Adams Resources & Energy (AE) 9 Nov 232023 Q3 Earnings call transcript

Good morning, everyone. Welcome to the Adams Resources & Energy Third Quarter 2023 Financial Results Conference Call.

[Operator Instructions] As a reminder, this conference call is being recorded.

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

good and operator, you, morning, everyone. Thank the Conference Call. to Adams Resources XXXX Quarter Third Energy and Welcome

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

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

the is This page and audio through link webcast accessed Relations on being call at be adamsresources.com. Investor the can

recorded. events or financial be accurate forward-looking will discussion made to XXXX. be and session date Q&A Litigation you the are that including pursuant future are statements may reading. be call, any not that that longer statements of Act today's Securities of transcript safe the made information including Private are of remind as future Please time-sensitive like or Today's harbor statements Reform advised provisions the to I'd the the any facts, no performance replay in or historical or expectations of

Forward-looking outside statements. for other Actual described of Exchange was implied. and press yesterday statements that Securities refer from on materially disclosures detail to in the uncertain and the expressed Please and those Commission. release and are may with differ in control. the the results issued company's These earnings are their factors filings our forward-looking nature by risks or uncertainties company's

of to release. any GAAP forward-looking adjusted EBITDA, per will earnings can and Resources the Reconciliations Management free to and return Energy publicly the Adams found statements. flow, at measures and net on assumes revise no to nearest earnings end be or including cash our non-GAAP update share. refer income measures, adjusted obligation

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

the Kevin? like would to turn Kevin Roycraft. the call and President to CEO, I over Now company's

call the market. Presidents, dive and Wade today's prepared the discussing at Tracy oil macroeconomic our continued experienced beyond. remarks. on conclusion your Division quarter positive will be and then the the of and in-depth key everyone. a my will the the of prolonged drilling available shipment over John, I morning, good with Thank Mills before for legacy despite freight for into some turning recession financials. I Tracy our by improvement begin Myself, will crude including outlook more Greg QX Harrison, and questions you, in to our business, a and remarks in close it our We details the of across limited financial measures some company headwinds basins prepared chemical for

or quarter. The million the $X.XX commodity the at our of of At drilling end continued payments is $XX.X Our Energy, into improvement. price and share, operations to improvements largely $XX.X net $XX.X or by over $X.XX increases cash $X.X GAAP barrels was improved also from an end million came recently increased market third also market, improved On by year margin the the to growth impacted to adjusted limiting business. in Oil per third liquidity GulfMark per acquired largely XX% increases, inventory $XXX,XXX per XXXX share at from an diluted which increased saw barrels from a from of our from QX day to These rising million quarter. from We of day million. improvement diluted cash of to GulfMark's soft and income from this the from prior $X the million we positions GulfMark XX,XXX the in in flow ability and day. $XX.X while from of to generated XX,XXX timing oil but came June, year customers. basis, volume price be quarter XX,XXX million second sequentially early per volumes quarter in from increased the in the received up our barrels sell Phoenix per numbers the performance

division throughout produced the environment had call. decrease details our later and plans VEX soft GulfMark's about GMT on Oklahoma and impact Northwest the River loss. Red and Texas more in marginal also will saw River pipeline storage a our into business. the an Red for volumes also in get The future I quarter drilling area

on in the this Midstream delays our our of to make necessary recently connection oil customer lift to Our system. continue this through as the new repairs acquired recent system to projected. Also, purchase Victoria with we to Port feeding barges to as oil as initially asset flowing from Max customer third-party Station see struggled frequently the continues

are each a reduces We later the commissioning the burden the of that the barrels trucking results cost transport. the trips this GulfMark. not by day, GulfMark's commencement miles. excess over quarter. in eliminating occur asset fleet, by VEX of risks in the remains critical and money efficiency flow also risk per through will This The but for by Max over-the-road the XXX saves the Utilizing and XX truck this of savings oil hopeful only line improving own line of this with connection for associated

profitability pipeline generate this to company. barrels external of the additional and will to addition The efficiency

flow the were earnings transportation oil commodity of and continue Phoenix grow in purchasing approximately together our Transport volumes. Also, results driven work increased million by Oil between throughout division. It these quarter recently prices spot cooperation $X.X as and bid these of These commodities. divisions improved intracompany million to was the and recyclable Service $X.X generated the to largely for quarter on cash adjusted in performance of quarter. bright acquired and the Another the Phoenix adjusted

