Yahoo Finance Adams Resources & Energy, Inc. (AMEX:AE) Q1 2024 Earnings Call Transcript
Adams Resources & Energy, Inc. (AMEX:AE) Q1 2024 Earnings Call Transcript May 10, 2024
Adams Resources & Energy, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, everyone. Welcome to the Adams Resources & Energy First Quarter 2024 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask question. [Operator Instructions] Please note, this event is being recorded. Now I will turn the call over to John Beisler, Investor Relations at Three Part Advisors. Please go ahead.
John Beisler: Thank you, and good morning, everyone. Welcome to the Adams Resources & Energy first quarter 2020 conference call. Joining me on the call today are Adams Resources & Energy President and CEO, Kevin Roycraft; and the company's EVP and CFO, Tracy Ohmart. This call is also being webcast and can be accessed through the audio link on the Investor Relations page at adamsresources.com. Today's call including the Q&A session will be recorded. Please be advised that any time-sensitive information may no longer be accurate as of the date of any replay or transcript reading. I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements or expectations or future events or future financial performance are forward-looking statements and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements by their nature are uncertain and outside of the company's control. Actual results may differ materially from those expressed or implied. Please refer to the earnings press release that was issued yesterday for our disclosures on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Adams Resources & Energy assumes no obligation to publicly update or revise any forward-looking statements. Management will refer to certain non-GAAP measures, including EBITDA. Reconciliations to the nearest GAAP measures can be found at the end of our earnings release. Finally, the earnings press release, we issued yesterday is posted on the Investor Relations section of our website.
A copy of the release has also been included in an 8-K submitted to the SEC. Now I would like to turn the call over to the company's President and CEO, Kevin Roycraft. Kevin?
Kevin Roycraft: Thank you, John, and good morning, everyone. Thank you for your continued interest in Adams. I will begin today's call with some details on the quarter, before turning it over to Tracy for a more in-depth dive into the financials. I will then close the prepared remarks by discussing the outlook for the second quarter and for the full year 2024. Myself, Tracy and our division Presidents, Greg Mills and Wade Harrison, will be available for your questions at the conclusion of the prepared remarks. In the first quarter, we began to see some encouraging signs of recovery in certain segments of our business, especially in the latter half of the quarter where volumes and margins of our oil segments were much improved.
We are hopeful that this trend will continue into Q2 and encouraged with our current visibility. For the first quarter of 2024, the company produced $6 million in EBITDA. These results include $1.8 million in earnings from inventory valuation and liquidation. This compares to $4.4 million in EBITDA from Q1 of 2023. The 2023 number includes inventory valuation and net liquidation losses of approximately $1 million. I'm generally pleased with the direction the business is headed even with the continued economic headwinds we face. Cash and liquidity continued their positive trends showing improving positions over the last three quarters. Cash improved 10% over Q4 2023 as we ended the first quarter with $36.6 million in unrestricted cash. Liquidity improved $3.3 million over the fourth quarter of 2023 from $80.3 million to $83.6 million.
We were able to deliver these improvements while still achieving our stated goal of accelerating payments towards our $25 million term loan that was used to repurchase the KSA share ownership in October of 2022. Additionally, during the quarter, we made additional principal payments of $2 million. The balance on the loan at the end of Q1 was approximately $19.5 million. GulfMark Energy's legacy area truck volumes, which include South Texas, Michigan and Louisiana, steadily ramped up as the quarter progressed, adding nearly 6,000 barrels a day. Along with these improving volumes, we were able to maintain strong quarter-over-quarter margins. Turning to the VEX Pipeline. Volumes on the line continued the recent positive trends, as we saw barrel counts improve by 20% on a sequential quarter basis to an average of 11,260 barrels per day for Q1.
This growth was primarily driven by our GulfMark Energy's division's ability to route much of their increased volume through the VEX. As a reminder, moving these barrels via pipeline instead of transporting them by truck improve safety internal profitability on the line as well as strengthen GulfMark's margins. VEX's terminaling location in Victoria, Texas, also saw third-party activity resume as our customer was successful in securing barrels in the quarter and began building back inventory, with intentions to restart barging operations in the second quarter. Phoenix Oil our hydrocarbon repurposing segment, experienced a slowdown during the quarter due to reduced truck deliveries of fuel oil, one of their primary products. We expect this slowdown to be temporary lasting into the back half of Q2, before resuming again in Q3.
I will provide further detail on Phoenix's plan to combat this, later in the outlook section of this call. Our recently purchased crude oil hauler Firebird Bulk Carriers had a favorable start to the year largely driven by improved volumes and recent rate increases taking hold. Firebird saw record volumes in the quarter hauling nearly 3 million barrels. This was a 7% improvement over Q4 2023 and a 24% improvement over the same quarter, a year ago. The soft market for service transport our over-the-road chemical hauling division, continued in the first quarter. STC did experience a sequential increase in volume and mileage. However, rate levels remained depressed due to shippers successfully demanding rate reductions, throughout the course of last year.
The spike in demand is encouraging, and if this demand can be sustained it should allow for rate increased negotiations in the back half of the year. I will touch on the outlook for Q2 and 2024 later, but now I'll turn the call over to Tracy for a deeper dive into the financials. Tracy?
