Adams Resources & Energy, Inc.

Good morning, everyone. Welcome to the Adams Resources and Energy Second Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw from the question queue, please press star then two. As a reminder, this call is being recorded. Now I will turn the call over to John Beisler, Investor Relations at Three-Part Advisors. Please go ahead.

Thank you, and good morning, everyone. Welcome to the Adams Resources and Energy Second Quarter 2023 Conference Call. Joining me on the call today are Adams Resources and Energy President and CEO, Kevin Woodcraft, and the company's EVP and CFO, Tracy Elmark. Additionally, Greg Mills, President of Gulfmark Asset Holdings, and Wade Harrison, President of Service Transport Company, will be joining us for the Q&A session at the end of the call. This call is also being webcast. It 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 and Energy assumes no obligation to publicly update or revise any forward-looking statements. Management will refer to non-GAAP measures, including adjusted EBITDA, free cash flow, return on, and adjusted net income and earnings per share. Reconciliations to the nearest GAAP measures can be found at the end of the earnings release. Finally, the earnings press release issued yesterday is posted on the investor relations section of the website, AdamsResources.com. A copy of the release has also been included in an 8K submitted to the SEC. Now, I would like to turn the call over to the company's president and CEO, Kevin Roy Krause. Kevin, please go ahead.

Thank you, John, and good morning, everyone. I will begin today's call with some color on the quarter before turning it over to Tracy for a deeper dive into the financials. I will then close the prepared remarks by discussing the outlook for Q3 and beyond. Myself, Tracy, and our division presidents will be available for your questions at the conclusion of the prepared remarks. I am pleased with the improved sequential quarter-over-quarter performance of the company. Adam saw adjusted cash flow rise from just over $5 million in Q1 to just over $7 million in Q2 of this year, an increase of 50%. Adjusted net income also improved by $800,000 over the same time period. These results were largely driven by the improved performance of our Gulfmark Energy division. These improvements were achieved despite continued market challenges. These challenges included sticky inflation, depressed chemical manufacturing, falling crude oil prices, oil production declines in our primary basins, and even a weather event that forced Gulfmark Energy's largest refining customer to declare force majeure where they had to shut down their production. I am extremely proud of the entire team for the resilience to fight through these challenges and to deliver these positive results. As previously mentioned, Gulfmark Energy's performance was a significant driver of our improved Q2 results. Although we saw lower volume in Q2, Gulfmark is successfully executing its plan to improve margins on our buy-sell contracts and reduce expenses. For the quarter, Gulfmark legacy volumes were 92,152 barrels per day. As I touched on earlier, Gulfmark's largest refinery market was forced to shut down operations in June due to a lightning strike that caused a fire at the plant, completely destroying one of their primary product storage units. The marketing team at Gulfmark showed amazing agility by finding alternate markets to place June's already purchased barrels. The ability to place these barrels on very short notice and to do so at comparable margin really shows the resilience of the team and the business overall. Gulfmark's Red River area in Oklahoma and North Texas showed volume growth as a new customer came on board mid-quarter, giving a boost to results. In this area, the volume grew from 26,005 barrels per day in Q1 to 26,139 barrels per day in Q2. The VEX pipeline and storage assets saw volumes drop quarter over quarter, largely due to the force majeure at the previously mentioned refinery, which was affected by product markets feeding the supply. Q1 barrels per day on VEX were 10,088 versus 8,560 barrels per day for Q2. On a positive note, the drop in volume was partially offset by the asset gaining new third-party customer revenue for storage and barge loading activity in the quarter. Two additional new customers were secured for this business, with one of the new customers having signed a one-year commitment to utilize the asset's storage and barge loading facilities. As mentioned on our previous earnings call, the connection with Max Midstream is complete. However, commercial in-service has been delayed due to the connecting pipeline needing additional repairs before it becomes operational. In the third full quarter under the ADAMS umbrella, the acquisition of Phoenix Oil and Firebird bulk carriers produced just over $1 million in cash flow for the quarter. Phoenix saw margin pressures as commodity prices fell in the quarter. However, the business saw results improve in June as the commodity prices began to rise. Firebird's hauling volumes remained steady at around 25,000 barrels hauled per day. We are pleased with the progress regarding the integration of these acquisitions, as we saw a significant increase in intercompany business through load sharing and customer crossover opportunities. In the quarter, the company closed on land in Dayton, Texas. It will be the future home of Phoenix Oil. We expect to break ground on the rail spur later this year. Turning to Service Transport Company, our over-the-road chemical hauling division, SDC's results were largely flat quarter over quarter, delivering approximately $2.4 million in cash flow for the company. A continued soft chemical manufacturing environment is leading to excess hauling capacity in the market, pressing shippers to bid out business in efforts to drive down rates. The positive side of this bidding activity is that it affords SEC the opportunity to add new customers to its recently expanded footprint, setting up this division for a strong rebound when the markets strengthen. I will touch on Q3 and future outlook later in the call, but I am confident the company is well positioned for strong performance when the market conditions improve. I will now turn the call over to Tracy for a deeper dive into the financials.