Giant Industries Inc. Announces Record Second Quarter Net Earnings

Business Wire, August 8, 2006

SCOTTSDALE, Ariz. -- Giant Industries Inc. (NYSE: GI) announced today net earnings of $49.2 million or $3.35 per diluted share for the second quarter ended June 30, 2006, versus $20.6 million or $1.51 per diluted share, for the second quarter of the prior year. For the first half of 2006, the company reported net earnings of $36.9 million or $2.51 per diluted share versus net earnings of $30.6 million or $2.34 per diluted share for the first six months of 2005.

Fred Holliger, Giant's chairman and CEO, said, "The first six months of this year have certainly been strong from an earnings perspective. Our net earnings for the second quarter and year-to-date exceeded our financial performance for the same period last year. Our Four Corners refining operations were exceptionally strong with operating income of $46.6 million in the first half of 2006 compared to $26.0 million for the same period last year. This improvement was primarily the result of improved refining margins. Operating income at the Yorktown refinery was lower for the second quarter and year-to-date as we operated at reduced capacity throughout the first quarter and most of the month of April as we completed repairs on the units that were damaged by a fire in late November 2005. Additionally, the delayed startup of the new diesel hydrotreater at Yorktown also had an impact on our June financial performance as we sold a portion of our distillates in the lower value heating oil market, and purchased diesel sulfur credits for the on-road sales. Throughout the months of May and June, the refinery operated at full capacity and is continuing to operate at that level. In the second quarter, we received a partial advance from our insurers in the amount of $33.1 million, which was booked as income in the quarter. In July, we received further advances from our insurers in the amount of $3.15 million. We believe that additional proceeds will be forthcoming in the future and will have a significant impact on our earnings during the remainder of 2006.

"Our retail group has also performed well financially and operationally in the first half of 2006 as same store fuel sales are up approximately 3.7% over the prior year level and our same store merchandise sales are up approximately 6.2% over the prior year level. Year-to-date operating income was also positively impacted by higher fuel margins in comparison to the first six months of 2005 and the addition of 12 new convenience stores as a result of an acquisition completed in July 2005.

"Our Wholesale group continued to experience strong growth in sales volumes and operating income grew approximately 18% from approximately $6.5 million in the first six months of 2005 to $7.7 million in the first six months of 2006, primarily as a result of the July 2005 acquisition."

Holliger continued, "We recently completed hydrotesting of the crude oil pipeline system that originates near Jal, N.M., and is connected to a company-owned pipeline network that directly supplies crude oil to the Bloomfield and Ciniza refineries. We are currently in the process of installing the pumps and other hardware necessary for reactivation. We anticipate that we should have the pipeline operational before the end of 2006. As we have previously noted, when operational the pipeline has sufficient capacity to allow us to again operate both Four Corners refineries at maximum rates. We are also in the process of closing the acquisition of certain assets from a New Mexico-based petroleum jobbership. We are acquiring 25 convenience stores, two bulk petroleum distribution plants and a transportation fleet. This acquisition is an excellent complement to all of our existing businesses."

Relative to third quarter performance, Holliger remarked, "We currently believe that our refining fundamentals, overall, are more positive now as compared to the same time last year. Additionally, we anticipate that further insurance proceeds will be received in connection with the fire at our Yorktown refinery that occurred in the fourth quarter of 2005. Further, all three of our refineries are now producing low sulfur highway diesel fuel, as our Yorktown refinery began production this past weekend. Same store fuel volumes for our retail group currently are above the prior year's levels, however, fuel margins are lower. In addition, same store merchandise sales for our retail group are above the prior year's level, while same store merchandise margins have remained stable. The wholesale group currently is experiencing stable margins and volumes as compared to the same time last year."

Giant's senior management will hold a conference call at 2 p.m. EDT on August 8, 2006, to discuss this earnings release and provide an update on company operations. The conference call will be broadcast live on the company's Web site at www.giant.com.

Giant Industries Inc., headquartered in Scottsdale, Ariz., is a refiner and marketer of petroleum products. Giant owns and operates one Virginia and two New Mexico crude oil refineries, a crude oil gathering pipeline system based in Farmington, N.M., which services the New Mexico refineries, finished products distribution terminals in Albuquerque, N.M., and Flagstaff, Ariz., a fleet of crude oil and finished product truck transports, and a chain of retail service station/convenience stores in New Mexico, Colorado and Arizona. Giant is also the parent company of Phoenix Fuel Co. Inc. and Dial Oil Co., both of which are wholesale petroleum products distributors. For more information, please visit Giant's Web site at www.giant.com.