Adams Resources & Energy, Inc.

Good morning, everyone. Welcome to the Adams Resources and Energy Third 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 touch-tone phone. To withdraw your question, please press star, then two. As a reminder, this conference call is being recorded. Now, I will turn the call over to John Beazler, Investor Relations at the Three-Part Advisors. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to the Adams Resources and Energy Third Quarter 2023 Conference Call. Joining me on the call today are Adams Resources and Energy President and CEO, Kim and Roy Kraut, and the company's EVP and CFO, Tracy Omar. 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 being webcast and 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 to the date of any replay or transcript reading. We'd 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 gap measures can be found at the end of our earnings release. Finally, the earnings press release we issued yesterday is posted on the investor relations section of our website, adamsresources.com, and a copy of the release has 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 Whitecraft. Kevin?

Thank you, John, and good morning, everyone. I will begin today's call with some details on the quarter before turning it over to Tracy for a more in-depth dive into the financials. I will then close my prepared remarks by discussing the outlook for Q4 and beyond. Myself, Tracy, and our division presidents, Greg Mills and Wade Harrison, will be available for your questions at the conclusion of the prepared remarks. We experienced some positive improvement across key financial measures of our company despite the continued macroeconomic headwinds of our business. including limited drilling in our legacy crude oil basins and a prolonged recession in the chemical freight shipment market. Our cash at the end of the third quarter increased to $16.3 million from $9 million at the end of June, while liquidity improved by 15% from $48.6 million to $55.9 million. These increases came largely from Gulfmark's ability to sell oil positions into a rising commodity price market and from the timing of early payments received from our customers. We generated $11.4 million in cash flow from operations in the third quarter of 2023, and net income increased to $2.3 million, or $0.88 per diluted share, up from $827,000, or $0.32 per diluted share, in the second quarter. The improvements in our GAAP numbers came largely from inventory price increases, but also from the improved performance of our recently acquired Phoenix Oil business. At Gulfmark Energy, volumes increased sequentially from 92,152 barrels per day to 92,556 barrels per day. Q3 of this year was also an improvement over the 91,878 barrels per day we saw in the prior year quarter. On an adjusted basis, Gulfmark continued to be impacted by the soft drilling market, which is limiting volume growth and margin improvements. Gulfmark's Red River Division in Oklahoma and Northwest Texas saw volumes decrease throughout the quarter and also produce a marginal loss. I will get into more details about our future plans for the Red River area later in the call. The soft drilling environment also had an impact on our BEX pipeline and GMT storage business. Our new third-party customer on this asset struggled to purchase the oil necessary to lift barges from our Port of Victoria station as frequently as initially projected. Also, we continue to see delays in oil flowing through our recent connection with the Max Midstream system, as this customer continues to make repairs to the recently acquired feeding system. We are hopeful that the commissioning of this line and the commencement of oil flow through the Max connection will occur later this quarter. The VEX remains a critical asset for Gulfmark. Utilizing this line for Gulfmark's own barrels reduces the trucking burden and risk by over 50 trips per day. each in excess of 100 miles. This not only saves money by improving the efficiency of the fleet, but also results in cost savings by eliminating the risk associated with the over-the-road truck transport. The addition of external barrels to this pipeline will generate additional efficiency and profitability to the company. Another bright spot in the quarter was the performance of our recently acquired Phoenix Oil Division. It generated approximately $1.4 million in adjusted cash flow and 1.1 million of adjusted earnings for the quarter. These results were largely driven by improved commodity prices throughout the quarter and increased volumes. Also, intra-company cooperation between Phoenix Oil and Service Transport continued to grow as these divisions worked together to bid on the purchasing and transportation of these recyclable commodities. Turning to Service Transport Company, our over-the-road chemical hauling division, In Q3, STC's cash flow decreased slightly compared to Q2, largely due to the continued sluggishness of the chemical shipment environment, limited loads available to haul, and forced rate reductions, especially from large shippers. Despite this, the team at Service Transport has done a good job adding new customers while retaining our existing customers and our driver base. As market conditions improve, STC is well positioned for strong performance. I will touch on Q4 and the future outlook later in the call. I will now turn the call over to Tracy for a deeper dive into the financials.

