Executive Overview

The Company recorded a net loss of $1.2 million for the first quarter of 2009, compared to a loss of $.4 million for the same period of 2008. The Woodlands segment, Deltic's established core operation, provided $5.7 million in operating income during the current quarter of 2009. Deltic's Real Estate and Mills segments reported operating losses in the first quarter of 2009. The Real Estate segment recorded a loss of $1 million in the current-year quarter compared to a loss of $.6 million for the corresponding period of 2008 due to a lack of sales activity in the 2009 period. The Company's Mills segment recorded an operating loss of $3.6 million in the first quarter of 2009, which compares to a loss of $4.4 million in the first quarter of 2008. The improvement reflects increased hourly production rates and lower log costs, which helped to offset the historical low sales price per MBF of lumber sold and low demand due to reduced housing starts that is affecting the forest products industry. Deltic owns a 50 percent interest in Del-Tin Fiber L.L.C. and recorded related equity income of $.8 million for the first quarter of 2009, an increase from $.7 million for the same quarter of 2008.

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, credit availability and associated costs, imports, foreign exchange rates, housing starts, new and existing home inventories, foreclosures, residential repair and remodeling, commercial construction, industry capacity and production levels, the availability of raw material, and weather conditions. The downturn in the United States economy and uncertainties in the financial sector have negatively impacted any recovery of the housing market and industries closely associated with that market. The current inventory of unsold homes and low-level of housing starts indicated weakness continued in the housing market. With this, residential lot sales and lumber demand will continue to be affected for the foreseeable future. Because of mill curtailments and closures, the lumber supply of late has been moving toward demand levels and with the recent seasonal increase in construction activity, lumber sales prices were moving slightly upward at the end of the first quarter. 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. However, the Company will continue its efforts to increase operating efficiencies, reduce controllable manufacturing costs, manage production levels to match demand, and implement other cost reducing measures required by the market.

For the first quarter of 2009, pine sawtimber harvest levels decreased 24,843 tons to 155,531 tons, when compared to the first quarter of 2008's harvest level of 180,374 tons. The decrease is due in part to weather and timing of the harvest. Deltic plans to keep 2009's total pine sawtimber harvest volume comparable to the level in 2008, thus continuing to manage the timberlands on a sustainable-yield basis. The average sales price for pine sawtimber was $29 per ton in the first quarter of 2009, a 22 percent decrease from the first quarter of 2008. The decrease is a result of lower demand due to curtailments and closures of sawmills in Deltic's operating region. The Company harvested 89,833 tons of pine pulpwood during the first quarter of 2009, a decrease of 9,943 tons from the same period in 2008. The average sales price was $11 per ton, a 31 percent decrease from $16 per ton for the first quarter of 2008. Lower pulpwood prices and volume are due to decreased demand for fiber by area papermills. The Company sold approximately 277 acres of non-strategic hardwood bottomland at an average sales price of $1,485 per acre during the first quarter of 2009 compared to sales of approximately 674 acres at an average sales price of $2,128 per acre for the same period of 2008. The 2009 decrease in the per-acre sales price is due to the location and quality of land sold. The Woodlands segment reported hunting lease income of $.5 million in the first quarter of 2009 essentially unchanged from first quarter of 2008.

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 current area of activity known as the "Fayetteville Shale Play" is an unconventional natural gas reservoir ranging in depth from 1,300 feet to 6,500 feet, and is spread across multiple Arkansas counties. Deltic has leased approximately 32,100 net mineral acres in this area to various exploration enterprises and received applicable lease bonus payments and the possibility of future royalty income should production be established. The Company

continues to evaluate additional leasing requests within the currently defined boundary of the Fayetteville Shale Play, although future leasing will probably not be significant within the boundary currently defined by the Arkansas Oil and Gas Commission. The ultimate benefit to Deltic from these mineral leases remains speculative and unknown to the Company and is contingent on the successful extraction and sale of natural gas from this area. Deltic's gas royalties from the defined Fayetteville Shale Play area were approximately $133,000 per month during the first quarter of 2009 compared to $40,000 per month during the first quarter of 2008. Deltic has reported total oil and gas royalty income of $.4 million and $.3 million for the first quarter of 2009 and 2008, respectively. Oil and gas lease rental income was $.5 million for the first quarter of 2009 and 2008.

