, the coker, and the
reformer.  The timing of the El Dorado turnaround is expected to
coincide with the completion of the crude unit and vacuum expansion project in
the spring of 2008.


Fiscal
2007 was a major turnaround year for the Cheyenne Refinery with work completed
on the fluid catalytic cracking unit (“FCCU”), the crude unit, the coker, and
other operating units.  At the Cheyenne refinery, 2008 turnaround work
is expected to be modest in scope and will involve a naphtha hydrotreater and
its associated reformer, diesel hydrotreater, and sulfur recovery
unit.





Marketing and Distribution


Cheyenne
Refinery.  The primary market for the Cheyenne Refinery’s
refined products is the Eastern Slope.  For the year ended December
31, 2007, we sold approximately 88% of the Cheyenne Refinery’s gasoline volumes
in Colorado and 11% in Wyoming.  For the year ended December 31, 2007,
we sold approximately 67% of the Cheyenne Refinery’s diesel in Wyoming and 30%
in Colorado.  Because of the location of the Cheyenne Refinery, we are
able to sell a significant portion of its diesel product from the truck rack at
the Refinery, thereby eliminating transportation costs.  The gasoline
and remaining diesel produced by this Refinery are primarily shipped via
pipeline to terminals for distribution by truck or rail.  Pipeline
shipments from the Cheyenne Refinery are handled mainly by the Plains All
American Pipeline (formerly Rocky Mountain Pipeline), serving Denver and
Colorado Springs, Colorado, and the ConocoPhillips Pipeline, serving Sidney,
Nebraska.


We sell
refined products from our Cheyenne Refinery to a broad base of independent
retailers, jobbers and major oil companies.  Refined product prices
are determined by local market conditions at distribution centers known as
“terminal racks,” and prices at the terminal racks are posted daily by
sellers.  The customer at a terminal rack typically supplies its own
truck transportation.  In the year ended December 31, 2007,
approximately 91% of the Cheyenne Refinery’s sales were made to its 25 largest
customers compared to the year ended December 31, 2006, when approximately 88%
of the Cheyenne Refinery’s sales were made to its 25 largest
customers.  Occasionally, volumes sold exceed the Refinery’s
production, in which case we purchase product in the spot market as
needed.


El Dorado
Refinery.  The primary markets for the El Dorado Refinery’s
refined products are Colorado and the Plains States, which include the Kansas
City metropolitan area.  The gasoline, diesel and jet fuel produced by
the El Dorado Refinery are primarily shipped via pipeline to terminals for
distribution by truck or rail.  The Valero Pipeline, serving the
northern Plains States, the Magellan Pipeline Company, L.P. (“Magellan”)
mountain pipeline serving Denver, Colorado, and the Magellan mid-continent
pipeline serving the Plains States handle shipments from our El Dorado
Refinery.


For the
year ended December 31, 2007, Shell was the El Dorado Refinery’s largest
customer, representing approximately 61% of the El Dorado Refinery’s total sales
and 42% of our total consolidated sales.  Under the offtake agreement,
Shell purchases gasoline, diesel and jet fuel produced by the El Dorado Refinery
at market-based prices.  Initially in 1999, Shell purchased all of the
El Dorado Refinery’s production of these products.  Beginning in 2000,
we retained and marketed 5,000 bpd of the Refinery’s gasoline and diesel
production.  The retained portion increases by 5,000 bpd each year
through 2009.  In 2007, we retained 40,000 bpd of the Refinery’s
gasoline and diesel production.  As our sales to Shell under this
agreement decrease, we intend to sell the gasoline and diesel produced by the El
Dorado Refinery in the same general markets currently served by Shell, as
previously described.




Competition


Cheyenne
Refinery.  The most competitive market for the Cheyenne
Refinery’s products is the Denver metropolitan area. Other than the Cheyenne
Refinery, three principal refineries serve the Denver market: an approximate
70,000 bpd refinery near Rawlins, Wyoming and an approximate 25,000 bpd refinery
in Casper, Wyoming, both owned by Sinclair Oil Company (“Sinclair”); and a
90,000 bpd refinery located in Denver and owned by Suncor Energy (U.S.A.) Inc.
(“Suncor”).  Five product pipelines also supply Denver, including
three from outside the region that enable refined products from other regions to
be sold in the Denver market.  Refined products shipped from other
regions typically bear the burden of higher transportation costs.


The
Suncor refinery located in Denver has lower product transportation costs to
serve the Denver market than we do.  However, the Cheyenne Refinery
has lower crude oil transportation costs because of its proximity to the
Guernsey, Wyoming hub, the major crude oil pipeline hub in the Rocky Mountain
region.  Moreover, unlike Sinclair and Suncor, we only sell our
products to the wholesale market.  We believe that our commitment to
the wholesale market gives us certain marketing advantages over our principal
competitors in the Eastern Slope area, all of which also have retail outlets,
because we do not compete directly with independent retailers of gasoline and
diesel.


El Dorado
Refinery.The El Dorado Refinery faces competition from other
Plains States and mid-continent refiners, but the principal competitors for the
El Dorado Refinery are Gulf Coast refiners.  Although our Gulf Coast
competitors typically have lower production costs because of their size
(economies of scale) than the El Dorado Refinery, we believe that our
competitors’ higher refined product transportation costs allow our El Dorado
Refinery to compete effectively in the Plains States and Rocky Mountain region
with the Gulf Coast refineries.  The Plains States and mid-continent
regions are supplied by three product pipelines (Magellan Midstream Partners,
L.P., Explorer Pipeline and Nustar Energy L.P.) that originate from the Gulf
Coast.




Crude Oil Supply


Cheyenne
Refinery.  In the year ended December 31, 2007, we obtained
approximately 61% of the Cheyenne Refinery’s crude oil charge from Canada, 19%
from Wyoming, 18% from Colorado and 2% from other domestic
sources.  During the same period, heavy crude oil constituted
approximately 72% of the Cheyenne Refinery’s total crude oil charge, compared to
73% in 2006.  Cheyenne is 88 miles south of Guernsey, Wyoming, the
main hub and crude oil trading center for the Rocky Mountain
region.  We have crude oil pipeline capacity from Guernsey to the
Cheyenne Refinery via the Plains All American Pipeline, which first transported
crude oil in October 2007, and a common carrier pipeline.  Ample
quantities of heavy crude oil are available at Guernsey, including both locally
produced Wyoming general sour and imported Canadian heavy crude oil, which is
supplied by the Express pipeline system and the Poplar and Butte
pipelines.  This type of crude oil typically sells at a discount from
lighter crude oil prices.  The Cheyenne Refinery’s ability to process
a higher percentage of heavy crude oil, gives us an advantage over the three
other Eastern Slope refineries, none of which has the necessary upgrading
capacity to process such high volumes of heavy crude oil.


We
purchase crude oil for the Cheyenne Refinery from several suppliers, including
major oil companies, marketing companies and large and small independent
producers, under arrangements which contain market-responsive pricing
provisions.  Many of these arrangements are subject to cancellation by
either party or have terms that are not in excess of one year and are subject to
periodic renegotiation.  We had an agreement with Baytex Marketing
Ltd., a Canadian crude oil producer, to supply heavy Canadian crude oil that
expired on December 31, 2007.  We will continue to purchase crude oil
from various suppliers under short-term commitments.  In the event we
become unable to purchase crude oil from any one of these sources, we believe
that adequate alternative supplies of crude oil would be available.


El Dorado
Refinery.  In the year ended December 31, 2007, we obtained
approximately 67% of the El Dorado Refinery’s crude oil charge from Texas, 20%
from Canada, 6% from Kansas, 4% from the Gulf of Mexico, and the remaining 3%
from other foreign and domestic locations.  El Dorado is 125 miles
north of Cushing, Oklahoma, a major crude oil hub.  The Cushing hub is
supplied by the Seaway Pipeline, which runs from the Gulf Coast; the Basin
Pipeline, which runs through Wichita Falls, Texas from West Texas; the Sun
Pipeline, which originates at the Gulf Coast and connects to the Basin Pipeline
at Wichita Falls and the Spearhead Pipeline which connects at Griffith, Indiana
with the Enbridge Pipeline to bring crude from Canada.  The Osage
Pipeline runs from Cushing to El Dorado and transported approximately 94% of our
crude oil charge during the year ended December 31, 2007.  The
remainder of our crude oil charge was transported to the El Dorado Refinery
through Kansas gathering system pipelines.  We have a Transportation
Services Agreement to transport up to 38,000 bpd of crude oil on the Spearhead
Pipeline from Griffith, Indiana to Cushing, Oklahoma, enabling us to transport
heavy Canadian crude oil to our El Dorado Refinery.  The initial term
of this agreement is for a period of ten years from the actual commencement date
of March 2006.  We have the right to extend the agreement for an
additional ten years and increase the volume transported under a preferential
tariff to 50,000 bpd.





Government Regulation





Environmental
Matters.


See
“Environmental” in Note 9 in the “Notes to Consolidated Financial
Statements.”




Centennial Pipeline
Regulation.We owned a 34.72%
undivided interest in the Centennial Pipeline, which runs approximately 88 miles
from Guernsey to Cheyenne, Wyoming.  Suncor Pipe Line Company is the
sole operator of the Centennial Pipeline and held the remaining ownership
interest and purchased our interest in September 2007.  During our
ownership, the Cheyenne Refinery received up to 25,000 bpd of crude oil
feedstock through the Centennial Pipeline.  Under the terms of the
operating agreement for the Centennial Pipeline, the costs and expenses incurred
to operate and maintain the Centennial Pipeline were allocated to us on a
combined basis, based on our throughput and ownership interest.  The
Centennial Pipeline is subject to numerous federal, state and local laws and
regulations relating to the protection of health, safety and the
environment.  We believe that the Centennial Pipeline was operated in
accordance with all applicable laws and regulations.  We are not aware
of any material pending legal proceedings which relate to the Centennial
Pipeline during our ownership.




Safety


We are
subject to the requirements of the federal Occupational Safety and Health Act
(“OSHA”) and comparable state occupational safety statutes.


The
Cheyenne Refinery’s OSHA recordable incident rate in 2007 of 2.72 is higher than
the latest reported U.S. industry average of 0.89 as compiled by the National
Petrochemical and Refiner’s Association (“NPRA”) but comparable to the regional
NPRA rate of 2.01.  While the frequency of injuries at the Cheyenne
Refinery has risen above NPRA averages, we continue to emphasize safety at all
levels of the Cheyenne organization.  In 2007, we reduced our
contractor injury rate by 64% and achieved a 2007 contractor incidence rate of
2.19, a significant improvement over prior years.  By improving the
training and selection of the contractor workforce, we were able to improve the
safety of the outside labor we hire. We intend to focus on safety by improving
procedures and training for all refinery workers in the coming
year.  These efforts include programs in both areas of occupational
and process safety initiatives and are comprehensive across all areas of the
Refinery.


The El
Dorado Refinery’s OSHA recordable incident rate of 0.95 in 2007 is a marked
improvement against the rate of 1.47 for 2006, and compares favorably to the
U.S. refining industry average of 0.89.  Management and employees at
the El Dorado Refinery remain committed to programs, processes and behaviors
that drive safety excellence.  Improvement in contractor safety
continued to be a key initiative for the El Dorado Refinery during
2007.  Behavior-based safety programs were introduced in 2004 for our
own employees.  During 2006, we included the majority of our
contractor base in these programs as well.  These efforts resulted in
a significant increase in contractor safety awareness and much improved
contractor safety results.  During 2008, the El Dorado Refinery also
plans to undertake extended work and embark upon new efforts to make the plant
stronger both in occupational- and process safety-related areas.


Our
employees and management continue to dedicate their efforts to a balanced safety
program that combines individual behavioral elements in a safety-coaching
environment with structured, management-driven programs to improve the safety of
our facilities and operating procedures.  Our objective is to provide
a safe working environment for employees and contractors who know how to work
safely.  Encouraging all employees and contractors to contribute
toward improving safety performance through personal involvement in
safety-related activities is an industry-proven method of reducing
injuries.




Employees


At
December 31, 2007, we employed approximately 800 full-time employees: 90 in the
Houston and Denver offices, 315 at the Cheyenne Refinery, and 395 at the El
Dorado Refinery.  The Cheyenne Refinery employees included
approximately 110 administrative and technical personnel and approximately 205
union members.  The El Dorado Refinery employees included 145
administrative and technical personnel and approximately 250 union
members.  The union members at our El Dorado Refinery are represented
by the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied
Industrial and Service Workers International Union (“USW”).  The union
members at our Cheyenne Refinery are represented by seven bargaining units, the
largest being the USW and the others with various craft unions.


For our
Cheyenne Refinery, the current contract between the Company, the USW, and its
Local 8-0574 expires in July 2009.  The current contract between the
Company, the craft unions, and its various local chapters expires in June
2009.


At our El
Dorado Refinery, the current contract between the Company, the USW, and its
Local 5-241 expires in January 2009.





Item 1A.
            Risk
      Factors Relating to Our Business





Crude
oil prices and refining margins significantly impact our cash flow and have
fluctuated substantially in the past.


Our cash
flow from operations is primarily dependent upon producing and selling refined
products at margins that are high enough to cover our fixed and variable
expenses.  In recent years, crude oil costs and crack spreads (the
difference between refined product sales prices and crude oil prices) have
fluctuated substantially.  Factors that may affect crude oil costs and
refined product prices include:


·  overall
demand for crude oil and refined products;


· general
economic conditions;


·  the level
of foreign and domestic production of crude oil and refined
products;


·  the
availability of imports of crude oil and refined products;


·  the
marketing of alternative and competing fuels;


·  the
extent of government regulation;


·  global
market dynamics;


·  product
pipeline capacity;


·  local
market conditions; and


·  the level
of operations of competing refineries.


Crude oil
supply contracts are generally short-term contracts with price terms that change
as market prices change.  Our crude oil requirements are supplied from
sources that include:


·  major oil
companies;


·  crude oil
marketing companies;


·  large
independent producers; and


·  smaller
local producers.


The price
at which we can sell gasoline and other refined products is strongly influenced
by the 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.  However, if crude oil prices
increase significantly, our operating margins would fall unless we could pass
along these price increases to our customers.


Our
Refineries maintain inventories of crude oil, intermediate products and refined
products, the value of each being subject to fluctuations in market
prices.  Our inventories of crude oil, unfinished products and
finished products are recorded at the lower of cost on a first-in, first-out
(“FIFO”) basis or market prices.  As a result, a rapid and significant
increase or decrease in the market prices for crude oil or refined products
could have a significant short-term impact on our earnings and cash
flow.





Our
profitability is affected by crude oil differentials, which may decline and
accordingly decrease our profitability.


The
light/heavy crude oil differentials that we report is the average differential
between the benchmark West Texas Intermediate (“WTI”) crude oil priced at
Cushing, Oklahoma (ConocoPhillips WTI crude oil posting plus) and the heavy
crude oil priced as delivered to our Cheyenne Refinery or El Dorado Refinery,
respectively.  The WTI/WTS (sweet/sour) crude oil differential is the
average differential between benchmark WTI crude oil priced at Cushing, Oklahoma
and West Texas sour crude oil priced at Midland, Texas.  Our
profitability at our Cheyenne Refinery is affected by the light/heavy crude oil
differential, and our profitability at our El Dorado Refinery is affected by the
WTI/WTS crude oil differential.  Starting in March 2006, when our El
Dorado Refinery began receiving heavy Canadian crude oil through the Spearhead
Pipeline, its profitability also began benefiting from the light/heavy crude oil
differential.  We typically prefer to refine heavy sour crude oil at
the Cheyenne Refinery and intermediate sour crude oil at the El Dorado Refinery
because these crudes provide a higher refining margin than light or sweet crude
oil does.  Accordingly, any tightening of these crude oil
differentials will reduce our profitability.  The Cheyenne Refinery
light/heavy crude oil differential averaged $18.55 per barrel in the year ended
December 31, 2007, compared to $16.21 per barrel in the same period in
2006.  The El Dorado Refinery light/heavy crude oil differential
averaged $20.60 per barrel in the year ended December 31, 2007 compared to
$18.13 per barrel in the ten months ended December 31, 2006.  The
WTI/WTS crude oil differential averaged $5.02 per barrel in the year ended
December 31, 2007, compared to $5.22 per barrel in the same period in
2006.  Crude oil prices were historically high during 2007,
contributing to attractive light/heavy crude oil differentials and WTI/WTS crude
oil differentials.  However the crude oil differentials may decline in
the future, which would have a negative impact on our earnings.





External
factors beyond our control can cause fluctuations in demand for our products,
our prices and margins, which may negatively affect income and cash
flow.


Among
these factors is the demand for crude oil and refined products, which is largely
driven by the conditions of local and worldwide economies as well as by weather
patterns and the taxation of these products relative to other energy
sources.  Governmental regulations and policies, particularly in the
areas of taxation, energy and the environment, also have a significant impact on
our activities.  Operating results can be affected by these industry
factors, by competition in the particular geographic areas that we serve and by
factors that are specific to us, such as the success of particular marketing
programs and the efficiency of our Refinery operations.  The demand
for crude oil and refined products can also be reduced due to a local or
national recession or other adverse economic condition that results in lower
spending by businesses and consumers on gasoline and diesel fuel, higher
gasoline prices due to higher crude oil prices, a shift by consumers to more
fuel-efficient vehicles or alternative fuel vehicles (such as ethanol or wider
adoption of gas/electric hybrid vehicles), or an increase in vehicle fuel
economy, whether as a result of technological advances by manufacturers,
legislation mandating or encouraging higher fuel economy or the use of
alternative fuel.


In
addition, our profitability depends largely on the spread between market prices
for refined petroleum products and crude oil prices.  This margin is
continually changing and may fluctuate significantly from time to
time.  Crude oil and refined products are commodities whose price
levels are determined by market forces beyond our control.  Due to the
seasonality of refined products markets and refinery maintenance schedules,
results of operations for any particular quarter of a fiscal year are not
necessarily indicative of results for the full year.  In general,
prices for refined products are influenced by the price of crude
oil.  Although an increase or decrease in the price of crude oil may
result in a similar increase or decrease in prices for refined products, there
may be a time lag in the realization of the similar increase or decrease in
prices for refined products.  The effect of changes in crude oil
prices on operating results therefore depends in part on how quickly refined
product prices adjust to reflect these changes.  A substantial or
prolonged increase in crude oil prices without a corresponding increase in
refined product prices, a substantial or prolonged decrease in refined product
prices without a corresponding decrease in crude oil prices, or a substantial or
prolonged decrease in demand for refined products could have a significant
negative effect on our results of operations and cash flows.





We
are dependent on others to supply us with substantial quantities of raw
materials.


Our
business involves converting crude oil and other refinery charges into liquid
fuels.  We own no crude oil or natural gas reserves and depend on
others to supply these feedstocks to our Refineries.  We use large
quantities of natural gas and electricity to provide heat and mechanical energy
required by our processing units.  Disruption to our supply of crude
oil, natural gas or electricity, or the continued volatility in the costs
thereof, could have a material adverse effect on our operations.  In
addition, our investment in inventory is affected by the general level of crude
oil prices, and significant increases in crude oil prices could result in
substantial working capital requirements to maintain inventory
volumes.





Our
Refineries face operating hazards,and the potential
limits on insurance coverage could expose us to significant liability
costs.


Our
operations could be subject to significant interruption, and our profitability
could be impacted if either of our Refineries experienced a major accident or
fire, was damaged by severe weather or other natural disaster, or was otherwise
forced to curtail its operations or shut down.  If a pipeline became
inoperative, crude oil would have to be supplied to our Refineries through an
alternative pipeline or from additional tank trucks to the Refineries, which
could hurt our business and profitability.  In addition, a major
accident, fire or other event could damage our Refineries or the environment or
cause personal injuries.  If either of our Refineries experiences a
major accident or fire or other event or an interruption in supply or
operations, our business could be materially adversely affected if the damage or
liability exceeds the amounts of business interruption, property, terrorism and
other insurance that we maintain against these risks.


Our
Refineries consist of many processing units, a number of which have been in
operation for many years.  One or more of the units may require
additional unscheduled down time for unanticipated maintenance or repairs that
are more frequent than our scheduled turnaround for such
units.  Scheduled and unscheduled maintenance could reduce our
revenues during the period of time that our units are not
operating.





We
face substantial competition from other refining companies, and greater
competition in the markets where we sell refined products could adversely affect
our sales and profitability.


The
refining industry is highly competitive.  Many of our competitors are
large, integrated, major or independent oil companies that, because of their
more diverse operations, larger refineries and stronger capitalization, may be
better positioned 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 level.  Many of these competitors
have financial and other resources substantially greater than ours.


We are
not engaged in the petroleum exploration and production business and therefore
do not produce any of our crude oil feedstocks.  We do not have a
retail business and therefore are dependent upon others for outlets for our
refined products.  Certain of our competitors, however, obtain a
portion of their feedstocks from company-owned production and have retail
outlets.  Competitors that have their own production or extensive
retail outlets, with brand-name recognition, are at times able to offset losses
from refining operations with profits from producing or retailing operations,
and may be better positioned to withstand periods of depressed refining margins
or feedstock shortages.  In addition, we compete with other
industries, such as wind, solar and hydropower, that provide alternative means
to satisfy the energy and fuel requirements of our industrial, commercial and
individual consumers.  If we are unable to compete effectively with
these competitors, both within and outside our industry, there could be a
material adverse effect on our business, financial condition and results of
operations.





Our
operations involve environmental risks that may require us to make substantial
capital expenditures to remain in compliance or that could give rise to material
liabilities.


Our
results of operations may be affected by increased costs of complying with the
extensive environmental laws to which our business is subject and from any
possible contamination of our facilities as a result of accidental spills,
discharges or other releases of petroleum or hazardous substances.


Our
operations are subject to extensive federal, state and local environmental and
health and safety laws and regulations relating to the protection of the
environment, including those governing the emission or discharge of pollutants
into the air and water, product specifications and the generation, treatment,
storage, transportation, disposal or remediation of solid and hazardous waste
and materials.  Environmental laws and regulations that affect the
operations, processes and margins for our refined products are extensive and
have become progressively more stringent.  Additional legislation or
regulatory requirements or administrative policies could be imposed with respect
to our products or activities.  Compliance with more stringent laws or
regulations or more vigorous enforcement policies of the regulatory agencies
could adversely affect our financial position and results of operations and
could require us to make substantial expenditures.  Any noncompliance
with these laws and regulations could subject us to material administrative,
civil or criminal penalties or other liabilities.


We are a
defendant in a series of lawsuits alleging, among other things, that emissions
from an oil field or the production facilities thereon at the campus of the
Beverly Hills High School, which were owned and operated by one of our
subsidiaries between 1985 and 1995, caused the plaintiffs to develop cancers or
various health problems.  See “Litigation – Beverly Hills Lawsuits” in
Note 9 in the “Notes to Consolidated Financial Statements” for more information
on these lawsuits.


Our
business is inherently subject to accidental spills, discharges or other
releases of petroleum or hazardous substances.  Past or future spills
related to any of our operations, including our Refineries, pipelines or product
terminals, could give rise to liability (including potential cleanup
responsibility) to governmental entities or private parties under federal, state
or local environmental laws, as well as under common law.  This could
involve contamination associated with facilities that we currently own or
operate, facilities that we formerly owned or operated and facilities to which
we sent wastes or by-product for treatment or disposal and other
contamination.  Accidental discharges could occur in the future,
future action may be taken in connection with past discharges, governmental
agencies may assess penalties against us in connection with past or future
contamination and third parties may assert claims against us for damages
allegedly arising out of any past or future contamination.  The
potential penalties and clean-up costs for past or future releases or spills,
the failure of prior owners of our facilities to complete their clean-up
obligations, the liability to third parties for damage to their property, or the
need to address newly-discovered information or conditions that may require a
response could be significant, and the payment of these amounts could have a
material adverse effect on our business, financial condition and results of
operations.





Our
operations are subject to various laws and regulations relating to occupational
health and safety, which could give rise to increased costs and material
liabilities.


The
nature of our business may result from time to time in industrial
accidents.  Our operations are subject to various laws and regulations
relating to occupational health and safety.  Continued efforts to
comply with applicable health and safety laws and regulations, or a finding of
non-compliance with current regulations, could result in additional capital
expenditures or operating expenses, as well as fines and penalties.





We
could incur substantial costs or disruptions in our business if we cannot obtain
or maintain necessary permits and authorizations.


Our
operations require numerous permits and authorizations under various laws and
regulations, including environmental and health and safety laws and
regulations.  These authorizations and permits are subject to
revocation, renewal or modification and can require operational changes, which
may involve significant costs, to limit impacts or potential impacts on the
environment and/or health and safety.  A violation of these
authorization or permit conditions or other legal or regulatory requirements
could result in substantial fines, criminal sanctions, permit revocations,
injunctions and/or refinery shutdowns.  In addition, major
modifications of our operations could require changes to our existing permits or
expensive upgrades to our existing pollution control equipment, which could have
a material adverse effect on our business, financial condition or results of
operations.





Hurricanes
along the Gulf Coast could disrupt our supply of crude oil and our ability to
complete capital improvement projects in a timely manner.


In August
and September of 2005, Hurricanes Katrina and Rita and related storm activity,
such as windstorms, storm surges, floods and tornadoes, caused extensive and
catastrophic physical damage in and to coastal and inland areas located in the
Gulf Coast region of the United States (parts of Texas, Louisiana, Mississippi
and Alabama) and certain other parts of the southeastern parts of the United
States.  Some of the materials we use for our capital projects are
fabricated at facilities located along the Gulf Coast.  Should other
storms of this nature occur in the future, it is possible that the storms and
their collateral effects could result in delays or cost increases for our
planned capital projects.


In
addition, supplies of crude oil to our El Dorado Refinery are sometimes shipped
from Gulf Coast production or terminaling facilities.  This crude oil
supply source could be potentially threatened in the event of future
catastrophic damage to such facilities.





We
may have labor relations difficulties with some of our employees represented by
unions.


Approximately
57 percent of our employees were covered by collective bargaining agreements at
December 31, 2007.  All of our union contracts expire in 2009, and
there is no assurance that we will be able to enter into new contracts on terms
acceptable to us or at all.  A failure to do so may increase our costs
or result in an interruption of our business.  See Item 1
“Business-Employees.”  In addition, employees may conduct a strike at
some time in the future, which may adversely affect our operations.





Terrorist
attacks and threats or actual war may negatively impact our
business.


Terrorist
attacks in the United States and the war in Iraq, as well as events occurring in
response to or in connection with them, including future terrorist attacks
against U.S. targets, rumors or threats of war, actual conflicts involving the
United States or its allies, or military or trade disruptions affecting our
suppliers or our customers, could adversely impact our operations.  In
addition, any terrorist attack could have an adverse impact on energy prices,
including prices for our crude oil and refined products, and an adverse impact
on the margins from our refining and marketing operations.  As a
result, there could be delays or losses in the delivery of supplies and raw
materials to us, decreased sales of our products and extensions of time for
payment of accounts receivable from our customers.





Item 1B.
            Unresolved
      Staff Comments





None.





Item 2.
            Properties




Refining
and Terminal Operations


We own
the approximately 125 acre site on which the Cheyenne Refinery is located in
Cheyenne, Wyoming and the approximately 1,000 acre site on which the El Dorado
Refinery is located in El Dorado, Kansas.  We lease the approximately
two acre site in Henderson, Colorado on which the EMC products and blending
terminal is located.






Other
Properties


We lease
approximately 6,500 square feet of office space in Houston, Texas for our
corporate headquarters under a lease expiring in October 2009.  We
also lease approximately 28,000 square feet of office space in Denver, Colorado
under a lease expiring in April 2012 for our refining, marketing and raw
material supply operations.





Item 3.
            Legal
      Proceedings





See
“Litigation” and “Environmental” in Note 9 in the “Notes to Consolidated
Financial Statements.”





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





None.




Available Information


We file
reports with the SEC, including annual reports on Form 10-K, quarterly reports
on Form 10-Q and other reports from time to time.  The public may read
and copy any materials that we file with the SEC at the SEC’s Public Reference
Room at 100 F Street, N.E., Room 1580, Washington, DC, 20549.  The
public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330.  We are an electronic filer, and
the SEC’s Internet site at http://www.sec.gov contains the reports, proxy and
information statements, and other information filed electronically.


As
required by Section 402 of the Sarbanes-Oxley Act of 2002, we have adopted a
code of ethics that applies to our chief executive officer, chief financial
officer and principal accounting officer.  This code of ethics is
posted on our web site.  Our web site address is:
http://www.frontieroil.com.  We make our web site content available
for informational purposes only.  It should not be relied upon for
investment purposes, nor is it incorporated by reference in this Form
10-K.  We make available on this web site under “Investor Relations,”
free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and amendments to those reports as soon as
reasonably practicable after we electronically file those materials with, or
furnish those materials to, the SEC.


We filed
our 2007 annual CEO certification with the New York Stock Exchange (“NYSE”) on
May 8, 2007.  We anticipate filing our 2008 annual CEO certification
with the NYSE on or about April 28, 2008.  In addition, we filed with
the SEC as exhibits to our Form 10-K for the year ended December 31, 2006 the
CEO and CFO certifications required under Section 302 of the Sarbanes-Oxley Act
of 2002.











PART II


Item 5.
            Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities





Our
common stock is listed on the New York Stock Exchange under the symbol
FTO.  The quarterly high and low sales prices (as adjusted for our
June 26, 2006 stock split) as reported on the New York Stock Exchange for 2007
and 2006 are shown in the following table:





2007
            High
            LowFourth
      quarter
              Third
      quarter
              Second
      quarter
              First
      quarter
            $
      49.13
              49.10
              45.75
              33.75
            $
      39.54
              31.61
              31.95
              25.472006
            High
            LowFourth
      quarter
              Third
      quarter
              Second
      quarter
              First
      quarter
            $
      33.00
              37.80
              33.10
              30.98
            $
      24.00
              24.33
              23.75
              18.99





The
approximate number of holders of record for our common stock as of February 20,
2008 was 939.  The quarterly cash divided on our common stock was
$0.02 per share for the quarters ended June 30, 2005 through March 31,
2006.  In addition, a special cash dividend of $0.50 per share was
declared for the quarter ended December 31, 2005 and paid on January 11, 2006,
to shareholders of record on December 15, 2005.  The quarterly cash
dividend was $0.03 per share for the quarters ended June 30, 2006 through March
31, 2007.  The quarterly cash dividend was $0.05 per share for the
quarters ended June 30, 2007 through December 31, 2007.  Our 6.625%
Notes and our Revolving Credit Facility may restrict dividend payments based on
the covenants related to interest coverage and restricted
payments.  See Notes 4 and 5 in the “Notes to Consolidated Financial
Statements.”


The
following graph indicates the performance of our common stock against the
S&P 500 Index and against a refining peer group which is comprised of Sunoco
Inc., Holly Corporation, Valero Energy Corporation and Tesoro
Corporation.





The
following table sets forth information regarding equity securities that we have
repurchased.





Period
            Total
      Number of Shares Purchased
            
            Average
              Price
      Paid
              Per
      Share
            
            Total
      Number of Shares Purchased as Part of Publicly Announced Plans or Programs
      (1)
            
            Maximum
      Approximate Dollar Value of Shares that May Yet Be Purchased Under the
      Plans or Programs (2)October
      1, 2007 toOctober
      31, 2007
            435,500
            
            $   43.3475
            
            435,500
            
            $
      81,767,994November
      1, 2007 to November 30, 2007
            258,900
            
            44.9867
            
            258,900
            
            $
      70,120,933December
      1, 2007 to December 31, 2007
            326,200
            
            41.9630
            
            326,200
            
            $
      56,432,616Total
      fourth quarter
            1,020,600
            
            $   43.3208
            
            1,020,600
            
            $
      56,432,616





(1)      In
November 2006, our Board of Directors approved a new $100 million share
repurchase program, which replaced all existing repurchase
authorizations.  The program has no expiration date but may be
terminated by the Board of Directors at any time.  In April 2007, our
Board of Directors authorized the utilization of up to an additional $100
million for share repurchases, and in August 2007, our Board of Directors
authorized the utilization of another $100 million for share
repurchases.  No shares were purchased during the periods shown other
than through publicly-announced programs.


(2)  Amounts
shown in this column reflect approximate dollar value of shares remaining as of
each month end which may be repurchased under the stock repurchase programs
referenced in note 1 above.





Item 6.   Selected Financial
Data




Five
      Year Financial Data(Unaudited)
            
            Years
      Ended December 31,2007
            
            
            2006
            
            
            2005
            
            
            2004
            
            
            2003(Dollars
      in thousands, except per share amounts)Revenues
            
            $
            5,188,740
            
            
            $
            4,795,953
            
            
            $
            4,001,162
            
            
            $
            2,861,716
            
            
            $
            2,170,503Operating
      income
            
            
            755,795
            
            
            
            574,194
            
            
            
            450,013
            
            
            
            142,903
            
            
            
            53,437Cumulative
      effect of accounting
              change, net of income taxes
      (1)
            
            
            -
            
            
            
            -
            
            
            
            (2,503
            )
            
            
            -
            
            
            
            -Net
      income
            
            
            499,125
            
            
            
            379,277
            
            
            
            275,158
            
            
            
            69,392
            
            
            
            4,200Basic
      earnings per share:Before cumulative effect
      of
              accounting change
            
            $
            4.67
            
            
            $
            3.40
            
            
            $
            2.51
            
            
            $
            0.65
            
            
            $
            0.04Cumulative effect of
      accounting
              change (1)
            
            
            -
            
            
            
            -
            
            
            
            (.02
            )
            
            
            -
            
            
            
            -Net income
            
            $
            4.67
            
            
            $
            3.40
            
            
            $
            2.49
            
            
            $
            0.65
            
            
            $
            0.04Diluted
      earnings per share:Before cumulative effect
      of
              accounting change
            
            $
            4.62
            
            
            $
            3.37
            
            
            $
            2.44
            
            
            $
            0.63
            
            
            $
            0.04Cumulative effect of
      accounting
              change (1)
            
            
            -
            
            
            
            -
            
            
            
            (.02
            )
            
            
            -
            
            
            
            -Net income
            
            $
            4.62
            
            
            $
            3.37
            
            
            $
            2.42
            
            
            $
            0.63
            
            
            $
            0.04Working
      capital (current assets less
              current
    liabilities)
            
            $
            529,510
            
            
            $
            479,518
            
            
            $
            270,145
            
            
            $
            106,760
            
            
            $
            45,049Total
      assets
            
            
            1,863,848
            
            
            
            1,523,925
            
            
            
            1,223,057
            
            
            
            770,177
            
            
            
            662,495Long-term
      debt
            
            
            150,000
            
            
            
            150,000
            
            
            
            150,000
            
            
            
            150,000
            
            
            
            168,689Shareholders’
      equity
            
            
            1,038,614
            
            
            
            775,854
            
            
            
            478,692
            
            
            
            271,120
            
            
            
            200,656Dividends
      declared per
              common share
            
            $
            0.180
            
            
            $
            0.100
            
            
            $
            0.575
            
            
            $
            0.055
            
            
            $
            0.050




_______________


(1)      As
of December 31, 2005, we adopted FASB Interpretation No. 47, “Accounting for
Conditional Asset Retirement Obligations.”  See Note 2 in the “Notes
to Consolidated Financial Statements.”








