UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___.

Commission file number: 1-7908

ADAMS RESOURCES & ENERGY, INC.

(Exact name of Registrant as Specified in Its Charter)

Delaware		74-1753147
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
	17 SOUTH BRIAR HOLLOW LANE, SUITE 100, HOUSTON, Texas 77027
	(Address of Principal Executive Offices) (Zip Code)
	(713) 881-3600
	(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 Par Value	AE	NYSE American LLC

Securities to be registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer þ Non-accelerated filer o Smaller reporting company þ Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. þ

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The aggregate market value of the Company’s voting and non-voting common shares held by non-affiliates as of the close of business on June 30, 2023 was $87,396,622 based on the closing price of $35.15 per one share of common stock as reported on the NYSE American LLC for such date. There were 2,566,649 shares of Common Stock outstanding at March 1, 2024.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held May 6, 2024 are incorporated by reference into Part III of this annual report on Form 10-K.

ADAMS RESOURCES & ENERGY, INC.

TABLE OF CONTENTS

		Page Number
PART I
Item 1 and 2.	Business and Properties.	2
Item 1A.	Risk Factors.	14
Item 1B.	Unresolved Staff Comments.	25
Item 1C.	Cybersecurity.	25
Item 3.	Legal Proceedings.	27
Item 4.	Mine Safety Disclosures.	27
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	27
Item 6.	[Reserved]	28
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	49
Item 8.	Financial Statements and Supplementary Data.	50
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.	94
Item 9A.	Controls and Procedures.	94
Item 9B.	Other Information.	96
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.	96
PART III
Item 10.	Directors, Executive Officers and Corporate Governance.	96
Item 11.	Executive Compensation.	96
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	97
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	97
Item 14.	Principal Accountant Fees and Services.	97
PART IV
Item 15.	Exhibits and Financial Statement Schedules.	97
Item 16.	Form 10-K Summary.	99
Signatures		100

1

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This annual report on Form 10-K for the year ended December 31, 2023 (our “annual report”) contains various forward-looking statements 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 this annual report. 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 annual 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.

PART I

Items 1 and 2. Business and Properties.

General

Adams Resources & Energy, Inc. (“AE”) is a publicly traded Delaware corporation organized in 1973. Our common shares are listed on the NYSE American LLC (“NYSE American”) under the ticker symbol “AE”. Through our subsidiaries, we are primarily engaged in crude oil marketing, truck and pipeline transportation of crude oil, and terminalling and storage in various crude oil and natural gas basins in the lower 48 states of the United States (“U.S.”). In addition, we conduct tank truck transportation of liquid chemicals, pressurized gases, asphalt and dry bulk primarily in the lower 48 states of the U.S. with deliveries into Canada and Mexico, and with seventeen terminals across the U.S. We also recycle and repurpose off-specification fuels, lubricants, crude oil and other chemicals from producers in the U.S. Our headquarters are located in 22,197 square feet of office space located at 17 South Briar Hollow Lane, Suite 100, Houston, Texas 77027. Unless the context requires otherwise, references to “we,” “us,” “our,” the “Company” or “AE” are intended to mean the business and operations of Adams Resources & Energy, Inc. and its consolidated subsidiaries.

We operate and report in four business segments: (i) crude oil marketing, transportation and storage; (ii) tank truck transportation of liquid chemicals, pressurized gases, asphalt and dry bulk; (iii) pipeline transportation, terminalling and storage of crude oil; and (iv) interstate bulk transportation logistics of crude oil, condensate, fuels, oils and other petroleum products and recycling and repurposing of off-specification fuels, lubricants, crude oil and other chemicals. For detailed financial information regarding our business segments, see Note 9 in the Notes to Consolidated Financial Statements included under Part II, Item 8 of this annual report.

Business Segments

Crude Oil Marketing

Our crude oil marketing segment consists of the operations of our wholly owned subsidiary, GulfMark Energy, Inc. (“GulfMark”). Our crude oil marketing activities generate revenue from the sale and delivery of crude oil purchased either directly from producers or from others on the open market. We also derive revenue from third party transportation contracts. We purchase crude oil and arrange sales and deliveries to refiners and other customers, primarily onshore in Texas, North Dakota, Michigan, Wyoming, Colorado and Louisiana.

2

Our crude oil marketing activities includes a fleet of 163 tractor-trailer rigs, the majority of which we own and operate, used to transport crude oil. We also maintain approximately 180 pipeline inventory locations or injection stations. We have the ability to barge crude oil from six crude oil storage facilities along the Intracoastal Waterway of Texas and Louisiana, and we have access to approximately 889,000 barrels of storage capacity at the dock facilities in order to access waterborne markets for our products.

The following table shows the age of our owned and leased tractors and trailers within our crude oil marketing segment at December 31, 2023:

	Tractors (1)	Trailers (2)
Model Year:
2024	27	2
2023	21	10
2022	35	—
2021	16	—
2020	44	—
2019	13	—
2018	2	—
2017	2	—
2015	1	10
2014	2	24
2013	—	27
2012	—	12
2011	—	80
2010 and earlier	—	21
Total	163	186

____________________

(1)Includes twenty-seven 2024 tractors, twenty-one 2023 tractors, sixteen 2021 tractors and five 2019 tractors that we lease from third parties under finance lease agreements.

(2)Includes two 2024 trailers, one 2007 trailer and two 2004 trailers that we lease from third parties under finance lease agreements. See Note 17 in the Notes to Consolidated Financial Statements for further information.

We purchase crude oil at the field (wellhead) level. Volume and price information were as follows for the periods indicated:

	Year Ended December 31,
	2023		2022		2021
Field level purchase volumes – per day (1)
Crude oil – barrels	87,985		94,873		89,061
Average purchase price
Crude oil – per barrel	$	74.96	$	92.63	$	65.48

____________________

(1)Reflects the volume purchased from third parties at the field level of operations.

3

Field level purchase volumes depict our day-to-day operations of acquiring crude oil at the wellhead, transporting crude oil, and delivering it to market sales points. We held crude oil inventory at a weighted average composite price as follows at the dates indicated (in barrels):

	December 31,
	2023			2022			2021
		Average			Average			Average
	Barrels	Price		Barrels	Price		Barrels	Price
Crude oil inventory	267,731	$	72.35	328,562	$	78.39	259,489	$	71.86

We deliver physical supplies to refinery customers or enter into commodity exchange transactions from time to time to protect from a decline in inventory valuation. During the year ended December 31, 2023, we had sales to two customers that comprised approximately 11.4 percent and 11.1 percent, respectively, of total consolidated revenues. We believe alternative market outlets for our commodity sales are readily available and a loss of any of these customers would not have a material adverse effect on our operations. See Note 19 in the Notes to Consolidated Financial Statements for further information regarding credit risk.

Operating results for our crude oil marketing segment are sensitive to a number of factors. These factors include commodity location, grades of product, individual customer demand for grades or location of product, localized market price structures, availability of transportation facilities, actual delivery volumes that vary from expected quantities, and the timing and costs to deliver the commodity to the customer.

Transportation

Our transportation segment consists of the operations of our wholly owned subsidiary, Service Transport Company (“STC”). STC transports liquid chemicals, pressurized gases, asphalt and dry bulk on a “for hire” basis throughout the continental U.S., and into Canada and Mexico. For deliveries into Mexico, our drivers meet a third party carrier at the border, and the third party contractor delivers the products to the customer within Mexico. We do not own any of the products that we haul; rather we act as a third party carrier to deliver our customers’ products from point A to point B, using predominately our employees and our owned or leased tractors and trailers. However, we also use contracted independent owner operators to provide transportation services. Transportation services are provided to customers under multiple load contracts in addition to loads covered under STC’s standard price list. Our customers include major oil and chemical companies and large and mid-sized industrial companies.

STC operates seventeen terminals in ten states: (i) Texas, with terminals in Houston, Corpus Christi, Nederland and Freeport; (ii) Louisiana, with terminals in Baton Rouge (St. Gabriel), St. Rose and Sterlington; (iii) Florida, with terminals in Jacksonville and Tampa; (iv) Augusta, Georgia; (v) Mobile, Alabama; (vi) Charlotte, North Carolina; (vii) Cincinnati, Ohio; (viii) South Charleston, West Virginia; (ix) Memphis, Tennessee; and (x) Illinois, with terminals in East St. Louis and Joliet. The St. Gabriel, Louisiana and the Corpus Christi, Texas terminals are situated on 11.5 acres and 3.5 acres, respectively, that we own, and both include an office building, maintenance bays and tank cleaning facilities.

Transportation operations are headquartered at a terminal facility situated on 26.5 acres that we own in Houston, Texas. This property includes maintenance facilities, administrative offices and terminal facility, tank wash rack facilities and a water treatment system. Pursuant to regulatory requirements, STC holds a Hazardous Materials Certificate of Registration issued by the U.S. Department of Transportation (“DOT”).

4

The following table shows the age of our owned and leased tractors and trailers within our transportation segment at December 31, 2023:

	Tractors (1) (2)	Trailers (3)
Model Year:
2024	24	34
2023	37	22
2022	31	51
2021	33	12
2020	129	100
2019	49	—
2018	—	20
2016	—	6
2015	2	75
2014	—	34
2013	—	5
2012	—	28
2008 and earlier	—	348
Total	305	735

____________________

(1)Excludes 90 contracted independent owner operator tractors.

(2)Includes fifteen 2024 tractors, thirty-five 2023 tractors and thirty-three 2021 tractors that we lease from third parties under finance lease agreements.

(3)Includes fourteen 2024 trailers, twenty-two 2023 trailers, twenty 2020 trailers and twenty 2018 trailers that we lease from third parties under finance lease agreements. See Note 17 in the Notes to Consolidated Financial Statements for further information.

Miles traveled was as follows for the periods indicated (in thousands):

	Year Ended December 31,
	2023	2022	2021
Mileage	25,487	26,510	27,902

All company and independent contractor tractors are equipped with in-cab communication technology, enabling two-way communications between our dispatch office and our drivers, through both standardized and free-form messaging, including electronic logging. We have also installed electronic logging devices (ELDs) on 100 percent of our tractor fleet. This technology enables us to dispatch drivers efficiently in response to customers’ requests and to provide real-time information to customers about the status of their shipments. We have also equipped our tractor fleet with forward-facing and inward facing event recorders. These cameras are constantly recording the movements of the vehicles, and our management team is alerted via email in the event the unit triggers a G-force event. A snapshot of this recording is then sent to our management team for review.

STC holds the American Chemistry Council’s certification as a Responsible Care Management System (“RCMS”) company. The scope of this RCMS certification covers the carriage of bulk liquids throughout STC’s area of operations as well as the tank trailer cleaning facilities and equipment maintenance. Certification was granted based on STC’s conformance to the RCMS’s comprehensive environmental health, safety and security requirements. STC’s quality management process is one of its major assets.  The practice of using statistical process control covering safety, on-time performance and customer satisfaction aids continuous improvement in all areas of quality service.