The Mills segment continues to operate in a weak market as the forest products industry struggles to balance production with demand. The average sales price was $234 per MBF in the first quarter of 2009, a three percent decrease from the average sales price of $240 per MBF for the same quarter of 2008. Lumber sales were 52.3 million board feet in the current period of 2009, a decrease when compared to 62.5 million board feet for the same period of 2008, as the Company reduced operating hours to balance production with demand. Deltic will continue to manage production levels to approximate market demand. The Mills showed financial improvement in the first quarter 2009 versus 2008 because of increased hourly productivity rates and lower log cost. As with any commodity market, the Company expects the historical volatility of lumber prices to continue in the future. The Company plans for over half of the logs supplied to its sawmills to come from its strategically located fee timberlands.

The Real Estate segment closed no residential lot sales during the first quarter of 2009, a reduction of seven residential lots when compared to the same quarter in 2008. Deltic has a low cost basis in its three developments, which allows it to maintain lot sales prices while waiting on the market to improve. Deltic's lot development plans provide for lot offerings that represent most real estate market segments for planned communities. The Company has an adequate supply of lots in the three market segment tiers and does not plan to develop any new neighborhoods in 2009. Future annual development activity will be dependent upon the demand for the Company's residential lots. Commercial real estate sales activity is by nature less predictable than residential activity. No commercial sales occurred in the first quarter of 2009 or 2008. Multi-family housing sites and commercially zoned acreage in and around the area of "The Promenade at Chenal," an upscale shopping center within Chenal Valley, continue to receive interest, but tightened credit markets and economic uncertainties have impacted the timing of potential sales transactions. The Company had no sales of undeveloped acreage during the first quarter of 2009 or 2008.

Operating results for Del-Tin Fiber are affected by the overall medium density fiberboard ("MDF") market and the plant's operating performance. Del-Tin's operational income increased during the first quarter of 2009, when compared to 2008, due primarily to lower wood and resin glue costs. The overall MDF market has been able to achieve better supply and demand balance versus other wood product markets. With regard to the Company's equity position in Del-Tin, Deltic continues to reduce depreciation expense related to the add-back per thousand square feet manufactured, which relates to the impairment taken by the Company in 2002 that was not recorded at the Del-Tin level. 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. (For further discussion, refer to Note 4 to the consolidated financial statements.)

Results of Operations

In the following tables, Deltic's net sales and results of operations are
presented for the quarters ended March 31, 2009 and 2008. Explanations of
significant variances and additional analyses for the Company's consolidated and
segment operations follow the tables.



                                                        Quarter Ended March 31,
  (Millions of dollars, except per share amounts)       2009                2008
  Net sales
  Woodlands                                         $         9.9              12.6
  Mills                                                      16.0              19.8
  Real Estate                                                 1.6               2.3
  Eliminations                                               (4.6 )            (6.9 )

  Net sales                                         $        22.9              27.8


  Operating income/(loss) and net loss
  Woodlands                                         $         5.7               8.4
  Mills                                                      (3.6 )            (4.4 )
  Real Estate                                                (1.0 )            (0.6 )
  Corporate                                                  (2.9 )            (3.5 )
  Eliminations                                                 .6              (0.2 )

  Operating loss                                             (1.2 )             (.3 )
  Equity in earnings of Del-Tin Fiber                          .8                .7
  Interest income                                              -                 .1
  Interest and other debt expense                             (.9 )            (1.3 )
  Interest capitalized                                         -                 .2
  Other income                                                 .1                .1
  Income taxes                                                 -                 .1