Item 7.    Management’s
      Discussion and Analysis of Financial Condition and Results
      of Operations






General


Frontier
operates Refineries in Cheyenne, Wyoming and El Dorado, Kansas as previously
discussed in Part I, Item 1 of this Form 10-K.  We focus our marketing
efforts in the Rocky Mountain and Plains States regions of the United
States.  We purchase crude oil to be refined and market refined
petroleum products, including various grades of gasoline, diesel, jet fuel,
asphalt and other by-products.




Results
of Operations


To assist
in understanding our operating results, please refer to the operating data at
the end of this analysis which provides key operating information for our
Refineries.  Refinery operating data is also included in our quarterly
reports on Form 10-Q and on our web site address:
http://www.frontieroil.com.  We make our web site content available
for informational purposes only. It should not be relied upon for investment
purposes, nor is it incorporated by reference in this Form 10-K.




Overview


Our
Refineries have a total annual average crude oil capacity of approximately
162,000 bpd.  The four significant indicators of our profitability,
which are reflected and defined in the operating data at the end of this
analysis, are the gasoline crack spread, the diesel crack spread, the
light/heavy crude oil differential and the WTI/WTS crude oil
differential.  Other significant factors that influence our financial
results are refinery utilization, crude oil price trends, asphalt and by-product
margins and refinery operating expenses (including natural gas and
maintenance).  Under our first-in, first-out (“FIFO”) inventory
accounting method, crude oil price trends can cause significant fluctuations in
the inventory valuation of our crude oil, unfinished products and finished
products, thereby resulting in FIFO inventory gains when crude oil prices
increase and FIFO inventory losses when crude oil prices decrease during the
reporting period.  We typically do not use derivative instruments to
offset price risk on our base level of operating inventories.  See
“Price Risk Management Activities” under Item 7A for a discussion of our
utilization of futures trading.


Crude oil
market fundamentals and geopolitical considerations have caused crude oil prices
to be volatile and generally higher than historical averages.  The
increase in crude oil prices, along with additional production of heavy and/or
sour crude oil, increased our crude oil differentials during the year ended
December 31, 2007, when compared to the same period in 2006.  Our 2007
gasoline and diesel crack spreads were the highest in our history, while 2006
gasoline and diesel crack spreads were the second highest in our
history.





2007
Compared with 2006





Overview
of Results





We had
net income for the year ended December 31, 2007, of $499.1 million, or $4.62 per
diluted share, compared to net income of $379.3 million, or $3.37 per diluted
share, for the same period in 2006.  Our operating income of $755.8
million for the year ended December 31, 2007, reflected an increase of $181.6
million from the $574.2 million operating income for the comparable period in
2006.  The average diesel crack spread was higher during 2007 ($22.59
per barrel) than in 2006 ($21.35 per barrel).  The average gasoline
crack spread was also higher during 2007 ($18.39 per barrel) than in 2006
($14.10 per barrel), and the light/heavy crude oil differentials
improved.





Specific
Variances





Refined product
revenues.  Refined product revenues increased $510.0 million,
or 11%, from $4.8 billion to $5.3 billion for the year ended December 31, 2007
compared to the same period in 2006.  This increase was due to an
increase in average product sales prices ($9.05 higher per sales barrel)
partially offset by lower product sales volumes in 2007 (1,890 fewer
bpd).  Sales prices increased primarily as a result of increased crude
oil prices and improvements in the gasoline and diesel crack
spreads.


Manufactured product
yields.  Manufactured product yields (“yields”) are the volumes
of specific materials obtained through the distilling of crude oil and the
operations of other refinery process units.  Yields decreased 1,826
bpd at the El Dorado Refinery and 4,067 bpd at the Cheyenne Refinery for the
year ended December 31, 2007 compared to 2006.  Planned and unplanned
shut downs at the Cheyenne Refinery during 2007 caused yields to be lower during
2007 than 2006.  At the El Dorado Refinery, we processed more heavy
crude oils during 2007 than in 2006, which resulted in decreased
yields.


Other
revenues.  Other revenues decreased $117.2 million to an $80.9
million loss for the year ended December 31, 2007, compared to a $36.3 million
gain for the same period in 2006, the sources of which were $86.4 million in net
losses from derivative contracts in the year ended December 31, 2007 compared to
net derivative gains of $34.6 million for the same period in 2006 offset by $4.8
million in gasoline sulfur credit sales in 2007 ($1.5 million in
2006).  See “Price Risk Management Activities” under Item 7A and Note
11 in the “Notes to Consolidated Financial Statements” for a discussion of our
utilization of commodity derivative contracts.


Raw material, freight and other
costs.  Raw material, freight and other costs include crude oil
and other raw materials used in the refining process, purchased products and
blendstocks, freight costs for FOB destination sales, as well as the impact of
changes in inventory under the FIFO inventory accounting method.  Raw
material, freight and other costs increased by $188.3 million, or 5%, during the
year ended December 31, 2007, from $3.9 billion in 2006 to $4.0 billion in
2007.  The increase in raw material, freight and other costs when
compared to 2006 was due to higher average crude prices, offset by lower crude
oil charges and FIFO inventory gains in the year ended December 31, 2007
compared to FIFO inventory losses in the year ended December 31,
2006.  We benefited from improved light/heavy crude oil differentials
during the year ended December 31, 2007 compared to the same period in
2006.  The average WTI crude oil priced at Cushing, Oklahoma
(ConocoPhillips WTI crude oil posting plus) was $71.99 for the year ended
December 31, 2007 compared to $64.94 for the year ended December 31,
2006.  Average crude oil charges were 146,046 bpd for the year ended
December 31, 2007, compared to 154,473 bpd for the comparable period in
2006.  For the year ended December 31, 2007, we realized a decrease in
raw material, freight and other costs as a result of net FIFO inventory gains of
approximately $78.4 million after tax ($126.3 million pretax, comprised of an
$84.9 million gain at the El Dorado Refinery and a $41.4 million gain at the
Cheyenne Refinery) due to increasing crude oil and refined product prices during
2007.  For the year ended December 31, 2006, we realized an increase
in raw material, freight and other costs as a result of net FIFO inventory
losses of approximately $16.1 million after tax ($25.7 million pretax, comprised
of a $31.7 million loss at the El Dorado Refinery and a $6.0 million gain for
the Cheyenne Refinery) due to decreasing crude oil and refined product prices
during the latter part of 2006.


The
Cheyenne Refinery raw material, freight and other costs of $62.08 per sales
barrel for the year ended December 31, 2007 increased from $57.07 per sales
barrel in the same period in 2006 due to higher crude oil prices partially
offset by a FIFO inventory gain in 2007 compared to FIFO inventory loss in 2006,
fewer crude oil charges in 2007 and the benefit of an improved light/heavy crude
oil differential in 2007.  Average crude oil charges of 41,778 bpd for
the year ended December 31, 2007 were lower than the 45,999 bpd in the
comparable period in 2006 because of a spring 2007 turnaround, a temporary
shutdown of the FCCU in the third quarter, and a December 2007 fire in the coker
unit at the Cheyenne Refinery.  The heavy crude oil utilization rate
at the Cheyenne Refinery expressed as a percentage of the total crude oil charge
decreased to 72% in the year ended December 31, 2007, from 73% in
2006.  The light/heavy crude oil differential for the Cheyenne
Refinery averaged $18.55 per barrel in the year ended December 31, 2007 compared
to $16.21 per barrel in the same period in 2006.


The El
Dorado Refinery raw material, freight and other costs of $66.25 per sales barrel
for the year ended December 31, 2007 increased from $63.15 per sales barrel in
the same period in 2006 due to higher average crude oil prices partially offset
by FIFO inventory gains in 2007 compared to FIFO inventory losses in 2006 and
lower crude oil charges in 2007.  Average crude oil charges were
104,268 bpd for the year ended December 31, 2007, compared to 108,475 bpd for
the comparable period in 2006.  Due to the favorable light/heavy
differentials, we ran more heavy crude oil in 2007 which limited the overall
crude rate.  We realized a light/heavy crude oil differential of
$20.60 per barrel during 2007.  In 2006, our El Dorado Refinery began
charging Canadian heavy crude oil and achieved a light/heavy crude oil
differential of $18.13 per barrel.  For the year ended December 31,
2007, the heavy crude oil utilization rate at our El Dorado Refinery expressed
as a percentage of the total crude oil charge was approximately 15%, compared to
11% in 2006.  The WTI/WTS crude oil differential decreased from an
average of $5.22 per barrel in the year ended December 31, 2006 to an average of
$5.02 per barrel for the same period in 2007.


Refinery operating
expenses.  Refinery operating expenses, excluding depreciation,
include both the variable costs (energy and utilities) and the fixed costs
(salaries, taxes, maintenance costs and other) of operating the
Refineries.  Refinery operating expenses, excluding depreciation,
increased $23.4 million, or 8%, to $300.5 million in the year ended December 31,
2007 from $277.1 million in the comparable period of 2006.


The
Cheyenne Refinery operating expenses, excluding depreciation, were $109.2
million in the year ended December 31, 2007, compared to $101.9 million in the
comparable period of 2006.  The increased expenses included higher
maintenance costs ($5.6 million, with $3.8 million of the costs relating to
repair from a coker unit fire in December 2007), higher salaries and benefits
($3.5 million, including $1.0 million in increased maintenance salaries and $1.1
million additional bonus costs due to an increased number of employees), higher
turnaround amortization ($1.5 million) and higher consulting and legal expenses
($1.4 million.)  These increases were partially offset by decreased
environmental costs ($3.2 million, primarily related to an estimated waste water
pond clean up accrual recorded in 2006 of $5.0 million offset by a $3.0 million
increase in groundwater remediation accrual in 2007), electricity costs ($1.6
million) and natural gas costs ($1.0 million).


The El
Dorado Refinery operating expenses, excluding depreciation, were $191.3 million
in the year ended December 31, 2007, increasing from $175.3 million for the year
ended December 31, 2006.  The primary areas of increased costs were in
higher property taxes ($6.0 million), increased chemicals and additives costs
($3.8 million), higher salaries and benefits ($2.6 million, including $1.2
million in increased bonus costs and $715,000 in increased stock-based
compensation costs), higher consulting and legal expenses ($1.7 million), higher
natural gas costs ($1.3 million) and higher environmental expenses ($1.2
million).


Selling and general
expenses.  Selling and general expenses, excluding
depreciation, increased $2.9 million, or 5%, from $52.5 million for the year
ended December 31, 2006 to $55.3 million for the year ended December 31, 2007,
primarily due to a $1.3 million increase in salaries and benefits expense, which
resulted from $4.3 million in additional stock-based compensation expense and
general salary increases, offset by a $3.8 million reduction in cash bonus
expense.  See Note 7 under “Stock-based Compensation” in the “Notes to
Consolidated Financial Statements” for a detailed discussion of our stock-based
compensation.  Stock-based compensation expense was $20.0 million for
the year ended December 31, 2007 compared to $15.8 million for the comparable
period in 2006.  Beverly Hills litigation costs also increased by
$641,000 in the year ended December 31, 2007, compared to the year ended
December 31, 2006.


Depreciation, amortization and
accretion.  Depreciation, amortization and accretion increased
$11.8 million, or 29%, from $41.2 million for the year ended December 31, 2006
to $53.0 million for the same period in 2007 because of increased capital
investment in our Refineries, including the ultra low sulfur diesel projects
placed into service in the middle of the second quarter of 2006 and our Cheyenne
Refinery coker expansion project placed into service in the second quarter of
2007.  We also had higher depreciation expense during the year ended
December 31, 2007 due to changes in the estimated useful lives of certain assets
that are expected to be retired in connection with certain of our capital
projects in 2008 and 2009.


Gain on sale of
assets.  The $15.2 million gain on sale of assets during the
year ended December 31, 2007 resulted from a gain of $17.3 million from the sale
of our 34.72% interest in a crude oil pipeline in Wyoming and a 50% interest in
two crude oil tanks in Guernsey, Wyoming in September 2007, partially offset by
the buyout and sale of a leased aircraft.


Interest expense and other financing
costs.  Interest expense and other financing costs of $8.8
million for the year ended December 31, 2007 decreased $3.4 million, or 28%,
from $12.1 million in the comparable period in 2006.  The decrease was
due to $8.1 million of interest cost being capitalized in the year ended
December 31, 2007, compared to $3.8 million of interest cost being capitalized
in the year ended December 31, 2006, offset by $2.4 million in accrued interest
expense for income tax contingencies in 2007 ($1.5 million in 2006) and $2.2
million ($1.9 million in 2006) in facility costs and financing expenses related
to the Utexam Master Crude Oil Purchase and Sale Contract entered into in March
2006 (“Utexam Arrangement”) (see “Leases and Other Commitments” in Note
9  in the “Notes to Consolidated Financial
Statements”).  Average debt outstanding (excluding amounts payable
under the Utexam Arrangement) decreased to $150.0 million during the year ended
December 31, 2007 from $151.7 million for the same period in 2006.


Interest and investment
income.  Interest and investment income increased $3.8 million,
or 21%, from $18.1 million in the year ended December 31, 2006 to $21.9 million
in the year ended December 31, 2007, due to larger cash balances and higher
interest rates on invested cash.


Provision for income
taxes.  The provision for income taxes for the year ended
December 31, 2007 was $269.7 million on pretax income of $768.9 million (or
35.1%) compared to $200.8 million on pretax income of $580.1 million (or 34.6%)
for the same period in 2006.  The American Jobs Creation Act of 2004
(“the Act”) benefited our 2006 current income taxes payable by allowing us an
accelerated depreciation deduction of 75% of qualified capital costs incurred to
achieve low sulfur diesel fuel requirements (See “Environmental” under Note 9 in
the “Notes to Consolidated Financial Statements”).  The Act also
provides for a $0.05 per gallon federal income tax credit on compliant diesel
fuel up to an amount equal to the remaining 25% of these qualified capital
costs. The $0.05 per gallon federal income tax credit allowed us to realize an
$8.5 million federal income tax credit ($5.5 million excess tax benefit) and a
$22.4 million federal income tax credit ($14.5 million excess tax benefit) in
the years ended December 31, 2007 and 2006, respectively.  This credit
reduced our 2007 and 2006 income taxes payable and reduced our overall effective
income tax rate for those years.  Another provision of the Act, the
Section 199 production activities deduction for manufacturers, benefited our
2007 and 2006 income taxes payable by an estimated $16.0 million and $5.7
million, respectively, and reduced our overall effective tax rate in both of
those years.  See Note 6 in the “Notes to Consolidated Financial
Statements” for detailed information on our deferred tax assets.





2006
Compared with 2005





Overview
of Results





We had
net income for the year ended December 31, 2006, of $379.3 million, or $3.37 per
diluted share, compared to net income of $275.2 million, or $2.42 per diluted
share, in the same period in 2005.  Our operating income of $574.2
million for the year ended December 31, 2006, reflected an increase of $124.2
million from the $450.0 million operating income for the comparable period in
2005.  The average diesel crack spread was higher during 2006 ($21.35
per barrel) than in 2005 ($17.13 per barrel).  The average gasoline
crack spread was also higher during 2006 ($14.10 per barrel) than in 2005
($11.67 per barrel), and both the light/heavy and WTI/WTS crude oil
differentials improved.





Specific
Variances





Refined product
revenues.  Refined product revenues increased $759.7 million,
or 39%, from $4.0 billion to $4.8 billion for the year ended December 31, 2006
compared to the same period in 2005.  This increase was due to both an
increase in average product sales prices ($8.81 higher per sales barrel) and an
increase in product sales volumes in 2006 (1,657 more bpd).  Sales
prices increased primarily as a result of increased crude oil prices and
improvements in the gasoline and diesel crack spreads.


Manufactured product
yields.  Yields increased 6,776 bpd at the El Dorado Refinery
while decreasing 3,669 bpd at the Cheyenne Refinery for the year ended December
31, 2006 compared to 2005.  A Cheyenne Refinery turnaround in April
2006 caused yields to be lower during 2006 than during 2005, and an El Dorado
Refinery turnaround from March 1 through April 5, 2005 caused yields to be lower
in 2005 than 2006.


Other
revenues.  Other revenues increased $35.1 million to a $36.3
million gain for the year ended December 31, 2006, compared to a $1.2 million
gain for the same period in 2005, the sources of which were $34.6 million in net
gains from derivative contracts in the year ended December 31, 2006 compared to
net derivative gains of $1.0 million for the same period in 2005 and $1.5
million in gasoline sulfur credit sales in 2006 (none in 2005).  We
utilized more derivative contracts during the year ended December 31, 2006 than
in the comparable period in 2005, primarily to hedge Canadian in-transit crude
oil for our El Dorado Refinery.  See “Price Risk Management
Activities” under Item 7A and Note 11 in the “Notes to Consolidated Financial
Statements” for a discussion of our utilization of commodity derivative
contracts.


Raw material, freight and other
costs.  Raw material, freight and other costs increased by
$603.6 million, or 19%, during the year ended December 31, 2006, from $3.2
billion in 2005 to $3.9 billion in 2006.  The increase in raw
material, freight and other costs when compared to 2005 was due to higher
average crude prices, higher crude oil charges on an overall combined basis, and
FIFO inventory losses in the year ended December 31, 2006.  We
benefited from slightly improved crude oil differentials during the year ended
December 31, 2006 compared to the same period in 2005.  The average
WTI crude oil priced at Cushing, Oklahoma (ConocoPhillips WTI crude oil posting
plus) was $64.94 for the year ended December 31, 2006 compared to $55.77 for the
year ended December 31, 2005.  Crude oil charges were 154,473 bpd for
the year ended December 31, 2006, compared to 152,649 bpd for the comparable
period in 2005.  For the year ended December 31, 2006, we realized an
increase in raw material, freight and other costs as a result of net FIFO
inventory losses of approximately $16.1 million after tax ($25.7 million pretax,
comprised of a $31.7 million loss at the El Dorado Refinery and a $6.0 million
gain at the Cheyenne Refinery) due to decreasing crude oil and refined product
prices during the latter part of 2006.  For the year ended December
31, 2005, we realized a reduction in raw material, freight and other costs as a
result of FIFO inventory gains of approximately $29.4 million after tax ($47.6
million pretax, comprised of $39.0 million for the El Dorado Refinery and $8.6
million for the Cheyenne Refinery) because of increasing crude oil and refined
product prices.


The
Cheyenne Refinery raw material, freight and other costs of $57.07 per sales
barrel for the year ended December 31, 2006 increased from $48.49 per sales
barrel in the same period in 2005 due to higher crude oil prices and a lower
FIFO inventory gain, offset by fewer crude oil charges and the benefit of a
slightly improved light/heavy crude oil differential.  Crude oil
charges of 45,999 bpd for the year ended December 31, 2006 were lower than the
46,922 bpd in the comparable period in 2005 because of the previously mentioned
turnaround in 2006.  The heavy crude oil utilization rate at the
Cheyenne Refinery expressed as a percentage of the total crude oil charge
decreased to 73% in the year ended December 31, 2006, from 82% in 2005 as we
increased our charges of lighter crude oil to take advantage of favorable
pricing opportunities for light crude purchases.  The light/heavy
crude oil differential for the Cheyenne Refinery averaged $16.21 per barrel in
the year ended December 31, 2006 compared to $15.32 per barrel in the same
period in 2005.


The El
Dorado Refinery raw material, freight and other costs of $63.15 per sales barrel
for the year ended December 31, 2006 increased from $54.01 per sales barrel in
the same period in 2005 due to higher average crude oil prices and a FIFO
inventory loss in 2006 compared to a FIFO inventory gain in
2005.  Crude oil charges were 108,475 bpd for the year ended December
31, 2006, compared to 105,727 bpd for the comparable period in 2005 because of
the previously mentioned turnaround in 2005.  In 2006, our El Dorado
Refinery began charging Canadian heavy crude oil and achieved a light/heavy
crude oil differential of $18.13 per barrel.  For the year ended
December 31, 2006, the heavy crude oil utilization rate at our El Dorado
Refinery expressed as a percentage of the total crude oil charge was
approximately 11%.  The WTI/WTS crude oil differential increased from
an average of $4.51 per barrel in the year ended December 31, 2005 to $5.22 per
barrel in the same period in 2006.


Refinery operating
expenses.  Refinery operating expenses, excluding depreciation,
increased $35.7 million, or 15%, from $241.5 million in the year ended December
31, 2005 to $277.1 million in the comparable period of 2006.


The
Cheyenne Refinery operating expenses, excluding depreciation, were $101.9
million in the year ended December 31, 2006, compared to $78.9 million in the
comparable period of 2005.  The increased expenses included higher
maintenance costs ($8.1 million, with $3.0 million of the costs related to a
plant-wide steam outage in February 2006, $1.2 million for slop oil
centrifuging, $557,000 related to a September 2006 coker outage and $577,000
related to a butamer unit outage), increased environmental expenses ($5.8
million, including a $5.0 million accrual related to a potential waste-water
pond clean up), higher salaries and benefits ($4.3 million, including $1.4
million in increased stock-based compensation costs and $787,000 additional
bonus accruals), higher additive and chemical costs ($2.1 million, including
increased wastewater treatment chemical use, cost of testing chemicals from a
new vendor and increased usage of fresh fluid catalyst) and higher turnaround
amortization ($1.0 million).


The El
Dorado Refinery operating expenses, excluding depreciation, were $175.3 million
in the year ended December 31, 2006, increasing from $162.5 million for the year
ended December 31, 2005.  The primary areas of increased costs were in
electricity ($3.8 million), chemicals and additives ($4.1 million), maintenance
($6.2 million, including $1.8 million due to a fire on a distillate hydrotreater
unit, $1.1 million for tank repairs and $1.0 million for a gofiner unit catalyst
change-out), salaries and benefits ($1.1 million, including $767,000 in
increased stock-based compensation costs), lease and rental equipment ($1.3
million, including higher cogeneration facility lease costs and rentals for a
reverse osmosis trailer and filter), environmental ($827,000), insurance
($668,000) and non-maintenance contractors ($928,000).  Electricity
costs were higher during the year ended December 31, 2006, compared to the same
period in 2005, as we produced electricity from our cogeneration facility in
2005 and did not do so in 2006.  Chemicals and additive costs were
higher during the year ended December 31, 2006, compared to the same period in
2005, as the fluid catalytic cracking unit consumed more additives and chemicals
running for the full year in 2006, while it was down for turnaround work for
approximately one month in 2005.  We also purchased more nitrogen and
oxygen during 2006 than in 2005 because the cogeneration facility provided us
with some nitrogen and oxygen in 2005.  We realized a $7.9 million
reduction in natural gas costs due to lower natural gas prices and lower
consumption in 2006 because we did not purchase natural gas for the cogeneration
facility.


Selling and general
expenses.  Selling and general expenses, excluding
depreciation, increased $21.8 million, or 71%, from $30.7 million for the year
ended December 31, 2005 to $52.5 million for the year ended December 31, 2006,
primarily due to a $15.0 million increase in salaries and benefits expense,
which resulted from the adoption on January 1, 2006 of FAS No. 123(R), the
issuance of additional stock-based compensation awards, the vesting of
stock-based compensation upon the retirement of an executive officer as of March
31, 2006 and higher bonus accruals.  See Note 7 under “Stock-based
Compensation” in the “Notes to Consolidated Financial Statements” for a detailed
discussion of our stock-based compensation.  Stock-based compensation
expense was $15.8 million for the year ended December 31, 2006 compared to $1.4
million for the comparable period in 2005.  Beverly Hills litigation
costs also increased by $6.2 million in the year ended December 31, 2006,
compared to the year ended December 31, 2005, as the 2005 litigation costs were
reduced by insurance recoveries and 2006 litigation costs increased in
preparation for certain court proceedings which took place in the fourth quarter
of 2006 and early 2007.


Depreciation, amortization and
accretion.  Depreciation, amortization and accretion increased
$6.0 million, or 17%, for the year ended December 31, 2006 compared to the same
period in 2005 because of increased capital investment in our Refineries,
including the ultra low sulfur diesel projects.


Interest expense and other financing
costs.  Interest expense and other financing costs of $12.1
million for the year ended December 31, 2006 increased $1.8 million, or 17%,
from $10.3 million in the comparable period in 2005.  The increase was
due to $1.5 million in accrued interest expense for income tax contingencies in
2006 ($163,000 in 2005) and $1.9 million in facility costs and financing
expenses related to the Utexam Master Crude Oil Purchase and Sale Contract
entered into in March 2006 (“Utexam Arrangement”) (see “Leases and Other
Commitments” in Note 9 in the “Notes to Consolidated Financial Statements”),
offset by $3.8 million of interest cost being capitalized in the year ended
December 31, 2006, compared to only $2.6 million of interest cost being
capitalized in the year ended December 31, 2005 and revolving credit facility
interest expense of $79,000 for the year ended December 31, 2006, decreasing by
$298,000 from the $377,000 for the year ended December 31,
2005.  Average debt outstanding (excluding amounts payable under the
Utexam Arrangement) decreased to $151.7 million during the year ended December
31, 2006 from $161.0 million for the same period in 2005.


Interest and investment
income.  Interest and investment income increased $10.5
million, or 138%, from $7.6 million in the year ended December 31, 2005 to $18.1
million in the year ended December 31, 2006, due to larger cash balances and
higher interest rates on invested cash.


Provision for income
taxes.  The provision for income taxes for the year ended
December 31, 2006 was $200.8 million on pretax income of $580.1 million (or
34.6%) compared to $170.0 million on pretax income of $447.3 million (or 37.9%)
for the same period in 2005.  The American Jobs Creation Act of 2004
(“the Act”) benefited both our 2006 and 2005 current income taxes payable by
allowing us an accelerated depreciation deduction of 75% of qualified capital
costs incurred to achieve low sulfur diesel fuel requirements (see
“Environmental” under Note 9 in the “Notes to Consolidated Financial
Statements”).  The Act also provides for a $0.05 per gallon credit on
compliant diesel fuel up to an amount equal to the remaining 25% of these
qualified capital costs for federal income tax purposes, and for the year ended
December 31, 2006 we realized a $22.4 million federal income tax credit ($14.5
million excess tax benefit).  This credit greatly reduced our 2006
income taxes payable and reduced our overall effective income tax
rate.  Another provision of the Act which benefited our 2006 and 2005
income taxes payable by an estimated $5.7 million and $3.2 million,
respectively, and reduced our overall effective tax rate in both of those years
was the Section 199 production activities deduction for
manufacturers.  See Note 6 in the “Notes to Consolidated Financial
Statements” for detailed information about our deferred tax assets.





Liquidity
and Capital Resources





Cash flows from operating
activities.  Net cash provided by operating activities was
$429.0 million for the year ended December 31, 2007, compared to net cash
provided by operating activities of $340.5 million during the year ended
December 31, 2006.  Improved results of operations increased cash flow
significantly during 2007, but were partially offset by a higher investment in
working capital.


Working
capital changes used a total of $137.2 million of cash in the year ended
December 31, 2007 while using $106.2 million of cash in the comparable period in
2006.  Working capital uses of cash during the year ended December 31,
2007 included an increase in inventories of $127.4 million, an increase in trade
and other receivables of $45.0 million and an increase in other current assets
of $12.7 million.  The increase in inventories was primarily due to
higher average prices of both crude oil and refined products.  The
increase in trade and other receivables was a result of a $20.3 million increase
in trade receivables due to higher refined products sale prices in 2007 and the
income tax receivable of $24.1 million as of December 31, 2007 compared to
$52,000 as of December 31, 2006.


The most
significant working capital item providing cash during the year ended December
31, 2007 was an increase in accounts payable of $30.3 million primarily due to
an increase of purchased product and blendstock accruals of $26.8 million and an
increase in outstanding checks of $10.8 million.


We made
estimated federal and state income tax payments of $261.0 million and $33.1
million, respectively, during the year ended December 31, 2007.  As of
December 31, 2007, we had accrued estimated state income taxes payable of $6.8
million and a receivable for our estimated overpayment of federal income taxes
for 2007 of $24.0 million.  We also have estimated prepaid state
income taxes of $7.1 million and prepaid federal income taxes of $2.1 million,
which will be applied to the related 2008 income tax liabilities.


At
December 31, 2007, we had $297.4 million of cash and cash equivalents, working
capital of $529.5 million and $191.8 million available for borrowings under our
revolving credit facility.  Our operating cash flows are affected by
crude oil and refined product prices and other risks as discussed in Item 7A
“Quantitative and Qualitative Disclosures About Market Risks.”


Cash flows used in investing
activities.  Capital expenditures during the year ended
December 31, 2007 were $291.2 million, which included approximately $152.9
million for the El Dorado Refinery and $133.7 million for the Cheyenne
Refinery.  The $152.9 million of capital expenditures for our El
Dorado Refinery included $85.6 million for the crude unit and vacuum tower
expansion, $28.7 million for the coke drum replacement, $8.3 million for the
gasoil hydrotreater revamp, $6.3 million for the catalytic cracker regenerator
emission control project and $3.6 million on the catalytic cracker expansion as
well as operational, payout, safety, administrative, environmental and
optimization projects.  The $133.7 million of capital expenditures for
our Cheyenne Refinery included approximately $90.7 million for the coker
expansion (substantially completing the total estimated $117.0 million coker
expansion project) and $9.2 million for the amine plant as well as
environmental, operational, safety, administrative and payout
projects.  The Cheyenne Refinery also completed a $5.8 million crude
fractionation project in the spring of 2007.  We funded our 2007
capital expenditures with cash generated from our operations.


We also
purchased in February 2007 for approximately $3.0 million (net of current assets
received), EMC, a 25,000 bpd products terminal and blending facility located in
Henderson, Colorado. In the
year ended December 31, 2007, we generated net proceeds of $19.9 million from
the sale of our 34.72% interest in a crude oil pipeline and 50% interest in two
crude oil tanks and $2.3 million from the sale of an aircraft.


Under the
provisions of the purchase agreement with Shell for our El Dorado Refinery, we
were required to make contingent earn-out payments for each of the years 2000
through 2007 equal to one-half of the excess over $60.0 million per year of the
El Dorado Refinery’s annual revenues less raw material, freight and other costs
and refinery operating expenses, excluding depreciation.  The total
amount of these potential contingent earn-out payments was capped at $40.0
million, with an annual cap of $7.5 million.  Such payments were
recorded as additional acquisition costs.  Payments of $7.5 million
each were required based on 2005, 2006 and 2007 results, and were accrued as of
December 31, 2005, 2006 and 2007, respectively.  Each of these
payments was paid in January 2006, 2007 and 2008,
respectively.  Including the payment we made in early 2008, we have
paid a total of $37.5 million for contingent earn-out payments and will no
longer be subject to this provision of the Shell agreement.


Cash flows used in financing
activities.  During the year ended December 31, 2007, we issued
396,761 shares of common stock due to stock option exercises by employees and
members of our Board of Directors, for which we received $2.3 million in cash
and 5,576 shares ($221,000) of our common stock in stock swaps where mature
stock was surrendered to facilitate the exercise of the
option.  During the year ended December 31, 2007, we received 126,923
shares ($4.9 million) of our common stock, now held as treasury stock, from
employees and members of our Board of Directors who surrendered stock to pay
withholding taxes related to stock-based compensation.


In
November 2006, our Board of Directors approved a $100 million share repurchase
program, which replaced all existing repurchase authorizations (no shares had
been repurchased under this program as of December 31, 2006).  At its
April 2007 meeting, our Board of Directors increased the size of our repurchase
authorization by $100 million and increased the repurchase authorization by an
additional $100 million at its August 2007 meeting, bringing the total
authorizations since November 2006 to $300 million.  We purchased
6,443,700 shares using a total $243.6 million to repurchase stock under this
program during the year ended December 31, 2007, leaving a remaining
authorization of $56.4 million.


As of
December 31, 2007, we had $150.0 million of long-term debt, due 2011, and no
borrowings under our $225.0 million revolving credit facility. We had $33.2
million of outstanding letters of credit under our revolving credit
facility.  On October 1, 2007, we entered into a $225.0 million third
amended and restated revolving credit agreement that provides us the ability to
increase our maximum commitment amount available to $350 million, extended the
termination date of the credit facility to October 3, 2011 as well as updated
the financial covenants and other terms of the facility.  We were in
compliance with the financial covenants of our revolving credit facility as of
December 31, 2007.  We had shareholders’ equity of $1.0 billion as of
December 31, 2007.


Our Board
of Directors declared a quarterly cash dividend of $0.03 per share of common
stock in December 2006, which was paid in January 2007.  In March
2007, our Board of Directors declared a quarterly cash dividend of $0.03 per
share of common stock, which was paid in April 2007.  Our Board of
Directors declared a quarterly cash dividend of $0.05 per share of common stock
in April, August and November, 2007, which were paid in July 2007, October 2007,
and January 2008, respectively.  The total cash required for the
dividend declared in November 2007 was approximately $5.4 million and was
accrued as a dividend payable at year-end.  “Accrued dividends” on the
Consolidated Balance Sheets include dividends accrued to date on restricted
stock, which are not paid until the restricted stock vests.





