The current U.S. refining industry is characterized by limited refinery capacity, high utilization rates, strong demand for finished products, increased reliance on imported products and higher differentials between sour and sweet crude oil prices. Decreasing petroleum product demand and deregulation of the domestic refining industry in the 1980s, along with new fuel standards introduced in the early 1990s, contributed to decreasing domestic refining capacity in the United States. According to the Department of Energy Information Administration, or EIA, and the Oil and Gas Journal’s 2004 Worldwide Refining Survey, the number of U.S. refineries has decreased from a peak of 324 in 1981 to 132 in January 2005. The last major new oil refinery in the United States was built in 1976. According to the EIA, while domestic refining capacity has decreased approximately 10%, from 6.8 billion barrels in 1981 to 6.1 billion barrels in 2003, domestic demand for refined fuels has increased approximately 24.8%, from 5.9 billion barrels to 7.3 billion barrels, over the same period.

Between 1982 and 2003, refinery utilization increased from 69% to over 92% and is approaching an effective maximum rate. The EIA projects that utilization will remain high relative to historic levels, ranging from 92% to 95% of design capacity. While growth in refining capacity is expected by the EIA to average 1.3% per year over the next two decades, the EIA projects demand for petroleum products to outpace capacity growth and continue to grow at an average of 1.5% per year over this period. Approximately 92% of the projected demand growth is expected to come from the increased consumption of light petroleum products, including gasoline, diesel, jet fuel and liquefied petroleum gas, which are more difficult and costly to produce than heavy products.

According to the EIA, total U.S. products demand increased 2.4% in 2004 compared to 2003, due primarily to an improving economy and a continued increase in the number of higher gas consumption vehicles utilized by U.S. consumers.

The Company owns and operates a sophisticated sour crude oil refinery in Big Spring, Texas, which it recently expanded from a crude oil throughput capacity of 62,000 barrels per day, or bpd, to 70,000 bpd. The Big Spring refinery’s primary products are gasoline, distillates, petrochemicals, petrochemical feedstocks, asphalt and other petroleum products. The Company’s refinery typically converts approximately 86% of its feedstock into higher value products such as gasoline, diesel, jet fuel and petrochemicals, with the remaining 14% primarily converted to asphalt and liquefied petroleum gas.

The Company owns a crude oil pipeline system. The pipeline and terminal network utilizes approximately 500 miles of crude oil pipelines, nearly 840 miles of product pipelines and six product terminals and provides the Company with access to four additional product terminals. The Company’s crude oil pipeline system provides its refinery access to Permian Basin crude oil and foreign and domestic crude oil from the Gulf Coast. The Company’s 504 mile bi-directional Amdel pipeline and its 25 mile White Oil pipeline connect its refinery to Nederland, Texas, which is located on the Gulf Coast. Permian Basin crude oil is delivered to the Company’s refinery through the two-mile long, 16-inch diameter Mesa Interconnect pipeline which is connected to the Mesa pipeline, a common carrier.

The product pipelines the Company utilizes are linked to the major third-party product pipelines in the geographic area around its refinery. The Company’s network can also receive additional transportation fuel products from the Gulf Coast through the Pride Product terminal and Magellan pipelines, deliver and receive product to and from the Williams system, the Company’s connection to the Group III, or mid-continent, markets, and deliver to the New Mexico and Arizona markets through third-party systems.

The Company markets its gasoline and diesel products under the FINA brand name to approximately 1,300 retail sites. The Company also markets unbranded gasoline, diesel, jet fuel and other refinery products, and it is one of the largest suppliers of asphalt in West Texas, New Mexico and Arizona. The Company’s convenience stores typically offer merchandise, food products and motor fuels. Substantially all of the motor fuel sold though the Company’s retail segment is produced at its Big Spring refinery and transported to its retail fuel sites through its product pipeline and terminal network.

Gross margin was $56.4 million for the three months ended March 31, 2005, compared to $49.7 million for the three months ended March 31, 2004, an increase of $6.7 million or 13.4%.

Direct operating expenses, were $18.3 million for the three months ended March 31, 2005, compared to $18.9 million for the three months ended March 31, 2004, a decrease of $0.6 million or 3.2%.

Operating income for the three months ended March 31, 2005, was $16.6 million, compared to $8.8 million for the three months ended March 31, 2004, an increase of $7.8 million or 88.6%.

Net income was $22.4 million for the three months ended March 31, 2005, compared to $1.5 million for the three months ended March 31, 2004, an increase of $20.9 million.