MANAGEMENT’S DISCUSSION AND ANALYSIS

**General**

              The terms “Frontier” and “we” refer to Frontier Oil Corporation and its subsidiaries.  On November 16, 1999, we acquired the110,000 barrel per day crude oil refinery located in El Dorado, Kansas from Equilon Enterprises LLC (“Equilon”).  Operating resultsfor this refinery have been included in our financial information from November 17, 1999.  Accordingly, absolute changes betweenperiods are not and should not be expected to be comparable.

              We experience stronger demand for our refined products, particularly gasoline and asphalt, during the summer months due toseasonal increases in highway traffic and road construction work.  As a result, our operating results for the first and fourthcalendar quarters are generally lower than those for the second and third quarters.  Demand for diesel is more stable, but reducedroad construction and agricultural work during the winter months does have an impact on demand for diesel.

**Result of Operations**

             *2001 Compared with 2000.*   We had net income for the year ended December 31, 2001 of $107.7 million, or $4.00 per dilutedshare, compared to net income of $37.2 million, or $1.34 per diluted share, for 2000.

              Operating income increased $93.4 million in 2001 versus 2000 due to increases in the refined product spread (revenues lessraw material, freight and other costs) of $119.9 million offset by a decrease in other income of $8.2 million and increases inrefinery operating expenses (excluding depreciation) of $12.1 million, selling and general costs of $4.2 million and depreciation of$2.0 million.

              The refined product spread was $6.84 per barrel for the year ended December 31, 2001 compared to $4.79 per barrel in 2000due to improved light product margins offset by a negative inventory valuation impact from declining crude oil prices.  The price ofcrude oil on the New York Mercantile Exchange declined through 2001 from $26.80 per barrel to $19.84 per barrel.  For the year endedDecember 31, 2001, we realized a reduction to the refined product spread from inventory losses of approximately $41.4 million pretax($28.9 million after tax) because of the decreasing crude oil prices.  For the year ended December 31, 2000, we realized an increaseto the refined product spread from inventory profits of approximately $19.2 million pretax ($18.7 million after tax) from risingcrude oil prices.  Frontier records inventories at the lower of cost on a first in, first out (FIFO) basis or market.

              The Cheyenne Refinery refined product spread was $8.03 per barrel in 2001 compared to $5.68 per barrel in 2000.  Theimproved product spread was due to improved light product margins and an increase in the light/heavy spread offset by a negativeinventory valuation impact.  The light/heavy spread increased from an average of $5.09 per barrel in 2000 to $7.07 per barrel in2001.  For the year ended December 31, 2001 at the Cheyenne Refinery, we realized a reduction to the refined product spread frominventory losses of approximately $8.9 million pretax compared to an increase to the refined product spread from inventory profits ofapproximately $2.3 million pretax from rising crude oil prices for the year ended December 31, 2000.

              The El Dorado Refinery refined product spread was $6.39 per barrel in 2001 compared to $4.42 per barrel in 2000 due toimproved light product margins and an increase in the WTI/WTS crude oil spread offset by a negative inventory valuation impact.  Forthe year ended December 31, 2001 at the El Dorado Refinery, we realized a reduction to the refined product spread from inventorylosses of approximately $32.5 million pretax compared to an increase to the refined product spread from inventory profits ofapproximately $16.9 million pretax from rising crude oil prices for the year ended December 31, 2000.

              Refined product revenues decreased $148.6 million or 7% for the year ended December 31, 2001 compared to 2000 due todecreased sales prices.  Average gasoline prices decreased $2.24 per barrel and average diesel prices decreased $3.07 per barrel.Yields of gasoline increased approximately 2% while yields of diesel and jet fuel remained nearly flat in 2001 compared to 2000.