Thank you, Kevin, and good morning, everyone. Total revenue for the third quarter of 2023 was $760.6 million compared to $852.9 million in the prior year quarter. The decline was primarily driven by lower revenues in our crude oil marketing segment and our transportation segment, with the crude oil segment being driven by the price of crude oil. It's partially offset by revenues related to our logistics and repurposing segment. Now let's look at the quarter by individual segments. Third quarter revenues for our marketing segment were $719.9 million compared to $814.4 million in the prior year quarter. The decrease is primarily due to a decrease in the market price of crude oil over the past year, partially offset by higher overall crude oil volumes. Operating income for the quarter for the marketing segment was $7.7 million compared to $5.1 million in the third quarter of 2022. The increase is due to inventory valuation changes partially offset by decrease in the average market price of crude oil and higher operating expenses in the 2023 period. Our transportation segment recorded $24.2 million of revenue in the third quarter compared to 29.8 million in the prior year quarter. Operating income was 1.6 million versus 3.3 million for the third quarter of 2022. The decrease is primarily due to decreased transportation rates during the period because of softening in the market due to change in demand, supply chain issues, and overall inflation. Our logistics and repurposing segment, which consists of Firebird and Phoenix that were acquired in August of 2022, added $16.4 million in revenue for the third quarter of 2023, compared to $8.7 million for the partial quarter in the prior year. The segment reported a loss of $269,000 for the quarter, which includes the allocation of corporate overhead. General administrative expenses decreased by $0.4 million from the third quarter of 2022 to $4.2 million for this quarter. The decrease is related to lower salaries and wages and related personal costs and legal fees. Interest expense increased to $1 million this year versus $119,000 in last year's third quarter, primarily due to the higher interest expense related to borrowings under the revolving credit agreement and our outstanding term loan. As Kevin previously stated, our net income for the quarter was $2.3 million, or $0.88 per per diluted share compared to net income of $2.2 million or 50 cents per diluted share in the third quarter of 2022. The main difference in earnings per share is the result of less shares outstanding currently because of the buyout in 2022 of the KSA and related family member shares. For the quarter, cash provided from operating activities was $11.4 million primarily driven by changes in our working capital accounts. Capital expenditures for the quarter totaled $3 million, primarily from the purchase of 10 tractors, 8 trailers, and other field equipment, as noted in our earnings release that was issued yesterday. Our available cash and cash equivalents as of September 30, 2023, totaled $16.3 million, compared to $9 million at the end of the second quarter, and $20.5 million on December 31, 2022. Total liquidity as of September 30th was $55.9 million, which includes $39.6 million available under our $60 million credit agreements. Now I'll turn the call back over to Kevin for some final comments. Kevin?

