Adams Resources & Energy (AE) 10 Aug 232023 Q2 Earnings call transcript

Good morning, everyone. Welcome to the Adams Resources & Energy Second Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]

call recorded. this reminder, a is being As

Now Beisler, Advisors. Investor turn the Please to John call over Relations ahead. I will go at Three Part

Thank the Welcome second morning, XXXX you, & quarter Resources Energy to call. conference and good Adams everyone.

call the me and Resources & Kevin EVP and CFO, are Energy Joining today Adams and President the CEO, on company’s Roycraft; Tracy Ohmart.

Company, the the President GulfMark Harrison, of Service Transport Wade Q&A call. Asset President for us at and Additionally, will Holdings; of joining Greg end Mills, the session be of

is also replay accurate the that call, advised be call of as transcript at Investor being This will be webcast of be be reading. Today’s accessed audio Relations any the date and time-sensitive through including adamsresources.com. or the session Please can the information Q&A link any may on recorded. longer page no

would made statements the statements facts, future provisions that the are financial Securities like in not Private Safe of to statements performance, of today’s events or I remind historical you Act pursuant to are or are made Reform expectations future including that the XXXX. Harbor also or and Litigation discussion forward-looking

Forward-looking statements, of may company’s or our for outside statements. materially uncertain by forward-looking are results press expressed to Actual implied. was nature, from those refer the issued yesterday and differ Please control. earnings the that their release disclosures on

Resources Exchange update Adams are forward-looking detail publicly the in any Commission. with Energy obligation in Securities and described factors statement. and other and uncertainties revise risks These company’s filings assumes or the to & no

the earnings adjusted per of and adjusted at refer can cash to return free share. nearest net release. on the be measures and will end measures, found income including earnings the GAAP EBITDA, Management non-GAAP Reconciliations to flow,

to release copy the submitted on press yesterday in earnings SEC. A has of section Investor the the the an release also X-K of website, the included adamsresources.com. posted been Relations is Finally, issued

please Roycraft. and go company’s turn I call Now ahead. the Kevin would over the CEO, to Kevin, President like to

it Tracy Thank you, financials. some outlook I a available to conclusion then over deeper on everyone. today’s remarks Tracy John, will be I questions close before dive the the the QX call will and begin for good at for morning, with turning will and discussing color quarter and the Myself, your division our for prepared remarks. presidents the by beyond. of prepared the into

improved I am of just cash company. to Adam sequential flow by time the $X performance $XXX,XXX of from were were over period. with pleased performance an largely continued These in same million just improvements despite GulfMark the of results Energy net improved by XX%. this over saw also $X of adjusted rise division. million QX in increase the achieved income challenges. These year, driven Adjusted quarter-over-quarter the QX market improved over our

I’m declare the force team they these production and manufacturing, results. falling entire these in first Energy’s basins deliver their depressed shut of chemical customer sticky our included the to challenges oil down largest fight prices, to event majeure challenges through extremely These that even production. and for resilience had proud positive primary to inflation, to declines GulfMark oil crude where a refining weather

mentioned, previously our significant results. QX As was of Energy’s a GulfMark improved driver performance

our GulfMark margins plan in and improve we QX, Although, buy/sell to is volume executing expenses. lower successfully saw on reduce its contracts

per the were day. XX,XXX barrels For GulfMark legacy quarter, volumes

due was storage I completely to their destroying units. lightning forced the in GulfMark’s down a fire at touched strike product that earlier, As market one to primary caused June shut on operations plant, of a largest refinery

so notice barrels the resilience margin to the and of on showed overall. very and GulfMark by at the finding place do team at June’s place to alternate marketing The amazing ability to business agility markets already really barrels. team short comparable The purchased shows these

the new the on QX volume barrels as Oklahoma in day XX,XXX area boost board results. River this giving to a mid-quarter, Red XX,XX GulfMark’s customer per North per from to barrels area, QX. volume came growth grew in and in showed In Texas day

The due the was the supply. refinery, feeding at affected majeure Storage largely drop product the by to Pipeline saw mentioned previously quarter-over-quarter, volumes force and VEX markets which assets