5

STC is a Partner in the U.S. Environmental Protection Agency’s (“EPA”) SmartWay Transport Partnership, a national voluntary program developed by the EPA and freight industry representatives to reduce greenhouse gases and air pollution and promote cleaner, more efficient ground freight transportation.

During 2020, STC applied for and received its first bronze star rating from EcoVadis, a global leader in monitoring, benchmarking and enabling sustainability in global supply chains.

During 2022, STC won the National Tank Truck Carriers’ (“NTTC”) Heil Trophy Award for its 2021 efforts. This esteemed award recognizes tank truck operations in North America with the best safety program and safety record for the year. STC claimed NTTC’s Heil Trophy Award in the Harvison division, which spotlights carriers whose trucks traveled more than 15 million miles during the previous year. NTTC’s longest-running safety contest annually recognizes North American for-hire and private tank truck fleets with elite safety programs and records. Winners are determined by their safety records, safety and preventive maintenance programs, personnel safety programs and record, and contributions to tank truck industry and general highway safety causes.

STC is a member of Texas TRANSCAER®, a non-profit organization with membership from the chemical, transportation and emergency response industries. The mission of Texas TRANSCAER® is to promote safe transportation and handling of hazardous materials, educate about the safety and security of hazardous materials that are transported through communities, and provide education and training for emergency responders along transportation routes. As members of Texas TRANSCAER®, STC Safety Personnel assist with training events for first responders all over Texas.

Our strategy is to build long-term relationships with our customers based upon the highest level of customer service, safety and reliability. We believe that our commitment to safety, flexibility, size and capabilities provide us with a competitive advantage over other carriers.

Pipeline and Storage

Our pipeline and storage segment consists of the operations of two of our wholly-owned subsidiaries, which constitute the VEX Pipeline System: (i) Victoria Express Pipeline, L.L.C. (“VEX”), which we acquired on October 22, 2020 and which owns the VEX pipeline, and (ii) GulfMark Terminals, LLC (“GMT”), which was formed in October 2020 to hold the related terminal facility assets we acquired with the VEX Pipeline System. The VEX Pipeline System complements our existing storage terminal and dock at the Port of Victoria, where with our crude oil marketing segment, we control approximately 450,000 barrels of storage with three docks.

Through 2021, pipeline and storage segment revenues were earned from a third-party shipper under a contract that had been in place at the time of the acquisition, and revenues were also earned from GulfMark, an affiliated shipper. The third-party contract ended in 2021, and all pipeline and storage segment revenues through mid-2023 were earned from GulfMark. In mid-2023, we began receiving revenue from an unaffiliated shipper. We are also currently constructing a new pipeline connection between the VEX Pipeline System and the Max Midstream pipeline system, and we expect to complete construction and place the assets into commercial service during the second half of 2024. In addition, we are exploring new connections with several other pipeline systems, for new crude oil supply opportunities both upstream and downstream of the pipeline, to enhance the crude oil supply and take-away capability of the system.

Volume information was as follows for the periods indicated (in barrels per day):

	Year Ended December 31,
	2023	2022	2021
Pipeline throughput	9,140	11,084	7,670
Terminalling	10,026	11,296	8,132

6

The VEX Pipeline System, with truck and storage terminals at both Cuero and the Port of Victoria, Texas, is a crude oil and condensate pipeline system, which connects the heart of the Eagle Ford Basin to the Gulf Coast waterborne market. The VEX Pipeline System includes 56 miles of 12-inch pipeline, which spans DeWitt County to Port of Victoria in Victoria County, Texas, with approximately 400,000 barrels of above ground storage at its two terminals. The pipeline system has a current capacity of 90,000 barrels per day and is regulated by the Federal Energy Regulatory Commission (“FERC”) and the Texas Railroad Commission. The VEX Pipeline System can receive crude oil by pipeline and truck, and has downstream pipeline connections to two terminals today, with potential for additional downstream connection opportunities in the future.

The Cuero terminal has 40,000 barrels per day of offload capacity via eight truck unloading stations, with two 100,000-barrel storage tanks and one 16,000-barrel storage tank. The Port of Victoria terminal has 30,000 barrels per day of truck offload capacity via six truck unloading stations and water access via two barge docks, which have been leased from the Port Authority in Victoria. The Port of Victoria has four 50,000-barrel storage tanks and one 10,000-barrel storage tank.

The VEX Pipeline System supports GulfMark’s Gulf Coast region crude oil supply and marketing business and integrates into GulfMark’s value chain, serving as the link between producers/operators and our end-user markets we supply directly along the Gulf Coast waterborne market. We have the opportunity to increase our efficiency by more effectively managing the pipeline and terminalling portion of our overall transportation costs.

Logistics and Repurposing

Our logistics and repurposing segment consists of the operations of two of our wholly-owned subsidiaries, Firebird and Phoenix, which we acquired on August 12, 2022. Firebird is headquartered in Humble, Texas, and currently operates seven terminal locations throughout Texas. Firebird transports crude oil, condensate, fuels, oils and other petroleum products on a “for hire” basis largely in the Eagle Ford basin. We do not own any of the products that we haul through Firebird; rather we act as a third-party carrier to deliver our customers’ products from point A to point B, using predominately our employees and our owned or leased tractors and trailers. However, we also use contracted independent owner-operators to provide transportation services. Firebird provides transportation services to customers under multiple load contracts in addition to loads covered under its standard price list. Our customers include major oil and chemical companies and large and mid-sized industrial companies. Firebird provides transportation services to Phoenix, and crude oil transportation services to GulfMark, when additional trucking capacity is required.

Phoenix is also headquartered in Humble, Texas. Phoenix repurposes and finds beneficial uses for off-specification fuels, lubricants, crude oil and other chemicals from producers in the U.S. With an advanced laboratory, sophisticated technology, and access to an expansive fleet of trucks, Phoenix can provide a solution for customers needing help managing off-specification fuels or oils. In addition to the removal from the customer site, Phoenix markets these refinery and plant co-products into the fuels or feedstock markets. Phoenix markets on approximately six different levels, ranging from heavy fuel oils to light-end naphthas. Phoenix utilizes Firebird’s fleet to assist in the transportation of these products, and has begun to utilize STC to also assist in the transportation of these products.

On May 4, 2023, we acquired approximately 10.6 acres of land in the Gulf Inland Industrial Park, located in Dayton, Texas, for approximately $1.8 million to build a new processing facility for Phoenix with rail spur and siding, product storage, and truck rack. Phoenix intends to build new infrastructure to service its existing customers and to create opportunities for growing the business. Phoenix also plans to relocate its headquarters from Humble, Texas to this new location. We expect to break ground on the Dayton facility during the second quarter of 2024. When completed, this facility will allow us to operate our rail and trucking business more efficiently, as well as open up opportunities to process a wider variety of products.

7

The following table shows the age of our owned and leased tractors and trailers within our logistics and repurposing segment at December 31, 2023:

	Tractors (1) (2)	Trailers
Model Year:
2024	15	—
2023	17	—
2022	—	2
2021	21	1
2020	14	2
2019	16	2
2018	23	3
2017	—	1
2016	6	5
2015	7	18
2014	3	31
2013	1	15
2012	6	43
2011	—	16
2010 and earlier	8	71
Total	137	210

____________________

(1)Excludes 10 contracted independent owner operator tractors.

(2)Includes six 2024 tractors and two 2023 tractors that we lease from third parties under finance lease agreements. See Note 17 in the Notes to Consolidated Financial Statements for further information.

All company and independent tractors in this segment are equipped with similar in-cab communication technology and event recorders as our STC tractors, described above under “—Transportation”. All tractors are also equipped with electronic logs.

Investment in Unconsolidated Affiliate

We own an approximate 15 percent equity interest (less than 3 percent voting interest) in VestaCare, Inc., a California corporation (“VestaCare”), through Adams Resources Medical Management, Inc. (“ARMM”), a wholly owned subsidiary. We acquired our interest in VestaCare in April 2016 for a $2.5 million cash payment, which we impaired in 2017. VestaCare provides an array of software as a service (SaaS) electronic payment technologies to medical providers, payers and patients including VestaCare’s product offering, VestaPay™. VestaPay™ allows medical care providers to structure fully automated and dynamically updating electronic payment plans for their patients. We do not currently have any plans to pursue additional medical-related investments. See Note 2 in the Notes to Consolidated Financial Statements for further information.

Competition

In all phases of our operations, we encounter strong competition from a number of regional and national entities. Many of these competitors possess financial resources substantially in excess of ours and may have a more expansive geographic footprint than we have. We face competition principally in establishing trade credit, pricing of available materials, quality of service and location of service. Our strategy is to build long-term partnerships with our customers based upon the safety of our operations, reliability and superior customer service.

8

Our crude oil marketing segment and our logistics and repurposing segment compete with major crude oil companies and other large industrial concerns that own or control significant refining, midstream and marketing facilities. These major crude oil companies may offer their products to others on more favorable terms than those available to us.

In the trucking industry, the tank lines transportation business is extremely competitive and fragmented. Price, service and location are the major competitive factors in each local market.

Seasonality

In the trucking industry, revenue has historically followed a seasonal pattern for various commodities and customer businesses. Peak freight demand has historically occurred in the months of September, October and November. After the December holiday season and during the remaining winter months, freight volumes are typically lower as many customers reduce shipment levels. Operating expenses have historically been higher in the winter months primarily due to decreased fuel efficiency, increased cold weather-related maintenance costs, and increased insurance claim costs attributable to adverse winter weather conditions. Revenue can also be impacted by weather, holidays and the number of business days that occur during a given period, as revenue is directly related to the available working days of shippers.

Although our crude oil marketing segment and our logistics and repurposing segment are not materially affected by seasonality, certain aspects of our operations are impacted by seasonal changes, such as tropical weather conditions, energy demand in connection with heating and cooling requirements and the summer driving season.

Inflation and Other Cost Increases

Most of our operating expenses are inflation-sensitive, with inflation generally producing increased costs of operations. We are experiencing increased inflation in the costs of various goods and services we use to operate our business, including the cost of equipment, tires, repairs and maintenance and compensation paid to drivers. These and other factors may continue to impact our costs, expenses and capital expenditures, and could continue to have an impact on customer demand for our services as customers manage the impact of inflation on their resources.

In order to mitigate the effect of price increases on our business, from time to time, we enter into monthly commodity purchase and sale contracts for up to 300,000 barrels of crude oil and commodity purchase contracts for the purchase of diesel fuel. See Note 13 in the Notes to Consolidated Financial Statements for further information regarding these contracts.