Thank you, Tracy. I wanted to touch base on the outlook for the remainder of 2023 and into next year. It appears we will be facing challenging market conditions for the remainder of the year and potentially into Q1 of 2024. We do not see market fundamentals that point to a quick turnaround in the current environment. While we anticipate the market's eventual rebound, it is crucial for our divisions to manage items that we can control, like safety, cost reductions, service, operational excellence, and employee retention. At Gulfmark specifically, we will focus on improving margins through reducing expenses, customer negotiations, and more efficient operations. I also wanted to touch on Gulfmark's future plans for its Red River operations in Oklahoma and North Texas. This trucking operation was acquired in 2018 to provide exclusive oil transportation services to the owners of the Red River pipeline system. Through no fault of their own, the operators of this line were unable to maintain the initial volume levels from 2018, let alone significantly grow the volumes as they expected. In fact, volumes today are down more than 50% from 2018 levels. Because of this, Gulfmark's history with this Red River system was one of continually revamping and right-sizing the trucking operations, just a struggle to do much better than break even with this operation. In October of this year, the ownership structure on this business changed, and our 2018 contract was up for renewal. The new owners of this system were seeking significant transportation rate reductions, while Gulfmark required rate increases to make this operation viable long-term. Ultimately, we were unable to come up with a contract agreement, and Gulfmark made the decision to shut operations in the Red River area, effective November 10, 2023. Gulfmark had approximately 60 drivers and 19 support personnel dedicated to this operation. It is unfortunate for the hardworking team in the Red River area, as they did everything within their control to provide excellent service, a safe working environment, and effectively manage costs to make this business as successful as it could be. I am thankful for their efforts and their dedication over the years. As a result of this closure, Gulfmark will see an overall volume reduction beginning in Q4. However, the impact of net income and EBITDA should be minimal over the long term. In fact, our ability to sell off the older assets and redeploy the newer Red River equipment into the Gulfmark and Firebird operations will help us improve our cash position and nearly eliminate the need for 2024 maintenance capex in these operations. Turning to our Phoenix and Firebird businesses, Phoenix will look to continue to improve margins and add customers. Firebird's priorities are continued volume growth and improving quality of revenue. We are seeing broader intercompany cooperation as service transport halls for Phoenix and Firebird halls for Gulfmark. As our businesses will continue to work together on developing new customers and projects, as well as reducing our dependence on unrelated third-party haulers. We must continue to be patient with the VEX pipeline, as we are seeing some progress from MAX towards being ready to begin shipping on the line. We are still very bullish on the long-term future of VEX, particularly when drilling activity in the Eagleford and surrounding basins improves. Although they will be facing headwinds in 2024, service transport is well-positioned for success when the market conditions improve. Customer feedback points to the status quo through Q1 of 2024 before improving in late Q2 of next year. In closing, our primary focus for the fourth quarter and into 2024 will be operating safely and efficiently, adding new customers and reducing costs. I believe Adam's overall near-term results will likely be similar to our third quarter performance until market conditions improve, which we believe will begin in the first half of next year. Finally, we will continue to be proactive in looking for the incremental wins that still exist even in this challenging environment. With that, I would like you to open the line for questions. Operator?

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Liam Burke with B Reilly Securities. Please go ahead.

Yeah, thank you so much, operator, and good morning, everyone. This is actually Nick Giles asking a question on behalf of Liam. My first question might be for Greg, and I apologize if I missed this in the prepared remarks. Has Gulfmark's largest refinery customer, have they resumed operations? And if so, how should we think about the cadence of those volumes returning? Thank you very much.

Yes, they have returned to operating pretty much as they were before. I would not expect any major changes going forward with respect to how we serve that refinery. And then, in addition, we picked up a new high-value customer as well during the period of time that they shut down, and we've continued to service those guys as well. So silver lining is we diversified and we found another high-margin customer for Golfmark.

Yeah, the challenge is, as Kevin, I'll just add, the challenge on that is because of the struggles to gain all the barrels we need to buy, we'll probably see that volume split between the previous customer who went down coming back and the new customer we gained. We elected to split that volume between the two customers. As drilling improves in the area, we'd like to increase volumes to both of those customers as our ability to buy oil improves.

Thank you both. That's helpful. I know the marketing team was really, really agile in diverting those barrels elsewhere, so that's good to hear. You touched on this a little, but maybe on Phoenix. Would you say the Phoenix and Firebird integration, has that been progressing as expected? When would you begin to really start to see the benefit of the overlap in Gulfmark sites?

Yeah, we're starting to see that now. You know, I think it's continuing to be a work in progress. You know, when we purchased those acquisitions, I don't think it's progressing as we hoped it would. The market softened shortly after we bought both of them. But that being said, I think we're seeing positive movements both in Phoenix and Firebird. Phoenix from largely from commodity prices improving over the last quarter, them adding new customers. But we've also seen service transport become a significant hauler for Phoenix. And then Firebird is in the top. Firebird is one of the top haulers for Gulfmark. So we're seeing great progress with that. We mentioned the closure of the Red River area. We're taking that shop equipment out of that location and opening up a new location for Gulfmark and Firebird combined in Victoria, Texas. We'll have a shared shop in that area and really have very little expense to get that up since that equipment will be moving down. So it's still a work in progress. I expect some more integration between the operations as 2024 progresses. Some of that needs to happen through technology and getting on the same computer platforms. From an accounting standpoint, we moved Firebird and Phoenix over to our Great Plains accounting system. We did that in the beginning of the fourth quarter. Third quarter. Beginning of third quarter. Beginning of third quarter, sorry. And so we're making progress in all those areas. It'll just be a continual work through 2024. Got it.