QX for barrels customers this by activity partially customers new having with building activity per On facilities. day in quarter. barrels business. loading were barrels of storage in were the positive a on third-party per asset day and a X,XXX -- bar asset new note, for one storage for volume signed versus one-year VEX the gaining the revenue Two was barge per barge new drop XX,XXX and customer to day offset QX. the utilize loading additional secured the commitment

Max As earnings Midstream with complete. call, is previous our mentioned connection the on

However, due it the to pipeline before commercial delayed needing been additional in-service connecting operational. becomes has repairs

margin the In in Phoenix just under quarter. produced $X Carriers pressures prices and commodity the third Adams quarter the full over the in acquisition umbrella, quarter. saw Bulk Firebird of cash fell flow as the Oil for Phoenix million

However, the rise. in improve June to the commodity began -- prices business improve as saw results

Firebird hauling XX,XXX hauled volumes per day. around remained steady barrels at

the significant Texas be business the of sharing future low and through on are in we Phoenix these customer crossover increase closed on home the of will progress -- regarding land quarter, in as the company In oil. intercompany pleased integration with the opportunities. acquisitions We Dayton, saw the a

spur rail We the year. on to break later ground this expect

Transport Turning to Company. Service

down A STC’s to in were hauling chemical manufacturing leading million over-the-road is flow pressing excess largely the to capacity rates. company. hauling the results environment cash Our flat market, out delivering and bid quarter-over-quarter, division, continued $X.X shippers soft to in efforts for chemical drive approximately business

this of recently it market division rebound the its setting footprint, The for a strong opportunity to activity when expanded customers the new up positive to STC add this affords strengthened. is that side bidding

outlook call, company is improve. will I strong QX the later when well I performance market touch and future confident on am the positioned why the for in conditions

now will financials. for a over the deeper into the turn I call Tracy to dive

our the compared the was revenue of driven offset prior by quarter. and in million, last primarily quarter segment, related second are by of revenues lower the revenues which Firebird August. year Oil everyone. partially was Thank oil our The crude Total decline Carriers tied in you, marketing for Kevin, acquisitions $XXX.X Phoenix and good million to Bulk $XXX.X morning, to directly of and XXXX were price oil to

by at Now quarter the individual let’s segments. look

for a revenues segment a decrease our million, the daily of over $XXX.X quarter were decrease $XXX.X year oil prior Second in past decrease marketing crude the primarily The and compared X% the volume. to to price in quarter. year due in million is XX%

million of second loss quarter the expenses, year, to business. of quarter across for last the cost of of million to compared in The this versus decrease income $X.X second the in operating reflecting million, segment an in due $X.X marketing year’s Operating well as a higher the $X.X valuation loss quarter pressures $X XXXX. is was as million second inventory

$X.X Our quarter. transportation the was recorded Operating cost in to by income decrease million million second prior primarily $XX.X about versus coverage segment maintenance and and The for of expenses. depreciation to compared brought rates reduced is revenue million year XXXX. fixed quarter the lower $XX.X $X.X the in second million due higher quarter, of transportation

second added acquired loss for and will the consist in and corporate overhead. for a in reported quarter, quarter $XXX,XXX which repurposing the of million of that was the Phoenix $XX.X The Firebird XXXX. allocation segment of logistics includes August XXXX, revenue segment of of Our

mostly decrease XX were accrual, accrual Without $X.X -- $X.X purchase related second quarter reversal the expenses million G&A administrative of acquisition this The to by of from of from the Firebird to expenses price decreased the million is year’s and quarter. expenses. contingent in and consideration related with this last General the an the line Phoenix.