In addition to inflation, fluctuations in fuel prices can affect profitability. Most of our transportation contracts with customers contain fuel surcharge provisions. Although we historically have been able to pass through most long-term increases in fuel prices and operating taxes to transportation customers in the form of surcharges and higher rates, there is no guarantee that this will be possible in the future. In addition, we are not able to obtain the benefit of a fuel surcharge on the crude oil marketing segment private fleet. See “Part I, Item 1A. Risk Factors.”

9

Regulatory Matters

We are subject to an extensive variety of evolving federal, state and local laws, rules and regulations governing the storage, transportation, manufacture, use, discharge, release and disposal of product and contaminants into the environment, or otherwise relating to the protection of the environment. Below is a non-exclusive listing of the environmental laws, each as amended, that potentially impact our business.

•The Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976.

•The Clean Water Act of 1972.

•The Clean Air Act of 1970.

•The Comprehensive Environmental Response Compensation and Liability Act.

•The Toxic Substances Control Act of 1976.

•The Emergency Planning and Community Right-to-Know Act.

•The Occupational Safety and Health Act of 1970.

•Texas Clean Air Act.

•Texas Solid Waste Disposal Act.

•Texas Water Code.

•Texas Oil Spill Prevention and Response Act of 1991.

Railroad Commission of Texas (“RRC”)

The RRC regulates, among other things, the drilling and operation of crude oil and natural gas wells, the operation of crude oil and natural gas pipelines, the disposal of crude oil and natural gas production wastes, and certain storage of crude oil and natural gas in Texas. RRC regulations govern the generation, management and disposal of waste from these crude oil and natural gas operations and provide for the cleanup of contamination from crude oil and natural gas operations. These regulations primarily affect our crude oil marketing segment, our pipeline and storage segment and our logistics and repurposing segment.

Louisiana Office of Conservation

The Louisiana Office of Conservation has primary statutory responsibility for regulation and conservation of crude oil, natural gas, and other natural resources in the State of Louisiana. Their objectives are to (i) regulate the exploration and production of crude oil, natural gas and other hydrocarbons, (ii) control and allocate energy supplies and distribution thereof, and (iii) protect public safety and the environment from oilfield waste, including the regulation of underground injection and disposal practices.

Trucking Activities

Our crude oil marketing, transportation and logistics and repurposing businesses operate truck fleets pursuant to the authority of the DOT and various state authorities. Trucking operations must be conducted in accordance with various laws relating to pollution and environmental control as well as safety requirements prescribed by states and by the DOT. Matters such as weight and dimension of equipment are also subject to federal and state regulations. These regulations also require mandatory drug testing of drivers and require certain tests for alcohol levels in drivers and other safety personnel. The regulations also impose hours of service restrictions and mandatory rest periods. The trucking industry is subject to possible regulatory and legislative changes, such as increasingly stringent environmental requirements or limits on vehicle weight and size. Regulatory change may affect the economics of the industry by requiring changes in operating practices or by changing the demand for private and common or contract carrier services or the cost of providing truckload services. In addition, our tank wash facilities are subject to increasingly stringent local, state and federal environmental regulations.

10

We have implemented security procedures for drivers and terminal facilities. Satellite tracking transponders installed in the power units are used to communicate emergencies to us and to maintain constant information as to the unit’s location. If necessary, our terminal personnel will notify local law enforcement agencies. In addition, we are able to advise a customer of the status and location of their loads. Remote cameras and enhanced lighting coverage in the staging and parking areas have augmented terminal security. We have a focus on safety in the communities in which we operate, including leveraging camera technology to enhance driver behavior and awareness. Our crude oil marketing and transportation businesses are Partners in the EPA’s SmartWay Transport Partnership, a national voluntary program developed by the EPA and freight industry representatives to reduce greenhouse gases and air pollution and promote cleaner, more efficient ground freight transportation.

FERC Regulation

The VEX Pipeline System, which we acquired in 2020, is regulated by the FERC as a common carrier interstate pipeline under the Interstate Commerce Act (“ICA”), the Energy Policy Act of 1992, and related rules and orders. The ICA and its implementing regulations give the FERC authority to regulate the rates charged for service on interstate common carrier pipelines and generally require the rates and practices of interstate liquids pipelines to be just, reasonable, not unduly discriminatory and not unduly preferential. The ICA also requires tariffs that set forth the rates a common carrier pipeline charges for providing transportation services on its interstate common carrier liquids pipelines, as well as the rules and regulations governing these services, to be maintained on file with the FERC and posted publicly. The Energy Policy Act of 1992 and its implementing regulations allow interstate common carrier liquids pipelines to annually index their rates up to a prescribed ceiling level and require that such pipelines index their rates down to the prescribed ceiling level if the index is negative. In addition, the FERC retains cost-of-service ratemaking, market-based rates and settlement rates as alternatives to the indexing approach. The ICA also permits interested parties to challenge new or changed rates and gives the FERC the authority to change rates and order refunds.

Changes in the FERC’s methodologies for approving rates could adversely affect us. In addition, challenges to our regulated rates could be filed with the FERC and future decisions by the FERC regarding our regulated rates could adversely affect our cash flows. We believe the transportation rates currently charged by our interstate liquids pipeline is in accordance with the ICA and applicable FERC regulations. However, we cannot predict the rates we will be allowed to charge in the future for transportation services by such pipeline.

Pipeline Safety

We are subject to regulation by the DOT as authorized under various provisions of Title 49 of the United States Code and comparable state statutes relating to the design, installation, testing, construction, operation, replacement and management of our pipeline facilities. Among other things, these statutes also require companies that own or operate pipelines to permit access to and copying of pertinent records, file certain reports and provide other information as required by the U.S. Secretary of Transportation. The DOT regulates natural gas and hazardous liquids pipelines through its Pipeline and Hazardous Materials Safety Administration (“PHMSA”). PHMSA continues to implement and enforce these rules and has discretion to assess significant fines should non-compliance be determined.

The development and/or implementation of more stringent requirements pursuant to DOT regulations, as well as any implementation of the PHMSA rules thereunder or reinterpretation of guidance by PHMSA or any state agencies with respect thereto, may result in us incurring significant and unanticipated expenditures to comply with such standards. Until any such proposed regulations or guidance are finalized or issued, the impact on our operations, if any, cannot be known.

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Regulatory Status and Potential Environmental Liability

Our operations and facilities are subject to numerous federal, state and local environmental laws and regulations including those described above, as well as associated permitting and licensing requirements. We regard compliance with applicable environmental regulations as a critical component of our overall operation, and devote significant attention to providing quality service and products to our customers, protecting the health and safety of our employees, and protecting our facilities from damage.

We have, where appropriate, implemented operating procedures at each of our facilities designed to assure compliance with environmental laws and regulation. However, given the nature of our business, we are subject to environmental risks, and the possibility remains that our ownership of our facilities and our operations and activities could result in civil or criminal enforcement and public as well as private actions against us, which may necessitate or generate mandatory cleanup activities, revocation of required permits or licenses, denial of application for future permits, and/or significant fines, penalties or damages, any and all of which could have a material adverse effect on us. See “Item 1A. Risk Factors” for further discussion.

Human Capital Resources

General

Our business strategy and ability to serve customers relies on employing talented professionals and attracting, training, developing and retaining a skilled workforce.

There is substantial competition for qualified truck drivers in the trucking industry. Recruitment, training, and retention of a professional driver workforce is essential to our continued growth and fulfillment of customer needs. We hire qualified professional drivers who hold a valid commercial driver’s license, satisfy applicable federal and state safety performance and measurement requirements, and meet our hiring criteria. These guidelines relate primarily to safety history, road test evaluations, and various other evaluations, which include physical examinations and mandatory drug and alcohol testing. We provide comfortable, late model equipment, encourage direct communication with management, pay competitive wages and benefits, and offer other incentives intended to encourage driver safety, retention and long-term employment. Prior to being released for individual duty, each new hire is required to undergo a mandatory training and evaluation period by a certified driver trainer/instructor. The length of this training period will be dependent on experience and the new hire adaptation to company policies and procedures.

Employees

At December 31, 2023, we employed 741 persons, of which 485, or 65 percent, were truck drivers. We believe our employee relations are satisfactory, and none of our employees are subject to union contracts or part of a collective bargaining unit.

Independent Contractors

In addition to company drivers, we enter into contracts with independent contractors, who provide a tractor and a driver and are responsible for all operating expenses in exchange for an agreed upon fee structure. At December 31, 2023, we had 100 independent contractor operated tractors in our transportation and logistics and repurposing segments, which comprised approximately 17 percent of our professional truck driving fleet.

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Health and Safety

Safety is one of our guiding principles as we are committed to providing our employees a safe working environment. We have implemented safety programs and management practices to promote a culture of safety. We are continuously working toward maintaining a strong safety culture to emphasize the importance of our employees’ role in identifying, mitigating and communicating safety risks.

In light of the current COVID-19 pandemic, we have updated and implemented our pandemic plan to ensure the continuation of safe and reliable service to customers and to maintain the safety of our employees, as well as to incorporate any new governmental guidance and rules and regulations regarding workplace safety. Since the beginning of the pandemic, we have been deemed an essential entity by virtue of the transportation services we provide.

Diversity and Inclusion

We are committed to providing a professional work environment where all employees are treated with respect and dignity and provided with equal opportunities. We do not discriminate based upon race, religion, color, national origin, gender (including pregnancy, childbirth, or related medical conditions), sexual orientation, gender identity, gender expression, age, status as a protected veteran, status as an individual with a disability or other applicable legally protected characteristics. We also support the hiring of veterans and are honored to provide opportunities to men and women who have served their respective countries.

We also partner with the Women in Trucking Association to support our efforts to advance the careers of women and gender diversity. It is our goal to empower the professional development of all employees and to operate from a mindset of sharing, caring, inclusion and equity.

We support basic human rights throughout our business enterprise and prohibit the use of child, compulsory or forced labor. Our employees are strictly prohibited from using our equipment to transport, or our facilities to shelter, unauthorized persons, or to take any other act in support of human trafficking or human rights abuses. Employees are required to immediately report any human trafficking concerns to the appropriate law enforcement agency.

We work with Truckers Against Trafficking (“TAT”) to train all over-the-road drivers on how to spot and report signs of human trafficking. Our drivers receive training from TAT and become registered as TAT trained and certified.

Benefits

Our compensation and benefits programs are designed to attract, retain and motivate our employees and to reward them for their services and success. In addition to providing competitive salaries and other compensation opportunities, we offer comprehensive and competitive benefits to our eligible employees including, depending on location, life and health (medical, dental and vision) insurance, prescription drug benefits, flexible spending accounts, parental leave, disability coverage, mental and behavioral health resources, paid time off and retirement savings plan.

Available Information

We electronically file certain documents with the U.S. Securities and Exchange Commission (“SEC”). We file Annual Reports on Form 10-K; Quarterly Reports on Form 10-Q; and Current Reports on Form 8-K (as appropriate); along with any related amendments and supplements thereto.

