ADAMS RESOURCES & ENERGY, INC. The following information should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and accompanying Notes included in this quarterly report on Form 10-Q and the Audited Consolidated Financial Statements and related Notes, together with our discussion and analysis of financial position and results of operations, included in our annual report on Form 10-K for the year endedDecember 31, 2021 (the "2021 Form 10-K"), as filed onMarch 9, 2022 with theU.S. Securities and Exchange Commission ("SEC"). Our financial statements have been prepared in accordance with generally accepted accounting principles inthe United States ("GAAP").
Cautionary Statement Regarding Forward-Looking Information
This quarterly report on Form 10-Q contains various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and information that are based on our beliefs, as well as assumptions made by us and information currently available to us. When used in this document, words such as "anticipate," "project," "expect," "plan," "seek," "goal," "estimate," "forecast," "intend," "could," "should," "would," "will," "believe," "may," "potential" and similar expressions and statements regarding our plans and objectives for future operations are intended to identify forward-looking statements. Although we believe that our expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that such expectations will prove to be correct. Forward-looking statements are subject to a variety of risks, uncertainties and assumptions as described in more detail under Part I, Item 1A of our 2021 Form 10-K. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or expected. You should not put undue reliance on any forward-looking statements. The forward-looking statements in this quarterly report speak only as of the date hereof. Except as required by federal and state securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or any other reason. Overview of BusinessAdams Resources & Energy, Inc. , aDelaware corporation organized in 1973, and its subsidiaries are primarily engaged in crude oil marketing, transportation, terminalling and storage in various crude oil and natural gas basins in the lower 48 states ofthe United States ("U.S."). We also conduct tank truck transportation of liquid chemicals, pressurized gases, asphalt and dry bulk primarily in the lower 48 states of theU.S. with deliveries intoCanada andMexico , and with nineteen terminals across theU.S. Unless the context requires otherwise, references to "we," "us," "our" or the "Company" are intended to mean the business and operations ofAdams Resources & Energy, Inc. and its consolidated subsidiaries. We operate and report in three business segments: (i) crude oil marketing, transportation and storage; (ii) tank truck transportation of liquid chemicals, pressurized gases, asphalt and dry bulk; and (iii) pipeline transportation, terminalling and storage of crude oil. See Note 7 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information regarding our business segments. 26 --------------------------------------------------------------------------------
Table of Contents Results of Operations Crude Oil Marketing
Our crude oil marketing segment revenues, operating earnings and selected costs were as follows for the periods indicated (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change (1) 2022 2021 Change (1)
Revenues $ 962,516 $ 463,092 108 % $ 1,710,071 $ 767,115 123 %
Operating earnings (2) 5,111 8,370 (39 %) 15,231 15,388 (1 %)
Depreciation and amortization 1,894 1,641 15 % 3,682 3,439 7 %
Driver compensation 4,616 4,296 7 % 9,242 8,686 6 %
Insurance 1,674 1,869 (10 %) 3,408 3,846 (11 %)
Fuel 3,458 1,971 75 % 6,004 3,712 62 %
_______________
(1)Represents the percentage increase (decrease) from the prior year period.
(2)Operating earnings included inventory valuation losses of $1.5 million and
inventory liquidation gains of $3.7 million for the three months ended June 30,
2022 and 2021, respectively. For the six months ended June 30, 2022 and 2021,
operating earnings included inventory liquidation gains of $7.2 million and
$10.6 million , respectively, as discussed further below.
