Adams Resources & Energy Inc (AE) filed Quarterly Report for the period ended 2012-09-30.
Adams Resources & Energy has a market cap of $131.1 million; its shares were traded at around $32 with a P/E ratio of 5.3. The dividend yield of Adams Resources & Energy stocks is 1.8%. Adams Resources & Energy 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 are fluctuating in 2012, the net impact through September 30, 2012 has yielded inventory liquidation losses totaling $1,543,000 for the first nine months of 2012. However, during the third quarter of 2012, prices trended up from $85 per barrel in the beginning of the quarter to $98 per barrel at the end of the quarter. This produced a $3,217,000 inventory liquidation gain for the quarter. As of September 30, 2012, the Company held 266,860 barrels of crude oil inventory at an average price of $98.03 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 at each period end requires the recognition of “mark-to-market” gains and losses. The impact on crude oil operating earnings of inventory liquidations and derivative valuations is summarized as follows (in thousands):
Comparative field level crude oil operating earnings increased in 2012 with the noted volume additions and overall improved unit margins for the comparative nine month current period. Unit margins first began to widen during the third quarter of 2011 when South Texas sourced production started selling at a discount to world crude oil prices due to its relative abundance in relation to the infrastructure available to deliver such oil to market. The initial burst in unit margins was most prevalent during the third quarter of 2011 as shown in the table above. Favorable unit margins continued into 2012, although they diminished as competition and additional industry infrastructure development progressed in the region.
Customer demand and revenues for the transportation segment were consistent and strong during all periods presented. However, an industry wide shortage of qualified drivers has affected the Company by suppressing current year revenues and results of operations. For 2012, the Company recognized $2,399,000 in gains from the sale of 128 used truck-tractors with gains totaling $1,070,000 occurring during the third quarter. For the first nine months of 2011 equipment sales gains totaled $1,024,000 with $632,000 of such gains occurring during the third quarter of 2011. The transport segment currently benefits from the present low price environment for natural gas, 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 has experienced a slowing of activity, but business has remained fundamentally sound.
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