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We also make available free of charge, through the “Investor Relations” link on our website, www.adamsresources.com, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, simultaneously with or as soon as reasonably practicable after filing such materials with, or furnishing such materials to, the SEC. The information on our website, or information about us on any other website, is not incorporated by reference into this report.

Item 1A.     Risk Factors.

An investment in our common stock involves certain risks.  If any of the following key risks were to occur, it could have a material adverse effect on our financial position, results of operations and cash flows.  In any such circumstance and others described below, the trading price of our securities could decline and you could lose part or all of your investment.

Risk Related to our Business

Difficulty in attracting and retaining drivers could negatively affect our operations and limit our growth.

There is substantial competition for qualified personnel, particularly drivers, in the trucking industry. We operate in geographic areas where there is currently a shortage of drivers. Regulatory requirements, including electronic logging, and an improving U.S. jobs market, could continue to reduce the number of eligible drivers in our markets. Any shortage of drivers could result in temporary under-utilization of our equipment, difficulty in meeting our customers’ demands and increased compensation levels, each of which could have a material adverse effect on our business, results of operations and financial condition. A loss of qualified drivers could lead to an increased frequency in the number of accidents, potential claims exposure and, indirectly, insurance costs.

Difficulty in attracting qualified drivers could also require us to limit our growth. Our strategy is to grow in part by expanding existing customer relationships into new markets. However, we may have difficulty finding qualified drivers on a timely basis when presented with new customer opportunities, which could result in our inability to accept or service this business or could require us to increase the wages we pay in order to attract drivers. If we are unable to hire qualified drivers to service business opportunities in new markets, we may have to temporarily send drivers from existing terminals to those new markets, causing us to incur significant costs relating to out-of-town driver pay and expenses. In making acquisitions and converting private fleets, some of the drivers in those fleets may not meet our standards, which would require us to find qualified drivers to replace them. If we are unable to find and retain such qualified drivers on terms acceptable to us, we may be forced to forgo opportunities to expand or maintain our business.

Our business is dependent on the ability to obtain trade and other credit.

Our future development and growth depends, in part, on our ability to successfully obtain credit from suppliers and other parties. We rely on trade credit arrangements as a significant source of liquidity for capital requirements not satisfied by operating cash flow, our revolving line of credit or letters of credit. If global financial markets and economic conditions disrupt and reduce stability in general, and the solvency of creditors specifically, the availability of funding from credit markets would be reduced as many lenders and institutional investors would enact tighter lending standards, refuse to refinance existing debt on terms similar to current debt or, in some cases, cease to provide funding to borrowers. These issues coupled with weak economic conditions would make it more difficult for us, our suppliers and our customers to obtain funding. If we are unable to obtain trade or other forms of credit on reasonable and competitive terms, the ability to continue our marketing businesses, pursue improvements, and continue future growth will be limited. We cannot assure you that we will be able to maintain future credit arrangements on commercially reasonable terms.

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We have a concentrated customer base and receive half of our revenue from a small number of customers.

Our largest customers consist of large multinational integrated crude oil companies and independent domestic refiners of crude oil. In addition, we transact business with independent crude oil producers, major chemical companies, crude oil trading companies and a variety of commercial energy users. Within this group of customers, we derive approximately 50 percent of our revenue from four to five large crude oil refining customers. During the year ended December 31, 2023, we had sales to two customers that comprised approximately 11.4 percent and 11.1 percent, respectively, of total consolidated revenues. While we believe alternative markets are available, our financial condition and results of operations may be adversely affected if we lose these customers or if these customers experience operating and financial performance decline or there is a decrease in their demand.

The financial soundness of customers could affect our business and operating results.

Constraints in the financial markets and other macro-economic challenges that might affect the economy of the U.S. and other parts of the world could cause our customers to experience cash flow concerns. As a result, if our customers’ operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, customers would not be able to pay, or may delay payment of, accounts receivable owed to us. Any inability of current and/or potential customers to pay for services may adversely affect our financial condition and results of operations.

We generate revenues under contracts that must be renegotiated periodically.

Substantially all of our revenues are generated under contracts which expire periodically or which must be frequently renegotiated, extended or replaced. Whether these contracts are renegotiated, extended or replaced is often subject to factors beyond our control. These factors include sudden fluctuations in crude oil and natural gas prices, our counterparties’ ability to pay for or accept the contracted volumes and, most importantly, an extremely competitive marketplace for the services we offer. We cannot assure you that the costs and pricing of our services can remain competitive in the marketplace or that we will be successful in renegotiating our contracts.

Anticipated or scheduled volumes will differ from actual or delivered volumes.

Our crude oil marketing business purchases initial production of crude oil at the wellhead under contracts requiring us to accept the actual volume produced. We generally resell this production under contracts requiring a fixed volume to be delivered. We estimate our anticipated supply and match that supply estimate for both volume and pricing formulas with committed sales volumes. Since actual wellhead volumes produced will rarely equal anticipated supply, our marketing margins may be adversely impacted. In many instances, any losses resulting from the difference between actual supply volumes compared to committed sales volumes must be absorbed by us.

We may face opposition to the operation of our pipeline and facilities from various groups.

We may face opposition to the operation of our pipeline and facilities from environmental groups, landowners, tribal groups, local groups and other advocates. Such opposition could take many forms, including organized protests, attempts to block or sabotage our operations, intervention in regulatory or administrative proceedings involving our assets, or lawsuits or other actions designed to prevent, disrupt or delay the operation of our assets and business. In addition, acts of sabotage or eco-terrorism could cause significant damage or injury to people, property or the environment or lead to extended interruptions of our operations. Any such event that interrupts the revenues generated by our operations, or which causes us to make significant expenditures not covered by insurance, could reduce our cash available for paying dividends to our shareholders and, accordingly, adversely affect our financial condition and the market price of our securities.

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Our pipeline integrity program as well as compliance with pipeline safety laws and regulations may impose significant costs and liabilities on us.

If we were to incur material costs in connection with our pipeline integrity program or pipeline safety laws and regulations, those costs could have a material adverse effect on our financial condition, results of operations and cash flows.

The DOT requires pipeline operators to develop integrity management programs to comprehensively evaluate their pipelines. The majority of the costs to comply with this integrity management rule are associated with pipeline integrity testing and any repairs found to be necessary as a result of such testing. Changes such as advances in pipeline inspection tools and identification of additional threats to a pipeline’s integrity, among other things, can have a significant impact on the costs to perform integrity testing and repairs. We will continue our pipeline integrity testing programs to assess and maintain the integrity of our pipeline. The results of these tests could cause us to incur significant and unanticipated capital and operating expenditures for repairs or upgrades deemed necessary to ensure the continued safe and reliable operation of our pipeline.

The rates of our regulated assets are subject to review and possible adjustment by federal and state regulators, which could adversely affect our revenues.

The FERC regulates the tariff rates and terms and conditions of service for our interstate common carrier liquids pipeline operations. To be lawful under the ICA, interstate tariff rates, terms and conditions of service must be just and reasonable and not unduly discriminatory, and must be on file with the FERC. In addition, pipelines may not confer any undue preference upon any shipper. Shippers may protest (and the FERC may investigate) the lawfulness of new or changed tariff rates. The FERC can suspend those tariff rates for up to seven months. It can also require refunds of amounts collected pursuant to rates that are ultimately found to be unlawful and prescribe new rates prospectively. The FERC and interested parties can also challenge tariff rates that have become final and effective. The FERC can also order new rates to take effect prospectively and order reparations for past rates that exceed the just and reasonable level up to two years prior to the date of a complaint. Due to the complexity of rate making, the lawfulness of any rate is never assured. A successful challenge of our rates could adversely affect our revenues.

The intrastate liquids pipeline transportation services we provide are subject to various state laws and regulations that apply to the rates we charge and the terms and conditions of the services we offer. Although state regulation typically is less onerous than FERC regulation, the rates we charge and the provision of our services may be subject to challenge.

Environmental liabilities and environmental regulations may have an adverse effect on us.

Our business is subject to environmental hazards such as spills, leaks or any discharges of petroleum products and hazardous substances. These environmental hazards could expose us to material liabilities for property damage, personal injuries, and/or environmental harms, including the costs of investigating, remediating and monitoring contaminated properties.

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Federal, state and local environmental laws and regulations govern many aspects of our business, such as transportation and waste management, as well as permitting and licensing requirements. There are no assurances that we will be able to comply with conditions or restrictions contained in any permit issued by a regulatory agency governing our operations. Further, additional conditions may be included in the renewal or amendment of any permit issued to or held by us, and any permit that has been issued remains subject to renewal, modification, suspension, or revocation by the agency with jurisdiction. Compliance with environmental laws and regulations can require significant costs or may require a decrease in business activities. Moreover, noncompliance with these laws and regulations could subject us to significant administrative, civil, and/or criminal fines and/or penalties, as well as potential injunctive relief. In many instances, liability is often “strict,” meaning it is imposed without a requirement of intent or fault by the regulated entity, and this can include not only fines and penalties, but also liability relating to the cleanup of contaminated properties. See discussion under “Item 1 and 2. Business and Properties — Regulatory Matters,” for additional detail.

Restrictions and covenants in our Credit Agreement reduce operating flexibility and create the potential for defaults, which could adversely affect our business, financial condition and results of operations.

Under our credit agreement with Cadence Bank (“Credit Agreement”), we may borrow or issue letters of credit in an aggregate of up to $60.0 million under a revolving credit facility, subject to our compliance with certain financial covenants. The Credit Agreement also includes a term loan in the initial principal amount of $25.0 million. At December 31, 2023, we had $21.9 million of borrowings outstanding under the term loan and $13.0 million of letters of credit issued under the Credit Agreement.

The terms of our Credit Agreement restrict our ability to, among other things (and subject in each case, to various exceptions and conditions):

•incur additional indebtedness,

•create additional liens on our assets,

•make certain investments,

•pay dividends,

•dispose of our assets or engage in a merger or other similar transaction, or

•engage in transactions with affiliates.

Our ability to comply with the financial covenants in the Credit Agreement depends on our operating performance, which in turn depends significantly on prevailing economic, financial and business conditions and other factors that are beyond our control. Therefore, despite our best efforts and execution of our strategic plan, we may be unable to comply with these financial covenants in the future.

At December 31, 2023, we were in compliance with all financial covenants. However, if in the future there are economic declines, we can make no assurance that these declines will not negatively impact our financial results and, in turn, our ability to meet these financial covenant requirements. If we fail to comply with certain covenants, including our financial covenants, we could be in default under our Credit Agreement. In the event of such a default, the lenders under the Credit Agreement are entitled to take various actions, including the acceleration of the maturity of all loans and to take all actions permitted to be taken by a secured creditor against the collateral under the related security documents and applicable law. Any of these events could adversely affect our business, financial condition and results of operations.

