Executive Overview

The Company reported net income of $.2 million for the third quarter of 2007 compared to $6.3 million for the same period of 2006. Like other forest product companies, Deltic continues to be impacted by the depressed housing and softwood lumber markets. Deltic's Woodlands segment provided $4.9 million operating income in the third quarter. The Company's Mills segment recorded an operating loss of $.8 million in 2007's third quarter. The Real Estate segment's operations broke even during the third quarter. Deltic owns a 50 percent interest in Del-Tin Fiber L.L.C., and recorded related equity income of $.3 million for the third quarter of 2007.

Deltic is primarily a wood products producer operating in a commodity-based business environment, with a major diversification in real estate development. This environment is affected by a number of factors including general economic conditions, interest rates, imports, foreign exchange rates, housing starts, residential repair and remodeling, commercial construction, industry capacity and production levels, the availability of raw material, and weather conditions. The downward trend in new home sales began during the second half of 2005, and the level of housing starts continued to drop, reaching its slowest pace in more than 14 years in September 2007. Factors affecting this decline in the new housing market were higher mortgage rates, increased home inventory levels, and the impact of stricter lending practices due to sub-prime loans failing in the mortgage banking industry. The Company's sales of real estate were affected by these factors, which helped to cause a reduction in residential lot sales as compared to the first nine months of 2006. The decline in the housing market has led in large part to a continued lower demand in the first nine months of 2007 for softwood lumber products. Given its relative size and the nature of most commodity markets, the Company has little or no control over pricing levels for its lumber products but will continue to focus on increasing efficiencies and reducing controllable manufacturing cost.

On August 9, 2007, the Company experienced a fire in the planer section of its operating facility located in Waldo, Arkansas. Damage was extensive to this portion of the facility and operations at the facility have been temporarily suspended while repairs are made to the damaged area. Costs of repair or replacement of property and equipment and business interruption are covered under the terms of applicable insurance policies, subject to deductibles. All property insurance proceeds are expected to be reinvested to fully restore the Waldo operations. The Company expects to be fully operational in November 2007.

For the third quarter of 2007, the pine sawtimber harvest level decreased 17,571 tons to 104,065 and sales price declined from $44 to $39 per ton when compared to the third quarter of 2006. Since the Company's mills are the primary consumer of company timber, a fire at the Waldo Mill impacted the timing of the pine sawtimber harvest in that region. The Company expects the Mill to resume production in November, which will allow Deltic to resume harvesting in conjunction with the Mill startup. Deltic plans to keep 2007's total pine sawtimber harvest volume comparable to the harvest level in 2006, and will continue to manage the timberlands on a sustainable-yield basis. Ultimately, the Company's ability to sell pine sawtimber at acceptable prices in the future will be dependent upon the health of the markets for manufactured lumber and other wood products. The Company harvested 105,999 tons of pine pulpwood during the third quarter of 2007, compared to 120,288 tons from the same period in 2006. The average sales price was $13 per ton, an 86 percent increase from $7 for the third quarter of 2006. Deltic recorded an increase in pine pulpwood revenues of $.5 million when compared to the third quarter of 2006. The increased demand and prices for pulpwood has been attributed in part to reduced production of residual wood chips from area sawmills due to production curtailments caused by the depressed lumber market, and to the impact of wet weather conditions on pulpwood harvesting activity in the Company's operating region during the first half of 2007. The Company also sold approximately 360 acres of non-strategic timberland for $1,964 per acre during the third quarter of 2007 versus no acres sold during the same period of 2006.

As reported during the past several quarters, advances in technology and increased pricing levels for natural gas have resulted in the viability of expanded natural gas exploration within the state of Arkansas. One area known as the "Fayetteville Shale Play", an unconventional natural gas reservoir, is spread across multiple central Arkansas counties. Deltic has leased approximately 26,000 net mineral acres in this area to various exploration enterprises and has received applicable lease bonus payments in addition to the possibility of future royalty income should production be established. The Company continues to evaluate additional leasing requests within the Fayetteville Shale Play, although future leasing will probably not be significant unless the defined boundary of the Play expands. The ultimate benefit to Deltic from these mineral leases is contingent on the successful extraction and sale of natural gas from the area.