Tracy Ohmart: Thank you, Kevin and good morning, everyone. Total revenue for the first quarter of 2024 was $661.1 million compared to $650.2 million in the prior year quarter. The increase was primarily driven by an increase in the market price of crude oil, partially offset by lower crude oil volumes. The increase in crude oil price was primarily due to continued uncertainty in the Chinese economy, geopolitical tensions in the Middle East and continued concerns of our economic recession, which caused crude oil prices to fluctuate. Now let's look at the quarter by individual segments. First quarter revenues for Marketing segment was $623.8 million compared to $608.5 million in the prior year quarter. Operating income for the quarter for the Marketing segment was $6.7 million compared to $1.9 million in the first quarter of 2023.
The increase is due to inventory valuation changes and an increase in the average market price of crude oil and lower operating expenses in the 2024 period. Our Transportation segment reported $23.2 million of revenue in the first quarter compared to $26.4 million in the prior year quarter. Operating income was $213,000 versus $901,000 for the first quarter of 2023. The decrease is primarily due to a decrease in volumes and transportation rates during 2024, as a result of the softening in the transportation market. Our Logistics and Repurposing segment revenues, which consist of Firebird and Phoenix that we acquired in August of 2022, were $14 million compared to $15.2 million in the prior year quarter. Firebird's revenues increased primarily due to increased transportation rates and volumes while Phoenix's revenues decreased due to lower volumes and activity.
The segment reported an operating loss of $1.5 million compared to $535,000 of income in the prior year quarter. General and administrative expenses were $4.8 million for both the first quarter of 2024 and 2023, with higher outside service costs out of fees and legal fees offset by lower banking fees insurance costs and director fees. Interest expense increased to $793000 for the first quarter of 2024 versus $696000 in the prior year quarter, primarily due to higher interest rates over the past 12 months, partially offset by a lower loan balance compared to the prior year quarter under the credit agreement and additional finance leases that were put in place during the course of last year. Net loss for the quarter was $498000 or $0.19 per share compared to a net loss of $2 million or $0.79 per share in the first quarter of 2023.
For the quarter, cash provided from operating activities was $13.1 million compared to $23.7 million in the prior year. This decrease was a result of an increase in the price of our crude oil inventory and a 23% increase in the number of barrels held in inventory. Capital expenditures for the quarter totaled $6.2 million, primarily for the purchase of 17 tractors, 13 trailers and other field equipment. Our available cash and cash equivalents as of March 31, 2024, totaled $36.6 million compared to $33.3 million on December 31, 2023. Total liquidity as of March 31 was $83.6 million versus $80.3 million in the prior quarter. Now I'll turn the call back over to Kevin for some final comments. Kevin?
Kevin Roycraft: Thank you, Tracy. Turning to our outlook for the second quarter and for full year 2024. As all divisions are continuing the work to control costs and improve operational efficiencies, we are seeing signs that the markets we serve are awakening. Even with drilling activity slowing in our legacy areas, GulfMark's has experienced steadily improving volumes throughout the year, while maintaining their margins. We expect that trend to continue into the second quarter. GulfMark's increasing volumes also should have a positive effect on the results for the VEX pipeline, as we have been able to route much of the increased oil volume through the line this year. This ability allows VEX to improve internal cash flows and helps reduce GulfMark's costs by shipping more barrels via pipeline versus the expense of trucking barrels.
Also our third-party customer that utilizes the VEX Victoria Texas barge loading terminal has started consolidating barrels again in our storage tanks and their barge shipments should resume in Q2. Our hydrocarbon repurposing business Phoenix Oil will most likely continue to experience soft results in Q2, as our fuel oil business transitions from delivering by truck deliveries to mostly by barge. Later this quarter, Phoenix expects to sign an agreement with the terminaling location in the Houston area with barge deliveries expected to start in late Q2 or early Q3. Phoenix recently broke ground on our 11-acre land purchase in Dayton, Texas, which will be the future home of Phoenix Oil. We are targeting to have the rail spur on this property operational late in 2024.
An operational rail spur will improve cost and efficiencies for Phoenix by reducing the expense of trucking the product from our current leased rail location to our current storage location that is 24 miles west in Noble Texas. The new spur will allow for unloading of product from railcar directly into our storage tanks. This will eliminate the trucking cost and rail lease expense associated with this business and significantly improve operational efficiencies. We expect full completion of the project, which will move all of Firebird's trucking operations on-site late in 2025. Speaking of Firebird, the crude oil trucking operations saw volumes increase steadily throughout the first quarter and recorded record monthly volumes in March. This along with a series of positive rate adjustments led to much improved results as the quarter progressed.
Early Q2 returns show this trend holding and we are optimistic this trend will hold for the balance of the year, if crude oil volumes can remain at steady levels. Late in the first quarter and continuing into early stages of Q2, our Chemical Transportation division, Service Transport, began to see capacity tighten in pockets of their service area. In the upcoming quarters they will need to work to add drivers to meet this increasing demand and then make in the process of targeted rate increases to offset the rate reductions we incurred over the past year. STC is well placed to take advantage of a recovering chemical market. In closing, I'm not yet ready to say that market recovery is imminent. However, I am encouraged with the prospect of improving markets across all of our divisions that we have seen in recent months.
I am convinced the actions we have taken in response to the economic headwinds faced over the past year have made us a more cost-effective and efficient company. And the Adams is well positioned to capitalize on the opportunities in front of us, driving improved results and deliver long-term value to shareholders. Lastly, we will be participating in the Three Part Advisors IDEAS Conference in New York City on June 13. Qualified investors that would like to attend or schedule a meeting with Tracy and I should contact Three Part Advisors. With that I would like to open the line for questions. Operator?
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