Future
capital expenditures




Significant future capital
projects.  Both the Cheyenne and El Dorado Refineries will
continue working on significant, multi-year projects in 2008 and
2009.  The approximate $117.0 million coker expansion at the Cheyenne
Refinery, which was substantially completed in 2007 with the coke handling
portion expected to be completed in early 2008, significantly decreased the
amount of asphalt produced and increased the amount of higher margin
projects.  The new amine unit at the Cheyenne Refinery estimated at a
total cost of $20.5 million is intended to result in improved alkylation unit
reliability and provide a partial backup unit if the main amine unit is not
operating.  The project is expected to be completed and start-up is
expected to occur in mid-2008.  The above amounts include estimated
capitalized interest.


The
approximate $151 million crude unit and vacuum tower expansion at the El Dorado
Refinery will allow for higher crude charge rates (including a significantly
greater percentage of heavy crude oil) and higher gasoline and distillate
yields.  This project also includes a significant metallurgical
upgrade to the unit which will allow for running high napthenic acid crude oils,
a characteristic typical of crude types found in Western Canada, West Africa and
the North Sea.  We expect to bring this project online in the spring
of 2008 during the planned turnaround for the crude/vacuum unit
complex.  The coke drum replacement project estimated at $60 million
for our El Dorado Refinery includes safety and reliability components as well as
overall throughput support for the Refinery and is expected to be completed by
mid-2008.  The gasoil hydrotreater revamp at the El Dorado Refinery is
the key project to achieve gasoline sulfur compliance for our El Dorado Refinery
and has a total estimated cost of $82 million (see “Environmental” in Note 9 in
the “Notes to Consolidated Financial Statements”).  The project will
also result in significant yield improvement for the catalytic cracking unit and
is anticipated to be completed in the fall of 2009.  The El Dorado
Refinery $84 million catalytic cracker expansion project includes a revamp
component and new technology which will increase charge rate and improve product
yields and is also anticipated to be completed in the fall of
2009.  The El Dorado Refinery catalytic cracker regenerator emission
control project, with a fall 2009 estimated completion date and total estimated
cost of $36 million, will add a scrubber to improve the environmental
performance of the unit, specifically as it relates to flue-gas
emissions.  This project is necessary to support the catalytic
cracking expansion project and to meet a portion of the expected requirements of
the EPA Petroleum Refining Initiative (see “Environmental” in Note 9 in the
“Notes to Consolidated Financial Statements”).  The above amounts
include estimated capitalized interest.


2008 capital
expenditures.Including the projects discussed above, 2008
capital expenditures aggregating approximately $306.0 million are currently
planned, and include $188.0 million at our El Dorado Refinery, $116.0 million at
our Cheyenne Refinery, $1.5 million at our products terminal and blending
facility and $600,000 of capital expenditures for our Denver and Houston
offices.  The $188.0 million of planned capital expenditures for our
El Dorado Refinery includes $29.0 million of the gasoil hydrotreater revamp
project, $28.0 million of  the coke drum replacement project, $27.0
million of the crude unit and vacuum expansion project, $22.0 million of the
catalytic cracker expansion project and $20.0 million of the catalytic cracker
regenerator emission control project, as mentioned above, as well as
environmental, operational, safety, payout and administrative
projects.  The $116.0 million of planned capital expenditures for our
Cheyenne Refinery includes $15.0 million for the Refinery main office
replacement, $13.0 million for a new boiler project ($14.0 million total cost),
$8.0 million for a waste water selenium treatment project ($15.0 million total
cost), and $8.0 million for the new amine plant ($20.5 million total cost), as
well as environmental, operational, safety, payout and administrative
projects.  We expect that our 2008 capital expenditures will be funded
with cash generated by our operations and by using a portion of our existing
cash balance, if necessary.  We may experience cost overruns and/or
schedule delays on any of these projects because of the strong industry demand
for material, labor and engineering resources.





Contractual
Cash Obligations





The table
on the following page lists the contractual cash obligations we have by
period.  These items include our long-term debt based on their
maturity dates, our operating lease commitments, purchase obligations and other
long-term liabilities.


Our
operating leases include building, equipment, aircraft and vehicle leases, which
expire from 2008 through 2017, as well as an operating sublease for the use of
the cogeneration facility at our El Dorado Refinery.  The
non-cancelable sublease, entered into in connection with the acquisition of our
El Dorado Refinery in 1999, expires in 2016 with an option that allows us to
renew the sublease for an additional eight years.  This lease has both
a fixed and a variable component.


Purchase
obligations include agreements to purchase goods or services that are
enforceable and legally binding and that specify terms, including fixed or
minimum quantities to be purchased, fixed, minimum or variable price provisions,
and the approximate timing of the transaction.  Purchase obligations
exclude agreements that are cancelable without penalty.


The
amounts shown in the table on the following page for transportation,
terminalling and storage contractual obligations include our anticipated
commitments based on our agreements for shipping crude oil on the Express
Pipeline, the Spearhead Pipeline, the Plains All American Pipeline and the Osage
Pipeline.


For more
information on the agreements discussed above, see “Lease and Other Commitments”
in Note 9 in the “Notes to Consolidated Financial Statements.”








Contractual
      Cash Obligations
            
            Payments
      Due by PeriodTotal
            
            
            Within
              1
      Year
            
            
            Within
              2-3
      years
            
            
            Within
              4-5
      years
            
            
            After
              5
      years(in
      thousands)Long-term
      debt
            
            $
            150,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            150,000
            
            
            $
            -Interest
      on long-term debt
            
            
            37,266
            
            
            
            9,938
            
            
            
            19,875
            
            
            
            7,453
            
            
            
            -Operating
      leases
            
            
            82,945
            
            
            
            13,106
            
            
            
            26,417
            
            
            
            17,677
            
            
            
            25,745Purchase
      obligations:Crude
      supply, feedstocks andnatural
      gas (1)
            
            
            701,183
            
            
            
            687,099
            
            
            
            14,084
            
            
            
            -
            
            
            
            -Transportation,
      terminalling and storage
            
            
            351,571
            
            
            
            53,089
            
            
            
            93,187
            
            
            
            78,504
            
            
            
            126,791Refinery
      capital projects (2)
            
            
            40,192
            
            
            
            40,192
            
            
            
            -
            
            
            
            -
            
            
            
            -Other
      goods and services
            
            
            7,483
            
            
            
            6,917
            
            
            
            555
            
            
            
            11
            
            
            
            -Total
      purchase obligations
            
            
            1,100,429
            
            
            
            787,297
            
            
            
            107,826
            
            
            
            78,515
            
            
            
            126,791Contingent
      income tax liabilities
            
            
            32,257
            
            
            
            -
            
            
            
            31,340
            
            
            
            917
            
            
            
            -Other
      long-term liabilities
            
            
            13,605
            
            
            
            -
            
            
            
            4,054
            
            
            
            3,202
            
            
            
            6,349Pension
      and post-retirement healthcareand other benefit plans funding requirements
      (3)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Total
      contractual cash
            
            $
            1,416,502
            
            
            $
            810,341
            
            
            $
            189,512
            
            
            $
            257,764
            
            
            $
            158,885





(1)
            Crude
      supply, feedstocks and natural gas future obligations were calculated
      using current market prices and/or prices established in applicable
      contracts. Of these obligations, $559.3 million relate to January and
      February 2008 feedstock and natural gas requirements of the
      Refineries.


(2)
            The
      $40.2 million of Refinery capital projects primarily consists of $10.9
      million for the crude unit and vacuum tower expansion project, $10.7
      million for coke handling equipment and $9.7 million for coke drum
      replacement project, all at our El Dorado Refinery.  These
      amounts for refinery capital projects reflected here relate to current
      contractual commitments that have been made but with no current liability
      as of December 31, 2007, not the total estimated costs of the
      projects.


(3)
            No
      pension funding will be required in 2008 for our cash balance pension
      plan.  Funding requirements for remaining years will be based on
      actuarial estimates and actual experience.  Our retiree health
      care plan is unfunded.  Future payments for retiree health care
      benefits are estimated for the next ten years in Note 8 “Employee Benefit
      Plans” in the “Notes to Consolidated Financial
  Statements.”




Off-Balance
Sheet Arrangements


We have
an interest in one unconsolidated entity (see Note 1 “Nature of Operations” in
the “Notes to Consolidated Financial Statements”).  Other than
facility and equipment leasing agreements, we do not participate in any
transactions, agreements or other contractual arrangements which would result in
any off-balance sheet liabilities or other arrangements to us.




Environmental


We will
be making significant future capital expenditures to comply with various
environmental regulations.  See “Environmental” in Note 9 in the
“Notes to Consolidated Financial Statements.”




Application
of Critical Accounting Policies


The
preparation of financial statements in accordance with United States generally
accepted accounting principles requires our management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes.  Actual results could differ from
those estimates.  The following summary provides information about our
critical accounting policies, including identification of those involving
critical accounting estimates, and should be read in conjunction with Note 2
“Significant Accounting Policies” in the “Notes to Consolidated Financial
Statements.”


Turnarounds.Normal
maintenance and repairs are expensed as incurred.  Planned major
maintenance (“turnarounds”) is the scheduled and required shutdown of refinery
processing units for significant overhaul and
refurbishment.  Turnaround costs include contract services, materials
and rental equipment.  The costs of turnarounds are deferred when
incurred and amortized on a straight-line basis over the period of time
estimated to lapse until the next turnaround occurs.  These deferred
charges are included in our Consolidated Balance Sheets in “Deferred turnaround
costs.” Also included in our Consolidated Balance Sheets in “Deferred catalyst
costs” are the costs of the catalyst that is replaced at periodic intervals when
the quality of the catalyst has deteriorated beyond its prescribed
function.  The catalyst costs are deferred when incurred and amortized
on a straight-line basis over the estimated useful life of the specific
catalyst. The amortization expenses for deferred turnaround and catalyst costs
are included in “Refinery operating expenses, excluding depreciation” in our
Consolidated Statements of Income.  Since these policies rely on our
estimated timing for the next turnaround and the useful lives of the catalyst,
adjustments can occur in the amortization expenses as these estimates
change.


Inventories.  Inventories
of crude oil, unfinished products and all finished products are recorded at the
lower of cost on a FIFO basis or market.  Crude oil includes both
domestic and foreign crude oil volumes at its cost and associated freight and
other cost.  Unfinished products (work in process) include any crude
oil that has entered into the refining process, and other feedstocks that are
not finished as far as refining operations are concerned.  These
include unfinished gasoline and diesel, blendstocks and other
feedstocks.  Finished product inventory includes saleable gasoline,
diesel, jet fuel, chemicals, asphalt and other finished
products.  Unfinished and finished products inventory values have
components of raw material, the associated raw material freight and other costs,
and direct refinery operating expense allocated when refining begins relative to
their proportionate market values.  The FIFO method of accounting for
inventories sometimes results in our recognizing substantial gains (in periods
of rising prices) or losses (in periods of falling prices) from our inventories
of crude oil and products.  While we believe that this accounting
method accurately reflects the results of our operations, many other refining
companies utilize the last-in, first-out (“LIFO”) method of accounting for
inventories.  Thus, a comparison of our results to those of other
refineries must take into account the impact of the inventory accounting
differences.


Asset Retirement
Obligations.  We account for asset retirement obligations as
required under the Financial Accounting Standards Board (“FASB”) Statement of
Financial Accounting Standard (“FAS”) No. 143, “Accounting for Retirement Asset
Obligations.”  FAS No. 143 requires that the fair value of a liability
for an asset retirement obligation be recognized in the period in which the
liability is incurred, with the associated asset retirement costs being
capitalized as a part of the carrying amount of the long-lived
asset.  FAS No. 143 also includes disclosure requirements that provide
a description of asset retirement obligations and reconciliation of changes in
the components of those obligations.


In March
2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional
Asset Retirement Obligations” (“FIN 47”).  FIN 47 clarified that the
term “conditional asset retirement obligation” as used in FAS No. 143 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 reporting entity.  Since the
obligation to perform the asset retirement activity is unconditional, FIN 47
provides that a liability for the fair value of a conditional asset obligation
should be recognized if that fair value can be reasonably estimated, even though
uncertainty exists about the timing and/or method of settlement.  FIN
47 also clarifies when an entity would have sufficient information to reasonably
estimate the fair value of a conditional asset retirement obligation under FAS
No. 143.  We adopted FIN 47 as of December 31, 2005; in doing so, we
recorded a net asset retirement obligation of $5.5 million, recognized $4.0
million in 2005 as the pretax cumulative effect of an accounting change ($2.5
million after tax) and recorded a $1.5 million increase in property, plant and
equipment.  At December 31, 2007, our asset retirement obligation was
$6.0 million.


Asset
retirement obligations are affected by regulatory changes and refinery
operations as well as changes in pricing of services.  In order to
determine fair value, management must make certain estimates and assumptions,
including, among other things, projected cash flows, a credit-adjusted risk-free
interest rate, and an assessment of market conditions that could significantly
impact the estimated fair value of the asset retirement
obligation.  These estimates and assumptions are subjective and are
currently based on historical costs with adjustments for estimated future
changes in the associated costs.  Therefore, we expect the dollar
amount of these obligations to change as more information is
obtained.  A 1% change in pricing of services would cause an
approximate $50,000 change to the asset retirement obligation.  We
believe that we have adequately accrued for our asset retirement obligations at
this time and that changes in estimates in future periods will not have a
significant effect on our results of operations or financial
condition.  See “Significant Accounting Policies” in Note 2 in the
“Notes to Consolidated Financial Statements” for further information about asset
retirement obligations.


Environmental
Expenditures.  Environmental expenditures are expensed or
capitalized based upon their future economic benefit.  Costs that
improve a property’s pre-existing condition, and costs that prevent future
environmental contamination, are capitalized.  Remediation costs
related to environmental damage resulting from operating activities subsequent
to acquisition are expensed.  Liabilities for these expenditures are
recorded when it is probable that obligations have been incurred and the amounts
can be reasonably estimated.  Such estimates are subject to change due
to many factors, including the identification of new sites requiring
remediation, changes in environmental laws and regulations and their
interpretation, additional information related to the extent and nature of
remediation efforts, and potential improvements in remediation
technologies.


Pension and Other Post-retirement
Benefit Obligations.  We have significant pension and
post-retirement benefit liabilities and costs that are developed from actuarial
valuations.  Inherent in these valuations are key assumptions,
including discount rates, expected returns on plan assets and health care
inflation rates.  Changes in these assumptions are primarily
influenced by factors outside of our control.  These assumptions can
have a significant effect on the amounts reported in our consolidated financial
statements.  See Note 8 “Employee Benefit Plans” in the “Notes to
Consolidated Financial Statements” for more information about these plans and
the current assumptions used.


Income Taxes.We
provide for income taxes in accordance with FAS No. 109, “Accounting for Income
Taxes” (“FAS 109”) and FASB Interpretation No. 48, “Accounting for Uncertain Tax
Positions – An Interpretation of FAS 109” (“FIN 48”.)  We record
deferred tax assets and liabilities to account for the expected future tax
consequences of events that have been recognized in our financial statements and
our tax returns.  We routinely assess the realizability of our
deferred tax assets and if we conclude that it is more likely than not that some
portion or all of the deferred tax assets will not be realized, the tax asset
would be reduced by a valuation allowance.  We consider future taxable
income in making such assessments which requires numerous judgments and
assumptions.  We record contingent income tax liabilities, interest
and penalties, as provided for in FIN 48, based on our estimate as to whether,
and the extent to which, additional taxes may be due.




New
Accounting Pronouncements


See “New
Accounting Pronouncements” in Note 2 in the “Notes to Consolidated Financial
Statements.”




Market
Risks


See Item
7A “Quantitative and Qualitative Disclosure about Market Risk” and Notes 2 and
11 in the “Notes to Consolidated Financial Statements” under “Price Risk
Management Activities” for a discussion of our various price risk management
activities.  When we make the decision to manage our price exposure,
our objective is generally to avoid losses from negative price changes,
realizing we will not obtain the benefit of positive price changes.





Item 7A.   Quantitative and
      Qualitative Disclosure About Market
Risk





Impact of Changing
Prices.  Our revenues and cash flows, as well as estimates of
future cash flows, are sensitive to changes in energy prices.  Major
shifts in the cost of crude oil, the prices of refined products and the cost of
natural gas can generate large changes in the operating margin from refining
operations.  These prices also determine the carrying value of our
Refineries’ inventories.


Price Risk Management
Activities.At times, we enter into
commodity derivative contracts to manage our price exposure to our inventory
positions, purchases of foreign crude oil and consumption of natural gas in the
refining process or to fix margins on certain future
production.  Gains or losses on commodity derivative contracts
accounted for as hedges are recognized in the related inventory in “Inventory of
crude oil, products and other” on the Consolidated Balance Sheets and
ultimately, when the inventory is charged or sold, in “Raw material, freight and
other costs” on the Consolidated Statements of Income.  Gains and
losses on transactions accounted for using mark-to-market accounting are
reflected in “Other revenues” on the Consolidated Statements of Income at each
period end.  See “Price Risk Management Activities” under Notes 2 and
11 in the “Notes to Consolidated Financial Statements.”


Our
outstanding derivatives sell contracts and net unrealized gains as of December
31, 2007 are summarized below:





Commodity
            
            Period
            
            Volume
              (thousands
      of bbls)
            
            Expected
      Close Out Date
            
            Unrealized
              Net
      Gain
              (in
      thousands)Crude
      Oil
            
            February
      2008
            
            1,597
            
            January
      2008
            
            $    1,894Crude
      Oil
            
            March
      2008
            
            1,690
            
            February
      2008
            
            7,616








Operating
Data





The
following tables set forth the refining operating statistical information on a
consolidated basis and for each Refinery for 2007, 2006 and 2005.  The
statistical information includes the following terms:


·
            WTI
      Cushing crude oil price - the benchmark West Texas Intermediate crude oil
      priced at Cushing, Oklahoma (ConocoPhillips WTI crude oil posting
      plus).


·
            Charges
      - the quantity of crude oil and other feedstock processed through Refinery
      units on a bpd basis.


·
            Manufactured
      product yields - the volumes of specific materials that are obtained
      through the distilling of crude oil and the operations of other refinery
      process units on a bpd basis.


·
            Gasoline
      and diesel crack spreads - the average non-oxygenated gasoline and diesel
      net sales prices that we receive for each product less the average WTI
      Cushing crude oil price.


·
            Cheyenne
      light/heavy crude oil differential - the average differential between the
      WTI Cushing crude oil price and the heavy crude oil delivered to the
      Cheyenne Refinery.


·
            WTI/WTS
      crude oil differential - the average differential between the WTI Cushing
      crude oil price and the West Texas sour crude oil priced at Midland,
      Texas.


·
            El
      Dorado Refinery light/heavy crude oil differential - the average
      differential between the WTI Cushing crude oil price and the Canadian
      heavy crude oil delivered to the El Dorado Refinery.  This
      differential is only applicable beginning in 2006 when we began utilizing
      Canadian crude oil at the El Dorado
Refinery.





Consolidated:Years
      Ended December 31,
            
            2007
            
            
            2006
            
            
            2005Charges
      (bpd)Light crude
            
            
            31,171
            
            
            
            39,659
            
            
            
            39,210Heavy and intermediate
      crude
            
            
            114,875
            
            
            
            114,814
            
            
            
            113,439Other feed and
      blendstocks
            
            
            18,831
            
            
            
            17,346
            
            
            
            15,955Total
            
            
            164,877
            
            
            
            171,819
            
            
            
            168,604Manufactured
      product yields (bpd)Gasoline
            
            
            76,974
            
            
            
            81,484
            
            
            
            83,574Diesel and jet
fuel
            
            
            55,889
            
            
            
            57,678
            
            
            
            55,151Asphalt
            
            
            5,945
            
            
            
            6,032
            
            
            
            7,434Other
            
            
            22,074
            
            
            
            21,580
            
            
            
            17,506Total
            
            
            160,882
            
            
            
            166,774
            
            
            
            163,665Total
      product sales (bpd)Gasoline
            
            
            88,744
            
            
            
            89,895
            
            
            
            90,372Diesel and jet
fuel
            
            
            56,862
            
            
            
            57,326
            
            
            
            54,350Asphalt
            
            
            5,988
            
            
            
            6,138
            
            
            
            7,526Other
            
            
            18,554
            
            
            
            18,679
            
            
            
            18,133Total
            
            
            170,148
            
            
            
            172,038
            
            
            
            170,381Refinery
      operating margin information (per sales barrel)Refined products
      revenue
            
            $
            84.85
            
            
            $
            75.80
            
            
            $
            64.32Raw material, freight and other
      costs
              (FIFO inventory
      accounting)
            
            
            65.04
            
            
            
            61.33
            
            
            
            52.22Refinery operating expenses,
      excluding depreciation
            
            
            4.84
            
            
            
            4.41
            
            
            
            3.88Depreciation and
      amortization
            
            
            0.85
            
            
            
            0.65
            
            
            
            0.56Average
      WTI crude oil price at Cushing, OK (per barrel)
            
            $
            71.99
            
            
            $
            64.94
            
            
            $
            55.77Average
      gasoline crack spread (per barrel)
            
            
            18.39
            
            
            
            14.10
            
            
            
            11.67Average
      diesel crack spread (per barrel)
            
            
            22.59
            
            
            
            21.35
            
            
            
            17.13Average
      sales price (per sales barrel)Gasoline
            
            $
            92.15
            
            
            $
            80.79
            
            
            $
            69.09Diesel and jet
fuel
            
            
            94.55
            
            
            
            86.62
            
            
            
            73.61Asphalt
            
            
            44.69
            
            
            
            37.68
            
            
            
            26.72Other
            
            
            33.18
            
            
            
            31.11
            
            
            
            28.28







Years
      Ended December 31,
            
            2007
            
            
            2006
            
            
            2005Cheyenne
      Refinery:Charges
      (bpd)Light crude
            
            
            11,545
            
            
            
            12,436
            
            
            
            8,575Heavy crude
            
            
            30,233
            
            
            
            33,563
            
            
            
            38,347Other feed and
      blendstocks
            
            
            1,304
            
            
            
            1,694
            
            
            
            4,399Total
            
            
            43,082
            
            
            
            47,693
            
            
            
            51,321Manufactured
      product yields (bpd)Gasoline
            
            
            17,504
            
            
            
            19,089
            
            
            
            21,035Diesel
            
            
            12,281
            
            
            
            14,261
            
            
            
            14,580Asphalt
            
            
            5,945
            
            
            
            6,032
            
            
            
            7,434Other
            
            
            5,868
            
            
            
            6,283
            
            
            
            6,285Total
            
            
            41,598
            
            
            
            45,665
            
            
            
            49,334Total
      product sales (bpd)Gasoline
            
            
            27,427
            
            
            
            26,569
            
            
            
            27,186Diesel
            
            
            12,486
            
            
            
            14,147
            
            
            
            14,428Asphalt
            
            
            5,988
            
            
            
            6,138
            
            
            
            7,526Other
            
            
            3,577
            
            
            
            4,662
            
            
            
            6,124Total
            
            
            49,478
            
            
            
            51,516
            
            
            
            55,264Refinery
      operating margin information (per sales barrel)Refined products
      revenue
            
            $
            83.04
            
            
            $
            74.08
            
            
            $
            61.16Raw material, freight and other
      costs
              (FIFO inventory
      accounting)
            
            
            62.08
            
            
            
            57.07
            
            
            
            48.49Refinery operating expenses,
      excluding depreciation
            
            
            6.05
            
            
            
            5.42
            
            
            
            3.91Depreciation and
      amortization
            
            
            1.29
            
            
            
            1.00
            
            
            
            0.90Average
      light/heavy crude oil differential (per barrel)
            
            $
            18.55
            
            
            $
            16.21
            
            
            $
            15.32Average
      gasoline crack spread (per barrel)
            
            
            17.93
            
            
            
            15.58
            
            
            
            13.17Average
      diesel crack spread (per barrel)
            
            
            26.00
            
            
            
            24.35
            
            
            
            19.40Average
      sales price (per sales barrel)Gasoline
            
            $
            92.55
            
            
            $
            83.35
            
            
            $
            71.14Diesel
            
            
            98.84
            
            
            
            89.99
            
            
            
            75.57Asphalt
            
            
            44.69
            
            
            
            37.68
            
            
            
            26.72Other
            
            
            19.20
            
            
            
            20.91
            
            
            
            25.29





El
      Dorado Refinery:Charges
      (bpd)Light crude
            
            
            19,626
            
            
            
            27,224
            
            
            
            30,635Heavy and intermediate
      crude
            
            
            84,642
            
            
            
            81,251
            
            
            
            75,092Other feed and
      blendstocks
            
            
            17,527
            
            
            
            15,652
            
            
            
            11,556Total
            
            
            121,795
            
            
            
            124,127
            
            
            
            117,283Manufactured
      product yields (bpd)Gasoline
            
            
            59,470
            
            
            
            62,395
            
            
            
            62,539Diesel and jet
fuel
            
            
            43,608
            
            
            
            43,417
            
            
            
            40,572Other
            
            
            16,205
            
            
            
            15,297
            
            
            
            11,222Total
            
            
            119,283
            
            
            
            121,109
            
            
            
            114,333Total
      product sales (bpd)Gasoline
            
            
            61,318
            
            
            
            63,327
            
            
            
            63,186Diesel and jet
fuel
            
            
            44,376
            
            
            
            43,179
            
            
            
            39,922Other
            
            
            14,977
            
            
            
            14,018
            
            
            
            12,009Total
            
            
            120,671
            
            
            
            120,524
            
            
            
            115,117Refinery
      operating margin information (per sales barrel)Refined products
      revenue
            
            $
            85.59
            
            
            $
            76.53
            
            
            $
            65.83Raw material, freight and other
      costs
              (FIFO inventory
      accounting)
            
            
            66.25
            
            
            
            63.15
            
            
            
            54.01Refinery operating expenses,
      excluding depreciation
            
            
            4.34
            
            
            
            3.98
            
            
            
            3.87Depreciation and
      amortization
            
            
            0.67
            
            
            
            0.50
            
            
            
            0.40Average
      WTI/WTS crude oil differential (per barrel)
            
            $
            5.02
            
            
            $
            5.22
            
            
            $
            4.51Average
      light/heavy crude oil differential (per barrel)
            
            
            20.60
            
            
            
            18.13
            
            
            
            -Average
      gasoline crack spread (per barrel)
            
            
            18.59
            
            
            
            13.48
            
            
            
            11.02Average
      diesel crack spread (per barrel)
            
            
            21.63
            
            
            
            20.37
            
            
            
            16.31Average
      sales price (per sales barrel)Gasoline
            
            $
            91.98
            
            
            $
            79.72
            
            
            $
            68.21Diesel and jet
    fuel
            
            
            93.34
            
            
            
            85.51
            
            
            
            72.90Other
            
            
            36.52
            
            
            
            34.51
            
            
            
            29.81








Item 8. Financial
Statements and Supplementary Data


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM





To
the Board of Directors and Shareholders of Frontier Oil
Corporation:





We have
audited the accompanying consolidated balance sheets of Frontier Oil Corporation
and subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the
related consolidated statements of income, changes in shareholders’ equity and
comprehensive income, and cash flows for each of the three years in the period
ended December 31, 2007. Our audits also included the financial statement
schedules listed in the Index at Item 15. These consolidated financial
statements and financial statement schedules are the responsibility of the
Company’s management. Our responsibility is to express an opinion on the
financial statements and financial statement schedules 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 Frontier Oil Corporation and
subsidiaries as of December 31, 2007 and 2006, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2007, in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.


As
discussed in Note 2 to the consolidated financial statements, on December 31,
2005, the Company adopted the provisions of Financial Accounting Standards Board
(“FASB”) Interpretation No. 47, Accounting for Conditional Asset Retirement
Obligations.


We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the Company’s internal control over
financial reporting as of December 31, 2007, based on the criteria established
in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 25, 2008
expressed an unqualified opinion on the Company’s internal control over
financial reporting.





DELOITTE
& TOUCHE LLP




Houston,
Texas


February
25, 2008










MANAGEMENT’S REPORT ON INTERNAL


CONTROL
OVER FINANCIAL REPORTING





The
management of Frontier Oil Corporation is responsible for establishing and
maintaining adequate internal control over financial reporting.  Our
internal control system was designed to provide reasonable assurance to the
Company’s 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.


Frontier
Oil Corporation’s management assessed the effectiveness of the Company’s
internal control over financial reporting as of December 31, 2007.  In
making this assessment, it used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission in Internal
Control-Integrated Framework.  Based on our assessment, we believe
that, as of December 31, 2007, the Company’s internal control over financial
reporting is effective based on those criteria.


Frontier
Oil Corporation’s independent registered public accounting firm has issued an
audit report on the effectiveness of the Company’s internal control over
financial reporting.  This report appears on the following
page.





February
25, 2008





James
R. Gibbs


Chairman
of the Board, President and


Chief
Executive Officer




Michael
C. Jennings


Executive
Vice President – Chief Financial Officer




Nancy
J. Zupan


Vice
President – Controller










REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To
the Board of Directors and Shareholders of Frontier Oil
Corporation:





We have
audited the internal control over financial reporting of Frontier Oil
Corporation and its subsidiaries (the “Company”) as of December 31, 2007 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, included in the accompanying Management’s
Report on Internal Control Over Financial Reporting.  Our
responsibility is to express an opinion on 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, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances.  We
believe that our audit provides a reasonable basis for our opinion.


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.


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, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2007, 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 schedules as of and for the year ended December 31, 2007 of
the Company and our report dated February 25, 2008, expressed an unqualified
opinion on those financial statements and financial statement
schedules.





DELOITTE
& TOUCHE LLP





Houston,
Texas


February
25, 2008











FRONTIER OIL CORPORATION AND SUBSIDIARIESConsolidated
      Statements of IncomeYears
      Ended December 31,2007
            
            
            2006
            
            
            2005(in
      thousands, except per share data)Revenues:Refined products
            
            $
            5,269,674
            
            
            $
            4,759,661
            
            
            $
            3,999,935Other
            
            
            (80,934
            )
            
            
            36,292
            
            
            
            1,2275,188,740
            
            
            
            4,795,953
            
            
            
            4,001,162Costs
      and expenses:Raw material, freight and other
      costs
            
            
            4,039,235
            
            
            
            3,850,937
            
            
            
            3,247,372Refinery operating expenses,
      excluding depreciation
            
            
            300,542
            
            
            
            277,129
            
            
            
            241,445Selling and general expenses,
      excluding depreciation
            
            
            55,343
            
            
            
            52,488
            
            
            
            30,715Merger termination and legal
      costs
            
            
            -
            
            
            
            -
            
            
            
            48Depreciation, amortization and
      accretion
            
            
            53,039
            
            
            
            41,213
            
            
            
            35,213Gains on sales of
      assets
            
            
            (15,214
            )
            
            
            (8
            )
            
            
            (3,644
            )4,432,945
            
            
            
            4,221,759
            
            
            
            3,551,149Operating
      income
            
            
            755,795
            
            
            
            574,194
            
            
            
            450,013Interest
      expense and other financing costs
            
            
            8,773
            
            
            
            12,139
            
            
            
            10,341Interest
      and investment income
            
            
            (21,851
            )
            
            
            (18,059
            )
            
            
            (7,583
            )(13,078
            )
            
            
            (5,920
            )
            
            
            2,758Income
      before income taxes
            
            
            768,873
            
            
            
            580,114
            
            
            
            447,255Provision
      for income taxes
            
            
            269,748
            
            
            
            200,837
            
            
            
            169,594Income
      before cumulative effect of accounting change
            
            
            499,125
            
            
            
            379,277
            
            
            
            277,661Cumulative
      effect of accounting change, net of
              income taxes of
      $1,530
            
            
            -
            
            
            
            -
            
            
            
            (2,503
            )Net
      income
            
            $
            499,125
            
            
            $
            379,277
            
            
            $
            275,158Basic
      earnings per share of common stock:Before cumulative effect of
      accounting change
            
            $
            4.67
            
            
            $
            3.40
            
            
            $
            2.51Cumulative effect of accounting
      change
            
            
            -
            
            
            
            -
            
            
            
            (0.02
            )Net income
            
            $
            4.67
            
            
            $
            3.40
            
            
            $
            2.49Diluted
      earnings per share of common stock:Before cumulative effect of
      accounting change
            
            $
            4.62
            
            
            $
            3.37
            
            
            $
            2.44Cumulative effect of accounting
      change
            
            
            -
            
            
            
            -
            
            
            
            (0.02
            )Net income
            
            $
            4.62
            
            
            $
            3.37
            
            
            $
            2.42The
      accompanying notes are an integral part of these consolidated financial
      statements.