The Mills segment reported an operating loss of $.8 million in the third quarter of 2007 compared to a loss of $3.5 million in 2006. The average sales price for lumber in the third quarter of 2007 increased $10 per thousand board feet ("MBF"), or three percent, to $304 per MBF compared to $294 per MBF for the same period of 2006. Lumber sales volumes declined in the third quarter of 2007 by 28 percent from the third quarter of 2006 to 45.6 million board feet. This reduction was primarily caused by the Waldo Mill being temporarily shut down for the fire related repairs, even though the Company continued to sell lumber from existing finished inventory. The Company expects to resume production in November. Operating efficiencies at the Ola Mill improved significantly during the third quarter of 2007 when compared to the same period of 2006, which reduced average cost per MBF of lumber produced. As with any commodity market, Deltic expects the historical volatility of lumber prices to continue in the future. The Company continues to anticipate a significant percentage of logs supplied to both of its sawmills to come from strategically located Company fee timber lands.

The Real Estate segment closed the sale of 24 residential lots during the third quarter versus 23 lots for the same quarter in 2006. The average sales price per lot declined 20 percent, to $83,900, when compared to the same quarter last year. The reported average sales price for residential lots for a specific period is dependent upon the mix of lot sales. Deltic's lot development plans provide for a mix of lot offerings that represent most real estate market segments for planned communities. Due to the current pace of new home starts and the current sufficient lot inventory, there are no significant capital expenditures planned for residential lot development for the remainder of 2007. The Company sold 22 lots within the Chenal Valley development in the third quarter of 2007 versus 10 during the same period of 2006. In Deltic's other two developments, Red Oak Ridge and Chenal Downs, two lots were sold during the third quarter of 2007 compared to 13 lots in the same period of 2006. Chenal Downs is fully developed and Deltic does not plan to develop any additional lots within Red Oak Ridge for the remainder of 2007. Future annual development activity will depend on the demand for the Company's residential lots. There were no commercial sales for the third quarter of 2007, while commercial sales of approximately 53 acres at $246,300 per acre occurred in the third quarter of 2006. Although there were no sales of commercial real estate in the third quarter of 2007, interest in Deltic's commercial real estate, especially for multifamily use, remains strong.

During 2004, the Company disclosed plans for a 1,170-acre, 187 lot, upscale residential development, The Ridges at Nowlin Creek, on a portion of its land holdings located within the Highway 10 growth corridor west of Chenal Valley. A portion of the development would have been located within the watershed of Lake Maumelle, a principal source of drinking water for Little Rock. Even though the Company's development plans incorporated the most modern and proven best management practices to create a low impact development fully protective of water quality in the lake, and the local water utility, Central Arkansas Water, had just commissioned preparation of a new comprehensive watershed management plan, the water utility nonetheless commenced an action in September 2005 to condemn approximately 680 acres of company land located within the watershed, including approximately 640 acres of The Ridges at Nowlin Creek. On March 28, 2007, the Company and Central Arkansas Water entered into a full and complete settlement of the condemnation. Pursuant to the terms of the settlement, the Company sold Central Arkansas Water 680.06 acres of land for $8.2 million, and Central Arkansas Water granted to the Company an option to repurchase said land for the same consideration should Central Arkansas Water determine the land is not needed for watershed protection or should Central Arkansas Water cease to utilize said land for such purpose. The term of the option is 90 years. The Company intends to further assess the viability of proceeding to develop the remaining acreage of its planned real estate development, The Ridges at Nowlin Creek.