In addition, these restrictions reduce our operating flexibility and could prevent us from exploiting certain investment, acquisition, or other time-sensitive business opportunities.

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Our indebtedness, along with the variable interest rates we pay on our indebtedness, could adversely affect our business and our ability to execute our business strategy.

We have a $25.0 million term loan and a revolving credit facility that permits us to borrow up to $60.0 million in additional loans and letters of credit (with letters of credit not to exceed $30.0 million). Our Credit Agreement bears interest at variable rates, which will generally change as interest rates change. During our fiscal year ended December 31, 2023, we experienced, and we may continue to experience, increases in interest on our variable rate loans. If interest rates increase and we do not hedge such variable rates, our debt service obligations will increase even when the amount borrowed may stay the same. In an increasing interest rate environment, we bear the risk that the rates we are charged by the lenders under our Credit Agreement will increase faster than the earnings and cash flow of our business, which could reduce our profitability, adversely affect our ability to service our debt, cause us to breach covenants in our Credit Agreement, or divert capital that we would otherwise be able to use to grow the business or declare dividends in order to fulfill our debt service requirements.

Risk Related to our Industry

Public health emergencies, including the COVID-19 pandemic, could disrupt or continue to disrupt our operations and adversely impact our business and financial results.

The COVID-19 pandemic resulted in a number of adverse economic effects, including changes in consumer behavior related to the economic slowdown, disruption of historical supply and demand patterns, and changes in the work force, which has affected our business and the businesses of our customers and suppliers. These adverse economic effects of the COVID-19 outbreak have impacted our operations and services.

The COVID-19 pandemic has created business challenges primarily related to changes in the work force, which have impacted our ability to hire and retain qualified truck drivers, and created issues with the supply chain, resulting in delays in purchasing items, including new tractors. While demand for transportation of products and demand for crude oil has largely rebounded from 2020 levels during the initial stages of the pandemic, our growth has been limited in certain markets by the availability of truck drivers.

We have been seeking ways to overcome supply shortages in tractors, by additional maintenance to extend vehicle lives, shortages in tires and other inventory by having additional items on hand and increases in the price of diesel fuel by continuing to pass costs through to customers or attempting to reduce costs through efficiencies. If the pandemic continues to affect global supply chains and fuel costs, we may be unable to pass costs through to customers or maintain our operating margins.

We continue to monitor the effect of the pandemic on our financial condition, liquidity, operations, customers, industry and workforce. If the pandemic and its economic effects continue or worsen, particularly in light of new and variant strains of the virus and the plateau of vaccination rates, it may have a material adverse effect on our results of future operations, financial position and liquidity.

Should the coronavirus continue to spread, our business operations could be delayed or interrupted. For instance, our operations would be adversely impacted if a number of our administrative personnel, drivers or field personnel are infected and become ill or are quarantined. At this time, we believe that our business would generally be exempted from shelter-in-place orders or other mandated local travel restrictions as an essential service but there can be no assurance as the scope of restrictions imposed by local or state governments.

While the potential economic impact brought by and the duration of public health emergencies such as the coronavirus may be difficult to assess or predict, such emergencies may cause significant disruption of global financial markets, which may reduce our ability to access capital either at all or on favorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the spread or worsening of the coronavirus or other public health emergencies could materially and adversely affect our business and financial results.

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General economic conditions could reduce demand for chemical-based trucking services.

Customer demand for our products and services is substantially dependent upon the general economic conditions for the U.S., which are cyclical in nature. In particular, demand for liquid chemical truck transportation services is dependent on activity within the petrochemical sector of the U.S. economy. Chemical sector demand typically varies with the housing and auto markets as well as the relative strength of the U.S. dollar to foreign currencies. A relatively strong U.S. dollar exchange rate may be adverse to our transportation operation since it tends to suppress export demand for petrochemicals. Conversely, a weak U.S. dollar exchange rate tends to stimulate export demand for petrochemicals.

Fluctuations in crude oil prices could have an adverse effect on us.

Our future financial condition, revenues, results of operations and future rate of growth are materially affected by crude oil prices that historically have been volatile and are likely to continue to be volatile in the future. Crude oil prices depend on factors outside of our control. These factors include:

•supply and demand for crude oil and expectations regarding supply and demand;

•political conditions in other crude oil-producing countries, including the possibility of insurgency or war in such areas;

•economic conditions in the U.S. and worldwide;

•the impact of public health epidemics, like the global coronavirus outbreak beginning in 2020;

•governmental regulations and taxation;

•the impact of energy conservation efforts;

•the price and availability of alternative fuel sources;

•weather conditions;

•availability of local, interstate and intrastate transportation systems; and

•market uncertainty.

Increases in the price of diesel fuel and availability of diesel fuel could have an adverse effect on us.

As an integral part of our crude oil marketing, transportation and logistics and repurposing businesses, we operate approximately 605 tractors, and diesel fuel costs are a significant component of our operating expenses. The market price for fuel can be extremely volatile and is affected by a number of economic and political factors. In addition, changes in federal or state regulations can impact the price of fuel, as well as increase the amount we pay in fuel taxes.

In our transportation segment, we typically incorporate a fuel surcharge provision in our customer contracts. During periods of high prices, we attempt to recoup rising diesel fuel costs through the pricing of our services. However, our customers may be able to negotiate contracts that minimize or eliminate our ability to pass on fuel price increases. We are also not able to obtain the benefit of a fuel surcharge on the crude oil marketing segment private fleet.

Our operations may also be adversely affected by any limit on the availability of fuel. Disruptions in the political climate in key oil producing regions in the world, particularly in the event of wars or other armed conflicts, could severely limit the availability of fuel in the U.S. In the event we face significant difficulty in obtaining fuel, our business, results of operations and financial condition would be materially adversely affected.

Insurance and claims expenses, including for self-insured risks, could significantly reduce our earnings.

Transportation of hazardous materials involves certain operating hazards such as automobile accidents, explosions, fires and pollution. Any of these operating hazards could cause serious injuries, fatalities or property damage, which could expose us to liability. The payment of any of these liabilities could reduce, or even eliminate, the funds available for other areas.

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Consistent with the industry standard, our insurance policies provide limited coverage for losses or liabilities relating to pollution, with broader coverage provided for sudden and accidental occurrences. Insurance might be inadequate to cover all liabilities. Obtaining insurance for our line of business can become difficult and costly. Typically, when insurance cost escalates, we may reduce our level of coverage, and more risk may be retained to offset cost increases.

Beginning in 2021, we self-insure a significant portion of our claims exposure resulting from auto liability, general liability and workers’ compensation through our wholly owned captive insurance company. Although we reserve for anticipated losses and expenses based on actuarial reviews and periodically evaluate and adjust our claims reserves to reflect our experience, estimating the number and severity of claims, as well as related costs to settle or resolve them, is inherently difficult, and such costs could exceed our estimates. Accordingly, our actual losses associated with insured claims may differ materially from our estimates and adversely affect our financial condition and results of operations in material amounts.

We maintain an insurance program for potential losses that are in excess of the amounts that we insure through the captive, as well as potential losses from other categories of claims. Although we believe our aggregate insurance limits should be sufficient to cover our historic or future claims amounts, it is possible that one or more claims could exceed our aggregate coverage limits. If any claim were to exceed our aggregate insurance coverage, we would bear the excess, in addition to the amount in the captive.

Given the current claims settlement environment, the amount of commercially available insurance coverage is decreasing, and the premiums for this coverage are increasing significantly. For the foregoing reasons, our insurance and claims expenses may increase, or we could increase our self-insured retention as policies are renewed or replaced. In addition, we may assume additional risk within our captive insurance company that we may or may not reinsure. Our results of operations and financial condition could be materially and adversely affected if (1) our costs or losses significantly exceed our aggregate self-insurance and excess coverage limits, (2) we are unable to obtain affordable insurance coverage in amounts we deem sufficient, (3) our insurance carriers fail to pay on our insurance claims, or (4) we experience a claim for which coverage is not provided.

Counterparty credit default could have an adverse effect on us.

Our revenues are generated under contracts with various counterparties, and our results of operations could be adversely affected by non-performance under the various contracts. A counterparty’s default or non-performance could be caused by factors beyond our control. A default could occur as a result of circumstances relating directly to the counterparty, or due to circumstances caused by other market participants having a direct or indirect relationship with the counterparty. We seek to mitigate the risk of default by evaluating the financial strength of potential counterparties; however, despite mitigation efforts, contractual defaults do occur from time to time.

Our business is subject to changing government regulations.

Federal, state or local government agencies may impose environmental, labor or other regulations that increase costs and/or terminate or suspend operations. Our business is subject to federal, state and local laws and regulations. These regulations relate to, among other things, transportation of crude oil and natural gas. Existing laws and regulations could be changed, and any changes could increase costs of compliance and costs of operations.

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Climate change legislation or regulations restricting emissions of “greenhouse gases” (“GHGs”) could result in increased operating or compliance costs and reduced demand for the crude oil we market and transport.

More stringent laws and regulations relating to climate change and GHGs may be adopted which could cause us to incur material expenses to comply with such laws and regulations. In 2014, the U.S. Supreme Court upheld the EPA’s authority to regulate GHG emissions. Pursuant to EPA regulations, a permit governing GHG emission may be required, in conjunction with authorization of emissions of other pollutants. The EPA also requires, pursuant to its GHG Reporting Rule, specified large GHG emission sources to report their GHG emissions. Regulated sources include, without limitation, onshore and offshore crude oil and natural gas production facilities and onshore crude oil and natural gas processing, transmission, storage and distribution facilities. Reporting of GHG emissions from such large facilities is required on an annual basis. We do not presently operate any such large GHG emissions sources, but if we were to do so, we would incur costs associated with evaluating and meeting this reporting obligation.

Our industry is subject to regular enactment of new or amended federal, state, and local environmental health and safety statutes, regulation, and ballot initiatives, as well as judicial decisions interpreting these requirements, which have become more stringent over time. We expect these trends to continue, which could lead to material increases in our costs for future environmental, health, and safety compliance. These requirements may also impose substantial capital and operating costs and operational limitations on us and may adversely affect our business.

Regulation of methane and volatile organic compound (“VOC”) emissions has varied significantly between recent administrations, but regulation of these emissions is becoming increasingly stringent. Increased regulatory oversight by the EPA may result in increased compliance costs for our business. More directly, these costs may extend to our customers and the industry as a whole, which could lead to a diminution in our customers’ business and their exploration and production activities, and ultimately detrimentally affect our business.