FRONTIER OIL CORPORATION AND
SUBSIDIARIESConsolidated
      Balance SheetsDecember
      31,2007
            
            
            2006(in
      thousands, except share data)ASSETSCurrent
      assets:Cash and cash
      equivalents
            
            $
            297,399
            
            
            $
            405,479Trade receivables, net of
      allowance of $500 in both years
            
            
            155,454
            
            
            
            135,111Income taxes
      receivable
            
            
            24,056
            
            
            
            52Other receivables
            
            
            5,236
            
            
            
            2,299Inventory of crude oil, products
      and other
            
            
            501,927
            
            
            
            374,576Deferred tax
    assets
            
            
            9,426
            
            
            
            3,237Commutation
    account
            
            
            6,280
            
            
            
            -Other current
    assets
            
            
            31,245
            
            
            
            18,462Total current
    assets
            
            
            1,031,023
            
            
            
            939,216Property,
      plant and equipment, at cost:Refineries, terminal equipment
      and pipelines
            
            
            1,082,275
            
            
            
            802,498Furniture, fixtures and other
      equipment
            
            
            13,168
            
            
            
            11,0841,095,443
            
            
            
            813,582Less – accumulated depreciation
      and amortization
            
            
            317,993
            
            
            
            276,777777,450
            
            
            
            536,805Deferred
      turnaround costs
            
            
            39,276
            
            
            
            24,640Deferred
      catalyst costs
            
            
            6,540
            
            
            
            6,386Deferred
      financing costs, net of amortizationof $1,619 and $1,742 in 2007 and
      2006, respectively
            
            
            2,556
            
            
            
            2,752Commutation
      account
            
            
            -
            
            
            
            7,290Prepaid
      insurance, net of amortization
            
            
            909
            
            
            
            2,120Intangible
      assets, net of amortizationof $370 and $264 in 2007 and
      2006, respectively
              $158 and $53 in 2005 and 2004,
      respectively
            
            
            1,460
            
            
            
            1,316Other
      assets
            
            
            4,634
            
            
            
            3,400Total
      assets
            
            $
            1,863,848
            
            
            $
            1,523,925LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      liabilities:Accounts payable
            
            $
            417,395
            
            
            $
            390,019Contingent income tax
      liabilities
            
            
            -
            
            
            
            28,271Derivative
      liabilities
            
            
            15,089
            
            
            
            -Accrued liabilities and
      other
            
            
            69,029
            
            
            
            41,408Total current
      liabilities
            
            
            501,513
            
            
            
            459,698Long-term
      debt
            
            
            150,000
            
            
            
            150,000Contingent
      income tax liabilities
            
            
            32,257
            
            
            
            -Post-retirement
      employee liabilities
            
            
            27,549
            
            
            
            28,090Other
      long-term liabilities
            
            
            13,605
            
            
            
            16,376Deferred
      income taxes
            
            
            100,310
            
            
            
            93,907Commitments
      and contingenciesShareholders’
      equity:Preferred stock, $100 par value,
      500,000 shares authorized,no shares issued
            
            
            -
            
            
            
            -Common stock, no par, 180,000,000
      shares authorized, 131,850,356 and134,509,256 shares issued at
      December 31, 2007 and 2006,respectively
            
            
            57,736
            
            
            
            57,802Paid-in capital
            
            
            211,324
            
            
            
            181,386Retained earnings
            
            
            1,095,540
            
            
            
            719,802Accumulated other comprehensive
      income
            
            
            1,578
            
            
            
            256Treasury stock, at cost,
      26,893,939 and 24,164,808 sharesat December 31, 2007 and 2006,
      respectively
            
            
            (327,564
            )
            
            
            (183,392
            )Total shareholders’
      equity
            
            
            1,038,614
            
            
            
            775,854Total
      liabilities and shareholders’ equity
            
            $
            1,863,848
            
            
            $
            1,523,925The
      accompanying notes are an integral part of these consolidated financial
      statements.











FRONTIER OIL CORPORATION AND
    SUBSIDIARIESConsolidated
      Statements of Cash FlowsYears
      Ended December 31,2007
            
            
            2006
            
            
            2005(in
      thousands)Cash
      flows from operating activities:Net
      income
            
            $
            499,125
            
            
            $
            379,277
            
            
            $
            275,158Adjustments
      to reconcile net income to net cash
              from operating
      activities:Cumulative effect of accounting
      change, net of income taxes
            
            
            -
            
            
            
            -
            
            
            
            2,503Depreciation, amortization and
      accretion
            
            
            67,512
            
            
            
            54,388
            
            
            
            47,546Deferred income
      taxes
            
            
            (1,916
            )
            
            
            6,073
            
            
            
            30,259Stock-based compensation
      expense
            
            
            22,553
            
            
            
            18,029
            
            
            
            1,363Excess income tax benefits of
      stock-based compensation
            
            
            (6,962
            )
            
            
            (8,881
            )
            
            
            -Amortization of debt issuance
      costs
            
            
            769
            
            
            
            797
            
            
            
            785Gains on sales of
      assets
            
            
            (15,214
            )
            
            
            (8
            )
            
            
            (3,644
            )Decrease in commutation
      account
            
            
            1,009
            
            
            
            5,316
            
            
            
            3,832Amortization of long-term
      prepaid insurance
            
            
            1,211
            
            
            
            1,211
            
            
            
            1,211Increase in other long-term
      liabilities
            
            
            27,365
            
            
            
            9,309
            
            
            
            4,473Changes in deferred charges and
      other
            
            
            (29,287
            )
            
            
            (18,844
            )
            
            
            (17,316
            )Changes in components of
      working capital from operations:Increase in trade, note and other
      receivables
            
            
            (45,018
            )
            
            
            (7,633
            )
            
            
            (43,707
            )Increase in
    inventory
            
            
            (127,351
            )
            
            
            (126,955
            )
            
            
            (90,687
            )Increase in other current
      assets
            
            
            (12,724
            )
            
            
            (10,527
            )
            
            
            (5,591
            )Increase in accounts
      payable
            
            
            30,312
            
            
            
            23,187
            
            
            
            117,275Increase in accrued liabilities
      and other
            
            
            17,629
            
            
            
            15,778
            
            
            
            36,877Net cash provided by operating
      activities
            
            
            429,013
            
            
            
            340,517
            
            
            
            360,337Cash
      flows from investing activities:Additions
      to property, plant and equipment
            
            
            (291,174
            )
            
            
            (129,703
            )
            
            
            (109,710
            )Proceeds
      from sales of assets
            
            
            22,222
            
            
            
            8
            
            
            
            5,500El
      Dorado Refinery contingent earn-out payment
            
            
            (7,500
            )
            
            
            (7,500
            )
            
            
            (7,500
            )Other
      acquisitions and leasehold improvements
            
            
            (3,561
            )
            
            
            -
            
            
            
            -Net
      proceeds from insurance – involuntary conversion claim
            
            
            -
            
            
            
            -
            
            
            
            2,142Net cash used in investing
      activities
            
            
            (280,013
            )
            
            
            (137,195
            )
            
            
            (109,568
            )Cash
      flows from financing activities:Purchase
      of treasury stock
            
            
            (248,486
            )
            
            
            (98,950
            )
            
            
            (34,819
            )Proceeds
      from issuance of common stock
            
            
            2,303
            
            
            
            3,672
            
            
            
            23,616Dividends
      paid
            
            
            (17,271
            )
            
            
            (67,498
            )
            
            
            (7,776
            )Debt
      issuance costs and other
            
            
            (588
            )
            
            
            (13
            )
            
            
            (114
            )Excess
      income tax benefits of stock-based compensation
            
            
            6,962
            
            
            
            8,881
            
            
            
            -Net cash used in financing
      activities
            
            
            (257,080
            )
            
            
            (153,908
            )
            
            
            (19,093
            )(Decrease)
      increase in cash and cash equivalents
            
            
            (108,080
            )
            
            
            49,414
            
            
            
            231,676Cash
      and cash equivalents, beginning of period
            
            
            405,479
            
            
            
            356,065
            
            
            
            124,389Cash
      and cash equivalents, end of period
            
            $
            297,399
            
            
            $
            405,479
            
            
            $
            356,065The
      accompanying notes are an integral part of these consolidated financial
      statements.







FRONTIER OIL CORPORATION AND SUBSIDIARIESConsolidated
      Statements of Changes in Shareholders’ Equity and Statements of
      Comprehensive Income(in
      thousands, except share data)Common
      Stock
              
              
              
              
              
              
              
              
              
              
              
              Treasury
      Stock
              
              
              
              
              
              
              
              
              TotalNumber
      of Shares Issued
              
              
              Amount
              
              
              Paid-in
      Capital
              
              
              Comprehensive
      Income
              
              
              Retained
      Earnings
              
              
              Number
      of Shares
              
              
              Amount
              
              
              Deferred
      Compensation
              
              
              Accumulated
      Other Comprehensive Income (Loss)
              
              
              Number of
      Shares
              
              
              AmountDecember
      31, 2004
              
              
              126,678,096
              
              
              $
              57,607
              
              
              $
              119,525
              
              
              
              
              
              $
              142,475
              
              
              
              (18,553,868
              )
              
              $
              (47,024
              )
              
              $
              (266
              )
              
              $
              (1,197
              )
              
              
              108,124,228
              
              
              $
              271,120Shares
      issued under stock-based compensation plans
              
              
              6,951,300
              
              
              
              173
              
              
              
              29,369
              
              
              
              
              
              
              -
              
              
              
              339,596
              
              
              
              450
              
              
              
              (2,810
              )
              
              
              
              
              
              
              7,290,896
              
              
              
              27,182Issue
      of restricted stock units to directors
              
              
              -
              
              
              
              -
              
              
              
              1,224
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,224
              )
              
              
              -
              
              
              
              -
              
              
              
              -Shares
      received under:Stock
      repurchase plans
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              -
              
              
              
              (1,441,600
              )
              
              
              (24,596
              )
              
              
              -
              
              
              
              -
              
              
              
              (1,441,600
              )
              
              
              (24,596
              )Stock-based
      compensation plans
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              -
              
              
              
              (1,274,956
              )
              
              
              (15,700
              )
              
              
              -
              
              
              
              -
              
              
              
              (1,274,956
              )
              
              
              (15,700
              )Comprehensive
      income:Net
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              $
              275,158
              
              
              
              275,158
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              275,158Other
      comprehensive income:Defined
      benefit plans, net of tax liability of $755
              
              
              
              
              
              
              
              
              
              
              
              1,224Other
      comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,224
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,224
              
              
              
              -
              
              
              
              1,224Comprehensive
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              276,382Income
      tax benefits of stock-based compensation, net of
    contingency
              
              
              -
              
              
              
              -
              
              
              
              7,792
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              7,792Stock-based
      compensation expense
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,362
              
              
              
              -
              
              
              
              -
              
              
              
              1,362Dividends
      declared
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              (64,850
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (64,850
              )December
      31, 2005
              
              
              133,629,396
              
              
              $
              57,780
              
              
              $
              157,910
              
              
              
              
              
              
              $
              352,783
              
              
              
              (20,930,828
              )
              
              $
              (86,870
              )
              
              $
              (2,938
              )
              
              $
              27
              
              
              
              112,698,568
              
              
              $
              478,692Adoption
      of FAS No. 123 (R)
              
              
              -
              
              
              
              -
              
              
              
              (2,938
              )
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,938
              
              
              
              -
              
              
              
              -
              
              
              
              -Shares
      issued under stock-based compensation plans
              
              
              879,860
              
              
              
              22
              
              
              
              3,134
              
              
              
              
              
              
              
              -
              
              
              
              389,846
              
              
              
              516
              
              
              
              -
              
              
              
              -
              
              
              
              1,269,706
              
              
              
              3,672Shares
      received under:Stock
      repurchase plans
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              -
              
              
              
              (3,482,088
              )
              
              
              (92,273
              )
              
              
              -
              
              
              
              -
              
              
              
              (3,482,088
              )
              
              
              (92,273
              )Stock-based
      compensation plans
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              -
              
              
              
              (141,738
              )
              
              
              (4,765
              )
              
              
              -
              
              
              
              -
              
              
              
              (141,738
              )
              
              
              (4,765
              )Net
      income and comprehensive income
              
              
              
              
              
              
              
              
              
              
              $
              379,277
              
              
              
              379,277
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              379,277Adjustment
      to initially apply FAS No. 158, net of tax liability of
    $141
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              229
              
              
              
              -
              
              
              
              229Income
      tax benefits of stock-based compensation, net of
    contingency
              
              
              -
              
              
              
              -
              
              
              
              5,251
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              5,251Stock-based
      compensation expense
              
              
              -
              
              
              
              -
              
              
              
              18,029
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              18,029Dividends
      declared
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              (12,258
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (12,258
              )December
      31, 2006
              
              
              134,509,256
              
              
              $
              57,802
              
              
              $
              181,386
              
              
              
              
              
              
              $
              719,802
              
              
              
              (24,164,808
              )
              
              $
              (183,392
              )
              
              $
              -
              
              
              $
              256
              
              
              
              110,344,448
              
              
              $
              775,854Adoption
      of FIN 48
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              (1,016
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,016
              )Shares
      issued under stock-based compensation plans and other
              
              
              -
              
              
              
              -
              
              
              
              951
              
              
              
              
              
              
              
              -
              
              
              
              1,188,168
              
              
              
              1,574
              
              
              
              -
              
              
              
              -
              
              
              
              1,188,168
              
              
              
              2,525Shares
      received under:Stock
      repurchase plans
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              -
              
              
              
              (6,443,700
              )
              
              
              (243,568
              )
              
              
              -
              
              
              
              -
              
              
              
              (6,443,700
              )
              
              
              (243,568
              )Stock-based
      compensation plans
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              -
              
              
              
              (132,499
              )
              
              
              (5,139
              )
              
              
              -
              
              
              
              -
              
              
              
              (132,499
              )
              
              
              (5,139
              )Comprehensive
      income:Net
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              $
              499,125
              
              
              
              499,125
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              499,125Other
      comprehensive income:Defined
      benefit plans,
                net
      of tax liability of $805
              
              
              
              
              
              
              
              1,322Other
      comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,322
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,322
              
              
              
              -
              
              
              
              1,322Comprehensive
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              500,447Income
      tax benefits of stock-based compensation, net of
    contingency
              
              
              -
              
              
              
              -
              
              
              
              6,434
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              6,434Treasury
      stock retirements
              
              
              (2,658,900
              )
              
              
              (66
              )
              
              
              -
              
              
              
              
              
              
              
              (102,895
              )
              
              
              2,658,900
              
              
              
              102,961
              
              
              
              -
              
              
              
              -
              
              
              
              -Stock-based
      compensation expense
              
              
              -
              
              
              
              -
              
              
              
              22,553
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              22,553Dividends
      declared
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              (19,476
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (19,476
              )December
      31, 2007
              
              
              131,850,356
              
              
              $
              57,736
              
              
              $
              211,324
              
              
              
              
              
              
              $
              1,095,540
              
              
              
              (26,893,939
              )
              
              $
              (327,564
              )
              
              $
              -
              
              
              $
              1,578
              
              
              
              104,956,417
              
              
              $
              1,038,614The
      accompanying notes are an integral part of these consolidated financial
      statements.
  
  FRONTIER OIL CORPORATION AND SUBSIDIARIES


Notes
To Consolidated Financial Statements




For
The Years Ended December 31, 2007, 2006 and 2005




1.
            Nature
      of Operations




The
financial statements include the accounts of Frontier Oil Corporation (“FOC”), a
Wyoming corporation, and its wholly-owned subsidiaries, collectively referred to
as “Frontier” or “the Company.”  The Company is an energy company
engaged in crude oil refining and wholesale marketing of refined petroleum
products (the “refining operations”).


The
Company operates refineries (“the Refineries”) in Cheyenne, Wyoming and El
Dorado, Kansas.  In February 2007, the Company acquired Ethanol
Management Company (“EMC”) for approximately $3.1 million cash.  EMC’s
primary assets are a products terminal and blending facility located near
Denver, Colorado.  The Company also owned, until their sale in
September 2007, a 34.72% interest in a crude oil pipeline in Wyoming and a 50%
interest in two crude oil tanks in Guernsey, Wyoming, both of which were
accounted for as undivided interests.  Each of these assets and the
associated liabilities, revenues and expenses were reported on a proportionate
gross basis until their sale in September 2007.  In addition, the
equity method of accounting is utilized for the Company’s 25% interest in 8901
Hangar, Inc., a company which leases and operates a private airplane
hangar.  The Company’s investment in 8901 Hangar, Inc. was $100,000
and $99,000 at December 31, 2007 and 2006, respectively, and is included in
“Other assets” on the Consolidated Balance Sheets.  The Company also
owned, until its sale in November 2005, FGI, LLC, an asphalt terminal and
storage facility in Grand Island, Nebraska.  The activities of FGI,
LLC were included in the consolidated financial statements until its
sale.  All of the operations of the Company are in the United States,
with its marketing efforts focused in the Rocky Mountain and Plains States
regions of the United States.  The Rocky Mountain region includes the
states of Colorado, Wyoming, Montana and Utah, and the Plains States include the
states of Kansas, Oklahoma, eastern Nebraska, Iowa, Missouri, North Dakota and
South Dakota.  The Company purchases crude oil to be refined and
markets the refined petroleum products produced, including various grades of
gasoline, diesel fuel, jet fuel, asphalt, chemicals and petroleum
coke.  The operations of refining and marketing of petroleum products
are considered part of one reporting segment.




2.
            Significant
      Accounting Policies




Revenue
Recognition


Revenues
from sales of refined products are earned and realized upon transfer of title to
the customer based on the contractual terms of delivery (including payment terms
and prices).  Title primarily transfers at the refinery or terminal
when the refined product is loaded into the common carrier pipelines, trucks or
railcars (free on board origin).  In some situations, title transfers
at the customer’s destination (free on board
destination).  Nonmonetary product exchanges and certain buy/sell
crude oil transactions which are entered into in the normal course of business
are included on a net cost basis in “Raw material, freight and other costs” on
the Consolidated Statements of Income.  Taxes collected from customers
and remitted to governmental authorities are not included in reported
revenues.





Property,
Plant and Equipment


Property,
plant and equipment additions are recorded at cost and depreciated using the
straight-line method over the estimated useful lives, which range as
follows:


Refinery
      buildings and equipment
            
            5
      to 50 years


Pipelines
      and pipeline improvements
            
            5
      to 20 years


Furniture,
      fixtures and other
            
            3
      to 10 years





The costs
of components of property units, net of salvage value, retired or abandoned are
charged or credited to accumulated depreciation under the composite method of
depreciation.  Gains or losses on sales or other dispositions of major
units of property are recorded in operating income and are reported in “Gains on
sales of assets” in the Consolidated Statements of Income.


The
Company reviews long-lived assets for impairments under the Financial Accounting
Standards Board (“FASB”) Statement of Financial Accounting Standards (“FAS”) No.
144, “Accounting for the Impairment or Disposal of Long-lived Assets” whenever
events or changes in circumstances indicate that the carrying value of an asset
may not be recoverable.  If the undiscounted future cash flow of an
asset to be held and used in operations is less than the carrying value, the
Company would recognize a loss for the difference between the carrying value and
fair value.  When fair values are not available, the Company estimates
fair value based on a discounted cash flow analysis.


The
Company capitalizes interest on the long-term construction of significant
assets.  Interest capitalized for the years ended December 31, 2007,
2006 and 2005 was $8.1 million, $3.8 million and $2.6 million,
respectively.





Turnarounds


Normal
maintenance and repairs are expensed as incurred.  Planned major
maintenance is the scheduled and required shutdowns of refinery processing units
for significant overhaul and refurbishment
(“turnarounds”).  Turnaround costs include contract services,
materials and rental equipment.  The costs of turnarounds are deferred
when incurred and amortized on a straight-line basis over the period of time
estimated to lapse until the next turnaround occurs.  These deferred
charges are included in the Company’s Consolidated Balance Sheets in “Deferred
turnaround costs.” Also included in our Consolidated Balance Sheets, in
“Deferred catalyst costs,” are the costs of the catalyst that is replaced at
periodic intervals when the quality of the catalyst has deteriorated beyond its
prescribed function.  The catalyst costs are deferred when incurred
and amortized on a straight-line basis over the estimated useful life of the
specific catalyst.  The amortization expenses resulting from the
turnaround and catalyst costs are included in “Refinery operating expenses,
excluding depreciation” in the Company’s Consolidated Statements of
Income.





Inventories


Inventories
of crude oil, unfinished products and all finished products are recorded at the
lower of cost on a first-in, first-out (“FIFO”) basis or
market.  Crude oil includes both domestic and foreign crude oil
volumes at its cost and associated freight and other
costs.  Unfinished products (work in process) include any crude oil
that has entered into the refining process, and other feedstocks that are not
finished as far as refining operations are concerned.  These include
unfinished gasoline and diesel, blendstocks and other
feedstocks.  Finished product inventory includes saleable gasoline,
diesel, jet fuel, chemicals, asphalt and other finished
products.  Unfinished and finished products inventory values have
components of raw material, the associated raw material freight and other costs,
and direct refinery operating expense allocated when refining begins relative to
their proportionate market values.  Refined product exchange
transactions are considered asset exchanges with deliveries offset against
receipts.  The net exchange balance is included in
inventory.  Inventories of materials and supplies and process
chemicals are recorded at the lower of average cost or market.  Crude
oil inventories, unfinished product inventories and finished product inventories
are used to secure financing for operations under the Company’s revolving credit
facility.  (See Note 5 “Revolving Credit Facility.”)  The
components of inventory as of December 31, 2007 and 2006 were as
follows:





December
      31,2007
            
            
            2006(in
      thousands)Crude
      oil
            
            $
            223,715
            
            
            $
            182,215Unfinished
      products
            
            
            152,572
            
            
            
            84,682Finished
      products
            
            
            104,820
            
            
            
            89,457Process
      chemicals
            
            
            1,300
            
            
            
            1,009Repairs
      and maintenance supplies and other
            
            
            19,520
            
            
            
            17,213$
            501,927
            
            
            $
            374,576





Prepaid
Insurance


The
Company charges the amounts paid for insurance policies to expense over the term
of the policy.  Prepaid insurance related to policies with terms of
one year or less are included in “Other current assets” on the Consolidated
Balance Sheets.  The loss mitigation insurance premium and related
expenses (see “Litigation-Beverly Hills Lawsuits” under Note 9) totaling $6.4
million are included in “Prepaid insurance” in the long-term asset portion of
the Consolidated Balance Sheets and are reflected net of accumulated
amortization as of December 31, 2007 and 2006.  Of the total indemnity
premium, $1.4 million related to year one of the policy and was amortized to
expense over the one-year period which began October 1, 2003.  The
remaining $4.3 million of the indemnity premium is being amortized over four
years beginning October 1, 2004.  The administrative fee and
California insurance tax totaling $673,000 is being amortized to expense over
the five-year policy term, which began October 1, 2003.  Accumulated
amortization was $5.5 million and $4.3 million at December 31, 2007 and 2006,
respectively.





Income
Taxes


The
Company accounts for income taxes under the provisions of FAS No. 109,
“Accounting for Income Taxes.”  FAS No. 109 requires the asset and
liability approach for accounting for income taxes.  Under this
approach, deferred tax assets and liabilities are recognized based on
anticipated future tax consequences attributable to differences between the
financial statement carrying amounts of assets and liabilities and their
respective tax basis.  The Company recognizes liabilities, interest
and penalties for potential tax issues based on its estimate of whether, and the
extent to which, additional taxes may be due as determined under FASB
Interpretation No. 48, “Accounting for Uncertain Tax Positions – An
Interpretation of FAS No. 109, Accounting for Income Taxes” (“FIN
48”).  See Note 6 “Income Taxes” for further information.





Environmental
Expenditures


Environmental
expenditures are expensed or capitalized based upon their future economic
benefit.  Costs that improve a property’s pre-existing condition, and
costs that prevent future environmental contamination, are
capitalized.  Remediation costs related to environmental damage
resulting from operating activities subsequent to acquisition are
expensed.  Liabilities for these expenditures are recorded when it is
probable that obligations have been incurred and the amounts can be reasonably
estimated.





Price
Risk Management Activities


The
Company, at times, enters into commodity derivative contracts to manage its
price exposure to its inventory positions and purchases of foreign crude oil and
to fix margins on certain future production.  The commodity derivative
contracts used by the Company may take the form of futures contracts, collars or
price swaps and are entered into with creditworthy
counterparties.  The Company believes that there is minimal credit
risk with respect to its counterparties.  The Company accounts for its
commodity derivative contracts under the hedge (or deferral) method of
accounting when the derivative contracts are designated as hedges for accounting
purposes, or mark-to-market accounting if the Company elects not to designate
derivative contracts as accounting hedges or if such derivative contracts do not
qualify for hedge accounting under FAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities.”  As such, gains or losses on
commodity derivative contracts accounted for as hedges are recognized initially
in the related inventory in “Inventory of crude oil, products and other” on the
Consolidated Balance Sheets, and ultimately, when the related inventory is
charged or sold in “Raw material, freight and other costs” on the Consolidated
Statements of Income.  Gains and losses on transactions accounted for
using mark-to-market accounting are reflected in “Other revenues” at each period
end.





Stock-based
Compensation


Effective
January 1, 2006, the Company accounts for stock-based compensation in accordance
with FAS No. 123(R), “Share-Based Payment,” which requires companies to
recognize the fair value of stock options and other stock-based compensation in
the financial statements.  Prior to 2006, stock-based compensation was
measured in accordance with Accounting Principles Board (“APB”) No.
25.  Under this intrinsic value method, compensation cost was the
excess, if any, of the quoted market value of the Company’s common stock at the
grant date over the amount the employee must pay to acquire the
stock.  No compensation cost for stock options was recognized in the
Consolidated Statements of Income for the year ended December 31,
2005.  See Note 7 for detailed information on the Company’s
stock-based compensation.  Had compensation costs for share awards
been determined based on the fair value at grant dates and amortized over the
vesting period pursuant to FAS No. 123, the Company’s income and EPS would have
been the pro forma amounts listed in the following table (in thousands expect
per share amounts) for the year ended December 31, 2005.  The pro
forma compensation expense for the year ended December 31, 2005 includes
amortization for options granted in prior years.


For
      the Year Ended December 31, 2005Net
      income
            
            $
            275,158Pro
      forma compensation expense, net of tax
            
            
            (1,255
            )Pro
      forma net income
            
            $
            273,903Basic
      EPS:As reported
            
            $
            2.49Pro forma
            
            
            2.47Diluted
      EPS:As reported
            
            $
            2.42Pro forma
            
            
            2.41


Asset
Retirement Obligations


The
Company accounts for asset retirement obligations as required under FAS No. 143,
“Accounting for Retirement Asset Obligations.”  FAS No. 143 requires
that the fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred, with the associated asset
retirement costs being capitalized as a part of the carrying amount of the
long-lived asset.


In March
2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional
Asset Retirement Obligations” (“FIN 47”).  FIN 47 clarified that the
term “conditional asset retirement obligation” as used in FAS No. 143 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.  Because the obligation to
perform the asset retirement activity is unconditional, FIN 47 provides that a
liability for the fair value of a conditional asset obligation should be
recognized if that fair value can be reasonably estimated, although uncertainty
exists about the timing and/or method of settlement.  FIN 47 also
clarifies when an entity would have sufficient information to reasonably
estimate the fair value of a conditional asset retirement obligation under FAS
No. 143.


The
Company adopted FIN 47 as of December 31, 2005 and recognized $4.0 million in
2005 as the pretax cumulative effect of an accounting change ($2.5 million after
tax).  The Company’s Consolidated Balance Sheets as of December 31,
2007 and 2006 recognized a net asset retirement obligation of $6.0 million for
both years.  At December 31, 2007, $1.3 million of the $6.0 million
was classified as current in “Accrued liabilities and other” and $4.7 million
was included in “Other long-term liabilities.”  Changes in the
Company’s asset retirement obligations for the year ended December 31, 2007 were
as follows (in thousands):





Balance
      as of December 31, 2006
            
            $
            5,964Liabilities
      incurred
            
            
            92Liabilities
      settled
            
            
            (475
            )Accretion
      expense
            
            
            401Revisions
      to estimated cash flows
            
            
            58Balance
      as of December 31, 2007
            
            $
            6,040





The
Company has asset retirement obligations related to its Refineries and certain
other assets as a result of environmental and other legal
requirements.  The Company is not required to perform such work in
some circumstances until it permanently ceases operations of the long-lived
assets.  Because the Company considers the useful life of the
Refineries and certain other assets indeterminable, an associated asset
retirement obligation cannot be calculated at this time.  The Company
has recorded an asset retirement obligation for the handling and disposal of
hazardous substances that the Company is legally obligated to incur in
connection with maintaining and improving the Refineries and certain other
assets.





Principles
of Consolidation


The
Consolidated Financial Statements include the accounts of FOC and all 100% owned
subsidiaries, as well as the Company’s undivided interests in a crude oil
pipeline and crude oil tanks up until their sale in September 2007. The Company
utilizes the equity method of accounting for investments in entities in which it
does not have the ability to exercise control.  Entities in which the
Company has the ability to exercise significant influence and control are
consolidated.All
intercompany transactions and balances are eliminated in
consolidation.





Use
of Estimates


The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (“GAAP”) requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures 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.





Cash
Equivalents


Highly
liquid investments with maturity, when purchased, of three months or less are
considered to be cash equivalents.  Cash equivalents were $278.3
million and $377.5 million at December 31, 2007 and 2006,
respectively.




Supplemental
Cash Flow Information


Cash
payments for interest, net of capitalized interest, during 2007, 2006 and 2005
were $5.5 million, $8.4 million and $7.8 million, respectively.  Cash
payments for income taxes during 2007, 2006 and 2005 were $294.1 million, $183.6
million and $106.0 million, respectively.  Cash refunds of income
taxes during 2007, 2006 and 2005 were zero, $1.4 million and $3.6 million,
respectively.  Noncash investing activities include accrued capital
expenditures of $27.1 million, $30.2 million and $20.2 million, as of December
31, 2007, 2006 and 2005, respectively.





Reclassifications


Certain
prior year amounts have been reclassified to conform to the current period
financial statement presentation.  The Company has combined certain
accrued and long-term liabilities from 2006 into “Accrued liabilities and other”
and “Other long-term liabilities” on the Consolidated Balance Sheet with detail
provided for the accrued liabilities in Note 3, “Accrued Liabilities and
Other.”  In addition, the Company has broken out certain current and
long-term assets from the 2006 presentation in “Other receivables” and “Deferred
charges and other assets” on the Consolidated Balance Sheet.  These
reclassifications have no effect on previously reported net income.





New
Accounting Pronouncements


On January 1, 2007, the Company adopted FIN 48, which clarifies the
accounting for income taxes recognized and presents guidance on a recognition
threshold and measurement for the financial statements and tax position taken or
expected to be taken in a tax return.  Tax positions are evaluated in
accordance with FIN 48 in a two-step process.  The Company determines
whether a tax position is more likely than not (greater than 50 percent) to be
sustained upon examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the
position.  The Company then determines the amount of benefit to
recognize.  The tax position is measured at the largest amount of
benefit likely to be realized upon ultimate settlement only for benefits that
are greater than 50 percent likely to be sustained.  See Note 6
“Income Taxes” for more information on the adoption.


In
September 2006, the FASB issued FAS No. 157, “Fair Value Measurements” which
establishes a framework for measuring fair value in GAAP and expands disclosures
about fair value measurements.  FAS No. 157 states that fair value is
“the price that would be received to sell the asset or paid to transfer the
liability (an exit price), not the price that would be paid to acquire the asset
or received to assume the liability (an entry price).”  The statement
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years.  The
Company is currently evaluating the effect that this statement will have on the
Company’s financial statements and any other factors influencing its overall
business environment, but does not believe that it will have a material effect
on its financial statements.


In
February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities – Including an amendment of FAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities,” which expands
the use of fair value accounting but does not affect existing standards which
require assets or liabilities to be carried at fair value.  Under FAS
No. 159, a company may elect to use fair value to measure many financial
instruments and certain other assets and liabilities at fair
value.  The Company has preliminarily decided not to elect fair value
accounting for any of its eligible items.  The adoption of FAS No. 159
therefore will have no impact on the Company’s financial position, cash flows or
results of operations.  If the use of fair value is elected (the fair
value option), any upfront costs and fees related to the item (e.g., debt issue
costs) must be recognized in earnings and cannot be deferred.  The
fair value election is irrevocable and generally made on an
instrument-by-instrument basis even if a company has similar instruments that it
elects not to measure based on fair value.  At the adoption date,
unrealized gains and losses on existing items for which fair value has been
elected are reported as a cumulative adjustment to beginning retained
earnings.  Subsequent to the adoption of FAS No. 159, changes in fair
value are recognized in earnings.  FAS No. 159 is effective for fiscal
years beginning after November 15, 2007.


In April
2007, the FASB issued FASB Staff Position (“FSP”) No. FIN 39-1, an amendment of
FASB Interpretation No. 39.  This FSP amends paragraph 3 of
Interpretation 39 to replace the terms “conditional contracts” and “exchange
contracts” with the term “derivative instruments” as defined in FASB Statement
No. 133, “Accounting for Derivative Instruments and Hedging
Activities.”  It also amended paragraph 10 of Interpretation 39 to
permit a reporting entity to offset fair value amounts recognized for the right
to reclaim cash collateral (a receivable) or the obligation to return cash
collateral (a payable) against fair value amounts recognized for derivative
instruments executed with the same counterparty under the same master netting
arrangement that have been offset in accordance with the
paragraph.  The guidance in this FSP is effective for fiscal years
beginning after November 15, 2007, and an entity must recognize the effects of
applying this FSP as a change in accounting principle through retrospective
application for all financial statements presented unless it is impracticable to
do so. The Company is currently evaluating the aspects of this FSP, but does not
believe it will have a material effect on its financial statements.


The
Emerging Issues Task Force (“EITF”) of the FASB ratified EITF Issue 06-11,
“Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards”
(“EITF 06-11”) in June 2007.  In a stock-based compensation
arrangement, employees may be entitled to dividends during the vesting period
for nonvested shares or share units and until the exercise date for stock
options.  These dividend payments generally can be treated as a
deductible compensation expense for income tax purposes, thereby generating an
income tax benefit for the employer.  At issue was how such a realized
benefit should be recognized in the financial statements.  The EITF
reached a conclusion that an entity should recognize the realized tax benefit as
an increase in additional paid-in capital (“APIC”) and that the amount
recognized in APIC should be included in the pool of excess tax benefits
available to absorb tax deficiencies on stock-based payment
awards.  EITF 06-11 will be effective prospectively for the income tax
benefits that result from dividends on equity-classified employee share-based
payment awards that are declared in fiscal years beginning after December 15,
2007.  The Company is currently evaluating the effect that this EITF
will have on its financial statements, but does not believe that it will have a
material effect on its financial statements.