Operating results for Del-Tin Fiber L.L.C. are affected by the overall medium density fiberboard ("MDF") market and the plant's operating performance. Del-Tin experienced a reduction in operational income during the first nine months of 2007 because of decreased production due to uncertain market conditions for traditional products and available supply of fiber. These unfavorable factors combined with increased raw material wood chip cost negatively impacted the financial performance at Del-Tin Fiber in 2007 when compared to 2006. With regard to the Company's equity position in Del-Tin, these decreases were partially offset by the reduction in depreciation expense related to the add-back per thousand square feet ("MSF") due to the impairment taken by the Company in 2002 which was not recorded by Del-Tin. The difference in basis between the Company and Del-Tin is being adjusted to account for Del-Tin's operating results as if it were a consolidated subsidiary.

Results of Operations

Three Months Ended September 30, 2007 Compared with Three Months Ended
September 30, 2006

In the following tables, Deltic's net sales and results of operations are
presented for the quarters ended September 30, 2007 and 2006. Explanations of
significant variances and additional analyses for the Company's consolidated and
segmental operations follow the tables.



                                                  Quarter Ended September 30,
     (In millions, except per share amounts)        2007                 2006
     Net sales
     Woodlands                                 $          8.6                8.6
     Mills                                               16.8               22.6
     Real Estate                                          4.1               17.9
     Eliminations                                        (4.0 )             (5.4 )

     Net sales                                 $         25.5               43.7

     Operating income/(loss) and net income
     Woodlands                                 $          4.9                4.6
     Mills                                                (.8 )             (3.5 )
     Real Estate                                           -                10.8
     Corporate                                           (2.9 )             (3.0 )
     Eliminations                                         (.4 )               .1

     Operating income                                      .8                9.0

     Equity in Del-Tin Fiber                               .3                1.5
     Interest income                                       .3                 .1
     Interest and other debt expense                     (1.3 )             (1.4 )
     Interest capitalized                                  .2                 .3
     Other income                                          .1                 -
     Income taxes                                         (.2 )             (3.2 )

     Net income                                $           .2                6.3

     Earnings per common share
     Basic                                     $          .02                .52
     Assuming dilution                                    .02                .51

Consolidated

The $6.1 million decrease in net income was primarily the result of decreased operating income from the Real Estate segment caused by no sales of commercial real estate acreage, and decreased equity income from Del-Tin Fiber L.L.C., which were partially offset by improved results from the Mills segment due to a $10 per MBF increased sales price and improved operating efficiencies at the Ola Mill.

Operating income decreased $8.2 million. The decline in operating results was due primarily to the decrease in operating income from the Real Estate segment, which was partially offset by improvements in the Mills segment.

Woodlands

Selected financial and statistical data for the Woodlands segment is shown in
the following table.



                                                Quarter Ended September 30,
                                                   2007               2006
       Net sales (in millions)
       Pine sawtimber                        $            4.0              5.3
       Pine pulpwood                                      1.4               .9
       Hardwood sawtimber                                  .2               .3
       Hardwood pulpwood                                   .3               .2

       Sales volume (in thousands of tons)
       Pine sawtimber                                   104.1            121.6
       Pine pulpwood                                    106.0            120.3
       Hardwood sawtimber                                 6.6              8.2
       Hardwood pulpwood                                 27.6             35.3

       Sales price (per ton)
       Pine sawtimber                        $             39               44
       Pine pulpwood                                       13                7
       Hardwood sawtimber                                  32               32
       Hardwood pulpwood                                   10                5

       Timberland
       Net sales (in millions)               $             .7               -
       Sales volume (acres)                               360               -
       Sales price (per acre)                $          1,964               -

Net sales were the same for the third quarter 2007 and 2006. Sales of pine sawtimber decreased $1.3 million due to a 14 percent lower sales volume at a lower sales price per ton of $39, as compared to $44 per ton in 2006, an 11 percent decrease. Sales of pine pulpwood increased $.5 million due in large part to an 86 percent increase in the average sales price of pulpwood at $13 per ton. The Company sold 360 acres of non-strategic timberland at $1,964 per acre in the third quarter of 2007 versus no sales for the same period of 2006. The Company recognized a net margin of $.6 million from these timberland sales. There was a $.3 million increase in income from well site damages, water usage, and seismic permits in the third quarter of 2007 versus the same period in 2006. Cull timber removal expense increased $.3 million in the third quarter of 2007 when compared to the third quarter of 2006. In 2006, the majority of the cull timber removal program was delayed until the fourth quarter due to a shortage of qualified application contractors.