  Net loss                                          $        (1.2 )             (.4 )


  Loss per common share
  Basic and diluted                                 $        (.09 )            (.03 )

Consolidated

The $.8 million decrease in net income is largely due to reductions in real estate sales activity, lower pine sawtimber harvest volume at a lower average sales price, fewer acres of non-strategic timberland sold, and a reduced pine pulpwood harvest volume and per-ton sales price, which were partially offset by improved results from the Mills segment due to increased operating efficiencies and lower log cost, lower general and administrative expenses, and increased equity income from Del-Tin Fiber. The decrease in operating income was due primarily to the same factors impacting net income.

Woodlands

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



                                                Quarter Ended March 31,
                                                  2009            2008
           Net sales (millions of dollars)
           Pine sawtimber                     $         4.5           6.7
           Pine pulpwood                                1.0           1.6
           Hardwood sawtimber                            .1            .1
           Hardwood pulpwood                             .3            .3
           Oil and gas lease rentals                     .5            .5
           Oil and gas royalties (net)                   .4            .3
           Hunting leases                                .5            .4

           Sales volume (thousands of tons)
           Pine sawtimber                             155.5         180.4
           Pine pulpwood                               89.8          99.8
           Hardwood sawtimber                           3.4           2.4
           Hardwood pulpwood                           33.2          20.0

           Sales price (per ton)
           Pine sawtimber                     $          29            37
           Pine pulpwood                                 11            16
           Hardwood sawtimber                            33            34
           Hardwood pulpwood                              8            13

           Timberland
           Net sales (millions of dollars)    $          .4           1.4
           Sales volume (acres)                         277           674
           Sales price (per acre)             $       1,485         2,128

Net sales decreased $2.7 million. Sales of pine sawtimber decreased $2.2 million due to a 14 percent lower sales volume at a lower per-ton sales price of $29, which is a 22 percent decrease when compared to $37 per ton in 2008. The decreased volume is due mainly to weather conditions and timing of the pine sawtimber harvest. Sales of pine pulpwood decreased $.6 million due to a 10 percent lower harvest volume and a 31 percent decrease in the average per-ton sales price. The decline in both volume and price is due to decreased fiber demand by area papermills. The Company sold 277 acres of non-strategic hardwood bottomland at $1,485 per acre versus 674 acres at $2,128 per acre in 2008. There was a $.5 million increase in other operating income primarily from well site damages in the current period of 2009 versus the first quarter of 2008. The decrease in operating results was due primarily to the decrease in net sales.

Mills

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



                                                Quarter Ended March 31,
                                                  2009             2008
           Net sales (millions of dollars)
           Lumber                            $         12.3           15.0
           Residual by-products                         3.1            4.0

           Lumber
           Finished production (MMBF)                  53.3           60.3
           Sales volume (MMBF)                         52.3           62.5
           Sales price (per MBF)             $          234            240

Net sales decreased $3.8 million, or 19 percent, due to lower lumber sales price and sales volume. The Mills segment's net sales decrease was partially offset by lower per-ton log costs and reduced direct manufacturing costs per MBF due to improved hourly production rates.

Real Estate

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



                                                     Quarter Ended March 31,
                                                       2009            2008
      Net sales (millions of dollars)
      Residential lots                             $         -               .5
      Commercial acreage                                     -               -
      Undeveloped acreage                                    -               -
      Chenal Country Club                                   1.5             1.5

      Sales volume
      Residential lots                                       -                7
      Commercial acres                                       -               -
      Undeveloped acres                                      -               -

      Average sales price (thousands of dollars)
      Residential lots                             $         -               68
      Commercial acres                                       -               -
      Undeveloped acres                                      -               -

Net sales decreased $.7 million due to a decrease in sales of residential lots. The decrease in the segment's operating income was due primarily to the reduced lot sales and a lower operating margin at Chenal Country Club.