Volume and price information were as follows for the periods indicated:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Field level purchase volumes - per day (1)
Crude oil - barrels 94,876 89,585 92,643 86,254
Average purchase price
Crude oil - per barrel $ 107.28 $ 63.27 $ 100.21 $ 59.28
_______________(1)Reflects the volume purchased from third parties at the field level of operations.
Three Months EndedJune 30, 2022 vs. Three Months EndedJune 30, 2021 . Crude oil marketing revenues increased by$499.4 million during the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 , primarily as a result of an increase in the market price of crude oil, which increased revenues by approximately$445.7 million , and higher overall crude oil volumes, which increased revenues by approximately$53.7 million . The average crude oil price received was$63.27 during the three months endedJune 30, 2021 , which increased to$107.28 during the three months endedJune 30, 2022 . Revenues from legacy volumes are based upon the market price primarily in ourGulf Coast market area. The market price of crude oil has continued to increase in 2022, as it did throughout 2021, and was in excess of$100 per barrel by the end ofJune 2022 . ManyU.S. producers have been exercising capital discipline, maintaining oil production plans in spite of the crude oil price, and have been focusing capital on share buy-backs and renewables, although rig count has been increasing slowly. Contributing to the volatility in price has been the war inEurope , as well as COVID-19 outbreaks inChina , supply chain issues and labor shortages, creating uncertainty for demand growth. OPEC+ has also maintained a disciplined approach, allowing only modest production increases. 27 -------------------------------------------------------------------------------- Table of Contents Our crude oil marketing operating earnings decreased by$3.3 million during the three months endedJune 30, 2022 as compared to the same period in 2021, primarily due to higher fuel costs, higher driver compensation and inventory valuation changes (as shown in the table below), partially offset by higher crude oil prices and volumes. Driver compensation increased by$0.3 million during the three months endedJune 30, 2022 as compared to the same period in 2021, primarily as a result of higher volumes transported in the 2022 period as compared to the same period in 2021. Insurance costs decreased by$0.2 million during the three months endedJune 30, 2022 as compared to the same period in 2021, primarily due in part to our safety performance in the prior year, and to a lower overall driver count in the 2022 period. Fuel costs increased by$1.5 million during the three months endedJune 30, 2022 as compared to the same period in 2021, consistent with the increase in crude oil volumes in the current period and higher fuel prices. Depreciation and amortization increased by$0.3 million during the three months endedJune 30, 2022 as compared to the same period in 2021, primarily due to the timing of purchases and retirements of tractors and other field equipment during 2021 and 2022. Six Months EndedJune 30, 2022 vs. Six Months EndedJune 30, 2021 . Crude oil marketing revenues increased by$943.0 million during the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 , primarily as a result of an increase in the market price of crude oil, which increased revenues by approximately$825.0 million , and higher overall crude oil volumes, which increased revenues by approximately$118.0 million . The average crude oil price received was$59.28 during the six months endedJune 30, 2021 , which increased to$100.21 during the six months endedJune 30, 2022 . Our crude oil marketing operating earnings decreased by$0.2 million during the six months endedJune 30, 2022 , as compared to the same period in 2022, primarily due to inventory valuation changes (as shown in the table below), higher fuel costs and higher driver compensation, partially offset by higher crude oil prices and volumes. Driver compensation increased by$0.6 million during the six months endedJune 30, 2022 as compared to the same period in 2021, primarily as a result of higher volumes transported in the 2022 period as compared to the same period in 2021. Insurance costs decreased by$0.4 million during the six months endedJune 30, 2022 as compared to the same period in 2021, primarily due in part to our safety performance in the prior year, and to a lower overall driver count in the 2022 period. Fuel costs increased by$2.3 million during the six months endedJune 30, 2022 as compared to the same period in 2021, consistent with the increase in crude oil volumes in the current period and higher fuel prices. Depreciation and amortization expense increased by$0.2 million during the six months endedJune 30, 2022 as compared to the same period in 2021, primarily due to the timing of purchases and retirements of tractors and other field equipment during 2021 and 2022. Field Level Operating Earnings (Non-GAAP Financial Measure). Inventory valuations and forward commodity contract (derivatives or mark-to-market) valuations are two factors affecting comparative crude oil marketing segment operating earnings (losses), of which inventory valuations is the most significant. As a purchaser and shipper of crude oil, we hold inventory in storage tanks and third-party pipelines. During periods of increasing crude oil prices, we recognize inventory liquidation gains while during periods of falling prices, we recognize inventory liquidation and valuation losses. 