Mills

Selected financial and statistical data for the Mills segment is shown in the
following table.



                                           Quarter Ended September 30,
                                              2007              2006
            Net sales (in millions)
            Lumber                       $          13.8            18.6
            Residual by-products                     2.2             3.0

            Lumber
            Finished production (MMBF)              41.3            59.8
            Sales volume (MMBF)                     45.6            63.2
            Sales price (per MBF)        $           304             294

Net sales decreased $5.8 million, or 26 percent, due primarily to lower lumber sales volume caused by a temporary suspension of production at the Waldo Mill due to a fire. The reduction in the Mills segment's operating loss was partially due to a $10 per MBF higher average lumber sales price. Improved operating efficiencies and a lower average production cost per MBF at the Ola Mill provided additional benefits during the period.

Real Estate

Selected financial and statistical data for the Real Estate segment is shown in
the following table.



                                               Quarter Ended September 30,
                                                 2007               2006
        Net sales (in millions)
        Residential Lots                     $         2.0                2.4
        Commercial acreage                              -                13.0
        Chenal Country Club                            2.0                1.8

        Sales volume
        Residential lots                                24                 23
        Commercial acres                                -               52.81

        Average sales price (in thousands)
        Residential lots                     $          84                104
        Commercial acres                                -                 246

Net sales decreased $13.8 million due primarily to decreased sales of commercial real estate and a lower average sales price per lot sold due to sales mix. The decrease in the Real Estate segment's operating income was due primarily to the same factors impacting net sales.

Corporate

The decrease in operating expense for Corporate functions of $.1 million was due to decreased general and administrative expenses.

Eliminations

Intersegment sales of timber from Deltic's Woodlands to the Mills segment decreased $1.4 million to $4 million. The decrease was due to a reduced volume of logs coming into Deltic sawmills from its fee timberlands resulting from a temporary suspension of production at the Waldo Mill due to a fire, as well as a decreased transfer price from the Woodlands segment. Transfer prices are

approximately that of market, which were lower than the same quarter last year. There was a $.5 million decrease in operating income in the current quarter of 2007 caused by higher intersegment log inventories in the Mills segment when compared to the same period of 2006.

Equity in Del-Tin Fiber

For the third quarter of 2007, Deltic's equity in Del-Tin Fiber was $.3 million compared to $1.5 million for the same period of 2006. This reduction in the third quarter of 2007 when compared to 2006 was due to lower average sales prices, decreased production related to uncertain market conditions, and the available supply of fiber. Del-Tin also encountered higher raw material chip cost which impacted operating income.

Additional selected financial and statistical data for Del-Tin Fiber is shown in the following table.

                                           Quarter Ended September 30,
                                              2007              2006
            Net sales (in millions)      $          13.0            19.1
            Finished production (MMSF)              27.2            38.7
            Board sales (MMSF)                      26.6            38.4
            Sales price (per MSF)        $           489             497

Income Taxes

The effective income tax rate was 42 percent during the third quarter of 2007 while the rate was 35 percent for the same period of 2006. The decrease was due to higher effective rates for Federal income taxes during 2007.

Nine Months Ended September 30, 2007 Compared with Nine Months Ended
September 30, 2006

In the following tables, Deltic's net sales and results of operations are
presented for the nine-month periods ended September 30, 2007 and 2006.
Explanations of significant variances and additional analyses for the Company's
consolidated and segmental operations follow the tables.