Company. to Turning Transport Service

job our slightly good continued adding a our especially loads team at chemical retaining and has shippers. Despite base. to chemical In forced STC's flow rate available largely to compared and limited QX, haul new the large hauling division. reductions, over-the-road cash decreased Transport to driver Our of the this, shipment environment, from QX, while customers, customers due Service sluggishness existing done the

is I STC in future improve, strong for the performance. conditions call. later market touch positioned well QX will on and As the outlook

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

our Thank you, Kevin, for partially the was lower Crude million in our segment and related XXXX revenue our year repurposing marketing by million was in price Oil quarter being The and the of everyone. primarily Transportation by logistics Total with crude prior driven $XXX.X segment good the and It's segment. segment, decline revenues compared the to quarter. to $XXX.X revenues by driven morning, third oil oil. crude of offset

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

volumes. offset is quarter. Marketing past price compared income in the Third overall the inventory is million due were offset quarter the segment was the The million quarter a partially $XXX.X Operating market decrease million higher valuation primarily $X.X changes, crude compared XXXX to crude due year, to partially oil $XXX.X decrease of average to a price for Marketing crude and decrease the over for for The of in $X.X increase third period. in to million market the our operating in expenses segment higher prior the revenues year in XXXX. by by oil quarter the oil of

for third inflation. The in Operating recorded $XX.X supply change the chain million income in segment to million overall in to million is during the the the quarter. quarter versus market primarily softening compared XXXX. $X.X Our quarter year demand, in of of was prior revenue due rates Transportation $X.X million third due and of issues the decreased because to transportation decrease period $XX.X

personnel of the third $XXX,XXX and quarter quarter, of and for in million by quarter General $XX.X added overhead. The repurposing revenue this XXXX which of segment $X.X Firebird the for of The acquired logistics is costs the million and were year. fees. and segment, of prior and August legal for Our in third consists reported wages to million which administrative the to XXXX for loss quarter includes expenses in that a lower to Phoenix corporate of $X.X the decreased from partial quarter. XXXX, decrease allocation the salaries related $X.X and million related compared

quarter, borrowings year revolving expense and under year's $XXX,XXX due term increased to outstanding agreement Interest the in million the credit versus $X to this interest last to expense loan. related higher third our primarily

was of to share As previously share for $X.XX per diluted $X.X our or income per Kevin income or the compared quarter million diluted the million stated, $X.X net in net $X.XX a of the XXXX XXXX. The in shares. third per difference of shares in earnings member and family main less of outstanding buyout is related result share quarter KSA of the because currently

totaled activities working and for earnings other that For in noted $XX.X equipment the quarter, million, primarily tractors, was the Capital million, provided for yesterday. trailers expenditures was $X primarily from X cash release of in our the issued XX changes operating quarter capital by as driven accounts. purchase field our

liquidity of end $XX.X was XXXX, XX, compared on cash includes XXXX. $XX.X at December as of million million which and million the under and the million, million equivalents September cash $XX to September available as second XX Our XX, Total credit available totaled agreement. million $X our $XX.X quarter of $XX.X

I'll comments. Now over to Kevin for call final the Kevin? some back turn

you, do point for will QX current XXXX turnaround the facing the to XXXX. potentially We of and and a appears into not touch environment. for It that remainder in I market Thank be next Tracy. the conditions fundamentals to of base the market year into wanted of outlook see on we year. quick the challenging remainder

employee can safety, manage items anticipate cost service, divisions eventual like the market's excellence to and it reductions, crucial retention. rebound, While is operational we for we our that control,

we volume maintain was for North to the touch expenses, also At unable this Pipeline to Oklahoma significantly the GulfMark, in River to margins Red of reducing more grow from trucking fault System. own, operators as on services and wanted expected. acquired initial levels will to they provide XXXX, GulfMark's focus XXXX efficient future of the exclusive customer on volumes its operation Red were No negotiations the specifically, line oil operations. of alone through transportation in owners operations improving River This I let the their Texas. and plans