28 -------------------------------------------------------------------------------- Table of Contents Crude oil marketing operating earnings (losses) can be affected by the valuations of our forward month commodity contracts (derivative instruments), if material. These non-cash valuations are calculated and recorded at each period end based on the underlying data existing as of such date. We generally enter into these derivative contracts as part of a pricing strategy based on crude oil purchases at the wellhead (field level). The valuation of derivative instruments at period end requires the recognition of non-cash "mark-to-market" gains and losses. The impact of inventory liquidations and valuations and derivative valuations on our crude oil marketing segment operating earnings is summarized in the following reconciliation of our non-GAAP financial measure and provides management a measure of the business unit's performance without the impact of inventory valuation and liquidation adjustments for the periods indicated (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021
As reported segment operating earnings (1)
$ 15,231 $ 15,388 Add (subtract): Inventory liquidation gains - (3,650) (7,184) (10,593) Inventory valuation losses 1,533 - - - Derivative valuation (gains) losses (2) (611) (4) (630) (25) Field level operating earnings (3)$ 6,033 $ 4,716
_______________
(1)Our crude oil marketing segment's operating earnings included inventory valuation losses of$1.5 million and inventory liquidation gains of$3.7 million for the three months endedJune 30, 2022 and 2021, respectively. For the six months endedJune 30, 2022 and 2021, operating earnings included inventory liquidation gains of$7.2 million and$10.6 million , respectively. (2)During the second quarter of 2022, we entered into commodity purchase and sale contracts for 300,000 barrels of crude oil, which were adjusted to fair value atJune 30, 2022 . (3)The use of field level operating earnings is unique to us, not a substitute for a GAAP measure and may not be comparable to any similar measures developed by industry participants. We utilize this data to evaluate the profitability of our operations. Field level operating earnings and field level purchase volumes depict our day-to-day operation of acquiring crude oil at the wellhead, transporting the product and delivering the product to market sales point. Field level operating earnings increased during the three months endedJune 30, 2022 as compared to the same period in 2021 primarily due to higher crude oil prices and volumes in the 2022 period, partially offset by higher fuel costs and higher driver compensation. Field level operating earnings increased during the six months endedJune 30, 2022 as compared to the same period in 2021 primarily due to higher crude oil prices and volumes in the 2022 period, partially offset by higher fuel costs and higher driver compensation.
We held crude oil inventory at a weighted average composite price as follows at the dates indicated (in barrels):
June 30, 2022 December 31, 2021
Average Average
Barrels Price Barrels Price
Crude oil inventory (1) 573,036 $ 101.69 259,489 $ 71.86
_______________
(1)At June 30, 2022 , crude oil inventory included approximately 159,000 barrels
in which we had a contract with a customer to sell at June 2022 pricing. The
barrels were delivered in early July 2022 .
Prices received for crude oil have been volatile and unpredictable with price
volatility expected to continue. See "Part I, Item 1A. Risk Factors" in our 2021
Form 10-K.
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Table of Contents
Transportation
Our transportation segment revenues, operating earnings and selected costs were as follows for the periods indicated (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change (1) 2022 2021 Change (1)
Revenues $ 29,534 $ 23,497 26 % $ 56,224 $ 44,732 26 %
Operating earnings $ 2,937 $ 1,482 98 % $ 5,805 $ 2,256 157 %
Depreciation and amortization $ 2,923 $ 2,937 - % $ 5,880 $ 5,938 (1 %)
Driver commissions $ 3,724 $ 3,875 (4 %) $ 7,489 $ 7,471 - %
Insurance $ 2,164 $ 2,164 - % $ 4,313 $ 4,312 - %
Fuel $ 3,709 $ 2,105 76 % $ 6,511 $ 3,980 64 %
Maintenance expense $ 1,270 $ 1,061 20 % $ 2,518 $ 1,974 28 %
Mileage (000s) 6,863 7,246 (5 %) 13,661 14,178 (4 %)
_______________(1)Represents the percentage increase (decrease) from the prior year period.
Our revenue rate structure includes a component for fuel costs in which fuel
cost fluctuations are largely passed through to the customer. Revenues, net of
fuel costs, were as follows for the periods indicated (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Total transportation revenue $ 29,534 $ 23,497 $ 56,224 $ 44,732
Diesel fuel cost (3,709) (2,105) (6,511) (3,980)
Revenues, net of fuel costs (1)
_______________
(1) Revenues, net of fuel costs, is a non-GAAP financial measure and is utilized for internal analysis of the results of our transportation segment.