Got it. Well, that's good to hear. I really appreciate all that color. Maybe just one last one for me. I wanted to turn just to the chemical market. Obviously, it's been soft there. And I think I heard you mention that this could likely carry into Q1. You know, what do you think would be the main drivers of seeing a turnaround there?

Maybe I'll comment first, and then I'll let Wade comment as well. But I think if you look at large chemical shippers, Dow, BASF, and their results that they've recently released, you get a feel for their current environment. They're really the largest drivers of what the chemical shipment market could potentially see. So when we see them start to rebound and their projections on when they're seeing orders pick up and them needing to refill inventories, I think you'll begin to see the rebound and service transport will definitely benefit from that. Wade, do you have any additional comments?

Yeah, a couple of comments. So there's been a large amount of RFP activity going on in the latter half of this year. And we've been aggressively pursuing some additional business. A lot of this business is slated to start January 1 type scenarios. And so far, preliminary feedback is we've enjoyed some success with some of these exercises. And so while we wait for, I guess, kind of our normal packages of business to come back with our major customers, we should see some ancillary benefits from some of these new customers in their RFP packages. So I think we'll probably see the same type of sluggishness through Q4. And then Q1, I think we'll see a little bit of a boost just from from new areas that we're going to dive into. And then most of the larger guys are telling us Q2-ish is when their volumes will start to normalize. And so we'll see another bump then. So we're pretty well, we're somewhat optimistic about what things are to come. We've just got to get through Q4.

That's clear to me. Thanks for that, Wade. That's all for me now. Thanks so much, guys, and continue. Best of luck. Thank you, Nick. Thank you, Nick.

Our next question comes from Chris with Singular Research. Please go ahead.

Hi. Good morning. Just a question on VEX pipeline system. What was the reason for the drop in terminaling volumes for the quarter?

The reason for the drop in the terminaling volume is there's primarily some lower volume from our affiliate, Golfmark, as a shipper, and then also, because that plays into terminaling and VEX pipeline volume. We also had two third-party customers, I think through 2Q, following, kind of tapering off into 3Q, just based on, one was a spot deal that didn't get extended, And the other was a customer lost some product supply that they were counting on. And so they're having to go back and regroup and plan on coming back with more volume in the first quarter next year. But they are still a customer and doing some smaller barge volumes right now.

Yeah, and I'll just comment. I think the customers that we've had in the terminaling business on VEX have the same struggles we do. purchasing the necessary barrels. So it's a tight market as far as barrels that are available out there, very competitive. And I think that's part of the reason, as Greg mentioned, they just couldn't get the barrels to lift as many barges as they would like. But we're hopeful they have some more success into next year.

And on the upside, business development, we're working with several folks for some new terminaling business opportunities for Victoria, Gulfmark Terminals Victoria. So And we're also working with some folks who may be potential third-party VEX shippers as well. So aside from hoping that max midstream kicks off the joint tariff opportunity, we have a good amount of deal flow, if you will, around that business.

Okay, thanks for that. And can you talk about capital expenditures specifically? Do you see any major ones in the fourth quarter and do you have a general goal for 2024 with that?

For fourth quarter, we still have some tractors and trailers that are rolling in. We were early in the year optimistic we were going to be able to spend, invest money on the Dayton expansion project. Unfortunately, with The engineers and the developer and the city of Dayton, it's taken a lot longer to get all the details necessary to move forward with that spending. I don't anticipate much spending in the fourth quarter on the Dayton project. Again, we have just some tractors and trailers, a few things that we'd ordered well over a year ago that are still kind of rolling in. Then as we move into next year, we do expect we should be able to be in a better position to work on the Dayton expansion project. And service transport will still continue to replace some of their tractors and some of their trailers. But from a Firebird and Phoenix perspective, very, very little, if any, capital expenditure is going to be necessary. So nothing significant.