this, volumes operation. rate with the term. In and ownership this rate new to operations business this this year, the down increases our renewal. significant to required long The October XXXX GulfMark than struggle owners make transportation of fact, changed River more XX% XXXX this today on revamping from and up continually while reductions, structure viable Because than was of GulfMark's for one just of are system were levels. with history better operation much system this contract seeking of to rightsizing this was trucking do Red In breakeven

and decision were to GulfMark the support XX is be. working with Red hard XXXX. the we drivers this dedicated a the to unable had November XX, effective area, to made XX for in come River unfortunate operations personnel contract up could they Ultimately, and effectively safe agreement shut GulfMark working this operation. Red It over approximately am to a for provide service, and within the as the in successful as and everything River it did make as environment excellent cost years. dedication team I area to their control their manage thankful efforts their business

a GulfMark QX. an in beginning result reduction closure, overall As see of will volume this

EBITDA However, should long the income minimal to be over impact term. net and the

In operations will Red Firebird fact, into CapEx assets to the older these and ability eliminate help and us for cash sell off in the River operations. position the XXXX nearly redeploy equipment the our need and maintenance newer GulfMark our improve

continue Turning to improve are volume Phoenix of look revenue. and improving to our Firebird's continued priorities customers. and and growth will margins add Phoenix quality Firebird businesses. to

Phoenix We are seeing and cooperation for hauls as transfer GulfMark. for Firebird intercompany hauls broader service

to work as our reducing and as dependence new will developing on well businesses on projects continue customers unrelated haulers. our third-party As together

basins seeing the with in begin some long-term VEX the bullish when drilling ready We activity pipeline the as still particularly patient VEX, must progress Eagle line. very are We're from improves. on being Ford we to future Max the on continue of shipping be surrounding towards and to

headwinds in of XXXX, QX QX for Although, they to before facing Service next conditions improving feedback XXXX improve. positioned the when status in the of is quo year. will success Customer be well market points Transport through late

we similar near-term closing, year. the next primary into will adding of believe performance customers fourth be for in third will and will efficiently, believe Adam's quarter safely focus XXXX until our likely market to half first which our results In reducing the begin improve, overall new be conditions quarter and I operating and costs.

will that in exist still proactive even continue we incremental Finally, to looking for in be this the challenging wins environment.

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

Instructions] [Operator

first B. Securities. comes Burke Liam from Our question with Riley

refinery if This might customer, apologize this first on operations? should about volumes remarks. Has actually question for resumed largest Liam. and Giles we think prepared those the be asking returning? My I of in is a behalf so, cadence Greg if missed of the they question how And I Nick have GulfMark's

going to high-value of forward refinery. in I that before. operating well. expect new And we they up the during major a any were picked continued Yes, and to guys we've respect that they have those we down, with service to customer as period much shut they returned serve would as addition, pretty well then changes not as time how

So silver customer for we diversify GulfMark. as found another we lining high-margin and

Yes, because the new all of I'll that went the this coming back see between is the just who gained, barrels we Kevin. the need add. split split challenge down is and the to we'll on -- to elected that to buy, challenge getting volume customer volume the we The that customers. previous between struggles X customer we probably

area, oil like customers both improves. to volumes we'd as the increase in to improves buy of to drilling ability those As our

those barrels good was know outsourced. I hear. That's the helpful. That's marketing team really to and agile really, diverting

would that would start the benefit as in when the GulfMark has been you overlap sites? of touched begin little, the to see and You integration, this on progressing Phoenix, maybe on And Firebird say you expected? really to Phoenix a but

to We're that see starting Yes. now.

commodity Firebird, a last top will to don't The Phoenix. in that we've of those prices Firebird them. adding I from Phoenix is also service progress. become I I in Firebird seeing one we the don't And significant then for for then of from softened and movements, both transport hauler Phoenix be over customers. But haulers we're largely -- But bought top -- shortly new it improving think acquisitions, we is positive market seen work hoped quarter the a think GulfMark. after the said, as When it in would. we it's continue both progressing purchased being think

combined new the be So great We since that mentioned for taking we'll will have seeing Victoria, up that to really moving a the equipment Firebird a little that that. expense location and have in and area. of we're We're GulfMark shop shared very out equipment Texas, of in with get that location Red closure that down. progress opening River shop and up area