Three Months EndedJune 30, 2022 vs. Three Months EndedJune 30, 2021 . Transportation revenues increased by$6.0 million during the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 . Transportation revenues, net of fuel costs, increased by$4.4 million during the three months endedJune 30, 2022 , as compared to the prior year period. These increases in transportation revenues were primarily due to increased transportation rates during the 2022 period through continued negotiations with customers to increase rates. In addition, as a result of customer demand, we opened four new terminals during the second half of 2021. These terminals, located inWest Memphis, Arkansas ,Charleston, West Virginia ,Augusta, Georgia , andJoliet, Illinois , increased revenues by approximately$2.5 million during the second quarter of 2022. Our transportation operating earnings increased by$1.5 million for the three months endedJune 30, 2022 as compared to the same period in 2021, primarily due to higher revenues as a result of increased transportation rates and revenues from new terminals, partially offset by higher fuel costs and higher maintenance expense.
Driver commissions decreased by
30
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Table of Contents
Fuel costs increased by $1.6 million during the three months ended June 30, 2022
as compared to the same period in 2021, primarily as a result of an increase in
the price of fuel during the 2022 period. Insurance costs remained constant
during the three months ended June 30, 2022 as compared to the same period in
2021, primarily due to consistent insurance premiums during the 2021 and 2022
periods. Maintenance expense increased by $0.2 million during the three months
ended June 30, 2022 as compared to the same period in 2021, primarily due to
repairs and maintenance to older tractors and trailers in our fleet.
Depreciation and amortization expense was relatively consistent during the three
months ended June 30, 2022 as compared to the same period in 2021, primarily as
a result of the timing of purchases of new tractors and trailers in 2021 and
2022.
Six Months Ended June 30, 2022 vs. Six Months Ended June 30, 2021 .
Transportation revenues increased by $11.5 million during the six months ended
June 30, 2022 as compared to the six months ended June 30, 2021 . Transportation
revenues, net of fuel costs, increased by $9.0 million during the six months
ended June 30, 2022 , as compared to the prior year period. These increases in
transportation revenues were primarily due to increased transportation rates
during the 2022 period through continued negotiations with customers to increase
rates. In addition, as a result of customer demand, we opened four new terminals
during the second half of 2021. These terminals, located in West Memphis,
Arkansas , Charleston, West Virginia , Augusta, Georgia , and Joliet, Illinois ,
increased revenues by approximately $4.5 million during the first half of 2022.
In February 2021 , a severe winter storm and resulting power outages affected
Texas , which resulted in a significant decline in transportation services for
over a week and a temporary loss of revenues in the 2021 period.
Our transportation operating earnings increased by $3.5 million for the six
months ended June 30, 2022 as compared to the same period in 2021, primarily due
to higher revenues as a result of increased transportation rates and revenues
from new terminals, partially offset by higher fuel costs and higher maintenance
expense.
Driver commissions for the six months ended June 30, 2022 were consistent with
the same period in 2021, with lower mileage during the 2022 period, offset by an
increase in driver pay.
Fuel costs increased by $2.5 million during the six months ended June 30, 2022
as compared to the same period in 2021, primarily as a result of an increase in
price of fuel during the 2022 period. Insurance costs remained constant during
the six months ended June 30, 2022 as compared to the same period in 2021,
primarily due to consistent premiums during the 2021 and 2022 periods.
Maintenance expense increased by $0.5 million during the six months ended
June 30, 2022 as compared to the same period in 2021, primarily due to repairs
and maintenance to older tractors and trailers in our fleet.
Depreciation and amortization expense decreased by $0.1 million during the six
months ended June 30, 2022 as compared to the same period in 2021, primarily as
a result of the timing of purchases of new tractors and trailers in 2021 and
2022.
