Adams Resources & Energy Inc Reports Operating Results (10-Q)
Adams Resources & Energy, Inc. has a market cap of $153.2 million; its shares were traded at around $35.9 with a P/E ratio of 6.5 and P/S ratio of 0.1. The dividend yield of Adams Resources & Energy, Inc. stocks is 1.6%. Adams Resources & Energy, Inc. had an annual average earning growth of 19% over the past 5 years.
Highlight of Business Operations:Two significant factors affecting comparative crude oil segment operating earnings are inventory valuations and forward commodity contract (derivatives or mark-to-market) valuations. As a purchaser and shipper of crude oil, the Company holds inventory in storage tanks and third-party pipelines. Inventory sales turnover occurs approximately every three days, but the quantity held in stock at the end of a given period is reasonably consistent. As a result, during periods of increasing crude oil prices, the Company recognizes inventory liquidation gains while during periods of falling prices, the Company recognizes liquidation and valuation losses. Over time, these gains and losses tend to offset and have limited impact on cash flow. While crude oil prices trended up during most of 2012, the average acquisition cost of crude oil in December 2011 was in the $98 per barrel range level with a late period decline to the $85 per barrel range in June 2012. This produced an inventory liquidation loss of $4,760,000 for the first six months of 2012. The reverse event occurred during the first quarter of 2012 as crude oil prices increased from $98 per barrel to $110 per barrel for March 2012 producing a $2,538,000 inventory liquidation gain. As of June 30, 2012, the Company held 199,990 barrels of crude oil inventory at an average price of $85.01 per barrel.
Crude oil marketing operating earnings are also affected by the differing report date valuations of the Company s forward month commodity contracts (derivative instruments). Such non-cash valuations are calculated and recorded at each period end based on the underlying data existing as of such date. The Company generally enters into these derivative instruments as part of a pricing strategy based on crude oil purchases at the wellhead (field-lease level). The valuation of derivative instruments as of period-end requires the recognition of valuation gains and losses. The impact on crude oil operating earnings of inventory liquidations and derivative valuations is summarized as follows (in thousands):
Customer demand and revenues for the transportation segment were consistent and strong during all periods presented. A generally industry wide shortage of qualified drivers has also affected the Company and has suppressed current year revenues. For 2012 the Company realized $1,329,000 in gains from the sale of 91 used truck-tractors while the first six months of 2011 reflected gains totaling $1,024,000 from used truck sales with $458,000 of such amount occurring during the second quarter of 2011. The transport segment currently benefits from the present low price environment for natural gas as this commodity is a basic feedstock for the Company s petrochemical industry customer base. The petrochemical industry has been expanding capacity and the long-term prospect for demand for chemical hauling services remains positive. Presently, the Company is operating at near full capacity with the availability of qualified drivers a significant constraint.
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