3.
            Accrued
      Liabilities and Other





December
      31,2007
            
            
            2006(in
      thousands)Accrued
      compensation
            
            $
            16,119
            
            
            $
            16,971Accrued
      Beverly Hills litigation settlement
            
            
            10,000
            
            
            
            -Accrued
      income taxes
            
            
            6,819
            
            
            
            4,557Accrued
      El Dorado Refinery contingent earn-out payment
            
            
            7,500
            
            
            
            7,500Accrued
      dividends
            
            
            5,825
            
            
            
            3,486Accrued
      environmental costs
            
            
            8,750
            
            
            
            2,444Accrued
      property taxes
            
            
            4,998
            
            
            
            1,536Accrued
      coker fire costs
            
            
            2,800
            
            
            
            -Accrued
      interest
            
            
            2,541
            
            
            
            2,541Other
            
            
            3,677
            
            
            
            2,373$
            69,029
            
            
            $
            41,408





4.
            Long-term
      Debt





Schedule
of Long-term Debt


December
      31,2007
            
            
            2006(in
      thousands)6.625%
      Senior Notes, maturing 2011
            
            $
            150,000
            
            
            $
            150,000





On
October 1, 2004, the Company issued $150.0 million principal amount of 6.625%
Senior Notes. The 6.625% Senior Notes, which mature on October 1, 2011, were
issued at par, and the Company received net proceeds (after underwriting fees)
of $147.2 million.  Interest is paid semi-annually.  The
6.625% Senior Notes are redeemable, at the option of the Company, at 103.313%
after October 1, 2007, declining to 100% in 2010.  The 6.625% Senior
Notes may restrict payments, including dividends, and limit the incurrence of
additional indebtedness based on covenants related to interest coverage ratio
and restricted payments.  Frontier Holdings Inc. and its subsidiaries
are full and unconditional guarantors of the 6.625% Senior Notes (see Note 12
“Consolidating Financial Statements.”)




5.
            Revolving
      Credit Facility




The
refining operations have a working capital credit facility with a group of banks
led by Union Bank of California and BNP Paribas (“Facility”).  On
October 1, 2007, the Company entered into a third amended and restated revolving
credit agreement that provides Frontier the ability to increase its maximum
commitment amount to $350 million (previously $250 million), extended the
termination date of the credit facility to October 3, 2011 as well as updated
the financial covenants and other terms of the facility.  The Facility
is a collateral-based facility with total borrowing capacity, subject to
borrowing base availability amounts, of up to $225 million.  Any
unutilized capacity after cash borrowings is available for letters of
credit.  No borrowings were outstanding at December 31, 2007 or 2006
under the Facility.  Standby letters of credit outstanding were $33.2
million and $43.2 million at December 31, 2007 and 2006,
respectively.  As of December 31, 2007, the Company had borrowing base
availability of $191.8 million under the Facility.


The
Facility, secured by inventory, accounts receivable and related contracts and
intangibles, and certain deposit accounts, provides working capital financing
for operations, generally the financing of crude oil and product
supply.  The Facility provides for a quarterly commitment fee of 0.25%
per annum.  The Company’s current borrowing rates are based, at the
Company’s option, on the agent bank’s prime rate, the prevailing Federal Funds
Rate plus 1.0% or LIBOR plus 1.0%.  Outstanding standby letters of
credit charges are 0.875% per annum, plus standard issuance and renewal
fees.  The Company had no funds borrowed at any time during 2007 under
the Facility, and thus did not incur any interest expense under the
Facility.  The Facility is subject to compliance with financial
covenants relating to cash coverage and debt leverage ratios.  The
Company was in compliance with these covenants at December 31,
2007.


The
Facility restricts payments to FOC from its subsidiaries and thus, as required
by Regulation 210.5-04 of Regulation S-X of the Securities Exchange Act of 1934,
as amended, the Condensed Financial Information of FOC is included in Schedule I
of this Form 10-K.





6.
            Income
      Taxes





The
provision for income taxes is comprised of the following:





Years
      ended December 31,2007
            
            
            2006
            
            
            2005(in
      thousands)Current:Federal
            
            $
            238,555
            
            
            $
            168,950
            
            
            $
            121,455State
            
            
            33,109
            
            
            
            25,814
            
            
            
            17,880Total
      current provision
            
            
            271,664
            
            
            
            194,764
            
            
            
            139,335Deferred:Federal
            
            
            (1,567
            )
            
            
            5,269
            
            
            
            28,065State
            
            
            (349
            )
            
            
            804
            
            
            
            2,194Total
      deferred provision
            
            
            (1,916
            )
            
            
            6,073
            
            
            
            30,259Total
      provision
            
            $
            269,748
            
            
            $
            200,837
            
            
            $
            169,594


The
following is a reconciliation of the provision for income taxes computed at the
statutory United States income tax rates on pretax income and the provision for
income taxes as reported:





Years
      ended December 31,2007
            
            
            2006
            
            
            2005(in
      thousands)Provision
      based on statutory rates
            
            $
            269,106
            
            
            $
            203,040
            
            
            $
            156,539Increase
      (decrease) resulting from:State income taxes
            
            
            32,760
            
            
            
            26,618
            
            
            
            20,074Federal tax effect of state income
      taxes
            
            
            (11,466
            )
            
            
            (9,316
            )
            
            
            (7,026
            )Benefit of the Section 199
      manufacturers
              production activities
      deduction
            
            
            (15,387
            )
            
            
            (5,666
            )
            
            
            (3,229
            )Benefit of ultra-low sulfur diesel
      tax credit
            
            
            (5,525
            )
            
            
            (14,546
            )
            
            
            -Other, including permanent
      book-tax differences
            
            
            260
            
            
            
            707
            
            
            
            3,236Provision
      as reported
            
            $
            269,748
            
            
            $
            200,837
            
            
            $
            169,594





Significant
components of deferred tax assets and liabilities are shown below:





December
      31, 2007
            
            December
      31, 2006State
            
            
            Federal
            
            
            Total
            
            State
            
            
            Federal
            
            
            Total(in
      thousands)Current
      deferred tax assets:Gross current
      assets:Accrued bonuses
            
            $
            474
            
            
            $
            3,734
            
            
            $
            4,208
            
            
            $
            545
            
            
            $
            4,240
            
            
            $
            4,785Stock-based
      compensation
            
            
            148
            
            
            
            1,173
            
            
            
            1,321
            
            
            
            94
            
            
            
            734
            
            
            
            828Unrealized loss on derivative
      contracts
            
            
            668
            
            
            
            5,281
            
            
            
            5,949
            
            
            
            -
            
            
            
            -
            
            
            
            -Current state income tax
      liabilities
            
            
            -
            
            
            
            2,334
            
            
            
            2,334
            
            
            
            -
            
            
            
            683
            
            
            
            683Other
            
            
            170
            
            
            
            1,346
            
            
            
            1,516
            
            
            
            235
            
            
            
            1,822
            
            
            
            2,057Total gross deferred tax
      assets
            
            
            1,460
            
            
            
            13,868
            
            
            
            15,328
            
            
            
            874
            
            
            
            7,479
            
            
            
            8,353Gross current
      liabilities:Prepaid
expenses
            
            
            (341
            )
            
            
            (2,698
            )
            
            
            (3,039
            )
            
            
            (374
            )
            
            
            (2,902
            )
            
            
            (3,276
            )State income tax receivable or
      prepaid
            
            
            -
            
            
            
            (2,472
            )
            
            
            (2,472
            )
            
            
            -
            
            
            
            (496
            )
            
            
            (496
            )State deferred
      taxes
            
            
            -
            
            
            
            (391
            )
            
            
            (391
            )
            
            
            -
            
            
            
            (126
            )
            
            
            (126
            )Unrealized gain on derivative
      contracts
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (139
            )
            
            
            (1,079
            )
            
            
            (1,218
            )Total
      current net deferred tax assets
            
            $
            1,119
            
            
            $
            8,307
            
            
            $
            9,426
            
            
            $
            361
            
            
            $
            2,876
            
            
            $
            3,237Long-term
      deferred tax liabilities:Gross long-term
      assets:Pension and other
      post-retirement benefits
            
            $
            1,185
            
            
            $
            9,366
            
            
            $
            10,551
            
            
            $
            1,265
            
            
            $
            9,832
            
            
            $
            11,097Stock-based
      compensation
            
            
            1,095
            
            
            
            8,650
            
            
            
            9,745
            
            
            
            628
            
            
            
            4,878
            
            
            
            5,506Environmental liability
      accruals
            
            
            301
            
            
            
            2,375
            
            
            
            2,676
            
            
            
            315
            
            
            
            2,450
            
            
            
            2,765Asset retirement
      obligations
            
            
            208
            
            
            
            1,646
            
            
            
            1,854
            
            
            
            254
            
            
            
            1,974
            
            
            
            2,228Other
            
            
            433
            
            
            
            3,421
            
            
            
            3,854
            
            
            
            172
            
            
            
            1,340
            
            
            
            1,512State deferred
      taxes
            
            
            -
            
            
            
            4,094
            
            
            
            4,094
            
            
            
            -
            
            
            
            3,879
            
            
            
            3,879Total gross long-term
      assets
            
            
            3,222
            
            
            
            29,552
            
            
            
            32,774
            
            
            
            2,634
            
            
            
            24,353
            
            
            
            26,987Gross long-term
      liabilities:Depreciation
            
            
            (13,178
            )
            
            
            (104,419
            )
            
            
            (117,597
            )
            
            
            (12,606
            )
            
            
            (98,554
            )
            
            
            (111,160
            )Deferred turnaround
      costs
            
            
            (1,740
            )
            
            
            (13,747
            )
            
            
            (15,487
            )
            
            
            (1,110
            )
            
            
            (8,624
            )
            
            
            (9,734
            )Total
      long-term net deferred tax liabilities
            
            $
            (11,696
            )
            
            $
            (88,614
            )
            
            $
            (100,310
            )
            
            $
            (11,082
            )
            
            $
            (82,825
            )
            
            $
            (93,907
            )





As of
December 31, 2007, the Company had accrued state income taxes payable of $6.8
million, which are included in “Accrued liabilities and other” on the
Consolidated Balance Sheet and a receivable for the Company’s estimated
overpayment of federal income taxes for 2007 of $24.0 million.  The
Company also had estimated overpayments of 2007 state and federal income taxes
of $9.2 million, which are included in “Other current assets” on the
Consolidated Balance Sheet and will be applied to the related jurisdictions’
2008 income tax liabilities.  The American Jobs Creation Act of 2004
created the Internal Revenue Code Section 199 which provides an income tax
benefit to domestic manufacturers.  The Company recognized an income
tax benefit of approximately $15.4 million in 2007, $5.7 million in 2006 and
$3.2 million in 2005 related to the production activities
deduction.  The income tax provision for the year ended December 31,
2007 was reduced due to the excess $5.5 million income tax benefit of an $8.5
million credit for production of ultra low sulfur diesel fuel.  The
income tax provision for the year ended December 31, 2006 was reduced due to the
excess $14.5 million income tax benefit of a $22.4 million credit for production
of ultra low sulfur diesel fuel (see “Environmental” under Note 9 “Commitments
and Contingencies”).


The
Company recognizes the amount of taxes payable or refundable for the current
year and recognizes deferred tax liabilities and assets for the expected future
tax consequences of events and transactions that have been recognized in the
Company’s financial statements or tax returns.  Deferred tax assets
are reduced by a valuation allowance when, in the opinion of management, it is
more likely than not that some or all of its deferred tax assets will not be
realized.  Realization of the deferred income tax assets is dependent
on generating sufficient taxable income in future years.  Although
realization is not assured, management believes that it is more likely than not
that all of the deferred income tax assets will be realized and thus, no
valuation allowance was provided for as of December 31, 2007.


The
Company recognized income tax benefits related to the deductibility of
stock-based compensation, net of contingency, in the amounts of $6.4 million,
$5.3 million, and $7.8 million for the years ended December 31, 2007, 2006 and
2005, respectively.  Such benefits were recorded as an increase in
additional paid-in capital, a reduction of income taxes payable and an increase
in “Contingent income tax liabilities.”  The Company also recognized
an income tax liability related to the minimum defined benefit liability
reflected in “Accumulated other comprehensive income” in the amounts of
$805,000, $141,000 and $755,000 for the years ended December 31, 2007, 2006 and
2005, respectively.


The
Company utilized all remaining alternative minimum tax carryforwards during
2005.  The Company had no federal or state net operating loss
carryforwards as of December 31, 2007.


The
Company is currently under a U.S. Federal income tax examination for
2005.  As of December 31, 2007, no taxing authority has proposed any
significant adjustments to the Company's tax positions.


The
Company adopted the provisions of FIN 48 on January 1, 2007.  The
Company reviewed all open tax years for all jurisdictions, primarily U.S.
Federal and the states of Kansas, Colorado and Nebraska for the years 2003
through 2006.  As a result of the implementation of FIN 48, the
Company recognized approximately a $940,000 increase in the liability for
unrecognized tax benefits and $76,000 in accrued interest, which were accounted
for as reductions to the January 1, 2007 balance of retained
earnings.  In connection with the adoption of FIN 48, previously
recognized contingent income tax liabilities under FAS No. 5, “Accounting for
Contingencies” ($28.3 million, including accrued interest, at December 31, 2006)
were reclassified from a current liability to a long-term
liability.  A reconciliation of the beginning and ending amount of
unrecognized tax benefits, excluding accrued interest and the federal income tax
benefit of state contingencies, is as follows (in thousands):





Balance
      as of January 1, 2007
            
            $
            27,710Additions
      based on tax positions related to the current year
            
            
            692Additions
      for tax positions of prior years
            
            
            -Reductions
      for tax positions of prior years
            
            
            -Settlements
            
            
            -Reductions
      due to lapse of applicable statutes of limitations
            
            
            (78
            )Balance
      as of December 31, 2007
            
            $
            28,324


The total
contingent income tax liabilities and accrued interest of $32.3 million are
reflected in the Consolidated Balance Sheet at December 31, 2007 in “Contingent
income tax liabilities.”  The Company has no tax positions for which
the ultimate deductibility is highly certain but for which there is uncertainty
about the timing of such deductibility.  Total unrecognized tax
benefits at December 31, 2007 that, if recognized, would affect the effective
tax rate were $4.3 million.


The
Company recognizes penalties and interest accrued related to unrecognized tax
benefits in “Interest expense and other financing costs” on the Consolidated
Statements of Income.  During the years ended December 31, 2007 and
2006, the Company recognized approximately $2.4 million and $1.5 million,
respectively, of interest expense on contingent income tax
liabilities.  During the years ended December 31, 2007 and 2006, the
Company recorded $59,000 and $33,000, respectively, in tax
penalties.  No penalties or interest expense on contingent income tax
liabilities were recorded for the year ended December 31, 2005.  The
Company had approximately $4.1 million and $1.7 million in accrued interest on
income tax contingencies at December 31, 2007 and 2006,
respectively.


The
statutes of limitations for contingencies (totaling $6.7 million as of December
31, 2007) related to the Company’s 2003 and 2004 income tax returns will expire
in the third and fourth quarters of 2008.  These contingencies
primarily relate to the deductibility for income tax purposes of certain
stock-based compensation for executives and a deduction taken related to the
Company’s prior oil and gas operations.  Any income tax benefit
related to these contingencies will be recorded as a reduction to the income tax
provision ($3.4 million), an increase to paid-in capital ($2.0 million) and a
reduction of interest expense ($1.2 million as of December 31,
2007).  It is also reasonably possible that contingencies totaling
$18.6 million related to certain stock-based compensation for executives on the
Company’s 2005 income tax returns may be reversed or settled by the end of 2008
with the completion of the U.S. Federal income tax examination for 2005 now in
progress.  Any income tax benefit allowed for this stock-based
compensation would be recorded as an increase in additional paid-in capital
($16.2 million) and a reduction of interest expense ($2.4 million as of December
31, 2007).


As of
December 31, 2007, the Company is generally open to examination in the United
States and various individual states for tax years ended December 31, 2004
through December 31, 2007.





7.
            Common
      Stock





Dividends


The
Company declared a quarterly cash dividend of $0.03 per share of common stock
for the quarter ended March 31, 2007.  The quarterly cash dividend was
$0.05 per share of common stock for the quarters ended June 30, 2007 through
December 31, 2007.


All
outstanding common shareholders at the declaration date are eligible to
participate in dividends.  The payment of dividends is prohibited
under the Company’s revolving credit facility only if a default has occurred and
is continuing or such payment would cause a default.  The 6.625% Notes
may restrict dividend payments based on covenants related to interest coverage
and a restricted payments calculation.





Treasury
stock


The
Company accounts for its treasury stock under the cost method on a FIFO
basis.  In November 2006, the Company’s Board of Directors approved a
$100 million share repurchase program, which replaced all existing repurchase
authorizations, and was utilized for share repurchases in the year ended
December 31, 2007 (no shares had been repurchased under this new program as of
December 31, 2006).  On April 24, 2007, the Company announced a $100
million increase to the existing $100 million share repurchase
authorization.  An additional $100 million increase was announced on
August 29, 2007 bringing the total share repurchase authorization to $300
million.  During the year ended December 31, 2007, the Company
purchased 6,443,700 shares ($243.6 million) in open market
transactions.  At December 31, 2007, the remaining authorization for
repurchases was $56.4 million.  A portion of the shares of stock which
were purchased during 2007 were canceled instead of being held as treasury
stock.  Thus 2,658,900 shares ($103.0 million) were canceled,
resulting in a reduction of common stock by $66,000 and retained earnings by
$102.9 million as of December 31, 2007.  Subsequent to December 31,
2007 through February 25, 2008, the Company purchased an
additional   1,462,000 shares ($52.5 million) in open market
transactions under the share repurchase authorizations.


The
Company received 5,576 shares ($221,000) in 2007, no shares in 2006 and 381,916
shares ($3.6 million) in 2005 of its common stock, now held as treasury stock,
from employees or members of the Company’s Board of Directors in stock swaps
where mature stock is surrendered by the employees or board members to exercise
their stock options, as provided by the Company’s stock-based compensation
plan.  The Company received 126,923 shares ($4.9 million) in 2007,
141,738 shares ($4.8 million) in 2006 and 893,040 shares ($12.1 million) in 2005
of its common stock, now held as treasury stock, from employees to cover
withholding taxes on stock-based compensation.  As of December 31,
2007, the Company had 26,893,939 shares of treasury stock.





Earnings
per Share


The
following sets forth the computation of diluted earnings per share (“EPS”) for
the years ended December 31, 2007, 2006 and 2005.





2007
            
            
            2006
            
            
            2005Income
      (Numerator)
            
            
            Shares
      (Denomi-nator)
            
            
            Per
      Share Amount
            
            
            Income
      (Numerator)
            
            
            Shares
      (Denomi-nator)
            
            
            Per
      Share Amount
            
            
            Income
      (Numerator)
            
            
            Shares
      (Denomi-nator)
            
            
            Per
      Share Amount(in thousands except per share
      amounts)Basic
      EPS:Net
      income
            
            $
            499,125
            
            
            
            106,804
            
            
            $
            4.67
            
            
            $
            379,277
            
            
            
            111,408
            
            
            $
            3.40
            
            
            $
            275,158
            
            
            
            110,724
            
            
            $
            2.49Dilutive
      securities:Stock options
            
            
            -
            
            
            
            291
            
            
            
            -
            
            
            
            -
            
            
            
            565
            
            
            
            -
            
            
            
            -
            
            
            
            2,792
            
            
            
            -Restricted stock
            
            
            -
            
            
            
            875
            
            
            
            -
            
            
            
            -
            
            
            
            539
            
            
            
            -
            
            
            
            -
            
            
            
            120
            
            
            
            -Diluted
      EPS:Net
      income
            
            $
            499,125
            
            
            
            107,970
            
            
            $
            4.62
            
            
            $
            379,277
            
            
            
            112,512
            
            
            $
            3.37
            
            
            $
            275,158
            
            
            
            113,636
            
            
            $
            2.42





For the
years ended December 31, 2007 and 2005, there were no outstanding stock options
that could potentially dilute EPS in future years that were not included in the
computation of diluted EPS.  For the year ended December 31, 2006,
493,226 outstanding stock options that could potentially dilute EPS in future
years were not included in the computation of diluted EPS.





Stock-based
Compensation


Effective
January 1, 2006, the Company adopted FAS No. 123(R), “Share-Based Payment,”
which requires companies to recognize the fair value of stock options and other
stock-based compensation in the financial statements.  The Company
adopted FAS No. 123(R) using the modified prospective application method, and
accordingly, prior period amounts have not been retrospectively
adjusted.  Upon adoption of FAS No. 123(R), deferred compensation
recorded as contra-equity in prior periods was eliminated against the
appropriate equity accounts.  The Company evaluated the need for a
cumulative effect of a change in accounting principle as of January 1, 2006,
related to previously recognized compensation expense for previously forfeited
awards or in recognition of an assumption for future forfeits, and determined
that none was necessary.  In 2006, the adoption of FAS No. 123(R)
resulted in incremental stock-based compensation expense of $7.0
million.  This incremental stock-based compensation reduced the
Company’s net income by $4.3 million ($0.04 per basic and diluted share) for the
year ended December 31, 2006.  Cash provided by operating activities
decreased $8.9 million and cash provided by financing activities increased by
the same amount for the year ended December 31, 2006, due to excess income tax
benefits from stock-based payment arrangements.


The
Company also elected to use the FSP No. 123(R)-3’s simplified method of
calculating the adoption-date additional paid-in capital pool.  This
is for the purposes of calculating the pool of excess income tax benefits
available to absorb tax deficiencies subsequent to the adoption of FAS No.
123(R).


Stock-based
compensation costs and income tax benefits recognized in the Consolidated
Statements of Income for the years ended December 31, 2007, 2006 and 2005 are as
follows:





Years
      Ended December 31,2007
            
            
            2006
            
            
            2005(in
      thousands)Restricted
      shares and units
            
            $
            6,879
            
            
            $
            8,539
            
            
            $
            1,363Stock
      options
            
            
            1,515
            
            
            
            2,110
            
            
            
            -Performance-based
      awards
            
            
            14,159
            
            
            
            7,290
            
            
            
            -Stock
      grant to retiring executive (3,030 shares)
            
            
            -
            
            
            
            90
            
            
            
            -Total stock-based compensation
      expense
            
            $
            22,553
            
            
            $
            18,029
            
            
            $
            1,363Income
      tax benefit recognized in the income statement
            
            $
            8,570
            
            
            $
            6,851
            
            
            $
            518





Omnibus Incentive Compensation
Plan.  The shareholders of the Company approved the Frontier
Oil Corporation Omnibus Incentive Compensation Plan (the “Plan”) at the Annual
Meeting of Shareholders held on April 26, 2006.  The Plan is a
broad-based incentive plan that provides for granting stock options, stock
appreciation rights (“SAR”), restricted stock awards, performance awards, stock
units, bonus shares, dividend equivalent rights, other stock-based awards and
substitute awards (“Awards”) to employees, consultants and non-employee
directors of the Company. The Plan amends and restates the Company’s previously
approved 1999 Stock Plan and the Company’s Restricted Stock Plan, both of which
were merged into the Omnibus Plan.  The maximum number of shares of
the Company’s common stock that may be issued under the Plan with respect to
Awards is 12,000,000 shares, subject to certain adjustments as provided by the
Plan.  Awards issued under the prior plans between December 31, 2005
and April 26, 2006 reduced the number of shares available for Awards as though
the awards had been issued after April 26, 2006.  The number of shares
available for Awards will be reduced by 1.7 times the number of shares for each
stock-denominated award granted, other than an option or a SAR under the Plan,
and will be reduced by 1.0 times the number of option shares or SARs
granted.  As of December 31, 2007, 6,187,352 shares were available to
be awarded under the Plan assuming maximum payout is achieved on the performance
awards made in 2007 for which restricted stock will be issued in 2008 and in
2010 if the performance criteria are met (see “Performance Awards”
below).  For purposes of determining compensation expense, forfeitures
are estimated at the time Awards are granted based on historical average
forfeiture rates and the group of individuals receiving those
Awards.  The Plan provides that the source of shares for Awards may be
either newly issued shares or treasury shares.  The Company does not
plan to repurchase additional treasury shares in 2008 strictly for issuing share
Awards; however, treasury shares that are repurchased or are currently in
treasury may be issued as share Awards in 2008.  As of December 31,
2007, there was $21.3 million of total unrecognized compensation cost related to
the Plan including costs for stock options, restricted stock, restricted stock
units and performance-based awards, which is expected to be recognized over a
weighted-average period of 1.95 years.





Stock
Options.  Stock options are issued at the current market price
of the Company’s common stock on the date of grant and generally vest ratably
over three years and expire after five years.  The grant date fair
value is calculated using the Black-Scholes option pricing model.  The
Company uses historical employee exercise data, including post-vesting
termination behavior, to estimate the expected life of the
options.  Expected volatility is calculated using the historical
volatility of the price of the Company’s common stock.  The risk-free
interest rate is based on the U.S. Treasury yield curve in effect at the time of
the grant.  No stock options were granted during the year ended
December 31, 2007.  The $9.615 per share fair value of the five-year
options granted during the year ended December 31, 2006 was estimated with the
following assumptions:  risk-free interest rate of 4.89%, expected
volatility of 37.3%, expected life of 3.33 years and no dividend
yield.


For the
stock options granted in 2006, when common stock dividends are declared by the
Company’s Board of Directors, dividend equivalents are accrued but not paid
until the options are vested.  After vesting, dividend equivalents
will be paid concurrently with common stock dividends until the options are
exercised or expire.  Stock options issued prior to 2006 do not have
any dividend equivalent rights.


Stock
option changes during the years ended December 31, 2007, 2006 and 2005 are
presented below:





2007
            
            
            2006
            
            
            2005Number
      of Awards
            
            
            Weighted-Average
      Exercise Price
            
            
            Aggregate
      Intrinsic Value of Options
              (in
      thousands)
            
            
            Number
      of Awards
            
            
            Weighted-Average
      Exercise Price
            
            
            Number
      of Awards
            
            
            Weighted-Average
      Exercise PriceOutstanding
      at beginning of year
            
            
            1,032,126
            
            
            $
            16.3104
            
            
            
            
            
            
            1,381,700
            
            
            $
            4.3515
            
            
            
            8,353,800
            
            
            $
            3.9935Granted
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            493,226
            
            
            
            29.3850
            
            
            
            -
            
            
            
            -Exercised
      or issued
            
            
            (396,761
            )
            
            
            6.3655
            
            
            
            
            
            
            (842,800
            )
            
            
            4.3560
            
            
            
            (6,935,300
            )
            
            
            3.9195Expired
            
            
            (10,774
            )
            
            
            29.3850
            
            
            
            
            
            
            -
            
            
            
            -
            
            
            
            (36,800
            )
            
            
            4.5005Outstanding
      at endof
      year
            
            
            624,591
            
            
            $
            22.4021
            
            
            $
            11,354
            
            
            
            1,032,126
            
            
            
            
            
            
            
            1,381,700
            
            
            
            4.3515Vested
      or expected to vest at end of year
            
            
            613,672
            
            
            $
            22.2779
            
            
            $
            11,231
            
            
            
            1,021,207
            
            
            
            
            
            
            
            1,381,700Exercisable
      at end
              of year
            
            
            280,249
            
            
            $
            13.8223
            
            
            $
            7,499
            
            
            
            501,400
            
            
            
            
            
            
            
            640,700
            
            
            
            4.5115Weighted-average
      fair value of options granted during the year
            
            
            
            
            
            
            -
            
            
            
            
            
            
            
            
            
            
            
            9.615
            
            
            
            
            
            
            
            -





The
Company received $2.3 million, $3.7 million and $23.6 million of cash for stock
options exercised during the years ended December 31, 2007, 2006 and 2005,
respectively.  The total intrinsic value of stock options exercised
during the years ended December 31, 2007, 2006 and 2005 was $13.6 million, $22.4
million and $69.8 million, respectively.  The Company realized $5.1
million, $9.5 million and $25.5 million of income tax benefits during the years
ended December 31, 2007, 2006 and 2005, respectively, substantially all of which
were excess income tax benefits related to the exercises of stock
options.  Excess income tax benefits are the benefits from additional
deductions allowed for income tax purposes in excess of expenses recorded in the
financial statements.  These excess income tax benefits are recorded
as an increase to paid-in capital, and the majority of these amounts beginning
in 2006 (as provided for in FAS No. 123(R)), are reflected as cash flows from
financing activities in the Consolidated Statements of Cash Flows.


The
following table summarizes information about stock options outstanding at
December 31, 2007:


Stock
      Options Outstanding at December 31, 2007Number
      Outstanding
            
            Weighted-Average
      Remaining Contractual Life (Years)
            
            Exercise
      Price
            
            Exercisable
            Vested
      or Expected to Vest449,591
            
            3.32
            
            $  29.3850
            
            105,249
            438,672105,000
            
            1.15
            
            4.6625
            
            105,000
            105,00070,000
            
            0.14
            
            4.1625
            
            70,000
            70,000





Restricted Shares and Restricted
Stock Units.  Restricted shares and restricted stock units,
when granted, are valued at the closing market value of the Company’s common
stock on the date of issuance and amortized to compensation expense on a
straight-line basis over the nominal vesting period of the stock, and for awards
issued subsequent to the adoption of FAS No. 123(R), adjusted for
retirement-eligible employees, as required.  For awards granted prior
to the adoption of FAS No. 123(R), $1.2 million of compensation costs were
recognized during the year ended December 31, 2007, and continue to be
recognized over the nominal vesting periods which conclude by April
2008.  The restricted shares and restricted stock units have vesting
dates up to three years from the issue date.  When common stock
dividends are declared by the Company’s Board of Directors, dividends are
accrued on the issued restricted shares but are not paid until the shares
vest.  When common stock dividends are declared by the Company’s Board
of Directors, dividend equivalents are accrued on the restricted stock units and
paid when the common stock dividends are paid.


The
following table summarizes the changes in the Company’s restricted shares and
restricted stock units during the years ended December 31, 2007, 2006 and
2005.





2007
            
            
            2006
            
            
            2005Shares/
      Units
            
            
            Weighted-Average
      Grant-Date Market Value
            
            
            Shares/
      Units
            
            
            Weighted-Average
      Grant-Date Market Value
            
            
            Shares/
      Units
            
            
            Weighted-Average
      Grant-Date Market ValueNonvested
      atbeginning
      of year
            
            
            713,026
            
            
            $
            18.5465
            
            
            
            415,692
            
            
            $
            8.8870
            
            
            
            218,792
            
            
            $
            4.8575Conversion
      of 2006 stock unit awards
            
            
            657,232
            
            
            
            29.3850
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Granted
            
            
            127,762
            
            
            
            30.3280
            
            
            
            459,966
            
            
            
            26.4773
            
            
            
            465,616
            
            
            
            8.9124Vested
            
            
            (415,266
            )
            
            
            25.0136
            
            
            
            (162,622
            )
            
            
            16.2865
            
            
            
            (254,696
            )
            
            
            5.5057Forfeited
            
            
            (29,671
            )
            
            
            24.0291
            
            
            
            -
            
            
            
            -
            
            
            
            (14,020
            )
            
            
            8.2750Nonvested
      atend
      of year
            
            
            1,053,083
            
            
            
            24.0355
            
            
            
            713,036
            
            
            
            18.5465
            
            
            
            415,692
            
            
            
            8.8870





On April
26, 2006, the Company granted performance-based stock unit
awards.  Because performance goals were achieved for 2006, the stock
unit awards were converted into 657,232 shares of restricted stock in early 2007
following certification of performance by the Compensation Committee of the
Company’s Board of Directors, one-third vested on June 30, 2007, one-third will
vest on June 30, 2008 and the final one-third on June 30, 2009.


The total
fair value of restricted shares and restricted stock units which vested during
the years ended December 31, 2007, 2006 and 2005 was $16.0 million, $4.5 million
and $2.4 million, respectively.  The vesting for the year ended
December 31, 2007 in the table above includes 348,382 shares of previously
issued restricted stock and 66,884 restricted stock units (for which common
stock was issued upon vesting).  The vesting for the year ended
December 31, 2006 in the table above includes 128,596 shares of previously
issued restricted stock and 34,026 restricted stock units (for which common
stock was issued upon vesting).  The vesting for the year ended
December 31, 2005 in the table above includes 238,696 shares of previously
issued restricted stock and 16,000 restricted stock units (for which common
stock was issued upon vesting).  The Company realized $5.8 million,
$1.7 million and $893,000 of income tax benefits related to these vestings, of
which $2.1 million, $712,000, and $361,000 was excess income tax benefits, for
2007, 2006 and 2005, respectively.





Performance
Awards.  During the year ended December 31, 2007, the Company
granted up to 459,212 (net of forfeitures thru December 31, 2007) performance
stock unit awards to be earned if certain performance goals were met for
2007.  Upon certification by the Compensation Committee that the
performance goals were achieved for 2007, we expect that these stock unit awards
(or a portion thereof) will be converted into restricted stock during the first
quarter of 2008.  One-third of these restricted shares will vest on
June 30, 2008, one-third on June 30, 2009 and the final one-third on June 30,
2010.  The Company also granted up to 229,587 (net of forfeits)
performance stock unit awards contingent upon performance criteria being met for
a three-year period ending on December 31, 2009.  As of December 31,
2007, the Company has assumed the maximum award will be earned for purposes of
stock-based compensation expense.  When common stock dividends are
declared by the Company’s Board of Directors, dividend equivalents (on the stock
unit awards) and dividends (once the stock unit awards are converted to
restricted stock) are accrued but are not paid until the restricted stock
vests.  The stock unit awards were valued at the market value on the
date of grant and amortized to compensation expense on a straight-line basis
over the nominal vesting period, adjusted for retirement-eligible employees, as
required under FAS No. 123(R).





8.
            Employee
      Benefit Plans





Contribution
Plans


The
Company sponsors defined contribution plans for its employees.  All
employees may participate by contributing a portion of their annual earnings to
the plans.  The Company makes pension and/or matching contributions on
behalf of participating employees.  The cost of the defined
contribution plans for the years ended December 31, 2007, 2006 and 2005 was $7.5
million, $6.4 million and $6.1 million, respectively.