31-------------------------------------------------------------------------------- Table of Contents Pipeline and Storage
Our pipeline and storage segment revenues, operating losses and selected costs were as follows for the periods indicated (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change (1) 2022 2021 Change (1)
Segment revenues (2) $ 2,060 $ 651 216 % $ 4,120 $ 1,070 285%
Less: Intersegment revenues 504%
(2) (2,060) (496) 315 % (4,120) (682)
Revenues $ - $ 155 (100 %) $ - $ 388 (100%)
Operating losses (877) (556) 58 % (1,699) (1,121) 52%
Depreciation and amortization 271 223 22 % 539 477 13%
Insurance 200 148 35 % 400 358 12%
_______________
(1)Represents the percentage increase (decrease) from the prior year period.
(2)Segment revenues include intersegment revenues from our crude oil marketing
segment, which are eliminated due to consolidation in our unaudited condensed
consolidated statements of operations.
Volume information was as follows for the periods indicated (in barrels per
day):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Pipeline throughput 13,281 7,876 11,891 5,430
Terminalling 13,704 8,106 12,334 6,518
During the three and six months ended June 30, 2022 , all pipeline and storage
segment revenues were earned from an affiliated shipper, while during the three
and six months ended June 30, 2021 , pipeline and storage revenues included
revenues from a third party shipper under a contract that had been in place at
the time of the acquisition of the pipeline and related terminal assets, and has
subsequently ended. Revenues earned from an affiliated shipper are eliminated
due to consolidation, with the offset to marketing costs and expenses in our
unaudited condensed consolidated statements of operations.
We are continuing to focus on opportunities to increase our pipeline and storage
capacity utilization, by identifying opportunities with our existing and new
customers to increase volumes. In addition, we are exploring new connections for
the pipeline system both upstream and downstream of the pipeline, to increase
the crude oil supply and take-away capability of the system.
General and Administrative Expense
General and administrative expense increased by$1.3 million during the three months endedJune 30, 2022 as compared to the same period in 2021, primarily due to higher salaries and wages and related personnel costs, insurance costs, outside service costs, audit fees and legal fees, partially offset by lower franchise and other taxes. General and administrative expense increased by$1.9 million during the six months endedJune 30, 2022 as compared to the same period in 2021, primarily due to higher salaries and wages and related personnel costs, outside service costs, audit fees and legal fees, partially offset by lower franchise and other taxes. 32 -------------------------------------------------------------------------------- Table of Contents Income Taxes Provision for (benefit from) income taxes is based upon federal and state tax rates, and variations in amounts are consistent with taxable income (loss) in the respective accounting periods. OnMarch 27, 2020 , the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted and signed into law in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating losses ("NOL") incurred in tax years 2018, 2019 and 2020 to offset 100 percent of taxable income and be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. We carried back our NOL for fiscal year 2020 to fiscal years 2015 and 2016, and inJune 2022 , we received a cash refund of approximately$6.8 million .