              Other revenues decreased $8.2 million to a loss of $832,000 for the year ended December 31, 2001 compared to the same periodin 2000 due to a $1.9 million realized futures trading net loss in 2001 compared to a $4.6 million futures trading net gain in 2000.These items, while economic hedges, did not qualify for hedge accounting treatment. (see “Trading Activities”).  Other revenues in2000 also included $1.1 million proceeds from the sale of excess catalyst platinum from the El Dorado Refinery, insurance proceeds of$300,000, which was related to a business interruption at the El Dorado Refinery in 2000, and sulfur credit sales of $230,000.

              Refining operating costs decreased $256.4 million or 13% for the year ended December 31, 2001 compared to 2000 due todecreases in raw material, freight and other costs offset by higher refinery operating expenses.

              Raw material, freight and other costs per barrel decreased 16% or $4.72 per barrel in 2001 primarily due to lower crude oilprices.  The Cheyenne Refinery raw material, freight and other costs of $24.85 per barrel decreased from $28.51 per barrel in 2000due to lower crude oil prices and an increased light/heavy spread.  The heavy crude oil utilization rate at the Cheyenne Refineryexpressed as a percentage of the total crude oil charge decreased to 91% in the year ended December 31, 2001 from 94% in 2000 due tofulfilling light crude oil purchase contracts while reducing spot purchases of heavy crude oil during the fall 2001 crude unitturnaround.  The light/heavy spread for the Cheyenne Refinery averaged $7.07 per barrel compared to $5.09 per barrel in 2000.  The ElDorado Refinery raw material, freight and other costs of $26.01 per barrel decreased from $31.20 per barrel in 2000 due to lowercrude oil prices.

              Refinery operating expense (excluding depreciation) was $3.27 per sales barrel in 2001 compared to $3.07 per sales barrel in2000.  The Cheyenne Refinery operating expense (excluding depreciation) per barrel increased $.56 per barrel to $3.39 per barrel in2001 due to higher maintenance and turnaround costs and reduced yields and sales volumes due to the fall crude unit turnaround andhigher natural gas costs early in the year.  The El Dorado Refinery operating expense (excluding depreciation) was $3.22 per salesbarrel in 2001 increasing from $3.17 per sales barrel in 2000 due to higher natural gas costs early in the year, electrical costs,and chemical and additive costs offset by more yields and sales volumes.

              Selling and general expenses increased $4.2 million or 32% for the year ended December 31, 2001 because of increasedcompensation, mainly bonuses, personnel, and other costs, particularly travel, relating to the operation of multiple locations.

              Depreciation increased $2.0 million or 9% for the year ended December 31, 2001 as compared to 2000 because of increases incapital investment.

              The interest expense decrease of $3.0 million or 10% for the year ended December 31, 2001 was attributable to the reductionof debt including repurchases of 9-1/8% Senior Notes and 11-3/4% Senior Notes during 2001 and 2000 and lower borrowing rates, balancesand fees on the revolving credit facility.  Average debt decreased to $255.3 million for the year ended December 31, 2001 from $295.7million for the year ended December 31, 2000.

              Income tax expense of $28.1 million for the year ended December 31, 2001 increased as a result of the full utilization in2001 of our deferred tax assets (primarily net operating loss carryforwards) for which we had previously provided a valuationallowance.

              *2000 Compared with 1999.*   We had net income for the year ended December 31, 2000 of $37.2 million, or $1.34 per dilutedshare, compared to a net loss of $17.1 million, or $.62 per share for 1999.

              Operating income increased $75.9 million in 2000 versus 1999 due to increases in the refined product spread (revenues lessraw material, freight and other costs) of $205.2 million and other income of $5.2 million, offset by increases in refinery operatingexpenses of $120.6 million, depreciation of $10.0 million, and selling and general costs of $3.9 million.

