Adams Resources & Energy Inc Reports Operating Results (10-Q)
ADAMS RESOURCES & ENERGY INC. and its subsidiaries are engaged in the business of oil and gas exploration and production crude oil marketing petroleum products marketing and tank truck transportation of petroleum products and liquid chemicals. Adams Resources & Energy Inc has a market cap of $63.2 million; its shares were traded at around $15 . The dividend yield of Adams Resources & Energy Inc stocks is 3.4%. Adams Resources & Energy Inc had an annual average earning growth of 11.2% over the past 5 years. Highlight of Business Operations:Crude oil revenues were reduced for the comparative current period because of significantly lower crude oil prices as shown in the table above. While overall crude oil prices were reduced during the first quarter of 2009, the direction of change in prices initially declined but then increased during the period. The average acquisition price of crude oil moved from the $41 per barrel level at the beginning of the year to $48 per barrel for the March 2009 average price. This event produced a first quarter 2009 inventory liquidation gain of $1,325,000. A similar event occurred in the first quarter of 2008 as crude oil prices rose from the $90 per barrel range in January 2008 to the $105 per barrel range in March 2008 producing a $1,967,000 inventory liquidation gain. As of March 31, 2009 the Company held 184,045 barrels of crude oil inventory at an average price of $47.75 per barrel.
The Company s liquidity primarily derives from net cash provided from operating activities and such amount was $8,984,000 and $9,176,000 for each of the three-month periods ended March 31, 2009 and 2008, respectively. As of March 31, 2009 and December 31, 2008, the Company had no bank debt or other forms of debenture obligations. Cash and cash equivalents totaled $22,311,000 as of March 31, 2009, and such balances are maintained in order to meet the timing of day-to-day cash needs. Working capital, the excess of current assets over current liabilities, totaled $42,198,000 as of March 31, 2009. Management believes current cash balances, together with expected cash generated from future operations, will be sufficient to meet short-term and long-term liquidity needs.
Capital expenditures during the first three months of 2009 included $1,931,000 for marketing and transportation equipment additions and $2,976,000 in property additions associated with oil and gas exploration and production activities. For 2009, the Company anticipates expending an additional approximate $5 million on oil and gas exploration projects to be funded from operating cash flow and available working capital. In addition, approximately $2.2 million will be expended during the second half of 2009 toward the purchase of 110 tractors scheduled to come off lease financing with funding for such purchase from available cash flow.
Historically, the Company pays an annual dividend in the fourth quarter of each year, and the Company last paid a $.50 per common share or $2,109,000 dividend to shareholders of record as of December 2, 2008. The most significant item affecting future increases or decreases in liquidity is earnings from operations and such earnings are dependent on the success of future operations (see Item 1A Risk Factors in the annual report on Form 10-K for the year ended December 31, 2008). While the Company has available bank lines of credit (see below), management has no current intention to utilize such lines of credit or issue additional equity.
The Company s primary bank loan agreement with Bank of America provides for two separate lines of credit with interest at the bank s prime rate minus ¼ of one percent. The working capital loan provides for borrowings based on 80 percent of eligible accounts receivable and 50 percent of eligible inventories. Available capacity under the line is calculated monthly and as of March 31, 2009 the Company elected to establish the line at $5 million. The oil and gas production loan provides for flexible borrowings subject to a borrowing base requested by the Company and approved semi-annually by the bank. The borrowing base was established at $5 million as of March 31, 2009. The working capital facilities are subject to a ½ of one percent commitment fee. The line of credit loans are scheduled to expire on October 31, 2009, with the then present balance outstanding, if any, converting to a term loan payable in eight equal quarterly installments. As of March 31, 2009 and December 31, 2008 there was no bank debt outstanding under the Company s two revolving credit facilities.
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