Regulation of menthane and VOC emissions from oil and gas operation in particular is becoming more pervasive and comprehensive. In December 2023, EPA issued a final rule to further regulate methane emissions and VOCs from oil and gas industry sources—implementing regulations known as OOOOb and OOOOc. The rule includes a comprehensive suite of pollution reduction standards including, among others, the creation of a new New Source Performance Standard (NSPS) for oil and gas industry sources; a requirement that all well sites and compressor stations be routinely monitored for leaks; and the creation of what is known as a Super Emitter Program that authorizes third parties to remotely monitor regulated facilities and notify EPA when certain significant methane releases occur. Under OOOOb, a new NSPS includes generally more stringent standards for “new” emission sources not regulated previously under the previous rules—this being any facility constructed, reconstructed, or modified after December 6, 2022. Under OOOOc, the rule includes the first oil and gas emission guidelines for existing sources, which requires states to enforce standards largely consistent with those of Subpart OOOOb on existing oil and gas emissions sources. The state implementation plans are required to be submitted within two years of the rule’s finalization and regulated entities will be required to comply within three years of the submittal deadline.

These rules may require us and the industry to expend material sums on compliance, including equipment repair, replacement, and monitoring, which may reduce overall industry activity and demands which could have an adverse impact on our business. Further, states may adopt laws or regulations more stringent than the federal rules, which would remain in place regardless of the outcome of any federal rules stay or litigation, thus potentially causing additional impact on our business and the industry as a whole, which could adversely affect our business.

The Bureau of Land Management (“BLM”) has similarly promulgated proposed and final methane emission rulemakings, which also seek to reduce methane emissions from venting, flaring, and leaks during crude oil and natural gas operations on public lands. The increased regulation of the oil and gas industry’s operations could adversely affect our business, our customers’ business, and others. The heightened standards may increase the cost to our customers in delivering hydrocarbons and, as a result, may result in a diminution of product transported and our business generally.

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In addition, the U.S. Congress has considered legislation to reduce emissions of GHGs, and many states and regions have already taken legal measures to reduce or measure GHG emission levels, often involving the planned development of GHG emission inventories and/or regional cap and trade programs. Most of these cap and trade programs require major sources of emissions or major producers of fuels to acquire and surrender emission allowances. Generally, the number of allowances available for purchase is reduced each year in an effort to reduce overall GHG emissions, and the cost of these allowances could escalate significantly over time. In the markets in which we currently operate, our operations are not materially affected by such GHG cap and trade programs. On an international level, almost 200 nations agreed in December 2015 to an international climate change agreement in Paris, France that calls for countries to set their own GHG emissions targets and to be transparent about the measures each country will use to achieve its GHG emissions targets. Although the U.S. withdrew from the Paris accord in November 2020, it rejoined under the new administration in February 2021. Further, several states and local governments remain committed to the principles of the international climate agreement in their effectuation of policy and regulations. It is not possible at this time to predict how or when the U.S. might impose restrictions on GHGs as a result of the international climate change agreement. The adoption and implementation of any legislation or regulatory programs imposing GHG reporting obligations on, or limiting emissions of GHGs from, our equipment and operations could require us to incur costs to reduce emissions of GHGs associated with our operations including costs to operate and maintain our facilities, install new emission controls on our facilities, acquire allowances to authorize our GHG emissions, pay any taxes related to GHG emissions and administer and manage a GHG emissions program. Such programs also could adversely affect demand for the crude oil that we market and transport.

Generally, the promulgation of climate change laws or regulations restricting or regulating GHG emissions from our operations could increase our costs to operate by increasing control technology requirements or changing regulatory obligations. In the United States, the EPA’s current and proposed regulation of GHG emissions may result in an increased cost of our operations as well as that of our customers, which in either case could adversely affect our business.

In addition to the regulation of operations, the SEC has adopted disclosure rules in March 2024 that will generally require public companies, after a transition period, to disclose climate-related risks and impacts, mitigation or adaptation activities, board oversight of climate-related risks, capitalized costs, expenses and losses incurred as a result of severe weather events and other natural conditions, and other climate-related information, and will require many public companies to monitor and report direct GHG emissions and indirect GHG emissions from the purchase of energy. Even though we will be exempt from the more onerous emissions-related disclosure requirements for so long as we continue to qualify as a “smaller reporting company,” the rules may impose substantial compliance costs on our business, the impact of which we are currently unable to quantify.

The Inflation Reduction Act may have implications for our customers and our business operations.

The Inflation Reduction Act of 2022 (“IR Act”) put in place broad-reaching tax, loan, incentive and other programs. The IR Act’s provisions include, but are not limited to: incentives for carbon capture and hydrogen projects; royalties on gas produced from federal land, including gas consumed or lost by venting, flaring or equipment releases; new charges for methane emissions from certain oil and gas operations; and new and expanded tax credits for certain renewable energy projects, among others. It is possible that, as implemented, the IR Act could in some ways alter our operations as well as those of our customers. There is the possibility that incentives for carbon capture and hydrogen projects may, among other things, prompt development of new or repurposing existing pipeline infrastructure. It is not clear how these developments will impact our business.

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Our reputation may be adversely affected if we are not able to achieve our Environmental, Social and Governance (“ESG”) goals.

There is increasing shareholder and stakeholder focus upon the development and implementation of more robust ESG and sustainability policies, practices, and disclosures around climate-related risk identification and mitigation—as shown by the SEC’s proposed Climate Change Disclosure Rule. This focus has included, but is not limited to, expansion of mandatory and voluntary reporting, including disclosures on climate change, sustainability efforts, natural resources, waste reduction, energy, human capital, and risk oversight. Developing and implementing these new ESG and sustainability practices, new disclosure requirement responses, and monitoring networks can involve significant costs and require extended time commitment from employees, officers, and directors.

Further, certain investors and lenders are integrating ESG factors into their decision making in conjunction with traditional financial considerations. To the extent that ESG and sustainability metrics and targets become applicable to our operations (whether voluntary, aspirational, or otherwise), our failure to achieve these targets, or a perception among key stakeholders that such targets are insufficient, unattainable, or merely placeholders, could damage our reputation, competitive position, share price, and overall business.

General Risk Factors

Economic developments could damage our operations and materially reduce our profitability and cash flows.

Potential disruptions in the credit markets and concerns about global economic growth could have a significant adverse impact on global financial markets and commodity prices. These factors could contribute to a decline in our stock price and corresponding market capitalization. If commodity prices experience a period of rapid decline, or a prolonged period of low commodity prices, our future earnings will be reduced. We currently rely on our bank Credit Agreement to issue letters of credit and to fund certain working capital needs from time to time. If the capital and credit markets experience volatility and the availability of funds become limited, our customers and suppliers may incur increased costs associated with issuing commercial paper and/or other debt instruments and this, in turn, could adversely affect our ability to secure supply and make profitable sales.

Current and future litigation could have an adverse effect on us.

We are currently involved in certain administrative and civil legal proceedings as part of the ordinary course of our business. Moreover, as incidental to operations, we sometimes become involved in various lawsuits and/or disputes. Lawsuits and other legal proceedings can involve substantial costs, including the costs associated with investigation, litigation and possible settlement, judgment, penalty or fine. Although we maintain insurance to mitigate these costs, we cannot guarantee that costs associated with lawsuits or other legal proceedings will not exceed the limits of insurance policies. Our results of operations could be adversely affected if a judgment, penalty or fine is not fully covered by insurance.

We could be adversely affected by changes in tax laws or regulations.

The Internal Revenue Service, the U.S. Treasury Department, Congress and the states frequently review federal or state income tax legislation. We cannot predict whether, when, or to what extent new federal or state tax laws, regulations, interpretations or rulings will be adopted. Any such legislative action may prospectively or retroactively modify tax treatment and, therefore, may adversely affect taxation of us.

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We are subject to potential physical risks associated with climate change.

The potential physical effects of climate change and the potential increase in frequency of severe weather events on our operations and business are highly uncertain and vary largely depending on the geographical and environmental features of each facility and region. Regardless, our facilities still face the risk of these physical effects. Examples of potential physical risks include floods, water shortages and quality, hurricane-force winds, wildfires, freezing temperatures and snowstorms, and rising sea levels at our coastal or near-coastal facilities.

Our pipeline and storage facilities are fixed in place and in some cases near the coast, which may be particularly vulnerable. Depending on the physical effects of weather events, these facilities could potentially be required to temporarily or even permanently shut down operations. Further, these potential disruptions may hinder or prevent our ability to transport or receive products in these areas. Extended periods of disruption could have an adverse effect on our operations and therefore our business. Further, the overall oil and gas industry within the same region may also be negatively affected and/or disrupted resulting in diminution in our business and that of our customers.

We currently have systems in place to manage physical risks, but if such events occur they may still have an adverse effect on our assets and operations. We have incurred and will continue to incur costs to protect our assets from physical risks and to further mitigate such risks. If such events were to occur, operations may be adversely affected, including: disruption of our marketing and transportation activities, increases in our costs of operation, reductions in the efficiency of our operations, incurrence of substantial costs to repair damaged facilities; and potential increased costs for insurance coverage in the aftermath of such events.

These effects could also have an indirect effect on our financing and operations by disrupting the transportation or process-related services provided by companies or suppliers with whom we have a business relationship. Additionally, the demand for and consumption of our services (due to changes in both costs and weather patterns), and the economic health of the regions in which we operate, could have a material adverse impact on our business, our customers, and our suppliers—thus, further indirectly impacting us.

Cyber-attacks or other disruptions to our information technology systems could lead to reduced revenue, increased costs, liability claims, fines or harm to our competitive position.

We rely on our information technology systems to conduct our business, including systems of third-party vendors. These systems include information used to operate our assets and cloud-based services. These systems have been subject to attempted security breaches and cyber-attacks in the past, and may be subject to such attacks in the future.

Cyber-attacks are becoming more sophisticated, and U.S. government warnings have indicated that infrastructure assets, including pipelines, may be specifically targeted by certain groups. These attacks include, without limitation, malicious software, ransomware, attempts to gain unauthorized access to data, and other electronic security breaches. These attacks may be perpetrated by state-sponsored groups, “hacktivists”, criminal organizations or private individuals (including employee malfeasance). These cybersecurity risks include cyber-attacks on both us and third parties who provide material services to us. In addition to disrupting operations, cyber security breaches could also affect our ability to operate or control our facilities, render data or systems unusable, or result in the theft of sensitive, confidential or customer information. These events could also damage our reputation, and result in losses from remedial actions, loss of business or potential liability to third parties.

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We may incur increasing costs in connection with our efforts to enhance and ensure security and in response to actual or attempted cybersecurity attacks. Substantial aspects of our business depend on the secure operation of our computer systems and websites. Security breaches could expose us to a risk of loss, misuse or interruption of sensitive and critical information and functions, including our own proprietary information and that of our customers, suppliers and employees.  Such breaches could result in operational impacts, reputational harm, competitive disadvantage, litigation, regulatory enforcement actions and liability. While we devote substantial resources to maintaining adequate levels of cybersecurity, we cannot assure you that we will be able to prevent all of the rapidly evolving types of cyberattacks. Actual or anticipated attacks and risks may cause us to incur increasing costs for technology, personnel and services to enhance security or to respond to occurrences.