$XXX,XXX of in year. shares primarily to finance Interest stock quarter, expense due of X loan million versus increased in we last repurchase the from year put a of year’s KSA this the approximately last to term to part $XXX,XXX second place

per Net income was diluted quarter $X.X to of for the million income $X.XX quarter share, second or $XXX,XXX XXXX. or share per in net of the diluted compared $X.XX

For changes crude the barrels cash driven in pricing of customers quarter, inventory timing oil oil and crude to from fluctuations primarily in held. million, operating due by activities was $XX.X and used and payments receipts in the

expansion. which the purchase $X the the $X.X totaled for quarter and for million for Capital land million, relocation expenditures of the Phoenix includes the

XXXX, $XX.X XXXX. liquidity includes XXth $XX.X to credit Total cash agreement. Our million June which available million, XX, $XX available under million, $XX.X cash $X and June was equivalents on XX, compared December totaled of million as million of as our

call turn the Kevin? for Now over to back some remarks. I’ll final Kevin

higher the put difficult, on This the QX of our to as volumes pressures and in continue balance most outlook and as costs, purchasing and we Tracy. make likely will margins. lower you, environment continued growing It the continued production Thank I facing wanted touch QX for on and XXXX. oil the of chemical of challenges will manufacturing soft chemical shipment a volumes for be to remainder oil well appears year.

worse. On a not things positive appears are note, getting it

year until We range progresses, but are maybe market the seeing incremental expect we improvements conditions as improve. bound

for are production returns growth of projecting in the Our flat the year large shippers remainder XXXX. before

this execute grow volumes During plans we and reduce to costs will possible. continue and our margins time, where to

So results sequential as improvement seen we quarter-over-quarter for produced far, have two last this has plan positive the quarters.

the point that late is Phoenix and limited Oil refiner division expected margins the these in our higher activity early Also, strike commodity affected significantly drilling prices GulfMark jump we This third signals by the lightning of half additional basins. many third in restart at quarter. back a Firebird in the the and to are There prices the seen help in have spur production in year quarter. and hopefully the should to

always Adams than market are volatile founded conditions face company of in XXXX, and when this challenges has to flourish the we the ever industry. truly Since better challenges overcome was Today, these positioned very a improve.

the would I like that, With Operator? for line to questions. open

Riley. [Operator first Burke Instructions] B. is Liam from go Please question ahead. The of

Tracy. you. morning, Kevin. Good Thank Good morning,

Good Liam. morning,

Hi, Liam.

component driver do in any you are a expenses, anticipate or seeing On costs operating there key relief? you relief are any there,

that perspective drivers load. our most paid the the from Only by are of

implement. the natural drivers loads, the driver of think, we that come not strategy expense So is a doing reducing to pay fewer But I look directly down. will

customer the we a I able to So group. think payment demand on when to demand have changing quickly driver to certainly be to and that effect returns react be want negative prepared

fewer reduce through by pay just but loads, the So not expenses itself. we cutting will

Fair barrels enough. on stopped refinery higher transported And progression the it’s of your quarter. obviously every shutdown,

talked third anticipate trend quarter? getting of the You you end the fourth quarter. the the the in barrel of growing possibly back trend on Would about refinery at shipments opening

our answer GulfMark, can President Mills, that question. of Greg turn Liam, over that he so to I’ll

Hi, Greg.

Good morning.

back think give in I coming refiner September, outlet. with us does that online that another

that volumes in to group volumes the to -- move that I’ll we’re to and a all business and other we’re job continue -- very month, easily able crude most place the in in all a we usually. marketing of move However, the of our of did business. that typically market we middle the We point out hats off in do move markets great our the which to using our routine crew month to they is the not advance oil that

So the as to and do of we’ll some money can business. of goes, in related that is where far grow drop-off volume as volumes to continue we trading lower that our business our margin we make some

a is really Liam, is again. I’ll buy-side -- add this restriction. Kevin -- That

fine So the drilling that production there’s and to of limitation There’s buy-side us. lack the a area. lack because in a of of

have a barrels number we finite So of we purchase. can

Right.

comes online, barrels, new some us more until So those of some But and of more we’ll out production opportunities the be to barrels able to will have. see other more refinery back sell we of side. area, when continue on then increases activity probably really therefore, We’ll divert the drilling barrels allow buy new to and supply the it we back. the

Got it.

third-party Okay. Great. revenue. VEX. It’s on finally, And

a opportunities had third-party see that of Midstream. wasn’t come to [Technical will Midstream, Max little do Max online, there Difficulty] You eventually Outside here? you bit which

