Executive Overview

The Company recorded net income of $1 million for the second quarter of 2009, compared to income of $2.5 million for the same period of 2008. The Woodlands segment maintained its core operation position, providing operating income of $6.4 million during the second quarter of 2009. Deltic's Real Estate and Mills segments both reported operating losses in the second quarter of 2009. The Real Estate segment recorded a loss of $.4 million in the current-year quarter compared to a loss of $.3 million for the corresponding period of 2008. The higher loss was due to fewer lot sales and lower operating income from Chenal Country Club in the 2009 period. The Company's Mills segment recorded an operating loss of $1.9 million in the second quarter of 2009, which compares to a loss of $.6 million in the second quarter of 2008, a result of lower average lumber prices and sales volume due to weak demand. Deltic owns a 50 percent interest in Del-Tin Fiber L.L.C. and recorded related equity income of $.8 million for the second 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. Housing starts trended upward slightly during the second quarter but with the large inventory of unsold homes, the potential for increases in home mortgage foreclosures, rising unemployment, and a depressed economy, there is a low probability of any significant recovery in 2009 and 2010 for industries closely associated with the housing market. Even though there have been mill curtailments and closures and the lumber supply has continued to shrink toward current demand levels, supply still exceeds demand. 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. Notwithstanding, 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 in the current operating environment.

For the second quarter of 2009, the pine sawtimber harvest level increased 23,415 tons to 166,606 tons compared to the second quarter of 2008's harvest level of 143,191 tons. The increase is due largely to favorable weather conditions versus the first quarter of 2009 and to timing of the harvest. Since Deltic manages its timberlands on a sustainable-yield basis the Company plans to keep 2009's total pine sawtimber harvest volume near the estimated growth volume level of approximately 575,000 tons. The average sales price for pine sawtimber was $30 per ton in the second quarter of 2009, a 14 percent decrease from the second 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 77,194 tons of pine pulpwood during the second quarter of 2009, a decrease of 12,424 tons from the same period in 2008. The average sales price was $10 per ton, a 33 percent decrease from $15 per ton for the second quarter of 2008. Lower pulpwood prices and volume are due to decreased demand for fiber by area papermills. The Company sold approximately 724 acres of non-strategic hardwood bottomland at an average sales price of $2,100 per acre, which provided a net margin of $1.2 million during the second quarter of 2009. This compares to sales of approximately 971 acres at an average sales price of $2,300 per acre, yielding a net margin of $1.8 million for the same period of 2008. The Woodlands segment reported hunting lease income of $.5 million in the second quarter of 2009 and 2008. Because of the low historical cost basis for its timber and timberlands, the Woodlands segment is generating positive margins on current sales activities and management does not expect this to change in the future.

Advances in technology 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 $92,000 per month during the second quarter of 2009 compared to $119,000 per month during the second quarter of 2008, reflecting a 65 percent decrease in average gas prices, though volumes were 148 percent greater. Total oil and gas royalty income, including the gas royalty income from the Fayetteville Shale Play, was $.4 million and $.3 million for the second quarter of 2009 and 2008, respectively, due to increased production in other areas. Oil and gas lease rental income was $.5 million for the second quarter of 2009 and $.4 million in 2008.

Even though the Mills segment's second quarter of 2009 showed a quarter-over-quarter improvement from the first quarter of 2009, it operates in a weaker market than in 2008. As a result, the second quarter of 2009 had a loss of $1.9 million versus a loss of $.6 million in the same period of 2008. The average sales price was $240 per MBF in the second quarter of 2009, a 17 percent decrease from the average sales price of $289 per MBF for the same quarter of 2008. Lumber sales were 66.1 million board feet in the current period of 2009, a decrease when compared to 70.2 million board feet for the same period of 2008, as the Company reduced operating hours to balance production with demand. In addition, the Company expects the historical volatility of lumber prices to continue in the future as the forest products industry tries to balance production with demand. At current production levels, over half of the logs supplied to Company sawmills will come from its strategically located fee timberlands.