We have programs, processes and technologies in place to attempt to prevent, detect, contain, respond to and mitigate security-related threats and potential incidents. We undertake ongoing improvements to our systems, connected devices and information-sharing products in order to minimize vulnerabilities, in accordance with industry and regulatory standards; however, the techniques used to obtain unauthorized access change frequently and can be difficult to detect. Anticipating, identifying or preventing these intrusions or mitigating them if and when they occur is challenging and makes us more vulnerable to cyberattacks than other companies not similarly situated.

If our security measures are circumvented, proprietary information may be misappropriated, our operations may be disrupted, and our computers or those of our customers or other third parties may be damaged. Compromises of our security may result in an interruption of operations, violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a loss of confidence in our security measures.

Item 1B.    Unresolved Staff Comments.

None.

Item 1C.    Cybersecurity.

We operate in the logistics and crude oil distribution sector, which is subject to various cybersecurity risks from cybersecurity threats that could have a material adverse effect on our business, financial condition, operations, cash flows or reputation.

While we have not experienced material cybersecurity threats or incidents, or threats or incidents that are reasonably likely to materially affect us, there can be no guarantee that we will not be the subject of future successful attacks, threats or incidents. Information on cybersecurity risks and threats we face can be found in Part I, Item 1A. Risk Factors—“Cyber-attacks or other disruptions to our information technology systems could lead to reduced revenue, increased costs, liability claims, fine or harm to our competitive position”.

Our business depends on the availability, reliability and security of our information systems, networks, data, and intellectual property. Any disruption, compromise, or breach of our systems or data due to a cybersecurity threat or incident could adversely affect our operations, physical assets and infrastructure, customer service, product development and competitive position. They may also result in a breach of our contractual obligations or legal duties to protect the privacy and confidentiality of our stakeholders. Such a breach could expose us to business interruption, lost revenue, ransom payments, remediation costs, liabilities to affected parties, cybersecurity protection costs, lost assets, litigation, regulatory scrutiny and actions, reputational harm, customer dissatisfaction, harm to our relationships, or loss of market share.

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Governance

Our Board has delegated the primary responsibility to oversee cybersecurity matters to the Audit Committee. The Audit Committee regularly reviews the measures we implement to identify and mitigate data protection and cybersecurity risks. As part of such reviews, the Board and Audit Committee receive reports and presentations from members of our senior leadership for overseeing our cybersecurity risk management, including our Corporate Information Technology Director, which address a wide range of topics including recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends and information security considerations arising with respect to our peers and third parties. Such members of our senior leadership also report to the Board directly at least annually on cybersecurity matters, including information security and cybersecurity risk.

At the management level, our Corporate Information Technology Director, who has extensive cybersecurity knowledge and skills gained from over 30 years of work experience at our company and elsewhere, heads the team responsible for implementing, monitoring, and maintaining information security and cybersecurity practices across our businesses and reports directly to the Chief Financial Officer.

The Corporate Information Technology Director receives reports on information security and cybersecurity threats and, in conjunction with management, regularly reviews risk management measures we implement to identify and mitigate information security and cybersecurity risks. In addition to our internal cybersecurity capabilities, we also regularly engage assessors, consultants, auditors, and other third parties to assist with assessing, identifying, and managing cybersecurity risks.

We have protocols by which certain cybersecurity incidents that meet established reporting thresholds are escalated within the Company and, where appropriate, reported promptly to the Board and Audit Committee, as well as ongoing updates regarding any such incident until it has been addressed.

Risk Management and Strategy

We have implemented a risk-based approach to identify and assess the cybersecurity threats that could affect our business and information systems. This approach includes a variety of mechanisms, controls, technologies, methods, systems, protocols and physical safeguards, along with the use of third-party consultants and experts, that are reasonably designed to protect our information, and that of our stakeholders, against cybersecurity threats that may result in material adverse effects on the confidentiality, integrity, and availability of our information systems. We monitor and evaluate our cybersecurity posture and performance on an ongoing basis through regular vulnerability scans, penetration tests and threat intelligence feeds.

We continue to improve our cybersecurity risk assessment program and activities for assessing, identifying and managing cybersecurity risks through industry standard security frameworks and leading practices, including risk assessments and remediations, software and services, continuous systems monitoring, vendor risk management processes, incident response plans, phishing simulations, employee training, and communication programs, among other measures. We also employ processes designed to assess, identify, and manage the potential impact of a security incident at various customers and critical partners, including third-party vendors, service providers, or any cybersecurity incident otherwise impacting the third-party technology and systems we use.

We engage with third-party service providers in order to maintain awareness of the latest security trends and continuously promote comprehensive cybersecurity practices consistent with industry best practices.

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Item 3.    Legal Proceedings.

From time to time as incidental to our operations, we may become involved in various lawsuits and/or disputes. As an operator of an extensive trucking fleet, we are a party to motor vehicle accidents, workers’ compensation claims and other items of general liability as would be typical for the industry. We are currently unaware of any claims against us that are either outside the scope of insurance coverage or that may exceed the level of insurance coverage and could potentially represent a material adverse effect on our financial position or results of operations.

See Note 18 in the Notes to Consolidated Financial Statements for further discussion.

Item 4.    Mine Safety Disclosures.

Not applicable.

PART II

Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is traded on the NYSE American under the ticker symbol “AE”. As of March 1, 2024, there were approximately 109 shareholders of record of our common shares, however, the actual number of beneficial holders of our common stock may be substantially greater than the stated number of holders of record because a substantial portion of our common stock is held in street name.

We have paid dividends to our common shareholders each year since 1994. Our Board of Directors expects to continue paying dividends for the foreseeable future, although the declaration, amount and timing of any dividends falls within the sole discretion of our Board, whose decision will depend on many factors, including our financial condition, earnings, capital requirements and other factors that our Board may deem relevant.

Issuer Purchases of Equity Securities

None.

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Performance Graph

The following graph compares the total shareholder return performance of our common stock with the performance of: (i) the Standard & Poor’s 500 Stock Index (“S&P 500”) and (ii) the S&P 500 Integrated Oil and Gas Index (“S&P Integrated Oil & Gas”). The graph assumes that $100 was invested in our common stock and each comparison index beginning on December 31, 2018 and that all dividends were reinvested on a quarterly basis on the ex-dividend dates. The graph was prepared under the applicable rules of the SEC based on data supplied by Research Data Group. The stock performance shown on the graph is not necessarily indicative of future price performance.

The information under the caption “Performance Graph” above is not deemed to be “filed” as part of the Annual Report on Form 10-K, and is not subject to the liability provisions of Section 18 of the Exchange Act. Such information will not be deemed incorporated by reference into any filing we make under the Securities Act unless we explicitly incorporate it into such filing at such time.

	December 31,
	2018		2019		2020		2021		2022		2023
Adams Resources & Energy, Inc.	$	100.00	$	101.14	$	66.46	$	79.27	$	114.09	$	78.79
S&P 500	100.00		131.49		155.68		200.37		164.08		207.21
S&P Integrated Oil & Gas	100.00		107.19		71.37		109.06		192.43		175.08

Item 6.     [Reserved]

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following information should be read in conjunction with our Consolidated Financial Statements and accompanying notes included under Part II, Item 8 of this annual report. Our financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S.

Overview of Business

Adams Resources & Energy, Inc. and its subsidiaries are primarily engaged in crude oil marketing, truck and pipeline transportation of crude oil, and terminalling and storage in various crude oil and natural gas basins in the lower 48 states of the U.S. In addition, we conduct tank truck transportation of liquid chemicals, pressurized gases, asphalt and dry bulk primarily in the lower 48 states of the U.S. with deliveries into Canada and Mexico, and with seventeen terminals across the U.S. We also recycle and repurpose off-specification fuels, lubricants, crude oil and other chemicals from producers in the U.S.

We operate and report in four business segments: (i) crude oil marketing, transportation and storage; (ii) tank truck transportation of liquid chemicals, pressurized gases, asphalt and dry bulk; (iii) pipeline transportation, terminalling and storage of crude oil; and (iv) interstate bulk transportation logistics of crude oil, condensate, fuels, oils and other petroleum products and recycling and repurposing of off-specification fuels, lubricants, crude oil and other chemicals. See Note 9 in the Notes to Consolidated Financial Statements for further information regarding our business segments.

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):

	Year Ended December 31,
	2023		2022		Change (1)		2021		Change (1)
Revenues	$	2,585,355	$	3,232,193	(20.0	%)	$	1,930,042	67.5	%
Operating earnings (2)	17,029		15,874		7.3	%	25,243		(37.1	%)
Depreciation and amortization	8,042		7,724		4.1	%	6,673		15.8	%
Gains on sales of assets	2,730		1,738		57.1	%	368		372.3	%
Driver compensation	19,560		19,598		(0.2	%)	17,717		10.6	%
Insurance	7,261		7,954		(8.7	%)	6,193		28.4	%
Fuel	10,427		12,518		(16.7	%)	8,064		55.2	%

____________________

(1)Represents the percentage increase (decrease) from the prior year.

(2)Operating earnings included net inventory valuation losses of $0.8 million, net inventory valuation losses of $2.0 million and net inventory liquidation gains of $10.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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Volume and price information were as follows for the periods indicated:

	Year Ended December 31,
	2023		2022		2021
Field level purchase volumes – per day (1)
Crude oil – barrels	87,985		94,873		89,061
Average purchase price
Crude oil – per barrel	$	74.96	$	92.63	$	65.48

____________________

(1)Reflects the volume purchased from third parties at the field level of operations.

2023 compared to 2022. Crude oil marketing revenues decreased by $646.8 million during the year ended December 31, 2023 as compared to 2022, primarily as a result of a decrease in the market price of crude oil, which decreased revenues by approximately $444.4 million, and lower crude oil volumes, which decreased revenues by approximately $202.4 million. The average crude oil price was $92.63 per barrel for 2022, which decreased to $74.96 per barrel for 2023. Revenues from our volumes are mostly based upon the market price in our market areas, primarily in the Gulf Coast. The decrease in the market price of crude oil during 2023 as compared to 2022 was primarily due to weakness in the Chinese economy and concern over economic recession, which caused crude oil prices to fall. During the third quarter of 2023, OPEC oil production cuts and U.S. inventory draws from the Mid-Continent and Gulf Coast resulted in an increase in crude oil prices.

Revenues also decreased due to the termination on October 31, 2023 and non-renewal of our five year purchase contract in North Texas and South Central Oklahoma (the “Red River area”). In October 2018, we acquired a trucking company that owned approximately 113 tractors and 126 trailers operating in the Red River area, and subsequently entered into a new revenue agreement at that time. During the five year period, volumes handled in the Red River area ranged from an average of 25,000 to 28,000 barrels per day. The purchase price for Red River area volumes was based on a contractual price for volumes in North Texas and Oklahoma, which had been slightly lower than the purchase price for legacy volumes. The termination of this contract has resulted in a decrease in the average crude oil volumes for the crude oil marketing segment beginning in November 2023.