Yeah. much. Very

of increased terminaling but of increased number that include Max the -- of outside terminal. at Victoria VEX an activities of a especially shippers on an to working we’re amount do would our potential pipeline, connection, opportunity have the which So on an volume

will new So is business some than we on busier that in of and Max business some respect last good business, also there. to got bring it’s the there I’ll think, some that revenue Max say good independently us add activity see some bring the actually that, to targets and some opportunities the I good year value with been And to volume. to there we’ve

Great. Positive. Great. much. Thank you very

it. Appreciate Liam. you, Thank

next Chris Sakai The Research. Singular go is from Instructions] of Please ahead. [Operator question

Yes. morning. Hi. Good

Hi, Chris. Good morning.

this remainder wanted of at the your how should VEX question next barrels on -- quarter day we day quarter VEX? pipeline. the per the barrels get year, be for I for to a per sense of and the looking next Just for

supply change I think your some months. the demand you volume some than several back an to we’re and increase you coming a the rerouted better VEX your going barrels in see with routine in months. we’ve change just structure, will see be we around normal last September, VEX. the little We when been -- had business within in our we in I market on that next several

we’re So from -- quarter, day. a closed there the actually X,XXX almost -- we’re by we second up bit and a since barrels already

it to see of we kind in the I returning beginning of year. the So were where

Okay.

And good. flow? had and Firebird positive for on cash you a Sounds then how quarterly can on these Phoenix, comment impact

when Tracy. crude -- This higher generated $X price little oil flow original quarter. We it set Yeah. it a acquired expectations, of of was Again, what we our and expectations excess that’s the cash meeting is for of are. But not million up now. our the substantially

we that up, As continued expect price to oil crude cash the generated flow improve. see to of goes

and saw when performance Phoenix August. seen some into prices a we quarter the in of start late rise, that July that, and add I’ll Kevin. to of commodity better did we’ve out is continue This

So we’re commodity on move in as long right as that to continue direction. prices bullish the

on can How Okay. Great. And then you that quarter? retention? is this driver comment

Yeah. driver Maybe you’re retention, I’ll to what Transport turn talk would Wade, on Service it you the side? seeing about like Wade. to

Sure.

-- recorded we not on year-to-date company a XXXX the particularly Transport Drivers identical much pretty of number around driver pretty some movement, we Service side, XX% or the numbers actually much to the so to have side, contractor On did on driver side. running close so.

in think their right the and to in stay has as we based it’s training around they volume chemical Opportunities companies our strategies us I have and costs. reduce opportunities have as kind drivers our back companies the helped which to so of are cut much of their have put, current of kind have the and with kind limited A past fairly hiring lot that’s for move volumes to of retention. of similar slim so on drivers helped market now. Most and hiring it’s kind due as helped reduced on hiring

add just to... Yeah. I’ll

Okay.

During -- companies. one stable The to looking recession think, flock so Chris, out there freight week drivers we’re stable a believe drivers see for to during we tend are those solid this companies. homes. I and time, last I of announced

and can to our Those just base increase advertising we’ve we us really and been to able having in maintain Wade as at So drivers all. much expense driver coming it without, areas mentioned, generally where applying. are

-- mean, service on the GulfMark Firebird and put... on touch might You I to

their some we’ve and the do remote Firebird turnover GulfMark really And Yeah. year since road fleet. don’t have not home We since are the every have turnover in slowdown the at day always like their and areas. had the beginning drivers issues affected you of seen over with all. And has the

for Thanks Great. the Okay. answer.

Appreciate Chris. interest. you, Thank the

to would over turn like our remarks. concludes I question-and-answer Kevin to conference for Roycraft This session. back the closing

in everyone Thank you, for interest the Kate, you your company. thank continued and

quarter We Thank in you. report forward third the we August will Conference we on in results in be our Part look progress Advisors XXrd, and participating Three to IDEAS you an update Chicago providing when on November.

now has attending you for presentation. conference concluded. today’s Thank The

disconnect. now may You