The Real Estate segment closed five residential lot sales during the second quarter of 2009, a reduction of two 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. Any 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. There has been no commercial real estate sales to-date. 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 continue to impact the timing of potential sales transactions. Current economic conditions also continue to affect discretionary spending by both individuals and corporations, which has a negative impact on membership levels and activities at Chenal Country Club.

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 operating income increased during the second quarter of 2009, when compared to 2008 due primarily to lower wood, resin glue, and wax costs. This benefit was partially offset by a lower sales volume and per-unit sales price. The overall MDF market continues to be 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.)

In May of 2008, the TREE Act was enacted to provide a reduced federal tax rate on timber gains. Under the provisions of this act, gains on qualified timber sales had the potential to be taxed at a 15 percent alternate rate for corporations. This provision was adopted for one year and expired on May 23, 2009. Deltic reported the effects of the act in the second quarter of 2008. Due to the lack of taxable income for Deltic in 2008, the effects of this act were removed in the fourth quarter of 2008. Deltic has projected the effects of this act to be inconsequential for 2009 and thus had no effect on the current quarter or year's effective tax rate.

Results of Operations

Three Months Ended June 30, 2009 Compared with Three Months Ended June 30, 2008

In the following tables, Deltic's net sales and results of operations are
presented for the quarters ended June 30, 2009 and 2008. Explanations of
significant variances and additional analyses for the Company's consolidated and
segment operations follow the tables.



                                                        Quarter Ended June 30,
   (Millions of dollars, except per share amounts)      2009               2008

   Net sales
   Woodlands                                         $      10.3             11.5
   Mills                                                    20.8             26.1
   Real Estate                                               3.0              2.9
   Eliminations                                             (5.0 )           (4.9 )

   Net sales                                         $      29.1             35.6


   Operating income/(loss) and net income
   Woodlands                                         $       6.4              7.4
   Mills                                                    (1.9 )            (.6 )
   Real Estate                                               (.4 )            (.3 )
   Corporate                                                (2.9 )           (3.0 )
   Eliminations                                               .3               -

   Operating income                                          1.5              3.5
   Equity in earnings of Del-Tin Fiber                        .8               .7
   Interest income                                            -                .1
   Interest and other debt expense                           (.9 )           (1.3 )
   Interest capitalized                                       .1               .1
   Other income                                               -               (.1 )
   Income taxes                                              (.5 )            (.5 )

   Net income                                        $       1.0              2.5


   Income per common share
   Basic                                             $       .08              .19
   Diluted                                           $       .08              .19

Consolidated

The $1.5 million decrease in net income is largely due to lower financial results for the Woodlands and Mills operating segments, partially offset by reduced eliminations of intercompany profits in mill inventory caused by lower stumpage prices and by decreased interest expense from lower interest rates.

Operating income decreased $2 million. The Woodlands segment decreased $1 million mainly because of a lower pine pulpwood harvest volume and average per-ton sales price and reduced margins from sales of recreational-use hardwood bottomland. The Mills segment's operating income decreased $1.3 million due to a lower per-unit average sales price and reduced production volume, partially offset by lower log cost and operating efficiencies. The $.3 million benefit from intercompany eliminations is due to the same reasons affecting net income.

Woodlands

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



                                                Quarter Ended June 30,
                                                  2009            2008

           Net sales (millions of dollars)
           Pine sawtimber                     $         4.9           4.9
           Pine pulpwood                                 .8           1.3
           Hardwood sawtimber                            .1            .1
           Hardwood pulpwood                             .3            .2
           Oil and gas lease rentals                     .5            .4
           Oil and gas royalties (net)                   .4            .3
           Hunting leases                                .5            .5

           Sales volume (thousands of tons)
           Pine sawtimber                             166.6         143.2
           Pine pulpwood                               77.2          89.6
           Hardwood sawtimber                           4.6           1.9
           Hardwood pulpwood                           34.2          28.0

           Sales price (per ton)
           Pine sawtimber                     $          30            35
           Pine pulpwood                                 10            15
           Hardwood sawtimber                            28            34
           Hardwood pulpwood                              8             9

