Executive Overview

The Company recorded net income of $.2 million for the third quarter of 2009, compared to income of $2.5 million for the same period of 2008. Serving as the Company's core operation, the Woodland's segment provided operating income of $4.6 million during the third quarter of 2009, a decrease from $5.1 million in the third quarter of 2008. Deltic's Mills segment reported operating income in the third quarter of 2009 of $.1 million compared to $1.8 million in the third quarter of 2008, the decrease is due to lower average lumber sales prices and volumes. The Real Estate segment recorded a loss of $.8 million in the current-year quarter compared to a loss of $.5 million for the corresponding period of 2008. Deltic owns a 50 percent interest in Del-Tin Fiber L.L.C. and recorded related equity income of $.6 million for the third quarter of 2009, a decrease 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, levels of new and existing homes held for sale, mortgage foreclosures, residential repair and remodeling, commercial construction, industry capacity and production levels, the availability of raw material, and weather conditions. Recent unusually heavy rains have impacted logging conditions in the Company's operating region and have had a negative effect on the third quarter harvest, as well as logs supplied to Company mills from other sources, and this situation has continued into the fourth quarter. Reductions in housing starts seem to have leveled out, but the recovery is expected to be flat until home inventory levels are reduced further and the overall economy shows signs of being able to sustain growth. In addition, uncertainties in the U.S. financial sector continue to negatively impact the housing and residential development sector. The mills have continued to limit production to match demand, while closely monitoring costs and increasing operating efficiencies. 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.

For the third quarter of 2009, both the pine sawtimber harvest volume and average sales price per ton declined seven percent when compared to the third quarter of 2008. In the current period, the pine sawtimber harvest decreased 10,167 tons to 137,269 tons and the average sales price decreased $2 per ton to $27 per ton versus the third quarter 2008 amounts. The change in harvest volume was due to wet weather conditions while the price was affected by reduced demand. Since Deltic follows best management practices and guidelines from the Sustainable Forestry Initiative and Arkansas Forestry Association when harvesting timber, fourth quarter harvest levels may be affected by the unusually wet weather currently occurring in our region. The Company harvested 79,914 tons of pine pulpwood during the third quarter of 2009, a decrease of 4,224 tons from the same period of 2008. The average sales price was $10 per ton, a 23 percent decrease from $13 per ton for the third quarter 2008. Pulpwood volumes and price have been affected by logging conditions and decreased fiber requirements by area papermills. Sales of non-strategic hardwood bottomland were approximately 649 acres at an average price of $1,682 per acre, yielding a net margin of $.8 million during the third quarter of 2009. This compares to sales of approximately 185 acres at an average price of $1,469 per acre, which provided a net margin of $.2 million for the same period of 2008. The Woodlands segment reported hunting lease income of $.5 million in the third quarter of 2009 and $.4 million in the third quarter of 2008. Because of the low historical cost basis in 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.

Deltic currently has under lease approximately 31,500 net mineral acres in the area known as the "Fayetteville Shale Play," an unconventional natural gas reservoir in the state of Arkansas that is currently being developed. The Company received gas royalties from the defined Fayetteville Shale Play area of approximately $119,000 per month during the third quarter of 2009 compared to $132,000 per month during the same period of 2008. Although natural gas prices have declined from a year ago, this has been somewhat offset by higher volumes due to the increased number of producing wells. Total oil and gas royalty income, including the gas royalty from the Fayetteville Shale Play, was $.4 million and $.5 million for the third quarters of 2009 and 2008, respectively. Oil and gas lease rental income was $.5 million for the third quarters of 2009 and 2008.

The Mills segment continues to experience negative market pressures caused by a slump in the overall new housing market. Even though the segment has benefited from lower log stumpage prices in its operating region, current quarter results have declined from a year ago. The third quarter of 2009 had income of $.1 million compared to income of $1.8 million in the third quarter of 2008. The average sales price was $261 per MBF in the third quarter of 2009, a 15 percent decrease from the third quarter 2008 average sales price of $307 per MBF. The current quarter of 2009's lumber sales volume decreased 5.3 million board feet to 64.1 million board feet from the same quarter of 2008. During the current quarter, Deltic's sawmills continued to improve hourly production rates and other operating efficiencies. The Company will continue to manage controllable costs and operate its mills on reduced schedules to balance production with market demand. In addition, the Mills may be impacted by reduced log supply due to the wet weather conditions in its operating region.