Liquidity and Capital Resources
Liquidity
Our primary sources of liquidity are (i) our cash balance, (ii) cash flow from operating activities, (iii) borrowings under our$40.0 million credit agreement ("Credit Agreement") and (iv) funds received from the sale of equity securities. Our primary cash requirements include, but are not limited to, (i) ordinary course of business uses, such as the payment of amounts related to the purchase of crude oil, and other expenses, (ii) discretionary capital spending for investments in our business and (iii) dividends to our shareholders. We believe we will have sufficient liquidity through our current cash balances, availability under our Credit Agreement, expected cash generated from future operations, and the ease of financing tractor and trailer additions through leasing arrangements (should the need arise) to meet our short-term and long-term liquidity needs for the reasonably foreseeable future. Our cash balance and cash flow from operating activities is dependent on the success of future operations. If our cash inflow subsides or turns negative, we will evaluate our investment plan accordingly and remain flexible. We maintain cash balances in order to meet the timing of day-to-day cash needs. Cash and cash equivalents (excluding restricted cash) and working capital, the excess of current assets over current liabilities, were as follows at the dates indicated (in thousands): June 30, December 31, 2022 2021 Cash and cash equivalents$ 67,728 $ 97,825 Working capital 97,034 87,199
Our cash balance at
AtJune 30, 2022 , we had no borrowings outstanding under our Credit Agreement and$5.7 million of letters of credit issued under the Credit Agreement at a fee of 1.75 percent per annum. See Note 2 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information. During the second quarter of 2022, as a result of the significant increase in crude oil prices, we borrowed$30.0 million under the Credit Agreement for working capital purposes and repaid that amount in full shortly thereafter. AtJune 30, 2022 , we were in compliance with all financial covenants under the Credit Agreement. However, as ofJune 30, 2022 , we obtained a waiver relating to a breach of a non-financial covenant in connection with our failure to timely notify the lender of the creation of a new holding company subsidiary. 33 -------------------------------------------------------------------------------- Table of Contents We have in place an At Market Issuance Sales Agreement ("ATM Agreement") withB. Riley Securities, Inc. , as agent (the "Agent"), in which we may offer to sell shares of our common stock through or to the Agent for cash from time to time. During the three and six months endedJune 30, 2022 , we received net proceeds of approximately$0.3 million (net of offering costs toB. Riley Securities, Inc. of$14 thousand ) from the sale of 8,202 of our common shares at an average price per share of approximately$37.38 under this agreement. We utilize cash from operations to make discretionary investments in our crude oil marketing, transportation and pipeline and storage businesses. With the exception of operating and finance lease commitments primarily associated with storage tank terminal arrangements, leased office space, tractors, trailers and other equipment, and borrowings outstanding under the Credit Agreement, our future commitments and planned investments can be readily curtailed if operating cash flows decrease. See "Material Cash Requirements" below for information regarding our operating and finance lease obligations. The most significant item affecting future increases or decreases in liquidity is earnings from operations, and these earnings are dependent on the success of future operations. See "Part I, Item 1A. Risk Factors" in our 2021 Form 10-K.
Cash Flows from Operating, Investing and Financing Activities
Our consolidated cash flows from operating, investing and financing activities were as follows for the periods indicated (in thousands):
Six Months Ended
June 30,
2022 2021
Cash provided by (used in):
Operating activities $ (24,178) $ 52,107
Investing activities (3,409) (2,286)
Financing activities (4,149) (6,185)
Operating activities. Net cash flows used in operating activities was $24.2
million for the six months ended June 30, 2022 as compared to net cash flows
provided by operating activities of $52.1 million for the six months ended
June 30, 2021 . The decrease in net cash flows from operating activities of $76.3
million was primarily due to changes in our working capital accounts, including
an increase of $42.3 million in crude oil inventory at June 30, 2022 . The
increase in inventory was primarily due to an increase in the price of our crude
oil inventory, which increased from $71.86 at December 31, 2021 to $101.69 at
June 30, 2022 , and an increase of 121 percent in the number of barrels held in
inventory. At June 30, 2022 , crude oil inventory included approximately 159,000
barrels of pre-sold inventory at June 2022 pricing. The barrels were delivered
in early July 2022 .
At various times each month, we may make cash prepayments and/or early payments
in advance of the normal due date to certain suppliers of crude oil within our
crude oil marketing operations. Crude oil supply prepayments are recouped and
advanced from month to month as the suppliers deliver product to us. In
addition, in order to secure crude oil supply, we may also "early pay" our
suppliers in advance of the normal payment due date of the twentieth of the
month following the month of production. These "early payments" reduce cash and
accounts payable as of the balance sheet date.
We also require certain customers to make similar early payments or to post cash
collateral with us in order to support their purchases from us. Early payments
and cash collateral received from customers increases cash and reduces accounts
receivable as of the balance sheet date.