              The refined product spread was $4.79 per barrel for the year ended December 31, 2000 compared to $3.42 per barrel in 1999.The Cheyenne Refinery refined product spread was $5.68 per barrel in 2000 compared to $4.46 per barrel in 1999.  The improved productspread was due to improved light product margins, an increase in the light/heavy spread and increased throughput, offset by thenegative impact of higher crude oil prices on by-product margins.  The El Dorado Refinery refined product spread was $4.42 per barrelin 2000.  The El Dorado Refinery experienced extremely poor light product margins in early 2000 with gasoline margins improvingduring the second and third quarters.  Diesel margins also improved during that time and remained higher for the fourth quarter.  ElDorado also benefitted from improving crude oil spreads throughout the year 2000.

              The light/heavy spread for the Cheyenne Refinery was $5.09 per barrel for the year ended December 31, 2000, increasingsharply from $2.17 per barrel in 1999.  The 1999 light/heavy spread had been the lowest ever experienced by Frontier for such alengthy period and was due to a reduced supply of heavy crude oil as certain heavy crude oil was uneconomic to produce at low crudeoil prices.  The light/heavy spread for the Cheyenne Refinery is directly linked to pricing of Canadian heavy crude oil.  Ascrude oil prices increased dramatically in late 1999 and stayed higher during 2000, the widening light/heavy spread throughout 2000was the result of favorably priced Canadian heavy crude oil.

              Refined product revenues increased $1.54 billion or 306% for the year ended December 31, 2000 compared to 1999 due toincreased sales prices overall and increased sales volumes from the El Dorado Refinery acquisition.  Average gasoline pricesincreased $11.48 per barrel, average distillate prices increased $11.27 per barrel and there was a 173% overall increase in salesvolumes.  Yields of gasoline increased 208% while yields of diesel and jet fuel increased 194% in 2000 compared to 1999.

              Other income increased $5.2 million to $7.3 million for the year ended December 31, 2000 compared to the same period in 1999due to $4.6 million realized and unrealized futures trading gains on crude oil purchases, inventories or future production, $1.1million proceeds from the sale of excess catalyst platinum from the El Dorado Refinery and insurance proceeds of $300,000, which wasrelated to a business interruption at the El Dorado Refinery in 2000.  Other income in 1999 included $635,000 in legal settlementsand claims.

              Refining operating costs increased $1.45 billion or 299% for the year ended December 31, 2000 compared to 1999 due to the ElDorado Refinery acquisition and increases in raw material, freight and other costs and refinery operating expenses.  Raw material,freight and other costs were $30.41 per barrel in 2000 compared to $20.31 per barrel in 1999 primarily due to higher crude oilprices.  The Cheyenne Refinery raw material, freight and other costs of $28.51 per barrel benefitted from an increased heavy crudeoil utilization rate and an increased light/heavy spread.  The heavy crude oil utilization rate at the Cheyenne Refinery expressed asa percentage of the total crude oil charge increased to 94% in the year ended December 31, 2000 from 87% in 1999.  The light/heavyspread for the Cheyenne Refinery increased 135% to average $5.09 per barrel for 2000.  Refining operating expense averaged $3.07 persales barrel in 2000.  The Cheyenne Refinery operating expense per barrel increased $.06 per sales barrel to $2.83 per sales barrelin 2000 due to increased yields and sales offset by higher natural gas costs.  The El Dorado Refinery operating expense was $3.17 persales barrel in 2000.

              Selling and general expenses increased $3.9 million or 41% for the year ended December 31, 2000 because of increasedpersonnel and other costs relating to the El Dorado Refinery acquisition.

              Depreciation increased $10.0 million or 76% for the year ended December 31, 2000 as compared to 1999 because of the El Doradoacquisition and increases in capital investment.

              The interest expense increase of $21.4 million or 215% for the year ended December 31, 2000 was attributable to higher debtlevels used to purchase the El Dorado Refinery, higher working capital debt levels due to the addition of the El Dorado Refinery andhigher crude oil prices.  Average debt increased to $295.7 million for the year ended December 31, 2000 from $108.1 million for theyear ended December 31, 1999.