The Real Estate segment closed four residential lot sales during the third quarter of 2009, a reduction of seven lots when compared to the same quarter of 2008. The average sales price per lot declined $11,000 when compared to the same quarter a year ago due to the mix of lots sold. Deltic lot offerings are designed to provide for lot availability in many price ranges to fulfill the planned community program. The Company plans to offer 42 lots in the fourth quarter of this year to maintain planned lot inventory mix. Even though there has been no commercial real estate sales in 2009 or 2008, interest remains high. Commercially zoned acreage in and around "The Promenade at Chenal," an upscale shopping center within Chenal Valley, continues to be a focus of commercial interest despite uncertainties in the economy and financial sector. Due to the nature of commercial real estate sales, they are less predictable than residential activity, especially under current market and economic conditions that can impact the timing of potential sales transactions.

Operating results for Del-Tin Fiber are affected by the overall medium density fiberboard ("MDF") market and the plant's operating performance. The MDF market continued to weaken in the third quarter leading to lower prices and demand. The Company's share of Del-Tin's operating income decreased by $.1 million to $.6 million in the third quarter of 2009, when compared to 2008. The demand for thin board, used in laminate flooring, softened in the third quarter and Del-Tin was forced to realign its product mix to meet this change. The decreased percentage of thin board negatively affected the average sale price of MDF sold in the third quarter. Operations could also be affected by wood fiber supply in the fourth quarter of 2009 due to lower chip supplies from area sawmills as they have curtailed production due to reduced log supply.

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 third 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 the act had only an immaterial effect on the current quarter or the year-to-date effective tax rate.

Results of Operations

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

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



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

   Net sales
   Woodlands                                         $       8.9              8.9
   Mills                                                    21.6             27.3
   Real Estate                                               2.3              3.0
   Eliminations                                             (3.8 )           (4.3 )

   Net sales                                         $      29.0             34.9


   Operating income/(loss) and net income
   Woodlands                                         $       4.6              5.1
   Mills                                                      .1              1.8
   Real Estate                                               (.8 )            (.5 )
   Corporate                                                (3.4 )           (4.4 )
   Eliminations                                              (.1 )             .3

   Operating income                                           .4              2.3
   Equity in earnings of Del-Tin Fiber                        .6               .7
   Interest income                                            -                -
   Interest and other debt expense                           (.9 )           (1.2 )
   Interest capitalized                                       -                .1
   Other income                                              (.1 )             .1
   Income taxes                                               .2               .5

   Net income                                        $        .2              2.5


   Earnings per common share
   Basic                                             $       .02              .21
   Diluted                                           $       .02              .21

Consolidated

The $2.3 million decrease in net income is largely due to lower financial results for the Woodlands and Mills operating segments, partially offset by reduced Corporate expense.

Operating income decreased $1.9 million. The Woodlands segment decreased $.5 million mainly because of lower pine sawtimber and pulpwood harvest volumes and average per-ton sales prices, partially offset by increased sales of recreational-use hardwood bottomland. The Mills segment's operating income decreased $1.7 million due to a lower per-unit average sales price and reduced sales volume, partially offset by lower log cost and improved operating efficiencies. The increase in operating loss from Real Estate operations was mainly due to reduced residential sales margins. The improvement in the Corporate segment was due to no acquisition-related professional fees in 2009's current period.

Woodlands

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



                                                Quarter Ended Sept. 30,
                                                  2009            2008

           Net sales (millions of dollars)
           Pine sawtimber                     $         3.7           4.2
           Pine pulpwood                                 .8           1.1
           Hardwood sawtimber                            .4            .1
           Hardwood pulpwood                             .4            .3
           Oil and gas lease rentals                     .5            .5
           Oil and gas royalties (net)                   .5            .5
           Hunting leases                                .5            .4

           Sales volume (thousands of tons)
           Pine sawtimber                             137.3         147.4
           Pine pulpwood                               79.9          84.1
           Hardwood sawtimber                          11.1           2.7
           Hardwood pulpwood                           46.1          26.6

           Sales price (per ton)
           Pine sawtimber                     $          27            29
           Pine pulpwood                                 10            13
           Hardwood sawtimber                            32            35
           Hardwood pulpwood                              9            10