Yeah, and same with Gulfmark, too. So with us moving those Red River assets, those are 60 tractors. Half of those, generally half of those will be sold or in the process of being sold right now. The newer equipment, the later model equipment, will move into Gulfmark and Firebird, replacing some older equipment there that will also be sold and really eliminate the need for any tractor or trailer purchases for Firebird or Gulfmark in 2024. So some significant savings there.

Okay. Can you talk about driver retention at service transport? How is that? What's that this quarter?

Wade, I'll let you take that one.

Yeah, so we actually performed very well during Q3 with driver retention. I guess it's a positive and it's a negative for the guys. Despite our lack of work, they really, quite frankly, didn't have anywhere to go. Our terminals did a good job of spreading the work around as best that they could. We actually relaxed our hiring. Normally, it's hire, hire, hire, and we didn't put a freeze in place, but we were very, very selective on who we did bring in. We wanted to make sure we kept the wages as high as we could, and we actually saw quite a benefit of that. We've already reached our year-to-date our highest referral count that we saw all of last year. So we're doing a good job with the volumes that we have, and it's showing up in our turnover. So we're on track to beat last year's turnover, assuming Q4 goes as planned. We do expect to bring on some additional guys during the fourth quarter just to boost up our numbers based on the additional volumes we expect to see come January. And so we may see a little bit of turnover through that, but for the most part, we're actually doing pretty good.

I'll just touch on, I think, an important key to that is we do try to hang on to the driver base even in the slower times because we've seen these cycles before, need to be ready to react when the markets return. Those with capacity will benefit, and we want to have that capacity, but also our driver's On both sides, at Gulfmark, all three sides, Firebird and Service Transport, are paid either by the mile or by the load. So when there's fewer miles and fewer loads, they take a natural pay reduction. So there is some savings from that. It correlated to the levels of business.

Great. Thanks for the answers.

You're welcome, Chris.

Again, if you'd like to ask a question, please press star, then one at this time. Our next question comes from Jason Ersner with Thundershoot Holdings. Please go ahead.

Hi, Kevin Tracy. Nice to see the recovery from last quarter with some solid results, and thanks for taking a couple of questions. Just on the Gulfmark business, do you have a way to kind of better characterize the value-added sales and gross margin in that business? or maybe talk about, I guess, how much of the underlying crude that you're marketing is a pass-through, kind of spread business? Because I think one of the knocks that you've gotten is revenue bounces around with a lot of volatility. And if you look at the gross margin that you report, it's pretty low if you're including that underlying product. But as a spread volume business, I think the quality and the margin profile is pretty you know, a much more attractive, sustainable oil. So I don't know if you have a way to kind of characterize that better.

It's challenging. I'll say that in some terms, not from an investor perspective, from a business perspective, we keep that margin a little gray because we're providing, you know, we're negotiating on both the buy side and the sell side. We're providing transportation services, you know, to move the oil either from, you know, from the field to the pipeline or the field to a storage location and then eventually onto the barges. And then we provide the barging service, uh, you know, the loading for the barging service. So, uh, one of the reasons we don't really release what that margin is because we have to, we have, you know, we, we don't really put out there because we want it a little, uh, flexible to be able to, if we need to reduce transportation, you know, cost to improve the, uh, the ability to buy or sell, sell the oil. We do keep that intentionally gray, so it's very difficult to really report the margin piece. I don't know if you have any piece on that, Greg, or what advantage that gives to us.

Yeah, I mean, we monitor kind of our internal view of the margin continually, and obviously to ensure that we are understanding what the cost is to transport, you know, from the buy to the sell side, and then ensuring that And that gives us, I guess, the way I'd say is an ability to understand the competitive market. And we're competing with a lot of folks that really just kind of buy on a volume basis. They're feeding either a refinery or a pipeline. And our business model is different just because we are buying from a lot of long-time relationship operators. We provide a higher level of service and consistency. And then we're negotiating with the end providers using processors of the oil, and even to the extent that we'll put together specific distillation curves that each of the processors are looking for. So it's a lot. I would view it not as a volume just for a lower margin business, but it's a higher margin service-related business. That also probably limits us in terms of the total number of barrels that we can purchase and sell. I don't know if that was helpful, but...