              Income tax expense of $2.1 million for the year ended December 31, 2000 included $751,000 paid for Canadian income taxesrelating to a tax assessment resulting from an audit of Canadian tax returns for the years 1995, 1996 and 1997 when we conducted oiland gas operations in Canada.  Income tax expense for 2000 also included current and deferred state income taxes and federalalternative minimum taxes.  Income tax expense of $1.9 million for the year ended December 31, 1999 was for deferred state incometaxes.  In accordance with Statement of Financial Accounting Standards Board No. 109, “Accounting for Income Taxes”, deferred taxesare provided for the tax effect of cumulative to date net taxable book-tax differences, offset by available net operating losses.While at December 31, 2000 we had net operating losses available to offset future federal income taxes, the El Dorado Refineryacquisition resulted in a significant portion of future taxable income being apportioned to Kansas for state income tax purposes.

**Liquidity and Capital Resources**

              Net cash provided by operating activities was $138.6 million for the year ended December 31, 2001 while $66.3 million cashwas provided by operating activities for the year ended December 31, 2000. Working capital changes used $6.5 million of cash flows in2001 while providing $3.6 million of cash flows in 2000.

              At December 31, 2001, we had $104.0 million of cash and $104.0 million available under the revolving credit facility line ofcredit.  We had working capital of $109.1 million at December 31, 2001.

              On November 5, 1999, we issued $190 million principal amount of 11-3/4% Senior Notes due 2009.  The Notes were issued at aprice of 98.562%.  Net proceeds of the offering were approximately $181.0 million.  We used the net proceeds to fund the $170 millionpurchase of the El Dorado Refinery and for general corporate purposes.  During 2001 and 2000, we purchased $6.5 million principalamount and $13.0 million principal amount, respectively, of the 11-3/4% Senior Notes and are holding them as treasury notes.

              During 2001 and 2000, we purchased $24.4 million principal amount and $5.0 million principal amount, respectively, of the9-1/8% Senior Notes and are holding them as treasury notes.  The 9-1/8% Senior Notes were issued in 1998.

              On September 1, 1998, we announced that the Board of Directors had approved a stock repurchase program of up to threemillion shares of common stock.  In late 2000, the Board of Directors increased this amount to a total of four million shares and inJune 2001 authorized an additional two million shares to bring the total authorization to six million shares which may be purchasedand held as treasury shares.  In 1998, 469,700 shares of common stock were purchased for $2.3 million and in 1999, 627,700 shares ofcommon stock were purchased for $3.4 million.  In 2000, 1,393,696 shares of common stock were purchased for approximately $9.2million, of which 1,248,500 shares were purchased on the open market.  In 2001, 1,850,970 shares were acquired for approximately$23.4 million, of which 1,749,100 ($22.6 million) were purchased on the open market.  In addition, we had committed to purchaseanother 25,300 shares for $416,000 at December 31, 2001.

              Capital expenditures for 2001 were $22.8 million.  Capital expenditures for 2000 were $12.7 million which included $.3million in additional El Dorado Refinery acquisition expenditures.  Capital expenditures of approximately $46 million plus a $7.5million purchase contingency earn-out payment to Equilon for the El Dorado Refinery are planned for 2002.

              As of December 31, 2001, we have $208.9 million of total consolidated debt and shareholders’ equity of $169.2 million.  Itis anticipated that cash generated from operating activities will be sufficient to meet our 2002 investment and debt obligations.Operating cash flows are affected by crude oil and refined product prices and other risks (see “Market Risks”).

              Under certain conditions, the revolving credit facility, which is at the subsidiary level, restricts the transfer of cash inthe form of dividends, loans or advances from the operating subsidiary to the parent holding company.  We do not believe theserestrictions limit our current operating plans.  Our refining revolving credit facility was amended, effective June 20, 2001 toextend the facility expiration date from November 16, 2002 to June 15, 2004.