           Timberland
           Net sales (millions of dollars)    $         1.1            .3
           Sales volume (acres)                         649           185
           Sales price (per acre)             $       1,682         1,469

Net sales totaled $8.9 million in 2009 and 2008. Sales volumes of pine sawtimber decreased seven percent compared to 2008, and the per-ton sales price decreased by $2 per ton, or seven percent, from 2008's sales prices. Sales of pine pulpwood decreased $.3 million due to a five percent lower harvest volume and a 23 percent decrease in the average per-ton sales price. Hardwood sawtimber revenues increased $.3 million over 2008's third quarter. Revenues from hauling stumpage to other mills increased $.3 million when compared to the third quarter of 2008. The Company sold 649 acres of non-strategic hardwood bottomland at $1,682 per acre versus 185 acres at $1,469 per acre in 2008. The decrease in operating results was due primarily to reduced revenues from pine timber products, partially offset by increased margins on sales of timberland.

Mills

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



                                                Quarter Ended Sept. 30,
                                                  2009             2008

           Net sales (millions of dollars)
           Lumber                            $         16.7           21.3
           Residual by-products                         4.0            4.6

           Lumber
           Finished production (MMBF)                  63.5           67.9
           Sales volume (MMBF)                         64.1           69.4
           Sales price (per MBF)             $          261            307

Net sales decreased $5.7 million, or 21 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 sold due to improved hourly production rates and operating efficiencies.

Real Estate

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



                                                     Quarter Ended Sept. 30,
                                                       2009            2008

      Net sales (millions of dollars)
      Residential lots                             $         .3              .8
      Chenal Country Club                                   1.9             2.0

      Sales volume
      Residential lots                                        4              11

      Average sales price (thousands of dollars)
      Residential lots                             $         63              74

Net sales decreased $.7 million due to a decrease in revenues from 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 $3.4 million in the third quarter of 2009 versus $4.4 million for the same period of 2008. The decrease was due to lower professional fees associated with expensing of certain acquisition-related costs in the third quarter 2008.

Eliminations

Intersegment sales of timber from Deltic's Woodlands to the Mills segment decreased $.5 million to $3.8 million. The decrease was due to a lower transfer price and volume 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 third quarter of 2009, Deltic's equity in Del-Tin Fiber was $.6 million
compared to $.7 million for the same period of 2008. The decrease was due to
lower sales volumes and per-unit sales prices, partially offset by lower wood
fiber, resin glue, and wax costs. Additional selected financial and statistical
data for Del-Tin Fiber is shown in the following table.



                                                Quarter Ended Sept. 30,
                                                  2009             2008

           Net sales (millions of dollars)   $         12.3           16.6
           Finished production (MMSF)                  25.1           30.9
           Board sales (MMSF)                          24.9           29.7
           Sales price (per MSF)             $          495            558

Income Taxes

The expected income tax expense for the three months ended September 30, 2009 was offset by certain benefits from reconciliation of the 2008 tax returns to the financial income tax accrual for 2008 and other permanent deductions occurring in the period. The expected income tax expense for the three months ended September 30, 2008 was offset by benefits related to statutory income tax rate on timber capital gains, a discrete tax item related to the expiration of the statute of limitations on a state return, and other adjustments from the 2007 return to accrual reconciliation.

Nine Months Ended September 30, 2009 Compared with Nine Months Ended
September 30, 2008

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



                                                     Nine Months Ended Sept. 30,
 (Millions of dollars, except per share amounts)       2009                 2008

 Net sales
 Woodlands                                         $        29.1               33.0
 Mills                                                      58.4               73.2
 Real Estate                                                 6.9                8.2
 Eliminations                                              (13.4 )            (16.1 )

 Net sales                                         $        81.0               98.3


 Operating income and net income/(loss)
 Woodlands                                         $        16.7               20.9
 Mills                                                      (5.4 )             (3.2 )
 Real Estate                                                (2.2 )             (1.4 )
 Corporate                                                  (9.2 )            (10.9 )
 Eliminations                                                 .8                 .1