                                                       Nine Months Ended
                                                         September 30,
           (In millions, except per share amounts)      2007         2006
           Net sales
           Woodlands                                 $     29.9       30.8
           Mills                                           63.2       84.4
           Real Estate                                     26.1       29.3
           Eliminations                                   (15.4 )    (18.1 )

           Net sales                                 $    103.8      126.4

                                                       Nine Months Ended
                                                         September 30,
           (In millions, except per share amounts)      2007          2006
           Operating income/(loss) and net income
           Woodlands                                 $      18.9      19.6
           Mills                                            (3.5 )    (2.1 )
           Real Estate                                      12.6      12.9
           Corporate                                       (10.6 )    (9.7 )
           Eliminations                                      (.6 )      .6

           Operating income                                 16.8      21.3

           Equity in Del-Tin Fiber                           1.3       2.7
           Interest income                                    .7        .2
           Interest and other debt expense                  (3.9 )    (4.0 )
           Interest capitalized                               .5        .8
           Other income/(expense)                             .3        .2
           Income taxes                                     (6.3 )    (7.9 )

           Net income                                $       9.4      13.3

           Earnings per common share
           Basic                                     $      0.76      1.08
           Assuming dilution                                0.74      1.06

Consolidated

The $3.9 million decrease in net income was the result of decreased operating income from Deltic's Woodlands, Mills, and Real Estate segments, increased Corporate operating expenses, decreased related equity income from Del-Tin Fiber L.L.C., and increased intersegment eliminations of intercompany profit for pine sawtimber's transfer price of logs caused by higher log inventories in the Mills segment due to a temporary suspension of production at the Waldo sawmill caused by a fire.

Operating income decreased $4.5 million. The Woodlands segment decreased $.7 million due mainly to a decreased pine sawtimber harvest level and a decreased average per ton sales price, which was partially offset by increased harvest of pine pulpwood at a higher per-ton price, combined with higher hardwood revenues, lease income, and revenues from well site damage, water usage, and seismic permits. The Mills segment decreased $1.4 million primarily due to a lower sales volume and average sales price per MBF, which was partially offset by a lower manufacturing cost per MBF. Corporate operating expenses increased $.9 million due to higher general and administrative expenses. Intersegment eliminations increased in 2007 because of higher raw material log inventories at the Company's sawmills when compared to the nine month period a year ago.

Woodlands

Selected financial and statistical data for the Woodlands segment is shown in
the following table.



                                               Nine Months Ended
                                                 September 30,
                                                2007        2006
                   Net sales (in millions)
                   Pine sawtimber            $     17.8       22.4
                   Pine pulpwood                    4.8        2.4
                   Hardwood sawtimber                .3         .4
                   Hardwood pulpwood                 .5         .4

                                                    Nine Months Ended
                                                      September 30,
                                                      2007        2006
             Sales volume (in thousands of tons)
             Pine sawtimber                              437.3    489.4
             Pine pulpwood                               367.7    303.8
             Hardwood sawtimber                            8.5     12.1
             Hardwood pulpwood                            55.1     73.7

             Sales price (per ton)
             Pine sawtimber                        $        41       46
             Pine pulpwood                                  13        8
             Hardwood sawtimber                             31       30
             Hardwood pulpwood                               9        5

             Timberland
             Net sales (in millions)               $        .8       .2
             Sales volume (acres)                          424      160
             Sales price (per acre)                $     1,903    1,047

Total net sales decreased $.9 million in the nine months ended in 2007 when compared to the same period in 2006. The decrease was due primarily to a reduction in sales volume of pine sawtimber combined with a decrease in the average sales price per ton and a decrease in freight revenue for hauling to other mills. These decreases were partially offset by an increase in average pine pulpwood sales price and increased harvest volume, sales of timberland, lease income, and revenues for well site damages, water usage, and seismic permits. Operating income decreased $.7 million primarily as a result of the decreased net sales.

Mills
. . .