Deferred
Compensation Plan


The
Company sponsors a deferred compensation plan for certain employees and
directors whose eligibility to participate in the plan is determined by the
Compensation Committee of the Company’s Board of
Directors.  Participants may contribute a portion of their earnings to
the plan, and the Company makes pension and/or matching contributions on behalf
of eligible employees.  The contributions and any earnings are held in
an irrevocable trust known as a “rabbi trust” by an independent
trustee.  The trust account balance and related liability, both of
which are $3.2 million, are reflected in “Other assets” and “Other long-term
liabilities,” respectively, in the Consolidated Balance Sheets.





Executive
Retiree Medical Benefit Plan


On
February 22, 2006, the Compensation Committee of the Company’s Board of
Directors approved the Executive Retiree Medical Benefit Plan. The Executive
Retiree Medical Benefit Plan provides a post-retirement medical benefit for
certain of the Company’s executive officers.  Due to the plan design,
the amount to be contributed by the retirees is expected to cover approximately
the full cost of the plan.  The Company incurred costs of
approximately $2,000 for the year ended December 31, 2007.





Defined
Benefit Plans


The
Company established a defined benefit cash balance pension plan, effective
January 1, 2000, for eligible El Dorado Refinery employees to supplement
retirement benefits that those employees lost upon the sale of the El Dorado
Refinery to Frontier.  No other current or future employees will be
eligible to participate in the plan.  This plan had assets of $10.7
million at December 31, 2007, and its funding status is in compliance with
ERISA.


The
Company provides post-retirement healthcare and other benefits to certain
employees of the El Dorado Refinery.  Eligible employees are employees
hired by the Refinery before certain defined dates and who satisfy certain age
and service requirements.  Employees hired on or before November 16,
1999 qualify for retirement healthcare insurance until eligible for
Medicare.  Employees hired on or before January 1, 1995 are also
eligible for Medicare supplemental insurance. These plans were unfunded as of
December 31, 2007 and 2006.  The post-retirement health care plan
requires retirees to pay between 20% and 40% of total health care costs based on
age and length of service.  The plan’s prescription drug benefits are
at least equivalent to Medicare Part D benefits.  Post-retirement
healthcare benefits provided for Medicare eligible retirees were reduced
effective December 31, 2006 to levels stipulated at the time of the El Dorado
Refinery acquisition.


In
accordance with FAS No. 158, which the Company adopted as of December 31, 2006,
Frontier is required to 1) recognize the funded status of a benefit plan
(measured as the difference between plan assets at fair value and the benefit
obligation) in its statement of financial position, 2) recognize as a component
of other comprehensive income, net of tax, the gains or losses and prior service
costs or credits that arise during the period but are not recognized as
components of net period benefit cost, 3) measure defined benefit plan assets
and obligations as of the date of the employer’s fiscal year-end statement of
financial position, and 4) disclose in the notes to the financial statements
additional information about certain effects on net periodic benefit cost for
the next fiscal year that arise from delayed recognition of the gains or losses,
prior service costs or credits, and transition assets or
obligations.


The
tables on the following pages set forth the funded status of the pension plan
and post-retirement healthcare and other benefit plans change in benefit
obligation, items not yet recognized as a component of net periodic benefit
costs and reflected as a component of the ending balance of accumulated Other
Comprehensive Income (“OCI”), net of tax, and the measurement of defined benefit
plan assets and obligations for the years ended December 31, 2007, 2006 and
2005.  Also included in the tables on the following pages are weighted
average key assumptions, healthcare cost-trend rates and sensitivity analysis
for the years ended December 31, 2007, 2006 and 2005.







Pension
      Benefits
            
            
            Post-retirement
      Healthcare
              and
      Other Benefits (1)2007
            
            
            2006
            
            
            2007
            
            
            2006(in
      thousands)Change
      in benefit obligation:Benefit
      obligation at January 1
            
            $
            9,971
            
            
            $
            9,942
            
            
            $
            28,223
            
            
            $
            41,181Service
      cost
            
            
            -
            
            
            
            -
            
            
            
            752
            
            
            
            1,011Interest
      cost
            
            
            562
            
            
            
            541
            
            
            
            1,612
            
            
            
            2,075Plan
      participant contributions
            
            
            -
            
            
            
            -
            
            
            
            66
            
            
            
            49Actuarial
      gain
            
            
            (428
            )
            
            
            (246
            )
            
            
            (2,269
            )
            
            
            (2,772
            )Amendments
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (13,115
            )Benefits
      paid
            
            
            (164
            )
            
            
            (266
            )
            
            
            (228
            )
            
            
            (206
            )Benefit
      obligation at December 31
            
            $
            9,941
            
            
            $
            9,971
            
            
            $
            28,156
            
            
            $
            28,223Change
      in plan assets:Fair
      value of plan assets at January 1
            
            $
            9,668
            
            
            $
            8,279
            
            
            $
            -
            
            
            $
            -Actual
      return on plan assets
            
            
            883
            
            
            
            963
            
            
            
            -
            
            
            
            -Employer
      contribution
            
            
            344
            
            
            
            692
            
            
            
            162
            
            
            
            156Plan
      participant contributions
            
            
            -
            
            
            
            -
            
            
            
            66
            
            
            
            50Benefits
      paid
            
            
            (164
            )
            
            
            (266
            )
            
            
            (228
            )
            
            
            (206
            )Fair
      value of plan assets at December 31
            
            $
            10,731
            
            
            $
            9,668
            
            
            $
            -
            
            
            $
            -Funded
      status at December 31
            
            $
            790
            
            
            $
            (303
            )
            
            $
            (28,156
            )
            
            $
            (28,223
            )Amounts
      recognized in the balance sheets:Other
      assets
            
            $
            790
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Accrued
      liabilities and other
            
            
            -
            
            
            
            -
            
            
            
            (607
            )
            
            
            (436
            )Post-retirement
      employee liabilities
            
            
            -
            
            
            
            (303
            )
            
            
            (27,549
            )
            
            
            (27,787
            )Net
      amount recognized
            
            $
            790
            
            
            $
            (303
            )
            
            $
            (28,156
            )
            
            $
            (28,223
            )Amounts
      recognized in accumulated OCI (2):(Gain)
      loss
            
            $
            (1,209
            )
            
            $
            (611
            )
            
            $
            9,908
            
            
            $
            13,314Prior
      service credit
            
            
            -
            
            
            
            -
            
            
            
            (11,239
            )
            
            
            (13,115
            )$
            (1,209
            )
            
            $
            (611
            )
            
            $
            (1,331
            )
            
            $
            199(1)  
      The disclosed post-retirement healthcare obligations and net periodic
      costs for 2007 and 2006 reflect government subsidies for prescription
      drugs as allowed under the Medicare Prescription Drug, Improvement and
      Modernization Act. The subsidy reduced the benefit obligation at
      December 31, 2007 and 2006, byapproximately
      $5.1 million and $5.3 million, respectively. The Company did not
      recognize any benefits of the subsidy during the years ended December 31,
      2007 and 2006.
              (2)  
      None of the pension gain of $1.2 million will be recognized in the pension
      benefit cost in 2008. For the post-retirement healthcare and other
      benefits, $871,000 of the $9.9 million net loss and $1.9 million of the
      $11.2million
      of prior service cost credit will be recognized in the benefit cost in
      2008.







Pension
      Benefits
            
            
            Post-retirement
      Healthcare
                and
      Other Benefits2007
            
            
            2006
            
            
            2005
            
            
            2007
            
            
            2006
            
            
            2005(in
      thousands)Components
      of net periodic benefit
              cost and other amounts
      recognized
              in other comprehensive income for the
              year ended December 31:Service
      cost
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            752
            
            
            $
            1,011
            
            
            $
            1,130Interest
      cost
            
            
            562
            
            
            
            541
            
            
            
            526
            
            
            
            1,611
            
            
            
            2,075
            
            
            
            2,093Expected
      return on plan assets
            
            
            (714
            )
            
            
            (640
            )
            
            
            (606
            )
            
            
            -
            
            
            
            -
            
            
            
            -Amortization
      of prior service cost
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,876
            )
            
            
            -
            
            
            
            -Amortized
      net actuarial loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,137
            
            
            
            1,087
            
            
            
            1,525Net
      periodic benefit cost
            
            $
            (152
            )
            
            $
            (99
            )
            
            $
            (80
            )
            
            $
            1,624
            
            
            $
            4,173
            
            
            $
            4,748Changes
      in assets and benefit obligations
              recognized in other comprehensive income:Net
      gain
            
            $
            (598
            )
            
            $
            -
            
            
            
            
            
            
            $
            (2,269
            )
            
            $
            -Amortization
      of loss
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            (1,137
            )
            
            
            -Amortization
      of prior service cost
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            1,876
            
            
            
            -Adoption
      of SFAS 158
            
            
            -
            
            
            
            (611
            )
            
            
            
            
            
            
            -
            
            
            
            199Total
      recognized in other comprehensive income
            
            
            (598
            )
            
            
            (611
            )
            
            
            
            
            
            
            (1,530
            )
            
            
            199Total
      recognized in net periodic benefit cost and other comprehensive
      income
            
            $
            (750
            )
            
            $
            (710
            )
            
            
            
            
            
            $
            94
            
            
            $
            4,372Weighted
      average assumptions:Benefit
      obligation discount rate
              as of December 31
            
            
            6.25
            %
            
            
            5.75
            %
            
            
            5.50
            %
            
            
            6.25
            %
            
            
            5.75
            %
            
            
            5.50
            %Net
      periodic benefit cost discount rate
              for the year ended December
      31
            
            
            5.75
            %
            
            
            5.50
            %
            
            
            5.50
            %
            
            
            5.75
            %
            
            
            5.50
            %
            
            
            5.50
            %Expected
      return on plan assets (1)
            
            
            7.50
            %
            
            
            7.50
            %
            
            
            8.00
            %
            
            
            -
            
            
            
            -
            
            
            
            -Salary
      increases
            
            
            n/a
            
            
            
            n/a
            
            
            
            n/a
            
            
            
            -
            
            
            
            -
            
            
            
            -





(1)
            The
      cash balance pension plan assumes a 7.5% expected long-term rate of return
      on assets based on a blend of historic returns of equity and debt
      securities.  Actual returns on the Company’s plan assets have
      exceeded expected returns for 2007 and
2006.





Post-retirement
      Healthcare
              and
      Other Benefits2007
            
            
            2006
            
            
            2005(dollars
      in thousands)Healthcare
      cost-trend rate:
            
            
            10.00
            %
            
            
            10.00
            %
            
            
            11.00
            %ratable
      to
            
            
            ratable
      to
            
            
            ratable
      to5.00
            %
            
            
            5.00
            %
            
            
            5.00
            %from
              2012
            
            
            from
              2012
            
            
            from
              2008Sensitivity
      Analysis:Effect
      of 1% (-1%) change in healthcare cost-trend rate:Year-end
      benefit obligation
            
            $
            4,682
            
            
            $
            4,761
            
            
            $
            8,641(3,808
            )
            
            
            (3,852
            )
            
            
            (6,784
            )Total
      service and interest cost
            
            
            438
            
            
            
            662
            
            
            
            720(351
            )
            
            
            (519
            )
            
            
            (560
            )







At
December 31, 2007, the estimated future benefit payments to be paid over the
next ten years are as follows:





Estimated
      future benefit payments
              for
      years ending December 31,
            
            Pension
      Benefits
            
            
            Post-retirement
      Healthcare
              and
      Other BenefitsPayment
            
            
            Payment
            
            
            Subsidy
      Receipts(in
      thousands)2008
            
            $
            123
            
            
            $
            693
            
            
            $
            -2009
            
            
            231
            
            
            
            992
            
            
            
            282010
            
            
            398
            
            
            
            1,294
            
            
            
            412011
            
            
            499
            
            
            
            1,653
            
            
            
            532012
            
            
            530
            
            
            
            1,962
            
            
            
            71Next
      5 fiscal years thereafter
            
            
            6,505
            
            
            
            13,694
            
            
            
            853


Plan
Assets


The
pension plan assets are held in a Trust Fund (the “Fund”) whose trustee is Frost
National Bank (“trustee”).  Frontier’s pension plan weighted-average
asset allocations in the Fund at December 31, 2007 and 2006, by asset category
are as follows:





Percentage
      of Plan Assets
              at
      December 31,2007
            
            
            2006Asset
      Category:Cash
      and cash equivalents
            
            
            9
            %
            
            
            7
            %Equity
      common trust funds
            
            
            65
            %
            
            
            69
            %Fixed
      income common trust funds
            
            
            25
            %
            
            
            24
            %Real
      estate
            
            
            1
            %
            
            
            -Total
            
            
            100
            %
            
            
            100
            %





The
Company does not have a definitive target for the percentage allocation of
assets within the plan.  Management reviews the earnings on plan
assets each year and assesses portfolio asset allocation along with risk and
expected returns.  After this review, management may direct the
trustee to revise the asset allocation.  The trustee has the following
investment powers:


·
            except
      for limitations on investing Fund assets in Company securities or real
      property, the trustee may invest and reinvest in any property, real,
      personal or mixed, wherever situated, including, without limitation,
      common and preferred stocks, bonds, notes, debentures, mutual funds,
      leaseholds, mortgages, certificates of deposit, and oil, mineral or gas
      properties, royalties, interests or
rights;


·
            to
      make commingled, collective or common investments and to invest or
      reinvest all or any portion of the pension plan assets with funds of other
      pension and profit sharing trusts exempt from tax under section 501(a) of
      the Internal Revenue Code; and


·
            to
      deposit or invest all or a part of the Fund in savings accounts,
      certificates of deposit or other deposits which bear a reasonable rate of
      interest in a bank or similar financial institution, including the
      commercial department of the
trustee.


The
Company contributed $344,000 to the Fund during 2007 and is not required to, but
may choose to, contribute to the Fund during the year ending December 31,
2008.




9.
            Commitments
      and Contingencies




Lease
and Other Commitments


On
November 16, 1999, Frontier acquired the crude oil refinery located in El
Dorado, Kansas from Equilon Enterprises LLC, now known as Shell Oil Products US
(“Shell”).  Under the provisions of the purchase and sale agreement,
the Company was required to make contingent earn-out payments for each of the
years 2000 through 2007 equal to one-half of the excess over $60.0 million per
year of the El Dorado Refinery’s revenues less its material costs and operating
costs, other than depreciation.  The total amount of these potential
contingent earn-out payments was capped at $40.0 million, with an annual cap of
$7.5 million.  Any contingent earn-out payment was recorded when
determinable as additional acquisition cost.  The final contingent
earn-out payment of $7.5 million was required based on 2007 results, and was
accrued at December 31, 2007 and was paid in January 2008.  A
contingent earn-out payment of $7.5 million was required based on 2006 results
and was paid in January 2007.  Including the payment made in early
2008, the Company has paid a total of $37.5 million for contingent earn-out
payments and will no longer be subject to this provision of the Shell
agreement.


In
connection with the acquisition of the El Dorado Refinery, the Company entered
into an operating sublease agreement with Shell for the use of the cogeneration
facility at the El Dorado Refinery.  The non-cancelable operating
sublease, which has both a fixed and a variable component, expires in 2016,
although the Company has the option to renew the sublease for an additional
eight years.  At the end of the renewal period, the Company has the
option to purchase the cogeneration facility for the greater of fair value or
$22.3 million.  The Company also has building, equipment, aircraft and
vehicle operating leases that expire from 2007 through
2017.  Operating lease rental expense was approximately $13.6 million,
$13.8 million and $13.5 million for the years ended December 31, 2007, 2006 and
2005, respectively. The approximate future minimum lease payments for operating
leases as of December 31, 2007 were $13.1 million for 2008, $13.5 million for
2009, $12.9 million for 2010, $10.6 million for 2011, $7.1 million for 2012 and
$25.7 million thereafter.


The
Company has commitments for crude oil pipeline capacity on four pipelines (see
below) totaling approximately $33.6 million in 2008, an average of $33.9 million
for each of the years 2009 through 2011, an average of $28.8 million for each of
the years 2012 through 2014, $24.5 million in 2015 and an average of $9.8
million for each of the years 2016 and 2017.  The Company incurred
expenses under these commitments of $16.0 million, $9.8 million and $3.2 million
for the years ended December 31, 2007, 2006 and 2005, respectively.


The
Company has two contracts for crude oil pipeline capacity on the Express
Pipeline.  The first contract, which began in 1997, is for 15 years
and for an average of 13,800 barrels per day (“bpd”) over that 15-year
period.  In December 2003, the Company entered into an expansion
capacity agreement on the Express Pipeline for an additional 10,000 bpd from
April 2005 through 2015.


The
Company has a Transportation Services Agreement (“Agreement”) to transport
38,000 bpd of crude oil on the Spearhead Pipeline from Griffith, Indiana to
Cushing, Oklahoma (“Cushing”).  This pipeline enables the Company to
transport Canadian crude oil to the El Dorado Refinery.  The initial
term of this Agreement is for a period of ten years from the actual commencement
date of March 2006, although the Company has the right to extend the Agreement
for an additional ten-year term and increase the volume
transported.


The
Company entered into a definitive agreement with Rocky Mountain Pipeline System
LLC, now owned by Plains All American Pipeline, L.P. (“Plains All American”), on
March 31, 2006 to support construction of a new crude pipeline from Guernsey,
Wyoming to Rocky Mountain’s Fort Laramie, Wyoming tank farm and then to the
Cheyenne Refinery.  The Company made a ten-year commitment to ship
35,000 bpd based on a filed tariff on the new pipeline and will concurrently
lease approximately 300,000 barrels of dedicated storage capacity in the Plains
All American tank farm. The pipeline, which is designed to transport 55,000 bpd
of heavy crude and is expandable to 90,000 bpd, first transported crude oil in
October 2007.


The
Company entered into an agreement with Osage Pipeline in 2007 to ship additional
crude oil volumes from Cushing, Oklahoma to its El Dorado
Refinery.  The annual average increased commitment of 7,500 bpd is
expected to commence in the summer of 2008 with a term of five
years.


Effective
March 10, 2006, the Company’s subsidiary, Frontier Oil and Refining Company
(“FORC”), entered into a Master Crude Oil Purchase and Sale Contract
(“Contract”) with Utexam Limited (“Utexam”), a wholly-owned subsidiary of BNP
Paribas Ireland.  Under this $200.0 million Contract, Utexam will
purchase, transport and subsequently sell crude oil to FORC at a location near
Cushing, Oklahoma or other locations as agreed.  Under this agreement,
Utexam is the owner of record of the crude oil as it is transported from the
point of injection, typically Hardisty, Alberta, Canada to the point of ultimate
sale to FORC.  The Company has provided a guarantee of FORC’s
obligations under this Contract, primarily to receive crude oil and make payment
for crude oil purchases arranged under this Contract.  As of December
31, 2007, FORC and Utexam had entered into certain commitments to purchase and
sell crude oil in January 2008 under this Contract; however, neither party has a
continuing commitment to purchase or sell crude oil in the
future.  The Company accounts for the transactions under this Contract
as a financing arrangement, whereby the inventory and the associated liability
are recorded in the Company’s financial statements when the crude oil is
injected into the pipeline in Canada.





Litigation


Beverly Hills
Lawsuits.  On October 12, 2007, the Company announced that it
had reached agreement in principle on the terms of a settlement with the
attorneys for the plaintiffs in the Beverly Hills lawsuits.  Under the
terms of the settlement, the plaintiffs will receive $10.0 million from the
Company, its subsidiary and its insurance provider.  Frontier’s share
of the cost is approximately $6.3 million, which will be funded from the
Company’s commutation account that had previously been established with an
insurance provider. Once a settlement agreement is finalized between the
plaintiffs and the Company and its subsidiary, including releases by the
plaintiffs, the settlement will be subject to approval by the Los Angeles
Superior Court.  Following court approval, the settlement should
resolve all of the litigation against the Company and its subsidiary currently
pending in both the Los Angeles Superior Court and the California Court of
Appeal.  The following provides more information about the Beverly
Hills litigation and associated insurance coverage.


A
Frontier subsidiary, Wainoco Oil & Gas Company, owned and operated an
interest in an oil field in the Los Angeles, California metropolitan area from
1985 to 1995.  The production facilities for that oil field are
located at the campus of the Beverly Hills High School.  In April
2003, a law firm began filing claims against the Beverly Hills Unified School
District and the City of Beverly Hills on behalf of former students, school
employees, area residents and others alleging that emissions from the oil field
or the production facilities caused cancers or various other health problems in
those individuals.  Wainoco Oil & Gas Company and Frontier have
been named in seven such suits: Moss et al. v. Venoco, Inc. et al., filed in
June 2003; Ibraham et al. v. City of Beverly Hills et al., filed in July 2003;
Yeshoua et al. v. Venoco, Inc. et al., filed in August 2003; Jacobs v. Wainoco
Oil & Gas Company et al., filed in December 2003; Bussel et al. v. Venoco,
Inc. et al., filed in January 2004; Steiner et al. v. Venoco, Inc. et al., filed
in May 2004; and Kalcic et al. v. Venoco, Inc. et al., filed in April
2005.  Of the approximately 1,025 plaintiffs in the seven lawsuits,
Wainoco Oil & Gas Company and Frontier are named as defendants by
approximately 450 of those plaintiffs.  Other defendants in these
lawsuits include the Beverly Hills Unified School District, the City of Beverly
Hills, three other oil and gas companies (and their related companies), and one
company (and its related companies) involved in owning or operating a power
plant adjacent to the Beverly Hills High School.  The lawsuits include
claims for personal injury, wrongful death, loss of consortium and/or fear of
contracting diseases, and also ask for punitive damages.  No dollar
amounts of damages have been specified in any of the lawsuits.  The
seven lawsuits and two lawsuits that do not name Wainoco Oil & Gas Company
or Frontier as defendants have been consolidated and are pending before a judge
on the complex civil litigation panel in the Superior Court of the State of
California for the County of Los Angeles.  A case management order was
entered pursuant to which 12 plaintiffs were selected as the initial group of
plaintiffs to proceed to trial.


The oil
production site operated by Frontier’s subsidiary was a modern facility and was
operated with a high level of safety and responsibility.  Frontier
believes that its subsidiary’s activities did not cause any health problems for
anyone, including former Beverly Hills High School students, school employees or
area residents.  Nevertheless, as a matter of prudent risk management,
Frontier purchased insurance in 2003 from a highly-rated insurance company
covering the existing claims described above and any similar claims for bodily
injury or property damage asserted during the five-year period following the
policy’s September 30, 2003 commencement date.  The claims are
covered, whether asserted directly against the insured parties or as a result of
contractual indemnity.  In October 2003, the Company paid $6.25
million to the insurance company for loss mitigation insurance and also funded
with the insurance company a commutation account of approximately $19.5 million,
which is funding the first costs incurred under the policy including, but not
limited to, the costs of defense of the claims.  The policy covers
defense costs and any payments made to claimants, up to an aggregate limit of
$120 million, including coinsurance by Frontier of up to $3.9 million of the
coverage between $40 million and $120 million.  As of December 31,
2007, the commutation account balance was approximately $6.3 million and was
included in current assets on the Condensed Consolidated Balance
Sheet.  The Company also has been seeking coverage with respect to the
Beverly Hills, California claims from the insurance companies that provided
policies to Frontier during the 1985 to 1995 period. The Company has reached a
settlement on some of the policies and is continuing to pursue coverage efforts
on other policies.


On
October 27, 2006, the Los Angeles Superior Court granted summary judgment in
favor of the parent, Frontier Oil Corporation.  As a result of this
order, the plaintiffs in all of the lawsuits in which Frontier is a defendant
can no longer prosecute claims against Frontier Oil Corporation, either for
Frontier Oil Corporation’s alleged direct liability or for any of the
plaintiffs’ claims against its subsidiary.  The order does not affect
unresolved indemnity claims asserted by or against Frontier Oil
Corporation.  In addition, on November 22, 2006, the Court entered a
ruling granting summary judgment in favor of all of the defendants, including
Wainoco Oil & Gas Company and Frontier Oil Corporation, against the initial
12 trial plaintiffs.  A final judgment was entered by the Los Angeles
Superior Court on January 31, 2007 that included the ruling in favor of Frontier
Oil Corporation in October and the ruling in favor of all of the defendants in
November.  The plaintiffs’ notice of appeal from this final judgment
was filed March 29, 2007 and is currently pending before the California Court of
Appeal.


Additional
rulings by the Los Angeles Superior Court include a January 9, 2007 ruling
granting summary judgment in favor of the City of Beverly Hills, concluding that
the City has no liability to the plaintiffs in any of the lawsuits in which the
City is a defendant under the California governmental tort liability statutes,
and a March 23, 2007 ruling granting summary judgment in favor of the Beverly
Hills Unified School District, concluding that the School District has no
liability under the California governmental tort liability statutes. The entry
of a final judgment by the Court in favor of the City and the School District on
these recent rulings remains subject to appeal.


In
accordance with FAS No. 5, “Accounting for Contingencies,” Frontier accrued as
of December 31, 2007 the $10.0 million settlement (“Accrued Beverly Hills
litigation settlement” on the Condensed Consolidated Balance Sheet) because it
is probable and reasonably estimable, as well as an expense of $6.3 million
(included in “Selling and general expense, excluding depreciation” on the
Condensed Consolidated Statement of Income) and a receivable from insurance
providers of $3.7 million (included in “Other receivables” on the Condensed
Consolidated Balance Sheet).  Frontier does not believe that any
potential future claims or litigation, by which similar or related claims may be
asserted against the Company or its subsidiary, will result in any material
liability or have any material adverse effect upon the Company.


Other.  The Company
is also involved in various other lawsuits which are incidental to its
business.  In management’s opinion, the adverse determination of such
lawsuits would not have a material adverse effect on the Company’s liquidity,
financial position or results of operations.





Concentration
of Credit Risk


The
Company has concentrations of credit risk with respect to sales within the same
or related industry and within limited geographic areas.  The Company
sells its Cheyenne Refinery products exclusively at wholesale, principally to
independent retailers and major oil companies located primarily in the Denver,
Colorado, western Nebraska and eastern Wyoming regions.  The Company
sells a majority of its El Dorado Refinery gasoline, diesel and jet fuel to
Shell at market-based prices under a 15-year offtake agreement executed in
conjunction with the purchase of the El Dorado Refinery in
1999.  Beginning in 2000, the Company retained and marketed 5,000 bpd
of the El Dorado Refinery’s gasoline and diesel production.  The
retained portion is scheduled to increase by 5,000 bpd each year for ten
years.  In 2007, Frontier retained 40,000 bpd of the El Dorado
Refinery’s gasoline and diesel production.  Shell has also agreed to
purchase all jet fuel production from the El Dorado Refinery through the offtake
agreement term.  The Company retains and markets all by-products
produced from the El Dorado Refinery.  The Company made sales to Shell
of approximately $2.2 billion, $2.1 billion and $1.8 billion in the years 2007,
2006 and 2005, respectively, which accounted for 42%, 44% and 46% of
consolidated refined products revenues in 2007, 2006 and 2005,
respectively.


The
Company extends credit to its customers based on ongoing credit
evaluations.  An allowance for doubtful accounts is provided based on
the current evaluation of each customer’s credit risk, past experience and other
factors.  For the year ended December 31, 2007, $198,000 of previously
written off bad debts was collected.  A bad debt loss of $26,000 was
recorded in the year ended December 31, 2006.  No bad debt losses were
recorded during the year ended December 31, 2005.





Environmental


The
Company’s operations and many of its manufactured products are specifically
subject to certain requirements of the Clean Air Act (“CAA”) and related state
and local regulations.  The 1990 amendments to the CAA contain
provisions that will require capital expenditures for the production of cleaner
transportation fuels and the installation of certain air pollution control
devices at the Refineries during the next several years.


The
Environmental Protection Agency (“EPA”) has promulgated regulations requiring
the phase-in of gasoline sulfur standards, which began January 1, 2004 and
continues through 2008, with special provisions for small business refiners such
as Frontier.  As allowed by subsequent regulation, Frontier elected to
extend its small refinery interim gasoline sulfur standard at each of the
Refineries until January 1, 2011 by complying with the highway ultra low sulfur
diesel standard by June 2006.  The Cheyenne Refinery has spent
approximately $28.9 million (including capitalized interest) to meet the interim
gasoline sulfur standard, which was required by January 1, 2004.  To
meet final federal gasoline sulfur standards, the Company has identified
expenditures of $9.3 million in new process unit capacity plus $10.0 million for
intermediate inventory handling at the Cheyenne Refinery.  However,
new federal benzene regulations and anticipated state requirements for reduction
in Reid Vapor Pressure (“RVP”) suggest that additional capital expenditures may
be required to meet these standards.  The Company is presently
estimating the total cost in connection with an overall compliance strategy for
the Cheyenne Refinery.  Total capital expenditures estimated as of
December 31, 2007 for the El Dorado Refinery to comply with the final gasoline
sulfur standard are approximately $83.0 million, including capitalized interest,
and are expected to be incurred by the end of 2009.  As of December
31, 2007, $11.4 million of the estimated $83.0 million had been
incurred.  Substantially all of the estimated $83.0 million of
expenditures relates to the Company’s El Dorado Refinery gasoil hydrotreater
revamp project.  The gasoil hydrotreater revamp project will address
most of the El Dorado Refinery’s modifications needed to achieve gasoline sulfur
compliance, and the Company anticipates this project will provide a substantial
economic benefit.


The
Company had available to sell or use at its El Dorado Refinery 68,672 gasoline
sulfur credits as of December 31, 2006 that were generated by its Cheyenne
Refinery by producing gasoline with a lower sulfur content than the small
refiner EPA requirement.  In the second quarter of 2007, Frontier sold
34,748 of the 68,672 available sulfur credits for total proceeds of $4.8 million
recorded in “Other revenue” on the Consolidated Statements of Income for the
year ended December 31, 2007.  As of December 31, 2007 the Company had
available to sell or use approximately 172,000 gasoline sulfur credits that were
generated by its Cheyenne and El Dorado Refineries.


The EPA
has embarked on a Petroleum Refining Initiative (“Initiative”) alleging
industry-wide noncompliance with certain longstanding regulatory
programs.  These programs are:


·
            New
      Source Review (“NSR”) – a program requiring permitting of certain facility
      modifications,


·
            New
      Source Performance Standards – a program establishing emission standards
      for new emission sources as defined in the
  regulations,


·
            Benzene
      Waste National Elimination System for Hazardous Air Pollutants (“NESHAPS”)
      – a program limiting the amount of benzene allowable in industrial
      wastewaters, and


·
            Leak
      Detection and Repair (“LDAR”) – a program designed to control hydrocarbon
      emissions from refinery pipes, pumps and
valves.


The
Initiative has caused many refiners to enter into consent decrees typically
requiring substantial expenditures for penalties and the installation of
additional pollution control equipment.  In anticipation of such a
consent decree, the Company has undertaken certain modifications at each of the
Company’s Refineries.  At the Cheyenne Refinery, the Company has spent
$4.6 million on the flare gas recovery system which was completed in
2006.  At the El Dorado Refinery, the flare gas recovery system was
completed in 2007 for a total cost of $4.7 million.  Settlement
negotiations with the EPA and state regulatory agencies regarding additional
regulatory issues associated with the Initiative are underway.  The
Company now estimates that, in addition to the flare gas recovery systems
discussed above, capital expenditures totaling approximately $56.0 million at
the Cheyenne Refinery and $70 million at the El Dorado Refinery ($7.4 million of
the $70.0 million had been incurred as of December 31, 2007) will be required
prior to 2015 to satisfy these issues.  Notwithstanding these
anticipated regulatory settlements, many of these same expenditures would be
required for the Company to implement its planned facility
expansions.  In addition to the capital costs described above, the EPA
has proposed a civil penalty in the amount of $1.9 million as of December 31,
2007, to be discounted for a related $100,000 penalty and associated
supplemental environment project (“SEP”) paid to the State of Wyoming in 2005
and further offset up to 50 percent by the completion of mutually agreed upon
additional SEPs.  The Company has made an accrual for this estimated
penalty at December 31, 2007.


The EPA
has promulgated regulations to enact the provisions of the Energy Policy Act of
2005 regarding mandated blending of renewable fuels in gasoline.  The
Energy Independence and Security Act of 2007 greatly increases the amount of
renewable fuels that had been required by the 2005 legislation. The Company, as
a small refiner, will be exempt until 2012 from these requirements. While not
yet enacted or promulgated, other pending legislation or regulation regarding
the mandated use of alternative or renewable fuels and/or the reduction of
greenhouse gas emissions from either transportation fuels or manufacturing
processes is under consideration by the U.S. Congress and certain federal
regulatory agencies.  If enacted or promulgated, these requirements
may impact the operations of the Company.


On
February 26, 2007, the EPA promulgated regulations limiting the amount of
benzene in gasoline.  These regulations take effect for large refiners
on January 1, 2011 and for small refiners, such as Frontier, on January 1,
2015.  While not yet estimated, the Company anticipates that
potentially material capital expenditures may be necessary to achieve compliance
with the new regulation at its Cheyenne Refinery as discussed
above.  Gasoline manufactured at the El Dorado Refinery typically
contains benzene concentrations near the new standard.  The Company
therefore believes that necessary compliance expenditures at the El Dorado
Refinery will be substantially less than those at its Cheyenne
Refinery.


As is the
case with companies engaged in similar industries, the Company faces potential
exposure from future claims and lawsuits involving environmental matters,
including soil and water contamination, air pollution, personal injury and
property damage allegedly caused by substances that the Company may have
manufactured, handled, used, released or disposed.