              Our Board of Directors declared quarterly cash dividends in June 2001 and September 2001 each of $.05 per share which werepaid in July 2001 and October 2001, respectively.  The total paid out for dividends in 2001 was $2.6 million.  In addition, our Boardof Directors declared a quarterly cash dividend of $.05 per share in December 2001, to be paid on January 15, 2002 to shareholders ofrecord on December 28, 2001.  The total cash required for this dividend is approximately $1.3 million and was accrued at year end.

**Contractual Cash Obligations**

              The table below lists the contractual cash obligations we have by period.  These items include our long-term debt based onmaturity dates, our operating lease commitments and our commitment for crude oil pipeline capacity.  We have contracted for pipelinecapacity into 2012 on the Express Pipeline from Hardisty, Alberta to Guernsey, Wyoming. Our 15-year contract, which began in 1997, isfor an average of 13,800 barrels per day, however we were allowed to assign a portion of our capacity in earlier years for additionalcapacity in later years, thus our remaining commitments range from 13,800 barrels per day in 2002, increasing to a high of 22,600barrels per day in 2006 and reducing back to 13,800 barrels per day through the remainder of the contract.  Our operating leasesinclude building, equipment, aircraft and vehicle leases which expire from 2002 through 2008, as well as an operating sublease forthe use of the cogeneration facility at our El Dorado Refinery.  The noncancellable sublease, entered into in connection with theacquisition of our El Dorado Refinery in 1999, expires in 2016 with an option to allow us to renew the sublease for an additionaleight years.  At the end of the renewal sublease term, we have the option to purchase the cogeneration facility for the greater offair value or $22.3 million.

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Contractual Obligations                               Payments Due by Period (in thousands)
---------------------------- -----------------------------------------------------------------------------------------

                                Total      Within 1 year    Within 2 - 3 years   Within 4 - 5 years   After 5 years
---------------------------- ------------ ---------------- -------------------- ------------------- ------------------
Long-term Debt               $  211,014   $        -       $        -            $  40,565           $  170,449

Operating Leases                112,336       11,024           20,172               17,643               63,497

Pipeline Capacity                71,495        6,910           16,598               16,539               31,448

---------------------------- ------------ ---------------- -------------------- ------------------- ------------------
  Total Contractual
   Cash Obligations          $  394,845   $   17,934        $  36,770            $  74,747           $  265,394
---------------------------- ------------ ---------------- -------------------- ------------------- ------------------
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**Market Risks**

              *Impact of Changing Prices.*   Our revenues and cash flows, as well as estimates of future cash flows are very sensitive tochanges in energy prices.  Major shifts in the cost of crude oil and the price of refined products can result in large changes in theoperating margin from refining operations.  These prices also determine the carrying value of the refineries’ inventory.

              *Price Risk Management Activities.*   At times, we enter into commodity derivative contracts to manage our price exposure toour inventory positions, our purchases of foreign crude oil and consumption of natural gas in the refining process, as well as fixmargins on certain future production.  The commodity derivative contracts we use may take the form of futures contracts or priceswaps and are entered into with reputable counterparties.  We have in the past entered into derivative contracts with Enron, whichhas recently filed for bankruptcy protection.  At the time of such action we had no open derivative contracts with Enron and thus noassociated credit risk exists.  We use futures transactions to price foreign crude oil at the price when the crude oil is processedby the El Dorado Refinery instead of when purchased.  Foreign crude oil delivery times can exceed one month from when the purchase ismade.  In addition, at times, we engage in futures transactions for the purchase of natural gas at fixed prices.  The refineriesconsume natural gas for energy purposes.  Gains and losses on futures contracts designated as hedges under Statement of FinancialStandards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“Statement No. 133”) are recognized inrefinery operating costs when the associated hedge transaction is consummated. Other hedging transactions are recognized in otherrevenues.

       *Trading Activities.*