 Operating income                                             .7                5.5
 Equity in earnings of Del-Tin Fiber                         2.2                2.1
 Interest income                                              -                  .2
 Interest and other debt expense                            (2.7 )             (3.8 )
 Interest capitalized                                         .1                 .4
 Other income                                                 -                  .1
 Income taxes                                                (.3 )               .1

 Net income/(loss)                                 $          -                 4.6


 Earnings per common share
 Basic                                             $          -                 .37
 Diluted                                           $          -                 .37

Consolidated

The $4.6 million decrease in net income is primarily due to decreased operating results from the Woodlands, Mills, and Real Estate segments, partially offset by reduced Corporate general and administrative expenses, by interest expense due to lower interest rates, and by reduced intercompany profit eliminations in Mill inventory caused by reduced intercompany inventory and lower stumpage prices.

Operating income decreased $4.8 million. The Woodlands segment decreased $4.2 million mainly because of lower harvest volumes and per-ton average prices for pine sawtimber and pine pulpwood, and a lower margin from sales of recreational-use hardwood bottomland, partially offset by increases in hardwood sawtimber and pulpwood revenues, oil and gas lease rental and royalty income, income from well-site damages, and reduced cost of fee timber harvested. The Mills segment declined $2.2 million mainly because of a lower average unit sales price and sales volume, which was partially offset by lower log costs and the benefit of improved operating efficiencies. The Real Estate operating loss increased $.8 million primarily a result of fewer residential lot sales and lower operating income from Chenal Country Club. Corporate general and administrative expense decreased $1.7 million due to lower professional fees and incentive plan expense.

Woodlands

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



                                              Nine Months Ended Sept. 30,
                                                 2009               2008

        Net sales (millions of dollars)
        Pine sawtimber                     $           13.2             15.9
        Pine pulpwood                                   2.6              4.0
        Hardwood sawtimber                               .6               .2
        Hardwood pulpwood                                .9               .8
        Oil and gas lease rentals                       1.5              1.5
        Oil and gas royalties (net)                     1.3              1.1
        Hunting leases                                  1.4              1.3

        Sales volume (thousands of tons)
        Pine sawtimber                                459.4            471.0
        Pine pulpwood                                 246.9            273.5
        Hardwood sawtimber                             19.1              6.9
        Hardwood pulpwood                             113.5             74.6

        Sales price (per ton)
        Pine sawtimber                     $             29               34
        Pine pulpwood                                    10               15
        Hardwood sawtimber                               31               34
        Hardwood pulpwood                                 8               11

        Timberland
        Net sales (millions of dollars)    $            3.0              4.0
        Sales volume (acres)                          1,650            1,830
        Sales price (per acre)             $          1,828            2,159

Net sales decreased $3.9 million. The per-ton average sales price for pine sawtimber decreased 15 percent and the pine sawtimber harvest volume decreased two percent from 2008. The volume of pine pulpwood decreased 10 percent from 2008's level and the per-ton average sales price decreased 33 percent. Hardwood sawtimber harvest volumes increased 12,177 tons from 6,909 tons in 2008, and there was an increase of 38,983 tons in hardwood pulpwood harvested. The average price per ton for both hardwood sawtimber and pulpwood decreased $3 from 2008. Oil and gas lease rental and royalty income increased $.2 million over 2008's results. The Company sold approximately 1,650 acres of non-strategic hardwood bottomland at an average price of $1,828 per acre compared to 1,830 acres at $2,159 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 reduced volume and the mix of harvest by company.

Mills

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



                                              Nine Months Ended Sept. 30,
                                                 2009               2008

         Net sales (millions of dollars)
         Lumber                            $           44.8             56.6
         Residual by-products                          11.1             13.0
         Lumber
         Finished production (MMBF)                   178.6            194.5
         Sales volume (MMBF)                          182.5            202.1
         Sales price (per MBF)             $            246              280

Net sales decreased $14.8 million due to the lower lumber price and sales volume. The average sales price decreased 12 percent from 2008, while sales volume decreased 10 percent. Total operating loss increased $2.2 million due to the factors impacting net sales, partially offset by lower per-ton log cost and by the benefit of 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.



                                                   Nine Months Ended Sept. 30,
                                                      2009              2008

     Net sales (millions of dollars)
     Residential lots                             $          .6              1.8
     Speculative home                                        .6               -
     Chenal Country Club                                    5.5              5.9

     Sales volume
. . .