34--------------------------------------------------------------------------------
Table of Contents Early payments received from customers and prepayments to suppliers were as follows at the dates indicated (in thousands):
June 30, December 31,
2022 2021
Early payments received $ 54,434 $ 52,841
Prepayments to suppliers 30,903 5,732
We rely heavily on our ability to obtain open-line trade credit from our
suppliers especially with respect to our crude oil marketing operations. During
December 2021 and June 2022 , we received early payments from certain customers
in our crude oil marketing operations as noted in the table above. Our cash
balance decreased by approximately $30.1 million as of June 30, 2022 relative to
the year ended December 31, 2021 primarily as a result of the timing of the
receipt of these early payments received and prepayments made to suppliers
during each period resulting from an increase in crude oil price and marketing
activities.
Investing activities. Net cash flows used in investing activities for the six
months ended June 30, 2022 increased by $1.1 million as compared to the same
period in 2021. This increase was due to an increase of $1.2 million in capital
spending for property and equipment (see following table), partially offset by
an increase of $0.1 million in cash proceeds from the sales of assets.
Capital spending was as follows for the periods indicated (in thousands):
Six Months Ended
June 30,
2022 2021
Crude oil marketing (1) $ 4,008 $ 702
Transportation (2) 694 2,703
Pipeline and storage (3) 73 189
Other (4) 8 8
Capital spending $ 4,783 $ 3,602
_______________
(1)2022 amount relates to the purchase of 20 tractors and other field equipment,
and the 2021 amount primarily relates to the purchase of field equipment.
(2)2022 amount relates to the purchase of three tractors, one trailer and other
field equipment, and the 2021 amount relates to the purchase of 52 trailers, of
which 50 were placed into service during the third quarter of 2021, and computer
software and equipment.
(3)2022 and 2021 amounts relate to the purchase of field equipment.
(4)2022 amount relates to the purchase of a copier, and the 2021 amount relates
to the purchase of computer software and equipment.
Financing activities. Net cash used in financing activities for the six months
ended June 30, 2022 decreased by $2.0 million as compared to the same period in
2021. This decrease in net cash used in financing activities was primarily due
to borrowings and repayments under our Credit Agreement during each period.
During the 2022 period, as a result of the significant increase in crude oil
prices, we borrowed $30.0 million under the Credit Agreement for working capital
purposes and repaid $30.0 million shortly thereafter, while during the 2021
period, we borrowed $8.0 million under the Credit Agreement primarily to repay
the $10.0 million outstanding payable related to the purchase of the VEX
pipeline system in October 2020 . This decrease was partially offset by an
increase of $0.2 million in principal repayments made for finance lease
obligations (see "Material Cash Requirements" below for information regarding
our finance lease obligations). During each of the six months ended June 30,
2022 and 2021, we paid cash dividends of $0.48 per common share, or a total of
$2.1 million . During the six months ended June 30, 2022 , we received net
proceeds of approximately $0.3 million from the sale of 8,202 of our common
shares under the ATM Agreement.
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Table of Contents
Material Cash Requirements
The following table summarizes our contractual obligations with material cash
requirements at
Payments due by period
Less than 1 More than 5
Contractual Obligations Total year 1-3 years 3-5 years years
Finance lease obligations (1)
6,793 2,410 3,295 741 347
Purchase obligations (3) 15,499 15,499 - - -
Total contractual obligations
_______________
(1)Amounts represent our principal contractual commitments, including interest, outstanding under finance leases for certain tractors, trailers, tank storage and throughput arrangements and other equipment. (2)Amounts represent rental obligations under non-cancelable operating leases and terminal arrangements with terms in excess of one year. (3)Amount represents commitments to purchase 35 new tractors and 40 new trailers in our transportation business and 35 new tractors and two new trailers in our crude oil marketing business.
See Note 13 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information regarding our finance and operating leases.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably expected to have a material current or future effect on our financial position, results of operations or cash flows.
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements, see Note 2 in the Notes to Unaudited Condensed Consolidated Financial Statements.
Transactions with Affiliates
For more information regarding transactions with our affiliates during the three
and six months ended
Critical Accounting Policies and Use of Estimates
A discussion of our critical accounting policies and estimates is included in our 2021 Form 10-K. Certain of these accounting policies require the use of estimates. There have been no material changes to our accounting policies since the disclosures provided in our 2021 Form 10-K.
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