Cheyenne
Refinery.  The Company is party to an agreement with the State
of Wyoming requiring investigation and interim remediation actions at the
Cheyenne Refinery’s property that may have been impacted by past operational
activities.  As a result of past and ongoing investigative efforts,
capital expenditures and remediation of conditions found to exist have already
taken place, including the completion of surface impoundment closures, waste
stabilization activities and other site remediation projects.  In
addition, the Company estimates that an ongoing groundwater remediation program
will be required for approximately ten more years.  As of December 31,
2007, the Company had an accrual included on the Consolidated Balance Sheets of
$5.0 million reflecting the estimated present value of $410,000 estimated cost
for 2008 and $700,000 annual cost for 2009 through 2018 assuming a 3% inflation
rate and discounted at a rate of 7.5%.  As of December 31, 2006, the
Company’s accrual for groundwater remediation was $2.0 million.  The
Company also had accrued a total of $4.8 million and $5.0 million, as of
December 31, 2007 and 2006, respectively, for the cleanup of a waste water
treatment pond located on land adjacent to the Cheyenne Refinery which the
Company had historically leased from the landowner.  The Company
allowed the lease to expire and ceased use of the pond on the scheduled
expiration date of June 30, 2006.  The waste water pond will be
cleaned up pursuant to the aforementioned agreement with the State of
Wyoming.  Depending upon the results of the ongoing investigation, or
by a subsequent administrative order or permit, additional remedial action and
costs could be required.


The
Company has completed the negotiation of a settlement of a Notice of Violation
(“NOV”) from the Wyoming Department of Environmental Quality alleging
non-compliance with certain refinery waste management requirements.  A
negotiated penalty in the amount of $631,000 was accrued as of December 31,
2006, and was paid in 2007 as part of the settlement of this NOV.  The
Company has estimated that the capital cost for required corrective measures
will be approximately $2.7 million.  In addition, the Company had an
accrual at both December 31, 2007 and 2006 for an additional $1.2 million for
expense work.


Pursuant
to an agreement with the City of Cheyenne, the Company will contribute $1.5
million toward a project (estimated to take place in 2008) to relocate a city
storm water conveyance pipe, which is presently located on Refinery property and
therefore is potentially subject to contaminants from Refinery
operations.




El Dorado
Refinery.  The El Dorado Refinery is subject to a 1988 consent
order with the Kansas Department of Health and Environment
(“KDHE”).  Subject to the terms of the purchase and sale agreement for
the El Dorado Refinery entered into between the Company and Shell, Shell is
responsible for the costs of continued compliance with this
order.  This order, including various subsequent modifications,
requires the El Dorado Refinery to continue the implementation of a groundwater
management program with oversight provided by the KDHE Bureau of Environmental
Remediation.  More specifically, the El Dorado Refinery must continue
to operate the hydrocarbon recovery well systems and containment barriers at the
site and conduct sampling from monitoring wells and surface water
stations.  Quarterly and annual reports must also be submitted to the
KDHE.  The order requires that remediation activities continue until
KDHE-established groundwater criteria or other criteria agreed to by the KDHE
and the Refinery are met.





Collective
Bargaining Agreements


The union
members at our Cheyenne and El Dorado Refineries, comprising 56% of the
Company’s workforce, are represented by seven bargaining units, the largest
being the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy,
Allied Industrial and Service Workers International Union (“USW”) and the others
being affiliated with the AFL-CIO.  The current union contracts expire
in 2009.




10.
            Fair
      Value of Financial Instruments




The fair
value of the Company’s Senior Notes was estimated based on quotations obtained
from broker-dealers who make markets in these and similar
securities.  At both December 31, 2007 and 2006, the carrying amounts
of long-term debt instruments were $150.0 million, and the estimated fair values
were $150.0 million and $148.9 million, respectively.  For cash and
cash equivalents, trade receivables, inventory and accounts payable, the
carrying amount is a reasonable estimate of fair value.




11.
            Price
      Risk Management Activities





The
Company, at times, enters into commodity derivative contracts to manage its
price exposure to its inventory positions, purchases of foreign crude oil and
consumption of natural gas in the refining process or to fix margins on certain
future production.  The commodity derivative contracts used by the
Company may take the form of futures contracts, collars or price swaps and are
entered into with creditworthy counterparties.  The Company believes
that there is minimal credit risk with respect to its
counterparties.  The Company accounts for its commodity derivative
contracts under the hedge (or deferral) method of accounting when the derivative
contracts are designated as hedges for accounting purposes, or mark-to-market
accounting if the Company elects not to designate derivative contracts as
accounting hedges or if such derivative contracts do not qualify for hedge
accounting under FAS No. 133, “Accounting for Derivative Instruments and Hedging
Activities.”  As such, gains or losses on commodity derivative
contracts accounted for as fair value hedges are recognized in the related
inventory in “Inventory of crude oil, products and other” on the Consolidated
Balance Sheets and ultimately, when the inventory is charged or sold, in “Raw
material, freight and other costs” on the Consolidated Statements of
Income.  Gains and losses on transactions accounted for using
mark-to-market accounting are reflected in “Other revenues” at each period
end.  The Company has derivative contracts which it holds directly and
also derivative contracts held on Frontier’s behalf by Utexam, in connection
with the Master Crude Oil Purchase and Sale Contract (see Note 9 “Lease and
Other Commitments”).  The market value of open derivative contracts is
included on the Consolidated Balance Sheets in “Accrued liabilities and other”
when the unrealized value is a loss ($15.1 million at December 31, 2007), or in
“Other current assets” when the unrealized value is a gain ($2.5 million at
December 31, 2006).





Trading
Activities


During
2007, 2006 and 2005, the Company had the following derivative activities which,
while economic hedges, were not accounted for as hedges and whose gains or
losses are reflected in “Other revenues” on the Consolidated Statements of
Income:





Crude Purchases.  As of December
31, 2007, the Company had open derivative contracts held on Frontier’s behalf by
Utexam on 621,000 barrels of crude oil to hedge in-transit Canadian crude oil
costs for the El Dorado Refinery.  At December 31, 2007, these
positions had a $2.8 million unrealized loss.  During the year ended
December 31, 2007, the Company reported in “Other revenues” $18.0 million
(including the previously mentioned $2.8 million unrealized amount), in net
losses on positions to hedge in-transit crude oil, mainly Canadian crude oil for
the El Dorado Refinery.  During the year ended December 31, 2006, the
Company reported in “Other revenues” $14.6 million in net gains on positions to
hedge in-transit Canadian crude oil for the El Dorado
Refinery.  During the year ended December 31, 2005, the Company
reported in “Other revenues” a net $461,000 loss on positions to hedge
in-transit Canadian crude oil for the El Dorado Refinery.





Derivative contracts on barrels of
crude oil to hedge excess intermediate, finished product and crude oil inventory
for both theCheyenneandEl DoradoRefineries. As of
December 31, 2007, the Company had open derivative contracts on 2,666,000
barrels of crude oil to hedge crude oil, intermediate or finished product
inventory.  At December 31, 2007, these positions had a $12.3 million
unrealized gain.  During the year ended December 31, 2007, the Company
reported in “Other revenues” $68.4 million (including the previously mentioned
$12.3 million unrealized amount), in net losses on positions to hedge crude oil,
intermediate or finished product inventory.  During the years ended
December 31, 2006 and 2005, the Company recorded a $15.9 million gain and a $1.4
million gain, respectively, on these types of positions.





Hedging
Activities


During
the year ended December 31, 2007, the Company had no derivatives which were
accounted for as hedges.  During the years ended December 31, 2006 and
2005, the Company had the following derivatives which were appropriately
designated and accounted for as fair value hedges.





Crude purchases
in-transit.  During the year ended December 31, 2006, the
Company recorded $10.9 million in net losses on derivative contracts to hedge
in-transit Canadian crude oil, primarily for the El Dorado Refinery, of which
$15.0 million increased crude costs (“Raw material, freight and other costs”)
and $4.1 million increased income, which was reflected in “Other revenues” in
the Consolidated Statements of Income for the ineffective portion of these
hedges.  During the year ended December 31, 2005, the Company recorded
$193,000 in net losses on derivative contracts to hedge in-transit Canadian
crude oil for the Cheyenne Refinery, of which $296,000 increased crude costs
(“Raw material, freight and other costs”) and $103,000 increased income, which
was reflected in “Other revenues” in the Consolidated Statements of Income for
the ineffective portion of these hedges.





12.
            Consolidating
      Financial Statements





Frontier
Holdings Inc. and its subsidiaries (“FHI”) are full and unconditional guarantors
of the Company’s 6.625% Senior Notes.  Presented on the following
pages are the Company’s consolidating balance sheets, statements of operations,
and cash flows as required by Rule 3-10 of Regulation S-X of the Securities
Exchange Act of 1934, as amended.  As specified in Rule 3-10, the
condensed consolidating balance sheets, statement of operations, and cash flows
presented below meet the requirements for financial statements of the issuer and
each guarantor of the notes because the guarantors are all direct or indirect
100% owned subsidiaries of Frontier, and all of the guarantees are full and
unconditional on a joint and several basis.  The Company files a
consolidated U.S. federal income tax return and consolidated state income tax
returns in the majority of states in which it does business.  Each
subsidiary calculates its income tax provisions on a separate company basis,
which are eliminated in the consolidation process.























CONSOLIDATING
      FINANCIAL STATEMENTSFRONTIER
      OIL CORPORATIONCondensed
      Consolidating Statement of IncomeFor
      the Year Ended December 31, 2007(in
      thousands)FOC (Parent)
            
            
            FHI
      (Guarantor Subsidiaries)
            
            
            Other
      Non-Guarantor Subsidiaries
            
            
            Eliminations
            
            
            ConsolidatedRevenues:Refined products
            
            $
            -
            
            
            $
            5,269,674
            
            
            $
            -
            
            
            $
            -
            
            
            $
            5,269,674Other
            
            
            2
            
            
            
            (80,981
            )
            
            
            45
            
            
            
            -
            
            
            
            (80,934
            )2
            
            
            
            5,188,693
            
            
            
            45
            
            
            
            -
            
            
            
            5,188,740Costs
      and expenses:Raw material, freight and other
      costs
            
            
            -
            
            
            
            4,039,235
            
            
            
            -
            
            
            
            -
            
            
            
            4,039,235Refinery operating
      expenses,
              excluding
      depreciation
            
            
            -
            
            
            
            300,542
            
            
            
            -
            
            
            
            -
            
            
            
            300,542Selling and general
      expenses,
              excluding
      depreciation
            
            
            30,593
            
            
            
            24,750
            
            
            
            -
            
            
            
            -
            
            
            
            55,343Depreciation, amortization
      andaccretion
            
            
            61
            
            
            
            53,299
            
            
            
            -
            
            
            
            (321
            )
            
            
            53,039Losses (gains) on sales of
      assets
            
            
            2,028
            
            
            
            (17,242
            )
            
            
            -
            
            
            
            -
            
            
            
            (15,214
            )32,682
            
            
            
            4,400,584
            
            
            
            -
            
            
            
            (321
            )
            
            
            4,432,945Operating
      income (loss)
            
            
            (32,680
            )
            
            
            788,109
            
            
            
            45
            
            
            
            321
            
            
            
            755,795Interest
      expense and other
              financing costs
            
            
            12,723
            
            
            
            4,122
            
            
            
            -
            
            
            
            (8,072
            )
            
            
            8,773Interest
      and investment income
            
            
            (11,202
            )
            
            
            (10,649
            )
            
            
            -
            
            
            
            -
            
            
            
            (21,851
            )Equity
      in earnings of subsidiaries
            
            
            (802,362
            )
            
            
            -
            
            
            
            -
            
            
            
            802,362
            
            
            
            -(800,841
            )
            
            
            (6,527
            )
            
            
            -
            
            
            
            794,290
            
            
            
            (13,078
            )Income
      before income taxes
            
            
            768,161
            
            
            
            794,636
            
            
            
            45
            
            
            
            (793,969
            )
            
            
            768,873Provision
      for income taxes
            
            
            269,036
            
            
            
            279,174
            
            
            
            15
            
            
            
            (278,477
            )
            
            
            269,748Net
      income
            
            $
            499,125
            
            
            $
            515,462
            
            
            $
            30
            
            
            $
            (515,492
            )
            
            $
            499,125











Condensed
      Consolidating Statement of IncomeFor
      the Year Ended December 31, 2006(in
      thousands)FOC (Parent)
              
              
              FHI
      (Guarantor Subsidiaries)
              
              
              Other
      Non-Guarantor Subsidiaries
              
              
              Eliminations
              
              
              ConsolidatedRevenues:Refined products
              
              $
              -
              
              
              $
              4,759,661
              
              
              $
              -
              
              
              $
              -
              
              
              $
              4,759,661Other
              
              
              4
              
              
              
              36,146
              
              
              
              142
              
              
              
              -
              
              
              
              36,2924
              
              
              
              4,795,807
              
              
              
              142
              
              
              
              -
              
              
              
              4,795,953Costs
      and expenses:Raw material, freight and other
      costs
              
              
              -
              
              
              
              3,850,937
              
              
              
              -
              
              
              
              -
              
              
              
              3,850,937Refinery operating
      expenses,
                excluding
      depreciation
              
              
              -
              
              
              
              277,129
              
              
              
              -
              
              
              
              -
              
              
              
              277,129Selling and general
      expenses,
                excluding
      depreciation
              
              
              30,194
              
              
              
              22,294
              
              
              
              -
              
              
              
              -
              
              
              
              52,488Depreciation, amortization
      andaccretion
              
              
              88
              
              
              
              41,502
              
              
              
              -
              
              
              
              (377
              )
              
              
              41,213Gains on sales of
      assets
              
              
              (8
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (8
              )30,274
              
              
              
              4,191,862
              
              
              
              -
              
              
              
              (377
              )
              
              
              4,221,759Operating
      income (loss)
              
              
              (30,270
              )
              
              
              603,945
              
              
              
              142
              
              
              
              377
              
              
              
              574,194Interest
      expense and other
                financing costs
              
              
              11,978
              
              
              
              3,835
              
              
              
              -
              
              
              
              (3,674
              )
              
              
              12,139Interest
      and investment income
              
              
              (12,102
              )
              
              
              (5,957
              )
              
              
              -
              
              
              
              -
              
              
              
              (18,059
              )Equity
      in earnings of subsidiaries
              
              
              (609,265
              )
              
              
              -
              
              
              
              -
              
              
              
              609,265
              
              
              
              -(609,389
              )
              
              
              (2,122
              )
              
              
              -
              
              
              
              605,591
              
              
              
              (5,920
              )Income
      before income taxes
              
              
              579,119
              
              
              
              606,067
              
              
              
              142
              
              
              
              (605,214
              )
              
              
              580,114Provision
      for income taxes
              
              
              199,842
              
              
              
              209,951
              
              
              
              55
              
              
              
              (209,011
              )
              
              
              200,837Net
      income
              
              $
              379,277
              
              
              $
              396,116
              
              
              $
              87
              
              
              $
              (396,203
              )
              
              $
              379,277








FRONTIER
      OIL CORPORATIONCondensed
      Consolidating Statement of IncomeFor
      the Year Ended December 31, 2005(in
      thousands)FOC (Parent)
            
            
            FHI
      (Guarantor Subsidiaries)
            
            
            Other
      Non-Guarantor Subsidiaries
            
            
            Eliminations
            
            
            ConsolidatedRevenues:Refined products
            
            $
            -
            
            
            $
            3,999,935
            
            
            $
            -
            
            
            $
            -
            
            
            $
            3,999,935Other
            
            
            (6
            )
            
            
            1,143
            
            
            
            90
            
            
            
            -
            
            
            
            1,227(6
            )
            
            
            4,001,078
            
            
            
            90
            
            
            
            -
            
            
            
            4,001,162Costs
      and expenses:Raw material, freight and other
      costs
            
            
            -
            
            
            
            3,247,372
            
            
            
            -
            
            
            
            -
            
            
            
            3,247,372Refinery operating
      expenses,
              excluding
      depreciation
            
            
            -
            
            
            
            241,445
            
            
            
            -
            
            
            
            -
            
            
            
            241,445Selling and general
      expenses,
              excluding
      depreciation
            
            
            14,681
            
            
            
            16,034
            
            
            
            -
            
            
            
            -
            
            
            
            30,715Merger termination and legal
      costs
            
            
            48
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            48Depreciation, amortization
      andaccretion
            
            
            69
            
            
            
            35,700
            
            
            
            -
            
            
            
            (556
            )
            
            
            35,213Gains on sales of
      assets
            
            
            (3
            )
            
            
            (3,641
            )
            
            
            -
            
            
            
            -
            
            
            
            (3,644
            )14,795
            
            
            
            3,536,910
            
            
            
            -
            
            
            
            (556
            )
            
            
            3,551,149Operating
      income (loss)
            
            
            (14,801
            )
            
            
            464,168
            
            
            
            90
            
            
            
            556
            
            
            
            450,013Interest
      expense and other
              financing costs
            
            
            10,593
            
            
            
            2,009
            
            
            
            -
            
            
            
            (2,261
            )
            
            
            10,341Interest
      and investment income
            
            
            (5,905
            )
            
            
            (1,678
            )
            
            
            -
            
            
            
            -
            
            
            
            (7,583
            )Equity
      in earnings of subsidiaries
            
            
            (462,027
            )
            
            
            -
            
            
            
            -
            
            
            
            462,027
            
            
            
            -(457,339
            )
            
            
            331
            
            
            
            -
            
            
            
            459,766
            
            
            
            2,758Income
      before income taxes
            
            
            442,538
            
            
            
            463,837
            
            
            
            90
            
            
            
            (459,210
            )
            
            
            447,255Provision
      for income taxes
            
            
            168,910
            
            
            
            171,921
            
            
            
            -
            
            
            
            (171,237
            )
            
            
            169,594Income
      before cumulative effect of
              accounting
change
            
            
            273,628
            
            
            
            291,916
            
            
            
            90
            
            
            
            (287,973
            )
            
            
            277,661Cumulative
      effect of accounting
              change, net of income
      taxes
            
            
            1,530
            
            
            
            (2,503
            )
            
            
            -
            
            
            
            (1,530
            )
            
            
            (2,503
            )Net
      income
            
            $
            275,158
            
            
            $
            289,413
            
            
            $
            90
            
            
            $
            (289,503
            )
            
            $
            275,158











FRONTIER
      OIL CORPORATIONCondensed
      Consolidating Balance SheetAs
      of December 31, 2007(in
      thousands)FOC (Parent)
            
            
            FHI
      (Guarantor Subsidiaries)
            
            
            Other
      Non-Guarantor Subsidiaries
            
            
            Eliminations
            
            
            ConsolidatedASSETSCurrent
      assets:Cash
      and cash equivalents
            
            $
            186,368
            
            
            $
            111,031
            
            
            $
            -
            
            
            $
            -
            
            
            $
            297,399Trade
      and other receivables, net
            
            
            27,948
            
            
            
            156,798
            
            
            
            -
            
            
            
            -
            
            
            
            184,746Receivable
      from
              affiliated
    companies
            
            
            -
            
            
            
            2,319
            
            
            
            296
            
            
            
            (2,615
            )
            
            
            -Inventory
      of crude oil, products andother
            
            
            -
            
            
            
            501,927
            
            
            
            -
            
            
            
            -
            
            
            
            501,927Deferred
      tax assets
            
            
            9,426
            
            
            
            13,507
            
            
            
            -
            
            
            
            (13,507
            )
            
            
            9,426Commutation
      account
            
            
            6,280
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            6,280Other
      current assets
            
            
            9,646
            
            
            
            21,599
            
            
            
            -
            
            
            
            -
            
            
            
            31,245Total
      current assets
            
            
            239,668
            
            
            
            807,181
            
            
            
            296
            
            
            
            (16,122
            )
            
            
            1,031,023Property,
      plant and equipment, at cost:
            
            
            1,121
            
            
            
            1,090,695
            
            
            
            -
            
            
            
            3,627
            
            
            
            1,095,443Less
      – accumulated depreciation
              and
amortization
            
            
            943
            
            
            
            325,076
            
            
            
            -
            
            
            
            (8,026
            )
            
            
            317,993178
            
            
            
            765,619
            
            
            
            -
            
            
            
            11,653
            
            
            
            777,450Deferred
      turnaround costs
            
            
            -
            
            
            
            39,276
            
            
            
            -
            
            
            
            -
            
            
            
            39,276Deferred
      catalyst costs
            
            
            -
            
            
            
            6,540
            
            
            
            -
            
            
            
            -
            
            
            
            6,540Deferred
      financing costs, net
            
            
            1,810
            
            
            
            746
            
            
            
            -
            
            
            
            -
            
            
            
            2,556Prepaid
      insurance, net
            
            
            909
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            909Intangible
      assets, net
            
            
            -
            
            
            
            1,460
            
            
            
            -
            
            
            
            -
            
            
            
            1,460Other
      assets
            
            
            3,313
            
            
            
            1,321
            
            
            
            -
            
            
            
            -
            
            
            
            4,634Investment
      in subsidiaries
            
            
            1,106,243
            
            
            
            -
            
            
            
            -
            
            
            
            (1,106,243
            )
            
            
            -Total assets
            
            $
            1,352,121
            
            
            $
            1,622,143
            
            
            $
            296
            
            
            $
            (1,110,712
            )
            
            $
            1,863,848LIABILITIES AND SHAREHOLDERS’
      EQUITYCurrent
      liabilities:Accounts
      payable
            
            $
            242
            
            
            $
            417,153
            
            
            $
            -
            
            
            $
            -
            
            
            $
            417,395Accrued
      liabilities and other
            
            
            25,947
            
            
            
            57,982
            
            
            
            189
            
            
            
            -
            
            
            
            84,118Total
      current liabilities
            
            
            26,189
            
            
            
            475,135
            
            
            
            189
            
            
            
            -
            
            
            
            501,513Long-term
      debt
            
            
            150,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            150,000Contingent
      income tax liabilities
            
            
            31,185
            
            
            
            1,072
            
            
            
            -
            
            
            
            -
            
            
            
            32,257Other
      long-term liabilities
            
            
            3,208
            
            
            
            37,946
            
            
            
            -
            
            
            
            -
            
            
            
            41,154Deferred
      income taxes
            
            
            100,310
            
            
            
            107,652
            
            
            
            -
            
            
            
            (107,652
            )
            
            
            100,310Payable
      to affiliated companies
            
            
            2,615
            
            
            
            3,365
            
            
            
            70
            
            
            
            (6,050
            )
            
            
            -Shareholders’
      equity
            
            
            1,038,614
            
            
            
            996,973
            
            
            
            37
            
            
            
            (997,010
            )
            
            
            1,038,614Total liabilities and
              shareholders’
    equity
            
            $
            1,352,121
            
            
            $
            1,622,143
            
            
            $
            296
            
            
            $
            (1,110,712
            )
            
            $
            1,863,848
















FRONTIER
      OIL CORPORATIONCondensed
      Consolidating Balance SheetAs
      of December 31, 2006(in
      thousands)FOC (Parent)
            
            
            FHI
      (Guarantor Subsidiaries)
            
            
            Other
      Non-Guarantor Subsidiaries
            
            
            Eliminations
            
            
            ConsolidatedASSETSCurrent
      assets:Cash
      and cash equivalents
            
            $
            215,049
            
            
            $
            190,430
            
            
            $
            -
            
            
            $
            -
            
            
            $
            405,479Trade
      and other receivables, net
            
            
            1,363
            
            
            
            136,099
            
            
            
            -
            
            
            
            -
            
            
            
            137,462Receivable
      from
              affiliated
    companies
            
            
            -
            
            
            
            1,254
            
            
            
            251
            
            
            
            (1,505
            )
            
            
            -Inventory
      of crude oil, products andother
            
            
            -
            
            
            
            374,576
            
            
            
            -
            
            
            
            -
            
            
            
            374,576Deferred
      tax assets
            
            
            3,237
            
            
            
            7,846
            
            
            
            -
            
            
            
            (7,846
            )
            
            
            3,237Other
      current assets
            
            
            2,082
            
            
            
            16,380
            
            
            
            -
            
            
            
            -
            
            
            
            18,462Total
      current assets
            
            
            221,731
            
            
            
            726,585
            
            
            
            251
            
            
            
            (9,351
            )
            
            
            939,216Property,
      plant and equipment, at cost:
            
            
            1,301
            
            
            
            817,332
            
            
            
            -
            
            
            
            (5,051
            )
            
            
            813,582Less
      – accumulated depreciation
              and
amortization
            
            
            1,054
            
            
            
            284,034
            
            
            
            -
            
            
            
            (8,311
            )
            
            
            276,777247
            
            
            
            533,298
            
            
            
            -
            
            
            
            3,260
            
            
            
            536,805Deferred
      turnaround costs
            
            
            -
            
            
            
            24,640
            
            
            
            -
            
            
            
            -
            
            
            
            24,640Deferred
      catalyst costs
            
            
            -
            
            
            
            6,386
            
            
            
            -
            
            
            
            -
            
            
            
            6,386Deferred
      financing costs, net
            
            
            2,293
            
            
            
            459
            
            
            
            -
            
            
            
            -
            
            
            
            2,752Commutation
      account
            
            
            7,290
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            7,290Prepaid
      insurance, net
            
            
            2,120
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,120Intangible
      assets, net
            
            
            -
            
            
            
            1,316
            
            
            
            -
            
            
            
            -
            
            
            
            1,316Other
      assets
            
            
            2,734
            
            
            
            666
            
            
            
            -
            
            
            
            -
            
            
            
            3,400Investment
      in subsidiaries
            
            
            831,082
            
            
            
            -
            
            
            
            -
            
            
            
            (831,082
            )
            
            
            -Total assets
            
            $
            1,067,497
            
            
            $
            1,293,350
            
            
            $
            251
            
            
            $
            (837,173
            )
            
            $
            1,523,925LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable
            
            $
            1,436
            
            
            $
            388,583
            
            
            $
            -
            
            
            $
            -
            
            
            $
            390,019Contingent income tax liabilities
            
            
            28,271
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            28,271Accrued
      liabilities and other
            
            
            13,894
            
            
            
            27,325
            
            
            
            189
            
            
            
            -
            
            
            
            41,408Total
      current liabilities
            
            
            43,601
            
            
            
            415,908
            
            
            
            189
            
            
            
            -
            
            
            
            459,698Long-term
      debt
            
            
            150,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            150,000Other
      long-term liabilities
            
            
            2,630
            
            
            
            41,836
            
            
            
            -
            
            
            
            -
            
            
            
            44,466Deferred
      income taxes
            
            
            93,907
            
            
            
            97,620
            
            
            
            -
            
            
            
            (97,620
            )
            
            
            93,907Payable
      to affiliated companies
            
            
            1,505
            
            
            
            44,644
            
            
            
            55
            
            
            
            (46,204
            )
            
            
            -Shareholders’
      equity
            
            
            775,854
            
            
            
            693,342
            
            
            
            7
            
            
            
            (693,349
            )
            
            
            775,854Total liabilities and
              shareholders’
    equity
            
            $
            1,067,497
            
            
            $
            1,293,350
            
            
            $
            251
            
            
            $
            (837,173
            )
            
            $
            1,523,925














FRONTIER
      OIL CORPORATIONCondensed
      Consolidating Statement of Cash FlowsFor
      the Year Ended December 31, 2007(in
      thousands)FOC
              (Parent)
            
            
            FHI (Guarantor
      Subsidiaries
            
            
            Other
      Non-Guarantor Subsidiaries
            
            
            Eliminations
            
            
            ConsolidatedCash
      flows from operating activities:Net
      income
            
            $
            499,125
            
            
            $
            515,462
            
            
            $
            30
            
            
            $
            (515,492
            )
            
            $
            499,125Adjustments to reconcile
      net
              income to net cash
      from
              operating
    activities:Equity in earnings of
      subsidiaries
            
            
            (802,362
            )
            
            
            -
            
            
            
            -
            
            
            
            802,362
            
            
            
            -Depreciation, amortization
      andaccretion
            
            
            61
            
            
            
            67,772
            
            
            
            -
            
            
            
            (321
            )
            
            
            67,512Deferred income
      taxes
            
            
            (1,916
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,916
            )Stock-based compensation
      expense
            
            
            22,553
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            22,553Excess income tax benefits
      of
              stock-based
      compensation
            
            
            (6,962
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (6,962
            )Income taxes eliminated
      in
              Consolidation
            
            
            -
            
            
            
            278,462
            
            
            
            15
            
            
            
            (278,477
            )
            
            
            -Amortization of debt issuance
      costs
            
            
            483
            
            
            
            286
            
            
            
            -
            
            
            
            -
            
            
            
            769Losses (gains) on sales of
      assets
            
            
            2,028
            
            
            
            (17,242
            )
            
            
            -
            
            
            
            -
            
            
            
            (15,214
            )Decrease in commutation
      account
            
            
            1,009
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,009Amortization of
      long-term
              prepaid insurance
            
            
            1,211
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,211Increase (decrease) in other
      long-term liabilities
            
            
            31,058
            
            
            
            (3,693
            )
            
            
            -
            
            
            
            -
            
            
            
            27,365Changes in deferred charges
      andother
            
            
            (578
            )
            
            
            (28,709
            )
            
            
            -
            
            
            
            -
            
            
            
            (29,287
            )Changes in components
      of
              working capital from
      operations
            
            
            (46,639
            )
            
            
            (88,900
            )
            
            
            -
            
            
            
            (1,613
            )
            
            
            (137,152
            )Net
      cash provided by (used in)
              operating
      activities
            
            
            (300,929
            )
            
            
            723,438
            
            
            
            45
            
            
            
            6,459
            
            
            
            429,013Cash
      flows from investing activities:Additions
      to property, plant and
              equipment
            
            
            (4,310
            )
            
            
            (280,405
            )
            
            
            -
            
            
            
            (6,459
            )
            
            
            (291,174
            )Proceeds
      from sales of assets
            
            
            2,290
            
            
            
            19,932
            
            
            
            -
            
            
            
            -
            
            
            
            22,222El
      Dorado Refinery contingent
              earn-out
payment
            
            
            -
            
            
            
            (7,500
            )
            
            
            -
            
            
            
            -
            
            
            
            (7,500
            )Other
      acquisitions and leaseholdimprovements
            
            
            -
            
            
            
            (3,561
            )
            
            
            -
            
            
            
            -
            
            
            
            (3,561
            )Net
      cash used in investing activities
            
            
            (2,020
            )
            
            
            (271,534
            )
            
            
            -
            
            
            
            (6,459
            )
            
            
            (280,013
            )Cash
      flows from financing activities:Purchase
      of treasury stock
            
            
            (248,486
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (248,486
            )Proceeds
      from issuance of
              common stock
            
            
            2,303
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,303Dividends
      paid
            
            
            (17,271
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (17,271
            )Debt
      issuance costs and other
            
            
            -
            
            
            
            (588
            )
            
            
            -
            
            
            
            -
            
            
            
            (588
            )Excess
      income tax benefits of
              stock-based
      compensation
            
            
            6,962
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            6,962Intercompany
      transactions
            
            
            530,760
            
            
            
            (530,715
            )
            
            
            (45
            )
            
            
            -
            
            
            
            -Net
      cash provided by (used in)
              financing
      activities
            
            
            274,268
            
            
            
            (531,303
            )
            
            
            (45
            )
            
            
            -
            
            
            
            (257,080
            )Decrease
      in cash and cash equivalents
            
            
            (28,681
            )
            
            
            (79,399
            )
            
            
            -
            
            
            
            -
            
            
            
            (108,080
            )Cash
      and cash equivalents,
              beginning of
    period
            
            
            215,049
            
            
            
            190,430
            
            
            
            -
            
            
            
            -
            
            
            
            405,479Cash
      and cash equivalents,
              end of period
            
            $
            186,368
            
            
            $
            111,031
            
            
            $
            -
            
            
            $
            -
            
            
            $
            297,399














FRONTIER
      OIL CORPORATIONCondensed
      Consolidating Statement of Cash FlowsFor
      the Year Ended December 31, 2006(in
      thousands)FOC
              (Parent)
            
            
            FHI
      (Guarantor Subsidiaries)
            
            
            Other
      Non-Guarantor Subsidiaries
            
            
            Eliminations
            
            
            ConsolidatedCash
      flows from operating activities:Net
      income
            
            $
            379,277
            
            
            $
            396,116
            
            
            $
            87
            
            
            $
            (396,203
            )
            
            $
            379,277Adjustments to reconcile
      net
              income to net cash
      from
              operating activities:Equity in earnings of
      subsidiaries
            
            
            (609,265
            )
            
            
            -
            
            
            
            -
            
            
            
            609,265
            
            
            
            -Depreciation, amortization
      andaccretion
            
            
            88
            
            
            
            54,677
            
            
            
            -
            
            
            
            (377
            )
            
            
            54,388Deferred income
      taxes
            
            
            6,073
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            6,073Stock-based compensation
      expense
            
            
            18,029
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            18,029Excess income tax benefits
      of
              stock-based
      compensation
            
            
            (8,881
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (8,881
            )Income taxes eliminated
      in
              Consolidation
            
            
            -
            
            
            
            208,956
            
            
            
            55
            
            
            
            (209,011
            )
            
            
            -Amortization of debt issuance
      costs
            
            
            482
            
            
            
            315
            
            
            
            -
            
            
            
            -
            
            
            
            797Gains on sales of
      assets
            
            
            (8
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (8
            )Decrease in commutation
      account
            
            
            5,316
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            5,316Amortization of
      long-term
              prepaid insurance
            
            
            1,211
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,211Increase in other
      long-termliabilities
            
            
            416
            
            
            
            8,893
            
            
            
            -
            
            
            
            -
            
            
            
            9,309Changes in deferred charges
      andother
            
            
            (420
            )
            
            
            (18,424
            )
            
            
            -
            
            
            
            -
            
            
            
            (18,844
            )Changes in components
      of
              working capital from
      operations
            
            
            19,089
            
            
            
            (124,306
            )
            
            
            (80
            )
            
            
            (853
            )
            
            
            (106,150
            )Net
      cash (used in) provided by
              operating
      activities
            
            
            (188,593
            )
            
            
            526,227
            
            
            
            62
            
            
            
            2,821
            
            
            
            340,517Cash
      flows from investing activities:Additions
      to property, plant and
              equipment
            
            
            (88
            )
            
            
            (126,794
            )
            
            
            -
            
            
            
            (2,821
            )
            
            
            (129,703
            )El
      Dorado Refinery contingent
              earn-out
payment
            
            
            -
            
            
            
            (7,500
            )
            
            
            -
            
            
            
            -
            
            
            
            (7,500
            )Proceeds
      from sale of assets
            
            
            8
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            8Net
      cash used in investing activities
            