           Timberland
           Net sales (millions of dollars)    $         1.5           2.2
           Sales volume (acres)                         724           971
           Sales price (per acre)             $       2,100         2,300

Net sales decreased $1.2 million. Sales volumes of pine sawtimber increased 16 percent compared to 2008, but were offset by lower sales prices of $30 per ton, a 14 percent decrease from 2008's sales prices. Sales of pine pulpwood decreased $.5 million due to a 14 percent lower harvest volume and a 33 percent decrease in the average per-ton sales price. The Company sold 724 acres of non-strategic hardwood bottomland at $2,100 per acre versus 971 acres at $2,300 per acre in 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 June 30,
                                                  2009            2008

            Net sales (millions of dollars)
            Lumber                            $        15.8          20.3
            Residual by-products                        4.1           4.3

            Lumber
            Finished production (MMBF)                 61.8          66.3
            Sales volume (MMBF)                        66.1          70.2
            Sales price (per MBF)             $         240           289

Net sales decreased $5.3 million, or 20 percent, due to the lower lumber sales price and decreased sales volume. The Mills segment's net sales decrease was partially offset by lower per-ton log costs combined with 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 June 30,
                                                       2009            2008

      Net sales (millions of dollars)
      Residential lots                             $         .3             .5
      Speculative home                                       .6             -
      Chenal Country Club                                   2.1            2.3

      Sales volume
      Residential lots                                        5              7
      Speculative home                                        1             -

      Average sales price (thousands of dollars)
      Residential lots                             $         53             72
      Speculative home                                      556             -

Net sales increased $.1 million due to an increase in revenues from a speculative home sale, partially offset by a decrease in residential lot sales and revenues at Chenal Country Club. The decrease in the segment's operating income was due primarily to a reduced margin from residential lot sales and lower operating income for Chenal Country Club.

Corporate

Operating expense for Corporate functions was $2.9 million in the second quarter of 2009 versus $3 million for the same period of 2008. The decrease was due to lower general and administrative expenses.

Eliminations

Intersegment sales of timber from Deltic's Woodlands to the Mills segment increased $.1 million to $5 million. The increase was due to an increase in the volume of logs partially offset by a lower transfer price coming into Deltic sawmills from its fee timberlands. Transfer prices are approximately at market, which were higher in the same quarter last year.

Equity in Del-Tin Fiber

For the second quarter of 2009, Deltic's equity in Del-Tin Fiber was $.8 million
compared to $.7 million for the same period of 2008. The increase was due to
lower wood fiber, resin glue, and wax costs, partially offset by a lower sales
volume and per-unit sales price. Additional selected financial and statistical
data for Del-Tin Fiber is shown in the following table.



                                                Quarter Ended June 30,
                                                  2009            2008

            Net sales (millions of dollars)   $        13.1          15.4
            Finished production (MMSF)                 26.0          30.3
            Board sales (MMSF)                         25.6          29.3
            Sales price (per MSF)             $         515           526

Income Taxes

The effective income tax rate was 33 percent for 2009 and 19 percent for 2008. The increase was primarily because of a lower federal tax rate in the second quarter of 2008 due to the TREE Act. The act expired in May 2009, and the Company estimates the act will be inconsequential to the financial results in 2009.

Six Months Ended June 30, 2009 Compared with Six Months Ended June 30, 2008

In the following tables, Deltic's net sales and results of operations are
presented for the six months ended June 30, 2009 and 2008. Explanations of
significant variances and additional analyses for the Company's consolidated and
segment operations follow the tables.



                                                      Six Months Ended June 30,
  (Millions of dollars, except per share amounts)      2009                2008

  Net sales
  Woodlands                                         $      20.2               24.1
  Mills                                                    36.8               45.9
  Real Estate                                               4.6                5.2
  Eliminations                                             (9.6 )            (11.8 )

  Net sales                                         $      52.0               63.4


  Operating income and net income/(loss)
  Woodlands                                         $      12.1               15.8
  Mills                                                    (5.5 )             (5.0 )
  Real Estate                                              (1.4 )              (.9 )
  Corporate                                                (5.8 )             (6.5 )
  Eliminations                                               .9                (.2 )