It is, but I guess maybe putting it another way, you know, when I, when I guess when I look at the gross margin being very well, I think that kind of brings up a lot of risks as things swing, uh, negative versus as kind of a service business where it's a value added sale. Um, it's a different characteristic. So I guess maybe without getting into the margin, which I understand what you're saying on from a business perspective, I want to keep you that great. But, um, I guess is there a way to characterize the risk in that business? How long are you holding it versus are almost all the barrels that you're marketing, are they already kind of spoken for by the time you already have it?

Yeah, we don't hold. In fact, we try to keep our inventory as lean as possible, and we effectively sell everything that we buy each month. And, you know, to the extent that we – go a little long or a little short just based on normal market imbalances or barge timing, that type of thing. There's some of that, but sometimes that does show up in a carryover of inventory into the next month just based on barge schedules. So there's some volatility there. But in general, we're not trying to play the market at all. We buy and sell and clear barrels as efficiently as we can.

Yeah, we're not projecting or we're not going out and buying as much oil as possible and then hoping we have a sale for it. Generally, the refiners are committing to us how many barrels they need, and then we go out and attempt to purchase as many barrels as we can supply them to meet those needs. So It turns quickly, and like Greg said, when we see swings in inventory, it's generally because a barge has pushed either for weather or a refinery going down or an issue like that rather than us intentionally speculating on and holding oil.

And sometimes if those barges get pushed because of weather, so if they're scheduled to pick it up on the 29th of the month and they don't pick it up until the 1st or 2nd, in most instances, Greg, you can confirm this, the refiner will go ahead and price it in the in the month that was scheduled for delivery. So there's no price risk carrying from one month to the next month.

That's correct. And we're just not reporting the revenue until it's listed next month, but we're saving the value of that deal in our inventory.

Yeah, because technically from an accounting standpoint, the sale has not occurred until the following month, even though we know what the price is going to be. Okay.

And just on the VEX pipeline, obviously, I know I think everyone's waiting on kind of the third-party benefits to develop over time, but can you maybe just talk a little bit about sort of the first-party benefits, I guess you would call them, in terms of what that acquisition has done for your internal operations in terms of, I guess, maybe like a stacked margin kind of cost-benefit? I guess a little similar to what you're saying on Firebird being a hauler for Gulfmark, does Maybe talk a little bit about what VEX has done in a similar way for the operation.

It's been a huge benefit. Prior to our acquisition of the VEX, Gulfmark was already the largest shipper on that system. We're able to manage very efficiently and without the risk of third parties changing our expenses related to shipping on the pipeline. So managing our schedules, it's seamless from the truck picking up at the lease all the way to the barge loading. So it's been, I'd say, a nice benefit there. Related to in-truck company, you know, dollars changing hands to the extent that we need to. We can look at, I would refer to it as corporate economics. And since we're not paying a third party, there's more flexibility for the marketers to look at covering costs on a variable basis for the truck and the pipeline. We don't really have to do that very much, but that is a tool that we could use.

And I'll touch on the benefits of if we are unable to ship on that line or if someone had purchased it that was going to use it for their exclusive purpose or wouldn't allow us to ship on it. Depending on the volume we're doing, it's about 50 to 70 trucks a day not having to turn a 100-mile round trip. So there's a massive amount of savings and the efficiency that we can use those trucks in other areas. And don't have to purchase more equipment or hire more drivers because the pipeline's moving that oil from Cuero, Texas down to Victoria for us. So there's some big benefits as far as that goes as well. So we're glad to have the line. We're expecting and hopeful we get some third-party benefit of that. We've had a little bit on the terminaling side, but I think anything we can add to it, there's not a lot of incremental costs. So we just need to keep keep everything we can to get some third-party barrels on that. But while we wait for it, the line is still really, really important and valuable to the company.

Okay, awesome. Thanks for taking my question.

Thanks, Jason. Thanks.

This concludes our question and answer session. I would like to turn the conference back over to Kevin Roycroft for any closing remarks.

Thank you for your continued interest in the company. We will be participating in the Three-Part Advisors Ideas Conference in Dallas on November 16th. We look forward to providing you an update on our progress when we report the fourth quarter earnings. Thank you for joining us.