I expect integration a between operations still the it's progress. as work So XXXX progresses. in some more

from quarter Some Phoenix that quarter. the platforms We technology getting -- happen to We computer of an in our of on needs accounting Plains fourth to did beginning accounting third Great beginning the and system. and that Firebird standpoint. through over the same moved of

And so through making in just work areas. progress we're those be It a will XXXX. all continual

mention market. could QX. I think to Obviously, been turn a just just I turnaround What do the Maybe think And that me. one there? soft the this last likely into would to you one there. for wanted it's I chemical main carry heard seeing you be drivers of

let market I Maybe recently Wade the their that at shipment and really see. their I'll I'll drivers and released, you you Dow, shippers, if feel largest But They're first, comment get results what environment. chemical a comment chemical as think then for BASF current could of look potentially well. the they've large

the pick you think to will do additional rebound definitely see that. have in rebound seeing So inventories, benefit when begin needing orders to and they're and transfer on from see any we I Wade, them them refill comments? to when start you'll projections up their service

comments. of couple A Yes.

So there's pursuing this going of additional this activity on business large start the latter of been year, a RFP slated and half X A business. scenarios. been January type to in aggressively some of lot we've is amount

so of feedback enjoyed as success these some And exercises. we've some far, with preliminary

come of major from we back, in benefits We customers while these wait so see of our customers. some should ancillary for, their with of to normal kind RFP packages I new business guess, packages. And our some

boost through new QX, type a see see of QX. just of So little a think, I I bit And think from are and think the same see will I to larger -- when probably guys the then volumes into. we'll we'll sluggishness that going dive start see is another And areas us in. we'll QX-ish their normalize, then so most to telling of we're bump we'll

optimistic somewhat through to So to we're pretty get come. We've things well just we're are what got -- QX. about

Our Sakai Chris with question next comes Singular Research. from

for volumes the What terminaling the was Just for pipeline in the system. a on VEX reason quarter? question drop

drop terminaling terminaling pipeline into and plays GulfMark for the also shipper volume lower the VEX then volume that and as primarily reason in from our volume. was a because The affiliate some

We also X third-party had customers.

I XQ, -- one counting that was following lost supply of didn't XQ on. think get other tapering that based spot a some into customer they just deal kind off -- through a extended, and on was product were the

now. they're go doing having right they barge volumes And coming some customer a in and back to so and plan regroup on the next more volume first still and back smaller but are quarter with year,

And Yes. just comment. I'll

the the struggles purchasing had think that had same I customers barrels. in terminaling VEX business do necessary we've the we on the

there, as think reason, would that success we're barrels I tight a barges next the Greg couldn't out some available just of competitive. they far hopeful many are as as but lift as to barrels it's as like, mentioned, year. get So they And more they part have very that's the market into

And several on well. folks business be we're GulfMark as Victoria, may working opportunities new with potential terminals, some working And for we're who third-party also the upside, business with some folks terminalling Victoria. development, for shippers

from So have deal aside you hoping opportunity, Max off that the good we Midstream amount joint of kicks tariff a flow, will, that business. around if

And in that? expenditures? about XXXX major And fourth talk you goal do can quarter? see you a you have ones with capital Do general for any the

we the we Again, rolling details trailers Dayton longer much spending. Phoenix continue have and perspective, and very, Dayton the we'll to still the should year are to the with Dayton it's things anticipate City fourth of on of in But the project. the some that tractors we money on service in We and to invest the the just well over just expansion quarter Dayton, necessary. engineers to is very transport, few expect Firebird from lot some move work early of their forward in. rolling order trailers. on in. Then we any, able a have that spend project. going be we taken spending don't their a still still developer -- project able tractors that I better that to into a quarter, position some expansion and little, get necessary all move expenditure and going the be year, are trailers, to replace and tractors next year, to with in some be ago to as Fourth and we of are kind we'd Unfortunately, if capital optimistic were a do be a