Corporate

The decrease in operating expense for Corporate functions was due to lower general and administrative expenses, primarily employee incentive plan expenses.

Eliminations

Intersegment sales of timber from Deltic's Woodlands to the Mills segment decreased $2.3 million to $4.6 million. The decrease was due to a lower transfer price from the Woodlands segment offset by an increase in the volume of logs coming into Deltic sawmills from its fee timberlands. Transfer prices are approximately that of market which were higher in the same quarter last year.

Equity in Del-Tin Fiber

For the first quarter of 2009, Deltic's equity in Del-Tin Fiber was $.8 million
compared to $.7 million for the same period of 2008. The $.1 million increase in
the first quarter of 2009 when compared to 2008 was due to lower wood fiber and
resin glue costs. Additional selected financial and statistical data for Del-Tin
Fiber is shown in the following table.



                                                Quarter Ended March 31,
                                                  2009             2008
           Net sales (millions of dollars)   $         14.0           16.0
           Finished production (MMSF)                  26.5           29.8
           Board sales (MMSF)                          26.8           30.1
           Sales price (per MSF)             $          518            532

Income Taxes

The effective income tax rate was one percent for 2009 and 28 percent for 2008. The decrease from 2008 to 2009 was primarily as a result of recent state tax law changes.

Liquidity and Capital Resources

Cash Flows and Capital Expenditures

Net cash provided by operating activities totaled $.5 million for the first three months of 2009 compared to $1.9 million for the same period in 2008. Changes in operating working capital, other than cash and cash equivalents, required cash of $1.5 million and $1.2 million in 2009 and 2008, respectively. The Company's accompanying Consolidated Statements of Cash Flows identifies other differences between net income and cash provided by operating activities for each reporting period.

Capital expenditures required cash of $4.7 million in the current-year period and $5.6 million a year ago. Capital expenditures by segment consisted of the following:

                                                       Three Months
                                                      Ended March 31,
              (Thousands of dollars)                  2009        2008
              Woodlands                             $   3,966     3,291
              Mills                                       579     1,624
              Real Estate                                 168       862
              Corporate                                    42        45

              Capital expenditures                      4,755     5,822
              Non-cash land exchange                      (35 )    (249 )

              Capital expenditures requiring cash   $   4,720     5,573

The net change in purchased stumpage inventory to be utilized in the Company's sawmill operations used cash of $.5 million in 2009 and 2008. The Company advanced Del-Tin Fiber $1.9 million in the first quarter of 2009, and received repayments of $1.4 million, for a net advance of $.5 million during the first quarter. This compares to a net repayment of $.1 million for the same period of 2008. Funds held by trustees to be used for acquisitions of timberland designated as "replacement property" for income tax purposes, as required for tax-deferred exchanges, showed a net decrease of $2.8 million in the first quarter of 2009 versus an increase of $.2 million for the same period of 2008. Deltic received proceeds from other investing activities of $.4 million and $.2 million in 2009 and 2008, respectively. Deltic had borrowings of $3.5 million and repayments of borrowings of $1.5 million in 2009 versus no activity in 2008. The Company had $1.1 million of treasury stock purchases in 2009 and none in 2008. Deltic paid dividends on common stock of $.9 million during both 2009 and 2008. Proceeds from stock option exercises and related tax benefits in 2009 decreased $.8 million from 2008.

Financial Condition

Working capital totaled $4.5 million at March 31, 2009, and $4.8 million at December 31, 2008. Deltic's working capital ratio at March 31, 2009, was 1.39 to 1, compared to 1.42 to 1 at the end of 2008. Cash and cash equivalents at the end of the first quarter of 2009 were $.3 million compared to $2.4 million at the end of 2008. During the first three months of 2009, total indebtedness of the Company increased $2 million. Deltic's long-term debt to stockholders' equity ratio was .370 to 1 at March 31, 2009 and .356 to 1 at December 31, 2008.