            
            (80
            )
            
            
            (134,294
            )
            
            
            -
            
            
            
            (2,821
            )
            
            
            (137,195
            )Cash
      flows from financing activities:Purchase
      of treasury stock
            
            
            (98,950
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (98,950
            )Proceeds
      from issuance of
              common stock
            
            
            3,672
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            3,672Dividends
      paid
            
            
            (67,498
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (67,498
            )Debt
      issuance costs and other
            
            
            -
            
            
            
            (13
            )
            
            
            -
            
            
            
            -
            
            
            
            (13
            )Excess
      income tax benefits ofstock-based
      compensation
            
            
            8,881
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            8,881Intercompany
      transactions
            
            
            313,260
            
            
            
            (313,198
            )
            
            
            (62
            )
            
            
            -
            
            
            
            -Net
      cash provided by (used in)
              financing
      activities
            
            
            159,365
            
            
            
            (313,211
            )
            
            
            (62
            )
            
            
            -
            
            
            
            (153,908
            )(Decrease)
      increase in cash and cashequivalents
            
            
            (29,308
            )
            
            
            78,722
            
            
            
            -
            
            
            
            -
            
            
            
            49,414Cash
      and cash equivalents,
              beginning of
    period
            
            
            244,357
            
            
            
            111,708
            
            
            
            -
            
            
            
            -
            
            
            
            356,065Cash
      and cash equivalents,
              end of period
            
            $
            215,049
            
            
            $
            190,430
            
            
            $
            -
            
            
            $
            -
            
            
            $
            405,479














FRONTIER
      OIL CORPORATIONCondensed
      Consolidating Statement of Cash FlowsFor
      the Year Ended December 31, 2005(in
      thousands)FOC
              (Parent)
            
            
            FHI
      (Guarantor Subsidiaries)
            
            
            Other
      Non-Guarantor Subsidiaries
            
            
            Eliminations
            
            
            ConsolidatedCash
      flows from operating activities:Net
      income
            
            $
            275,158
            
            
            $
            289,413
            
            
            $
            90
            
            
            $
            (289,503
            )
            
            $
            275,158Adjustments to reconcile
      net
              income to net cash
      from
              operating activities:Equity in earnings of
      subsidiaries
            
            
            (462,027
            )
            
            
            -
            
            
            
            -
            
            
            
            462,027
            
            
            
            -Cumulative effect of
      accounting
              change, net of income
      taxes
            
            
            (1,530
            )
            
            
            2,503
            
            
            
            -
            
            
            
            1,530
            
            
            
            2,503Depreciation, amortization
      andaccretion
            
            
            69
            
            
            
            48,033
            
            
            
            -
            
            
            
            (556
            )
            
            
            47,546Deferred income
      taxes
            
            
            30,259
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            30,259Income taxes eliminated
      in
              consolidation
            
            
            -
            
            
            
            171,237
            
            
            
            -
            
            
            
            (171,237
            )
            
            
            -Amortization of debt issuance
      costs
            
            
            483
            
            
            
            302
            
            
            
            -
            
            
            
            -
            
            
            
            785Stock-based compensation
      expense
            
            
            1,363
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,363Gains on sales of
      assets
            
            
            (3
            )
            
            
            (3,641
            )
            
            
            -
            
            
            
            -
            
            
            
            (3,644
            )Decrease in commutation
      account
            
            
            3,832
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            3,832Amortization of
      long-term
              prepaid insurance
            
            
            1,211
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,211Increase in other
      long-termliabilities
            
            
            698
            
            
            
            3,775
            
            
            
            
            
            
            
            
            
            
            
            4,473Changes in deferred charges
      andother
            
            
            (206
            )
            
            
            (17,110
            )
            
            
            -
            
            
            
            -
            
            
            
            (17,316
            )Changes in components
      of
              working capital from
      operations
            
            
            32,645
            
            
            
            (18,478
            )
            
            
            -
            
            
            
            -
            
            
            
            14,167Net
      cash (used in) provided by
              operating
      activities
            
            
            (118,048
            )
            
            
            476,034
            
            
            
            90
            
            
            
            2,261
            
            
            
            360,337Cash
      flows from investing activities:Additions
      to property, plant and
              equipment
            
            
            (143
            )
            
            
            (107,306
            )
            
            
            -
            
            
            
            (2,261
            )
            
            
            (109,710
            )El
      Dorado Refinery contingent
              earn-out
payment
            
            
            -
            
            
            
            (7,500
            )
            
            
            -
            
            
            
            -
            
            
            
            (7,500
            )Proceeds
      from sale of assets
            
            
            3
            
            
            
            5,497
            
            
            
            -
            
            
            
            -
            
            
            
            5,500Net
      proceeds from insurance –
              involuntary conversion
      claim
            
            
            -
            
            
            
            2,142
            
            
            
            -
            
            
            
            -
            
            
            
            2,142Net
      cash used in investing activities
            
            
            (140
            )
            
            
            (107,167
            )
            
            
            -
            
            
            
            (2,261
            )
            
            
            (109,568
            )Cash
      flows from financing activities:Purchase
      of treasury stock
            
            
            (34,819
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (34,819
            )Proceeds
      from issuance of
              common stock
            
            
            23,616
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            23,616Dividends
      paid
            
            
            (7,776
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (7,776
            )Debt
      issuance costs and other
            
            
            (100
            )
            
            
            (14
            )
            
            
            -
            
            
            
            -
            
            
            
            (114
            )Intercompany
      transactions
            
            
            276,215
            
            
            
            (276,125
            )
            
            
            (90
            )
            
            
            -
            
            
            
            -Net
      cash provided by (used in)
              financing
      activities
            
            
            257,136
            
            
            
            (276,139
            )
            
            
            (90
            )
            
            
            -
            
            
            
            (19,093
            )Increase
      in cash and cash equivalents
            
            
            138,948
            
            
            
            92,728
            
            
            
            -
            
            
            
            -
            
            
            
            231,676Cash
      and cash equivalents,
              beginning of
    period
            
            
            105,409
            
            
            
            18,980
            
            
            
            -
            
            
            
            -
            
            
            
            124,389Cash
      and cash equivalents,
              end of period
            
            $
            244,357
            
            
            $
            111,708
            
            
            $
            -
            
            
            $
            -
            
            
            $
            356,065











13.
            Selected
      Quarterly Financial and Operating
Data




(Dollars
      in thousands, except per share and per bbl)2007
              
              
              2006Unaudited
              
              Fourth
              
              
              Third
              
              
              Second
              
              
              First
              
              
              Fourth
              
              
              Third
              
              
              Second
              
              
              FirstRevenues
              
              $
              1,319,637
              
              
              $
              1,386,520
              
              
              $
              1,434,700
              
              
              $
              1,047,883
              
              
              $
              1,087,267
              
              
              $
              1,381,127
              
              
              $
              1,315,366
              
              
              $
              1,012,193Operating
      income
              
              
              61,806
              
              
              
              207,024
              
              
              
              374,293
              
              
              
              112,672
              
              
              
              75,486
              
              
              
              180,762
              
              
              
              226,355
              
              
              
              91,591Net
      income
              
              
              43,417
              
              
              
              137,225
              
              
              
              243,763
              
              
              
              74,720
              
              
              
              52,434
              
              
              
              123,626
              
              
              
              145,864
              
              
              
              57,353Basic
      net income per share
              
              
              0.42
              
              
              
              1.30
              
              
              
              2.26
              
              
              
              0.68
              
              
              
              0.48
              
              
              
              1.11
              
              
              
              1.30
              
              
              
              0.51Diluted
      net income per share
              
              
              0.41
              
              
              
              1.28
              
              
              
              2.23
              
              
              
              0.68
              
              
              
              0.47
              
              
              
              1.10
              
              
              
              1.29
              
              
              
              0.51Refining
      operations:Total
      charges (bpd) (1)
              
              
              157,772
              
              
              
              171,243
              
              
              
              163,991
              
              
              
              166,529
              
              
              
              173,613
              
              
              
              175,907
              
              
              
              171,426
              
              
              
              166,202Gasoline
      yields (bpd) (2)
              
              
              72,173
              
              
              
              78,302
              
              
              
              79,921
              
              
              
              77,545
              
              
              
              83,283
              
              
              
              79,298
              
              
              
              79,817
              
              
              
              83,564Diesel
      and jet fuel yields (bpd) (2)
              
              
              51,475
              
              
              
              55,389
              
              
              
              55,437
              
              
              
              61,367
              
              
              
              60,950
              
              
              
              62,137
              
              
              
              54,857
              
              
              
              52,627Total
      product sales (bpd)
              
              
              161,899
              
              
              
              174,116
              
              
              
              173,888
              
              
              
              170,744
              
              
              
              174,252
              
              
              
              175,456
              
              
              
              173,642
              
              
              
              164,661Average
      gasoline crack spread (per bbl)
              
              $
              3.27
              
              
              $
              20.51
              
              
              $
              36.73
              
              
              $
              12.92
              
              
              $
              7.96
              
              
              $
              18.41
              
              
              $
              20.92
              
              
              $
              9.22Average
      diesel crack spread (per bbl)
              
              
              16.06
              
              
              
              23.43
              
              
              
              29.08
              
              
              
              21.66
              
              
              
              20.21
              
              
              
              26.21
              
              
              
              23.49
              
              
              
              15.51Cheyenne
      average light/heavy crude oil differential (per bbl)
              
              
              28.40
              
              
              
              18.40
              
              
              
              14.17
              
              
              
              13.24
              
              
              
              14.35
              
              
              
              16.30
              
              
              
              15.19
              
              
              
              18.99El
      Dorado average  light/heavy crude oil  differential
      (per bbl)
              
              
              30.64
              
              
              
              20.60
              
              
              
              18.78
              
              
              
              12.46
              
              
              
              13.99
              
              
              
              12.83
              
              
              
              25.41
              
              
              
              24.65Average
      WTI/WTS crude oil differential (per bbl)
              
              
              6.95
              
              
              
              4.20
              
              
              
              4.59
              
              
              
              4.34
              
              
              
              4.84
              
              
              
              4.69
              
              
              
              4.89
              
              
              
              6.44




(1)
            Charges
      are the quantity of crude oil and other feedstock processed through
      refinery units.


(2)
            Manufactured
      product yields are the volumes of specific materials that are obtained
      through the distilling of crude oil and the operations of other refinery
      process units.





Item 9.
            Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure




None.





Item 9A.
            Controls
      And Procedures


The
information contained in this Form 10-K, as well as the financial and
operational data we present concerning the Company, is prepared by
management.  Our financial statements are fairly presented in all
material respects in conformity with generally accepted accounting
principles.  It has always been our intent to apply proper and prudent
accounting guidelines in the presentation of our financial statements, and we
are committed to full and accurate representation of our condition through
complete and clear disclosures.


We
maintain a set of disclosure controls and procedures that are designed to ensure
that information required to be disclosed by us in the reports filed by us under
the Securities Exchange Act of 1934, as amended (“Exchange Act”), is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and that such information is accumulated and communicated
to management, including the Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure.  Management necessarily applies its judgment in assessing
the costs and benefits of such controls and procedures, which, by their nature,
can provide only reasonable assurance regarding management's control
objectives.


As of the
end of the period covered by this report, we evaluated, under the supervision
and with the participation of our management, including our Chairman of the
Board, President and Chief Executive Officer and our Executive Vice President
and Chief Financial Officer, the effectiveness of our disclosure controls and
procedures pursuant to Rule 13a-15 of the Exchange Act.  Based on that
evaluation, our Chairman of the Board, President and Chief Executive Officer and
our Executive Vice President and Chief Financial Officer concluded that our
disclosure controls and procedures are effective.


During
the most recent fiscal quarter, there have been no changes in our internal
control over financial reporting that have materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.


Our
“Management’s Report on Internal Control Over Financial Reporting” and the
related “Report of Independent Registered Public Accounting Firm” on our report
are include on pages 29 and 30.





Item 9B.
            Other
      Information




None.


PART III


The
information required by Part III of this Form is incorporated by reference from
the Company’s definitive proxy statement to be filed with the SEC pursuant to
Regulation 14A within 120 days after the close of its last fiscal
year.





PART IV


Item 15.
            Exhibits
      and Financial Statement Schedules





(a)1.Financial
      Statements and Supplemental DataReports of Independent Registered Public Accounting
      FirmManagement’s Report on Internal
    ControlsConsolidated Statements of IncomeConsolidated Balance SheetsConsolidated Statements of Cash
  FlowsConsolidated
      Statements of Changes in Shareholders’ Equity andStatements
      of Comprehensive IncomeNotes to Consolidated Financial
    Statements





(a)2.Financial
      Statements SchedulesSchedule I - Condensed Financial Information of
      RegistrantSchedule II - Valuation and Qualifying
      AccountsOther
      Schedules are omitted because of the absence of the conditions under which
      they are required or because the required information is included in the
      financial statements or notes
thereto.




(a)3. List of
Exhibits




*
            2.1
            
            Asset
      Purchase and Sale Agreement, dated as of October 19, 1999, among Frontier
      El Dorado Refining Company, as buyer, the Company, as Guarantor, and
      Equilon Enterprises LLC, as seller (Exhibit 10.1 to Form 8-K, File Number
      1-07627, filed December 1, 1999).*
            3.1
            
            Restated
      Articles of Incorporation of Wainoco Oil Corporation (now Frontier Oil
      Corporation) dated August 5, 1987 (Exhibit 3.1.1 to Registration Statement
      No. 333-120643, filed November 19, 2004).*
            3.2
            
            Articles
      of Amendment to the Restated Articles of Incorporation of Wainoco Oil
      Corporation (now Frontier Oil Corporation) dated June 14, 1988 (Exhibit
      3.1.2 to Registration Statement Number 333-120643, filed November 19,
      2004).*
            3.3
            
            Articles
      of Amendment to the Restated Articles of Incorporation of Wainoco Oil
      Corporation (now Frontier Oil Corporation) dated April 24, 1992 (Exhibit
      3.1.3 to Registration Statement Number 333-120643, filed November 19,
      2004).*
            3.4
            
            Articles
      of Amendment to the Restated Articles of Incorporation of Wainoco Oil
      Corporation (now Frontier Oil Corporation) dated April 27, 1998 (Exhibit
      3.1.4 to Registration Statement Number 333-120643, filed November 19,
      2004).*
            3.5
            
            Articles
      of Amendment to the Restated Articles of Incorporation of Frontier Oil
      Corporation dated May 23, 2005 (Exhibit 3.1 to Form 8-K, File Number
      1-07627, filed May 24, 2005).*
            3.6
            
            Articles
      of Amendment to the Restated Articles of Incorporation of Frontier Oil
      Corporation dated June 12, 2006 (Exhibit 3.1 to Form 8-K, File Number
      1-07627, filed June 15, 2006).*
            3.7
            
            Fourth
      Restated Bylaws of Wainoco Oil Corporation (now Frontier Oil Corporation),
      as amended through February 20, 2002 (Exhibit 3.2 to Wainoco Oil
      Corporation’s Annual Report on Form 10-K, File Number 1-07627, filed March
      10, 1993).*
            3.8
            
            First
      Amendment to Fourth Restated Bylaws of Frontier Oil Corporation, effective
      December 31, 2007 (Exhibit 10.1 to Form 8-K, File Number 1-07627, filed
      January 4, 2008).*
            4.1
            
            Indenture,
      dated as of October 1, 2004, among the Company, as issuer, the guarantors
      party thereto and Wells Fargo Bank, N.A., as trustee relating to the
      Company’s 6.625% Senior Notes due 2011 (Exhibit 4.1 to Form 8-K, File
      Number1-07627, filed October 4, 2004).*2
            10.1
            
            Frontier
      Deferred Compensation Plan (previously named Wainoco Deferred Compensation
      Plan dated October 29, 1993 and filed as Exhibit 10.19 to Form 10-K, File
      Number 1-07627, filed March 17, 1995).*2
            10.2
            
            Frontier
      Deferred Compensation Plan for Directors (previously named Wainoco
      Deferred Compensation Plan for Directors dated May 1, 1994 and filed as
      Exhibit 10.20 to Form 10-K, File Number 1-07627, filed March 17,
      1995).*2
            10.3
            
            Executive
      Change in Control Severance Agreement effective December 30, 2005, between
      the Company and James R. Gibbs (Exhibit 10.1 to Form 8-K, File Number
      1-07627, filed February 2, 2006).*2
            10.4
            
            Executive
      Change in Control Severance Agreement effective December 30, 2005, between
      the Company and Michael C. Jennings (Exhibit 10.3 to Form 8-K, File Number
      1-07627, filed February 2, 2006).*2
            10.5
            
            Executive
      Change in Control Severance Agreement effective December 30, 2005, between
      the Company and Doug S. Aron (Exhibit 10.4 to Form 8-K, File Number
      1-07627, filed February 2, 2006).*2
            10.6
            
            Executive
      Change in Control Severance Agreement effective December 30, 2005, between
      the Company and J. Currie Bechtol (Exhibit 10.5 to Form 8-K, File Number
      1-07627, filed February 2, 2006).*2
            10.7
            
            Executive
      Change in Control Severance Agreement effective December 30, 2005, between
      the Company and Gerald B. Faudel (Exhibit 10.6 to Form 8-K, File Number
      1-07627, filed February 2, 2006).*2
            10.8
            
            Executive
      Change in Control Severance Agreement effective December 30, 2005, between
      the Company and Jon D. Galvin (Exhibit 10.7 to Form 8-K, File Number
      1-07627, filed February 2, 2006).*2
            10.9
            
            Executive
      Change in Control Severance Agreement effective December 30, 2005, between
      the Company and Nancy J. Zupan (Exhibit 10.8 to Form 8-K, File Number
      1-07627, filed February 2, 2006).*2
            10.10
            
            Executive
      Change in Control Severance Agreement effective December 30, 2005, between
      the Company and Penny S. Newmark (Exhibit 10.9 to Form 8-K, File Number
      1-07627, filed February 2, 2006).*2
            10.11
            
            Executive
      Change in Control Severance Agreement effective December 30, 2005, between
      the Company and Kent A. Olsen (Exhibit 10.11 to Form 8-K, File Number
      1-07627, filed February 2, 2006).*2
            10.12
            
            Executive
      Change in Control Severance Agreement effective December 30, 2005, between
      the Company and Joel W. Purdy (Exhibit 10.12 to Form 8-K, File Number
      1-07627, filed February 2, 2006).*2
            10.13
            
            Executive
      Change in Control Severance Agreement effective December 30, 2005, between
      the Company and Billy N. Rigby (Exhibit 10.13 to Form 8-K, File Number
      1-07627, filed February 2, 2006).*2
            10.14
            
            Executive
      Change in Control Severance Agreement effective December 30, 2005, between
      the Company and James M. Stump (Exhibit 10.14 to Form 8-K, File Number
      1-07627, filed February 2, 2006).*2
            10.15
            
            Executive
      Change in Control Severance Agreement, effective December 30, 2005,
      between the Company and Leo J. Hoonakker (Exhibit 10.1 to Form 8-K, File
      Number 1-07627, filed March 9, 2006).*2
            10.16
            
            Executive
      Change in Control Severance Agreement, effective as of May 30, 2006, by
      and between the Company and W. Paul Eisman (Exhibit 10.1 to Form 8-K,
      filed May 31, 2006).*2
            10.17
            
            Form
      of Executive Severance Agreement, effective as of May 30, 2006, by and
      between the Company and each of James R. Gibbs, W. Paul Eisman, Michael C.
      Jennings, Doug S. Aron, J. Currie Bechtol, Gerald B. Faudel, Jon D.
      Galvin, Nancy J. Zupan, Leo J. Hoonakker, Penny S. Newmark, Kent A. Olsen,
      Joel W. Purdy, Billy N. Rigby, and James M. Stump (Exhibit 10.2 to Form
      8-K, File Number 1-07627, filed May 31, 2006).*
            10.18
            
            Crude
      Oil Supply Agreement dated October 15, 2002, between Baytex Energy Ltd.
      and Frontier Oil and Refining Company (Exhibit 10.2 to Form 10-Q, File
      Number 1-07627, filed October 30, 2002).  On November 28, 2002,
      this agreement was assigned by Baytex Energy Ltd. to its wholly-owned
      subsidiary, Baytex Marketing Ltd.*
            10.19
            
            Master
      Crude Oil Purchase and Sale Contract, dated March 10, 2006, among Utexam
      Limited, Frontier Oil and Refining Company and the Company (Exhibit 10.1
      to Form 8-K, File Number 1-07627, filed March 14,
2006).*
            10.20
            
            Guaranty,
      dated March 10, 2006, by the Company in favor of Utexam Limited (Exhibit
      10.2 to Form 8-K, File Number 1-07627, filed March 14,
    2006).*
            10.21
            
            Third
      Amended and Restated Revolving Credit Agreement dated October 1, 2007,
      among the Company, Frontier Oil and Refining Company, as borrower, the
      lenders named therein, Union Bank of California, N.A., as administrative
      agent, and BNP Paribas, as syndication agent (Exhibit 10.1 to Form 8-K,
      File Number 1-07627, filed October 4, 2007).*2
            10.22
            
            Frontier
      Oil Corporation Omnibus Incentive Compensation Plan (Annex A to Proxy
      Statement, File Number 1-07627, filed March 21, 2006).*2
            10.23
            
            Form
      of Frontier Oil Corporation Omnibus Incentive Compensation Plan Stock
      Unit/Restricted Stock Agreement (Exhibit 4.8 to Form S-8, File Number
      333-133595, filed April 27, 2006).*2
            10.24
            
            Form
      of Frontier Oil Corporation Omnibus Incentive Compensation Plan
      Nonqualified Stock Option Agreement (Exhibit 4.9 to Form S-8, File Number
      333-133595, filed April 27, 2006).*2
            10.25
            
            Form
      of Non-Employee Director Restricted Stock Unit Grant Agreement (Exhibit
      10.1 to Form 8-K, File Number 1-07627, filed April 7,
    2006).*2
            10.26
            
            Form
      of First Amendment to Restricted Stock Unit Grant (Exhibit 10.1 to Form
      10-Q, File Number 1-07627, filed August 7, 2006).*2
            10.27
            
            Form
      of Restricted Stock Agreement (Exhibit 10.2 to Form 8-K, File Number
      1-07627, filed April 7, 2006).*2
            10.28
            
            Separation
      Agreement and Release, effective as of March 7, 2006, between W. Reed
      Williams and the Company (Exhibit 10.1 to Form 8-K, File Number 1-07627,
      filed March 15, 2006).*2
            10.29
            
            Executive
      Retiree Medical Benefit Plan (Exhibit 10.3 to Form 10-Q, File Number
      1-07627, filed May 8, 2006).*2
            10.30
            
            Management
      Incentive Compensation Plan for Fiscal 2006 (Exhibit 10.1 to Form 8-K,
      File Number 1-07627, filed February 28, 2007).*2
            10.31
            
            Form
      of Indemnification Agreement by and between the Company and each of its
      officers and directors (Exhibit 10.41 to Form 10-K, File Number 1-07627,
      filed February 28, 2007).*2
            10.32
            
            Management
      Incentive Compensation Plan for Fiscal 2007 (Exhibit 10.1 to Form 8-K,
      File Number 1-07627, filed March 2, 2007).*2
            10.33
            
            Form
      of 2007 Stock Unit  / Restricted Stock Agreement (Exhibit 10.1
      to Form 10-Q, File Number 1-07627, filed May 9, 2007).2
            10.34
            
            Form of Executive Severance Agreement, effective as of
      July 30, 2007, by and between the Company and Mike
    Milam.2
            10.35
            
            Summary of Compensation for Non-Employee
      Directors.2
            10.36
            
            Summary of Compensation for Executive
      Officers.21
            
            Subsidiaries of the Registrant.23
            
            Consent of Deloitte & Touche
  LLP.31.1
            
            Certification by Chief Executive Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
            
            Certification by Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
            
            Certification pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
            
            Certification pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.




















*      Asterisk
indicates exhibits incorporated by reference as shown.


2    
Diamond indicates management contract or compensatory plan or
arrangement.





(b)
            Exhibits





The
Company’s 2007 Annual Report is available upon request.  Shareholders
of the Company may obtain a copy of any exhibits to this Form 10-K at a charge
of $0.05 per page.  Requests should be directed to:





Investor
Relations


Frontier
Oil Corporation


10000
Memorial Drive, Suite 600


Houston,
Texas  77024-3411











Frontier Oil CorporationCondensed
      Financial Information of RegistrantBalance
      SheetsSchedule
      IDecember
      31,2007
            
            
            2006ASSETS
            
            (in
      thousands)Current
      assets:Cash and cash
      equivalents
            
            $
            186,368
            
            
            $
            215,049Trade and other
      receivables
            
            
            27,948
            
            
            
            1,363Deferred tax
    assets
            
            
            9,426
            
            
            
            3,237Commutation
    account
            
            
            6,280
            
            
            
            -Other current
      assets
            
            
            9,646
            
            
            
            2,082Total current
    assets
            
            
            239,668
            
            
            
            221,731Property,
      plant and equipment, at cost:Furniture, fixtures and
      other
            
            
            1,121
            
            
            
            1,301Less - accumulated
      depreciation
            
            
            943
            
            
            
            1,054178
            
            
            
            247Deferred
      financing costs, net
            
            
            1,810
            
            
            
            2,293Commutation
      account
            
            
            -
            
            
            
            7,290Prepaid
      insurance, net
            
            
            909
            
            
            
            2,120Other
      assets
            
            
            3,313
            
            
            
            2,734Investment
      in subsidiaries
            
            
            1,106,243
            
            
            
            831,082Total
      assets
            
            $
            1,352,121
            
            
            $
            1,067,497LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      liabilities:Accounts
payable
            
            $
            242
            
            
            $
            1,436Contingent income tax
      liabilities
            
            
            -
            
            
            
            28,271Accrued liabilities and
      other
            
            
            25,947
            
            
            
            13,894Total current
      liabilities
            
            
            26,189
            
            
            
            43,601Long-term
      debt
            
            
            150,000
            
            
            
            150,000Contingent
      income tax liabilities
            
            
            31,185
            
            
            
            -Other
      long-term liabilities
            
            
            3,208
            
            
            
            2,630Deferred
      income taxes
            
            
            100,310
            
            
            
            93,907Payable
      to affiliated companies
            
            
            2,615
            
            
            
            1,505Shareholders’
      equity
            
            
            1,038,614
            
            
            
            775,854Total
      liabilities and shareholders’ equity
            
            $
            1,352,121
            
            
            $
            1,067,497











The
“Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K are an
integral part of these financial statements.













Frontier
      Oil CorporationCondensed
      Financial Information of RegistrantStatements
      of IncomeSchedule
    IYears
      Ended December 31,2007
            
            
            2006
            
            
            2005(in
      thousands)Revenues
            
            $
            2
            
            
            $
            4
            
            
            $
            (6
            )Costs
      and expenses:Selling and general expenses,
      excluding depreciation
            
            
            30,593
            
            
            
            30,194
            
            
            
            14,681Merger termination and legal
      costs
            
            
            -
            
            
            
            -
            
            
            
            48Depreciation
            
            
            61
            
            
            
            88
            
            
            
            69Loss (gain) on sales of
      assets
            
            
            2,028
            
            
            
            (8
            )
            
            
            (3
            )32,682
            
            
            
            30,274
            
            
            
            14,795Operating
      income
            
            
            (32,680
            )
            
            
            (30,270
            )
            
            
            (14,801
            )Interest
      expense and other financing costs
            
            
            12,723
            
            
            
            11,978
            
            
            
            10,593Interest
      and investment income
            
            
            (11,202
            )
            
            
            (12,102
            )
            
            
            (5,905
            )Equity
      in earnings of subsidiaries
            
            
            (802,362
            )
            
            
            (609,265
            )
            
            
            (462,027
            )(800,841
            )
            
            
            (609,389
            )
            
            
            (457,339
            )Income
      before income taxes
            
            
            768,161
            
            
            
            579,119
            
            
            
            442,538Provision
      for income taxes
            
            
            269,036
            
            
            
            199,842
            
            
            
            168,910Income
      before cumulative effect of accounting change
            
            
            499,125
            
            
            
            379,277
            
            
            
            273,628Income
      tax benefit for cumulative effect
              of accounting
      change
            
            
            -
            
            
            
            -
            
            
            
            1,530Net
      income
            
            $
            499,125
            
            
            $
            379,277
            
            
            $
            275,158







The
“Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K are an
integral part of these financial statements.













Frontier
      Oil CorporationCondensed
      Financial Information of RegistrantStatements
      of Cash FlowsSchedule
    IYears
      Ended December 31,2007
            
            
            2006
            
            
            2005(in
      thousands)Cash
      flows from operating activities:Net income
            
            $
            499,125
            
            
            $
            379,277
            
            
            $
            275,158Equity in earnings of
      subsidiaries
            
            
            (802,362
            )
            
            
            (609,265
            )
            
            
            (462,027
            )Cumulative effect of accounting
      change,
              net of income
      taxes
            
            
            -
            
            
            
            -
            
            
            
            (1,530
            )Depreciation
            
            
            61
            
            
            
            88
            
            
            
            69Deferred income
      taxes
            
            
            (1,916
            )
            
            
            6,073
            
            
            
            30,259Stock-based compensation
      expense
            
            
            22,553
            
            
            
            18,029
            
            
            
            1,363Excess income tax benefits of
      stock-based compensation
            
            
            (6,962
            )
            
            
            (8,881
            )
            
            
            -Amortization of debt issuance
      costs
            
            
            483
            
            
            
            482
            
            
            
            483Loss (gain) on sales of
      assets
            
            
            2,028
            
            
            
            (8
            )
            
            
            (3
            )Decrease in commutation
      account
            
            
            1,009
            
            
            
            5,316
            
            
            
            3,832Amortization of long-term
      prepaid insurance
            
            
            1,211
            
            
            
            1,211
            
            
            
            1,211Increase (decrease) in other
      long-term liabilities
            
            
            31,058
            
            
            
            416
            
            
            
            698Other
            
            
            (578
            )
            
            
            (420
            )
            
            
            (206
            )Changes in components of
      working capital from  operations
            
            
            (46,639
            )
            
            
            19,089
            
            
            
            32,645Net
      cash used by operating activities
            
            
            (300,929
            )
            
            
            (188,593
            )
            
            
            (118,048
            )Cash
      flows from investing activities:Additions to property, plant
      and equipment
            
            
            (4,310
            )
            
            
            (88
            )
            
            
            (143
            )Proceeds from sale of
      assets
            
            
            2,290
            
            
            
            8
            
            
            
            3Net
      cash used by investing activities
            
            
            (2,020
            )
            
            
            (80
            )
            
            
            (140
            )Cash
      flows from financing activities:Purchase of treasury
      stock
            
            
            (248,486
            )
            
            
            (98,950
            )
            
            
            (34,819
            )Proceeds from issuance of
      common stock
            
            
            2,303
            
            
            
            3,672
            
            
            
            23,616Dividends paid to
      shareholders
            
            
            (17,271
            )
            
            
            (67,498
            )
            
            
            (7,776
            )Intercompany transactions,
      net
            
            
            1,110
            
            
            
            (3,240
            )
            
            
            4,215Dividends received from
      subsidiaries
            
            
            529,650
            
            
            
            316,500
            
            
            
            272,000Excess income tax benefits of
      stock-based compensation
            
            
            6,962
            
            
            
            8,881
            
            
            
            -Debt issuance costs and
      other
            
            
            -
            
            
            
            -
            
            
            
            (100
            )Net
      cash provided by financing activities
            
            
            274,268
            
            
            
            159,365
            
            
            
            257,136(Decrease)
      Increase in cash and cash equivalents
            
            
            (28,681
            )
            
            
            (29,308
            )
            
            
            138,948Cash
      and cash equivalents, beginning of period
            
            
            215,049
            
            
            
            244,357
            
            
            
            105,409Cash
      and cash equivalents, end of period
            
            $
            186,368
            
            
            $
            215,049
            
            
            $
            244,357





The
“Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K are an
integral part of these financial statements.











Frontier Oil CorporationValuation
      and Qualifying AccountsFor the three years ended
      December 31,
            
            
            Schedule
    IIDescription
            
            Balance
      at beginning of period
            
            
            Additions
            
            
            Deductions
            
            
            Balance
      at end of period(in
      thousands)2007Allowance
      for doubtful accounts
            
            $
            500
            
            
            $
            198
            
            
            $
            198
            
            
            $
            5002006Allowance
      for doubtful accounts
            
            
            500
            
            
            
            26
            
            
            
            26
            
            
            
            5002005Allowance
      for doubtful accounts
            
            
            500
            
            
            
            -
            
            
            
            -
            
            
            
            500










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 on the date indicated.







FRONTIER
      OIL CORPORATIONBy:
              /s/ James
      R. GibbsJames
      R. GibbsChairman
      of the Board, President
                and
      Chief Executive Officer
                (chief
      executive officer)




Date:
            February
      28, 2008








Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of Frontier Oil Corporation and
in the capacities and on the date indicated.




/s/
      James R. Gibbs
              
              
              /s/
      T. Michael DosseyJames
      R. Gibbs
              
              
              T.
      Michael DosseyChairman
      of the Board, President and
                Chief
      Executive Officer and Director
                  (chief
      executive officer)
              
              
              Director




/s/
      Michael C. Jennings
              
              
              /s/
      James H. LeeMichael
      C. Jennings
              
              
              James
      H. LeeChief
      Financial Officer
                  (principal
      financial officer)
              
              
              Director


/s/
      Nancy J. Zupan
              
              
              /s/
      Paul B. Loyd, Jr.Nancy
      J. Zupan
              
              
              Paul
      B. Loyd, Jr.Vice
      President - Controller
                (principal accounting officer)
              
              
              Director




/s/
      Douglas Y. Bech
              
              
              /s/
      Michael E. RoseDouglas
      Y. Bech
              
              
              Michael
      E. RoseDirector
              
              
              Director
  /s/
      G.
      Clyde BuckG.
      Clyde BuckDirector







Date:
            February
      28, 2008