So nothing significant.

with And same Yes. GulfMark, too.

equipment replacing trailer moving So will and assets, or tractors, of be with those for GulfMark XX those The sold -- for move into model the of or newer will there Half us those River Firebird, be half also being for in now. sold purchases or will are Red equipment tractor any generally, of Firebird GulfMark really the are later older in need equipment, the and XXXX. right those that or Phoenix eliminate some sorry, sold -- process

So some significant savings there.

that, you at talk Okay. quarter? this How about driver Service that was was Can retention Transport.

let you I'll take that Wade, one.

Yes.

very it's It's guess, of retention. -- have driver they go. positive a -- frankly, the So our lack for guys. work, I quite we to actually a well we Despite with really, anywhere during QX performed didn't and negative it's

could. as -- that actually selective around the were we year. saw job freeze relaxed as benefit the good all we sure referral year-to-date our of kept bring last reached place, a wanted We've who of quite put we that. didn't very, high our in of we did but very hire, to a as highest could, in. We and saw terminals did work we count And our on it's we hire. Our wages hire, already make a actually We've as hiring. Normally, we best spreading they

up it's with the that So volumes have, turnover. and job we're good doing we in a our showing

last on volumes as to January. addition track on turnover, boost the we come we're expect see the guys year's some assuming goes to bring numbers additional our do expect of during quarter planned. We to based So just QX beat on up to fourth

through And good. doing turnover so -- But we're bit we see of little most part, the may some a pretty for that. actually

to think, base in important cycles is even because I I'll to an on Those Transport by touch return. to just X mile that hang when capacity need we've react driver times capacity. key and on markets ready do But be the either try on, to to these to drivers the paid slower are the And seen we our benefit, or will the all have sides, with that both the sides also Service GulfMark, load. by want Firebird at we and before,

loads, fewer pay So they natural reduction. when there's fewer miles a and take

from of some So that, to levels there it the business. correlated is savings

[ Eisner with Holdings. Our [indiscernible] next ] Jason comes question from

quarter taking for from Nice some with results couple to see recovery and a solid the of last questions. thanks

kind guess, the about and Or have I talking you pass-through of a way Just the that much characterize a spread the about, that value-added to better sales underlying kind margin do is marketing business? how business, in crude you're of maybe GulfMark gross talk of business?

that the one think a lot the I attractive, that at But including of if volume the is you've low is sustainable margin the And that business, much and I Because with you're pretty report, the quality if product. you volatility. as profile look gotten of a it's around underlying you level. more think gross knocks revenue spread bounces margin

better. of So way kind if have I don't a you characterize know to that

field service. business we because from side. investment -- say providing the an barging transportation and services little terms, to a -- the in We're the not for storage on a negotiating challenging. we a on the service barges. And we're perspective, both sell to move to pipeline gray that then the the the barging keep to field from side or eventually oil and the perspective, the the from It's we're some buy then either I'll providing loading margin location that provide

really that gray. to have able little or intentionally if reasons is the need oil, do because out really that be what margin the buy -- one to costs transportation we we reduce wanted flexible to -- we put ability don't to we keep So because the we sell a improve we release of don't there to

advantage you the piece. difficult or have report I if Greg, it's that... know don't margin what piece on very any So really that, to

end-user that They're we mean is model ensuring lot kind relationship a of that to I Yes. ensure margin what And I'd sell buy and cost we're on we transport a to service volume an the buy that looking obviously, is our higher understanding refinery business guess, from and ability the we're level -- and we continually a And the understand basis. long-time a curves that either of our we'll of side. say consistency, the of just to of the and feeding internal because with monitor specific And each different to way then the provide oil. or that view are with pipeline. the distillation the extent a competing us, even I then lot really are folks of buying just is negotiating of processors from operators. We a market, the kind and together that the for. put to gives processors competitive that of are

the helpful. business, I would can the for that lot it's -- and volume barrels sell. if probably business. lower-margin of of as it So was it's That total view number a not I us don't know purchase in terms limits also service-related but a a just that we higher-margin

kind value-added think very guess, where I service margin business it's lot guess it maybe But a of at kind when being of a I if that brings different characteristics. -- another up versus sale, swing things risks of a when is. a gross as It it's low, I negative look I way, the putting