Liquidity

The primary sources of the Company's liquidity are internally generated funds, access to outside financing, and working capital. The Company's current strategy for growth continues to emphasize its timberland acquisition program, and future real estate development opportunities, while expanding lumber production as market conditions allow.

In December 2000, the Company's Board of Directors authorized a stock repurchase program of up to $10 million of Deltic common stock. In December 2007, the Board announced a $25 million expansion of this program. As of March 31, 2009, the Company had expended $14.3 million under this program, with the purchase of 363,462 shares at an average cost of $39.35 per share; 35,571 shares have been purchased in 2009 under this program. In its two previously completed repurchase programs, Deltic purchased 479,601 shares at an average cost of $20.89 and 419,542 shares at a $24.68 per share average cost, respectively.

Off-Balance Sheet Arrangements, Contractual Obligations, and Commitments

On August 26, 2004, Del-Tin Fiber refinanced its existing long-term debt by entering into a credit agreement consisting of a letter of credit and term loan with multiple lending institutions. The funds provided from this credit agreement were used, together with the existing balance in Del-Tin Fiber's debt service reserve and bond sinking fund accounts, to redeem $60 million of its $89 million industrial revenue bonds. Under the new credit agreement, the lenders, on September 1, 2004, loaned Del-Tin Fiber $30 million which is repayable over five years in equal quarterly installments, beginning December 31, 2004, and issued on Del-Tin Fiber's behalf, a letter of credit in the amount of $29.7 million to support the remaining industrial revenue bonds originally issued in 1998 by Union County, Arkansas. Concurrent with this event, on August 26, 2004, Deltic executed a guarantee agreement in connection with the refinancing of the debt of Del-Tin Fiber. Under Deltic's guarantee agreement, Deltic unconditionally guarantees the due and punctual payment of 50 percent ($16 million at March 31, 2009) of Del-Tin's obligations under its credit agreement.

The Company has adopted the provisions of FASB Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB

Interpretation No. 34." In accordance with FIN 45, initially Deltic estimated the fair value of its guarantee of Del-Tin Fiber's credit agreement to be $3.5 million and included this non-cash amount in the Company's March 31, 2005 Consolidated Balance Sheet as a long-term liability with an offsetting increase in the Company's investment in Del-Tin Fiber. Deltic is reducing this liability systematically over the life of the credit agreement, as the Company is released from risk under the guarantee. As of March 31, 2009, Deltic's remaining liability regarding the guarantee was $.3 million.

The Company has both funded and unfunded noncontributory defined benefit retirement plans that cover the majority of its employees. The plans provide defined benefits based on years of service and final average salary. Deltic also has other postretirement benefit plans covering substantially all of its employees. The health care plan is contributory with participants' contributions adjusted as needed; the life insurance plan is noncontributory. (For information about material assumptions underlying the accounting for these plans and other components of the plans, refer to Note 15 to the consolidated financial statements included in the Company's 2008 annual report on Form 10-K.)

Tabular summaries of the Company's contractual cash payment obligations and other commercial commitment expirations, by period, are presented in the following tables.

                                                                    During        2010       2012      After
(Millions of dollars)                                Total           2009        to 2011    to 2013    2013
Contractual cash payment obligations
Real estate development committed capital
costs                                             $        5.0             .5        4.5         -        -
Woodlands land acquisition and committed
capital costs                                               .5             .5         -          -        -
Mills committed capital costs                               .4             .4         -          -        -
Long-term debt                                            78.9            1.1        2.2       35.6     40.0
Interest on debt*                                         21.4            3.0        6.0        5.2      7.2
Retirement plans                                          14.2             .8        2.3        2.7      8.4
Other postretirement benefits                              5.5             .4        1.1        1.1      2.9
Unrecognized tax benefits                                  1.9             -         1.3         .6       -
Other long-term liabilities                                1.5             .1        1.2         .2       -

                                                  $      129.3            6.8       18.6       45.4     58.5

. . .