Letter to Shareholders

In 1999, Frontier Oil Corporation took a major step toward building the Company for the future with the acquisition of Equilon's 110,000 bpd El Dorado, Kansas Refinery on November 16, 1999. We made this opportunistic acquisition in a weak refining market, thus we got a great deal and are well positioned to take advantage of already improving conditions. The outlook for 2000 is much better than 1999, with vastly reduced nationwide inventories of motor fuels, widening product crackspreads and widening heavy crude oil differentials.

We were disappointed by the financial results for the year. The Company had a loss of $17.1 million or $.62 per diluted share, compared to net income of $15.8 million or $.55 per diluted share in 1998. Last year's results included a $3.0 million extraordinary loss on the early retirement of debt. The Company's operating income before depreciation was $7.8 million compared to $36.4 million in 1998. The fourth quarter erased our earnings for the year and was the result of a combination of unfavorable industry conditions. The dramatic run-up in crude oil prices made seasonally weak gasoline and diesel margins even weaker and squeezed by-product margins into negative territory. Also, the light/heavy crude oil spread remained at historically narrow levels although it improved from the end of the third quarter. The narrowing of the light/heavy spread increases the cost of our feedstock relative to product prices and therefore also decreases our margins. When the spread widens, the opposite is true. For the year, the light/heavy crude oil spread averaged $2.17 per bbl which was $1.98 lower than the $4.15 per bbl in 1998. Since year end, the spread has widened significantly and this is a positive fundamental as we head into the new year.

Chairman of the Board, President and Chief Executive Officer

The acquisition of the El Dorado Refinery was a major step for Frontier; it more than tripled our refining capacity, has greatly improved our future earnings potential and eliminated our single plant operating and earnings exposure. It further defines and increases our market share in the markets where we intend to concentrate - the eastern slope of the Rocky Mountains and the Plains States, which are among the most profitable refined product markets in the United States.

The purchase of the El Dorado Refinery gives the Company over 150,000 barrels per day of refining capacity and establishes a major presence in a strong market. The purchase price was $170 million plus a contingency payment of up to $40 million to be paid to Equilon over the next eight years if cash flow generated by the El Dorado Refinery exceeds certain thresholds. Frontier also purchased the crude oil, intermediate product and finished product inventories at the plant at closing. The purchase price was paid from the of proceeds of $190 million new 11 3/4% Senior Notes due 2009 issued by the Company on November 5, 1999 and a new $175 million working capital facility.

The El Dorado Refinery serves the Denver market, just as the Cheyenne Refinery does, and also serves the Kansas City and other important markets in the Plains States. The El Dorado Refinery is an efficient, complex plant that also has a small petrochemical plant and a 38 megawatt cogeneration facility. The Company also signed two important commercial agreements with Equiva Trading, an affiliate of Equilon, which we believe will benefit the Company. The first is a long-term product offtake agreement whereby Frontier will sell gasoline, diesel and jet fuel produced at the El Dorado Refinery to Equiva at market prices. Frontier will retain an additional 5,000 bpd of gasoline and diesel every January 1 until we reach 50,000 bpd in year ten. This arrangement is good for Frontier because we can gradually build our volumes over time as we cultivate markets. Also, we signed a short-term renewable crude oil supply agreement whereby Equiva will act for us in the purchase of international cargos for the El Dorado Refinery.

Our reported results, which include the El Dorado Refinery for only the last six weeks of 1999, do not reflect the full potential contribution of El Dorado to our business. Pro forma for the acquisition as if we had owned El Dorado for the full year, revenues would have been $1.3 billion, operating income before depreciation would have been $63.1 million and net income would have been $3.7 million, or $.13 per diluted share. Unfortunately, we were not able to close the acquisition until mid-November 1999, thus we faced the weakest part of the year for our industry as a larger operation. Because we anticipated a weak winter, we maintained excess cash and protected our liquidity through this difficult period.

Frontier Oil Corporation now has several positive factors going in its favor. The Company has two quality refining assets located in two of the country’s best refining environments ­ the fast growing Rocky Mountain region and the Plains States. Our future profits are sheltered from income taxes because we have net operating loss carryforwards (NOLs) totaling $135 million at year end. The Company ended the year with $38 million in cash and capital expenditures for 2000 will be relatively modest ­ approximately $13 million. Refining fundamentals are improving and the Company is in a great position to benefit from higher margins. During the year 2000, we expect to increase profitability and will seek opportunities to reduce leverage, build assets and enhance shareholder value.

March 15, 2000

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