Greg. you're on into the want almost getting in margin, you're perspective, which the long of characterize without that is maybe how versus are I business the holding understand you there or that, for I guess already from kind they I already a way -- time all But barrels spoken by that a you it business, So to you the risk give saying I are to what marketing, have... guess

don't hold. We Yes.

long In of a a keep does possible, just that, buy go lean on that and imbalances barge fact, or market month There's effectively we in normal try that extent that month. a our as but does based next And of little we to short type -- of on we that to carryover or timing, that each thing. just we as say, sell up little the everything based show the into sometimes a schedules. barge inventory some inventory

But at and barrels and general, market So we're we trying all. can. efficiently there's buy clear some volatility as not as to in there. We play the sell

not much to out buying oil projecting they to for them how possible out we're Generally, as meet it. need. and can as many -- We're or purchase attempt have a and then then refiners barrels to we not And Yes. going barrels and supply -- as we go we the committing needs. us sale hoping are purchase many as those

than down inventory, Greg quickly. generally us turns when rather and in issue we on speculating it going intentionally that oil. or refinery So swings barge either like because say, holding see And like it's an a has pushed for or weather

the the barges first pick in that weather sometimes, pushed month, instances, scheduled and don't delivery. will get then price ahead refiner they go this, scheduled on Greg, the up you to or second up if month in it stuff, the most And of and Yes. can XXth of they're confirm it for the because pick those was until

So the no price from there's carrying next X risk to month month.

correct. That's the in -- deal we're not reporting our And the it's until month, that but we're just next of inventory. the value list saving revenue recording

to Yes, because standpoint, is going not the technically, know occurred the though we until month accounting has from following price sale even what be. the an

on you talk little that in maybe Can way the on think operations I benefits, know pipeline. bit maybe a margin would done on Obviously, in similar a VEX kind talk saying you're for I bit GulfMark. to cost acquisition for your to little just guess, everyone done has I the you I what Firebird a has the in can being terms of about first-party little VEX stacked about for a third-party of, what of guess terms waiting is similar sort a And internal kind benefits operation? develop maybe of of like I benefit, hauler guess, over what you just But a call the them time.

to benefit. on Yes. GulfMark largest the a VEX, It's acquisition huge of shipper prior our already system. been that the And was

risk to So efficiently very the and we're changing pipeline. on manage parties of the expenses third related without able to our shipping

from the truck schedules. way So barge the our all at managing the up the to It's loading. picking seamless lease

at So we're I'd look to the that to like we corporate to, a intracompany economics. it's And changing at, not benefit to there. would nice dollars since can been, paying the costs the I need as look marketers Related hands tool do refer could it third basis have we say, for a extent the don't we flexibility a to very party, pipeline. truck there's on a much, use. that but variable covering to really that for is more that We and

on a on having to day the ship XX line of benefits if purpose had it round to or that turn us volume to touch to that XXX-mile it. we're or wouldn't the someone to doing, exclusive trip. purchased was allow trucks on for use going if I'll And about Depending not unable XX a ship on it their we're it's

the us. more and So there's moving and in other to that areas, to oil Clara, we down efficiency of have pipeline purchase a more savings for trucks the can that hire from or massive drivers equipment because Victoria amount use Texas they'll is those

So there's far as some big well. as as goes benefits that

but We've we're terminalling add bit the So of We're hopeful think -- and really of can that. get some third-party benefit not I lot there's little to is glad line. a expecting have it cost. side, a anything to had we on incremental we the

wait really line need company. just to we keep on the valuable and we to third-party while barrels that. to So we is the for But really, some get everything it, important still can

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

in Thank company. the interest you continued for your

Three Thank We in will Fourth be IDEAS Conference participating providing report for XX, look in November the forward Dallas our Quarter Advisors progress you Part on we an us. Earnings. update to joining we on you when the and

attending you now today's for concluded. has Conference presentation. Thank

may You now disconnect.