  Operating income                                           .3                3.2
  Equity in earnings of Del-Tin Fiber                       1.6                1.4
  Interest income                                            -                  .2
  Interest and other debt expense                          (1.8 )             (2.6 )
  Interest capitalized                                       .1                 .3
  Other income                                               .1                 -
  Income taxes                                              (.5 )              (.4 )

  Net income/(loss)                                 $       (.2 )              2.1


  Income/(Loss) per common share
  Basic                                             $      (.02 )              .17
  Diluted                                           $      (.02 )              .16

Consolidated

The $2.3 million decrease in net income is primarily due to decreased operating results from the Woodlands, Mills, and Real Estate segments, partially offset by reduced interest expense due to lower interest rates and by reduced intercompany profit eliminations in Mill inventory caused by lower stumpage prices.

Operating income decreased $2.9 million. The Woodlands segment decreased $3.7 million in-part because of a lower per-ton average price for pine sawtimber, lower harvest volume and per-ton sales price for pine pulpwood, and lower margin from sales of recreational-use hardwood bottomland, partially offset by increases in oil and gas lease rental and royalty income, income from well-site damages, and reduced depletion expense. The Mills segment declined $.5 million mainly because of a lower average unit sales price, which was partially offset by lower log costs and improved operating efficiencies. Real Estate operating loss increased $.5 million primarily as a result of fewer residential lot sales and lower operating income from Chenal Country Club. Corporate operating expense decreased $.7 million due to lower general and administrative expenses. The eliminations benefit of $1.1 million is due to the same reason affecting net income.

Woodlands

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



                                               Six Months Ended June 30,
                                                 2009              2008

         Net sales (millions of dollars)
         Pine sawtimber                     $           9.5            11.7
         Pine pulpwood                                  1.8             2.9
         Hardwood sawtimber                              .2              .1
         Hardwood pulpwood                               .5              .5
         Oil and gas lease rentals                      1.0              .9
         Oil and gas royalties (net)                     .8              .6
         Hunting leases                                  .9              .9

         Sales volume (thousands of tons)
         Pine sawtimber                               322.1           323.6
         Pine pulpwood                                167.0           189.3
         Hardwood sawtimber                             8.0             4.2
         Hardwood pulpwood                             67.4            48.0

         Sales price (per ton)
         Pine sawtimber                     $            29              36
         Pine pulpwood                                   11              15
         Hardwood sawtimber                              30              34
         Hardwood pulpwood                                8              11

         Timberland
         Net sales (millions of dollars)    $           1.9             3.7
         Sales volume (acres)                         1,001           1,645
         Sales price (per acre)             $         1,900           2,200

Net sales decreased $3.9 million. The per-ton average sales price for pine sawtimber decreased 19 percent. The volume of pine pulpwood decreased 12 percent from 2008 levels and the per-ton average sales price decreased 27 percent. Oil and gas lease rental and royalty income increased $.3 million over 2008's results. Income from well-site damages increased $.3 million from 2008. The Company sold approximately 1,001 acres of non-strategic hardwood bottomland at an average price of $1,900 per acre compared to 1,645 acres at $2,200 per acre in the same period of 2008. The decrease in operating results was due primarily to the same factors affecting net sales, except for cost of fee timber harvested, which was $.6 million lower in 2009 than in 2008 due to the mix of harvest by company.

Mills

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



                                               Six Months Ended June 30,
                                                 2009              2008

          Net sales (millions of dollars)
          Lumber                            $          28.1            35.2
          Residual by-products                          7.2             8.4

          Lumber
          Finished production (MMBF)                  115.1           126.6
          Sales volume (MMBF)                         118.4           132.6
          Sales price (per MBF)             $           238             266

Net sales decreased $9.1 million due to the lower lumber price and sales volume. The average sales price decreased 11 percent from 2008, while sales volume also decreased 11 percent. Total operating income declined $.5 million due to the factors impacting net sales, partially offset by lower per-ton log cost and by improved operating efficiencies, which resulted in lower unit direct manufacturing cost.

Real Estate

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



. . .