Driver compensation remained relatively flat during the year ended December 31, 2023 as compared to 2022, despite a decrease in the overall driver count in 2023. At the end of October 2023, we had approximately 49 drivers dedicated to the Red River area, which were either terminated or redeployed to other areas of our businesses.

Insurance costs decreased by $0.7 million during the year ended December 31, 2023 as compared to 2022, primarily due to a lower overall driver count in 2023 and premium reductions due to our safety performance during the current year, partially offset by an overall increase in insurance premiums. Fuel costs decreased by $2.1 million during the year ended December 31, 2023 as compared to 2022, consistent with a lower driver count and lower fuel prices in 2023, as compared to 2022.

Depreciation and amortization expense increased by $0.3 million during the year ended December 31, 2023 as compared to 2022, primarily due to the timing of purchases and retirements of tractors and other field equipment during 2022 and 2023. In connection with the termination of the Red River contract, we sold 36 tractors and 65 trailers during the fourth quarter of 2023, resulting in gains of approximately $2.4 million, and also transferred tractors and trailers to other areas of our businesses.

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Our crude oil marketing operating earnings for the year ended December 31, 2023 increased by $1.2 million as compared to 2022, primarily as a result of inventory valuation losses of $2.0 million in 2022 compared to valuation losses of $0.8 million in 2023 (as shown in the table below) and lower fuel costs and insurance costs in 2023 as compared to 2022, partially offset by a decrease in the average market price of crude oil and a decrease in crude oil volumes in 2023.

2022 compared to 2021. Crude oil marketing revenues increased by $1,302.2 million during the year ended December 31, 2022 as compared to 2021, primarily as a result of an increase in the market price of crude oil, which increased revenues by approximately $1,104.2 million, and higher crude oil volumes, which increased revenues by approximately $198.0 million. The average crude oil price was $65.48 for 2021, which increased to $92.63 for 2022. Revenues from our volumes are mostly based upon the market price in our market areas, primarily in the Gulf Coast. The market price of crude oil increased during 2022 as compared to 2021 primarily as a result of a return of global crude oil demand following the pandemic, which combined with a perceived shortage of global crude oil production. In addition, the invasion of Ukraine by Russia contributed to an increase in the market price of crude oil in the first half of 2022. In the second half of 2022, weakness in the Chinese economy and concern over economic recession caused crude oil prices to fall, while still remaining historically high.

Driver compensation increased by $1.9 million during the year ended December 31, 2022 as compared to 2021, primarily as a result of higher volumes transported in 2022 and an increase in driver pay as compared to 2021, partially offset by a lower overall driver count in 2022.

Insurance costs increased by $1.8 million during the year ended December 31, 2022 as compared to 2021, primarily due to an increase in insurance premiums, partially offset by a lower overall driver count in 2022. Fuel costs increased by $4.5 million during the year ended December 31, 2022 as compared to 2021, consistent with higher fuel prices in 2022, as compared to 2021.

Depreciation and amortization expense increased by $1.1 million during the year ended December 31, 2022 as compared to 2021, primarily due to the timing of purchases and retirements of tractors and other field equipment during 2021 and 2022.

Our crude oil marketing operating earnings for the year ended December 31, 2022 decreased by $9.4 million as compared to 2021, primarily as a result of inventory valuation losses of $2.0 million in 2022 as compared to inventory liquidation gains of $10.3 million in 2021 (as shown in the table below), and higher operating expenses in 2022 as compared to 2021, partially offset by an increase in the average market price of crude oil and an increase in crude oil volumes in 2022.

Field Level Operating Earnings (Non-GAAP Financial Measure). Inventory valuations and forward derivative instrument (mark-to-market) valuations are two significant factors affecting comparative crude oil marketing segment operating earnings or losses. As a purchaser and shipper of crude oil, we hold inventory in storage tanks and third-party pipelines. Generally, 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.

Crude oil marketing operating earnings can be affected by the valuations of our forward month derivative instruments. 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 strategy to protect crude oil inventory value from market price fluctuations. The valuation of derivative instruments at period end requires the recognition of non-cash “mark-to-market” gains and losses.

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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 by removing the impact of inventory valuation and liquidation adjustments for the periods indicated (in thousands):

	Year Ended December 31,
	2023		2022		2021
As reported segment operating earnings	$	17,029	$	15,874	$	25,243
Add (subtract):
Inventory liquidation gains	—		—		(10,344)
Inventory valuation losses	751		2,008		—
Derivative valuation gains	(330)		(353)		(14)
Field level operating earnings (1)	$	17,450	$	17,529	$	14,885

____________________

(1)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 points. Field level operating earnings decreased slightly during the year ended December 31, 2023 as compared to 2022, primarily due to a decrease in the average market price of crude oil and a decrease in crude oil volumes in 2023, partially offset by lower fuel costs and insurance costs in 2023 as compared to 2022.

Field level operating earnings increased during the year ended December 31, 2022 as compared to 2021, primarily due to an increase in the average market price of crude oil and an increase in crude oil volumes in 2022, which increased revenues, partially offset by higher operating costs in 2022.

We held crude oil inventory at a weighted average composite price as follows at the dates indicated (in barrels and price per barrel):

	December 31,
	2023			2022			2021
		Average			Average			Average
	Barrels	Price		Barrels	Price		Barrels	Price
Crude oil inventory	267,731	$	72.35	328,562	$	78.39	259,489	$	71.86

Historically, prices received for crude oil have been volatile and unpredictable with price volatility expected to continue. See “Item 1A. Risk Factors.”

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Transportation

Our transportation segment revenues, operating earnings and selected costs were as follows for the periods indicated (in thousands):

	Year Ended December 31,
	2023		2022		Change (1)		2021		Change (1)
Revenues	$	98,359	$	112,376	(12.5	%)	$	94,498	18.9	%
Operating earnings	$	5,091	$	10,891	(53.3	%)	$	7,104	53.3	%
Depreciation and amortization	$	12,277	$	11,512	6.6	%	$	12,099	(4.9	%)
Driver commissions	$	14,020	$	15,193	(7.7	%)	$	14,948	1.6	%
Insurance	$	7,884	$	8,760	(10.0	%)	$	8,368	4.7	%
Fuel	$	10,280	$	12,574	(18.2	%)	$	8,201	53.3	%
Maintenance expense	$	4,683	$	5,282	(11.3	%)	$	3,932	34.3	%
Mileage (000s)	25,487		26,510		(3.9	%)	27,902		(5.0	%)

____________________

(1)Represents the percentage increase (decrease) from the prior year.

Our revenue rate structure includes a component for fuel costs in which fuel cost fluctuations are largely passed through to the customer over time. Revenues, net of fuel costs, were as follows for the periods indicated (in thousands):

	Year Ended December 31,
	2023		2022		2021
Total transportation revenue	$	98,359	$	112,376	$	94,498
Diesel fuel cost	(10,280)		(12,574)		(8,201)
Revenues, net of fuel costs (1)	$	88,079	$	99,802	$	86,297

____________________

(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.

2023 compared to 2022. Transportation revenues decreased by $14.0 million during the year ended December 31, 2023 as compared to 2022. Transportation revenues, net of fuel costs, decreased by $11.7 million during the year ended December 31, 2023 as compared to 2022. These decreases in transportation revenues were primarily due to a decrease in volumes and decreased transportation rates during 2023 as a result of a softening in the transportation market due to changes in demand, supply chain issues and inflation. Softening of customer demand during 2023 led us to close two terminals, one in Pittsburgh, Pennsylvania and another in Atlanta, Georgia, with drivers being reassigned to nearby terminals, bringing our total to seventeen terminals in ten states by the end of 2023.

Driver commissions decreased by $1.2 million during the year ended December 31, 2023 as compared to 2022, primarily due to a decrease in the overall driver count and lower mileage during 2023, partially offset by an increase in driver pay in July 2023.

Fuel costs decreased by $2.3 million during the year ended December 31, 2023 as compared to 2022, primarily as a result of a decrease in 2023 in the price of fuel, lower miles traveled during 2023 and a lower overall driver count during 2023. Insurance costs decreased $0.9 million during the year ended December 31, 2023 as compared to 2022, primarily due to a lower overall driver count in 2023 and premium reductions due to our safety performance during 2023, partially offset by an overall increase in insurance premiums. Maintenance expense decreased by $0.6 million during the year ended December 31, 2023 as compared to 2022, primarily due to lower repairs and maintenance for tractors and trailers in our fleet, partially offset by escalating prices of parts, repairs and maintenance.

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Depreciation and amortization expense increased by $0.8 million during the year ended December 31, 2023 as compared to 2022, primarily as a result of the timing of purchases and leases of new tractors and trailers in 2022 and 2023. See the following table for details regarding tractor and trailer purchases, sales and leases.

Our transportation operating earnings decreased by $5.8 million during the year ended December 31, 2023 as compared to 2022, primarily due to lower revenues as a result of lower volumes, decreased transportation rates and higher maintenance costs, partially offset by lower fuel costs, driver commissions and insurance costs.

2022 compared to 2021. Transportation revenues increased by $17.9 million during the year ended December 31, 2022 as compared to 2021. Transportation revenues, net of fuel costs, increased by $13.5 million during the year ended December 31, 2022 as compared to 2021. These increases in transportation revenues were primarily due to increased transportation rates during 2022 through continued negotiations with customers. In addition, as a result of customer demand, we opened four new terminals during the second half of 2021. These terminals, located in Charleston, West Virginia, West Memphis, Arkansas, Joliet, Illinois, and Augusta, Georgia, increased revenues by approximately $8.1 million during 2022. These increases also reflect the effect of a severe winter storm in February 2021 and the resulting power outages affecting Texas, which resulted in a significant decline in transportation services for over a week and a temporary loss of revenues in 2021. In addition, our Louisiana operations were impacted by Hurricane Ida in August 2021, resulting in a loss of days worked by drivers in the area, thus decreasing revenues. The impact of the storm affected our Louisiana locations through mid-September 2021.

Driver commissions increased by $0.2 million during the year ended December 31, 2022 as compared to 2021, primarily due to an increase in driver pay in mid-2022 and an increase in the number of drivers, partially offset by lower mileage during 2022. In addition, driver commissions were impacted by Hurricane Ida in August 2021, which affected our Louisiana operations, resulting in a loss of days worked by drivers in the area, thus decreasing driver commissions. The impact of the storm affected our Louisiana locations through mid-September 2021.

Fuel costs increased by $4.4 million during the year ended December 31, 2022 as compared to 2021, primarily as a result of an increase in the price of fuel during 2022. Insurance costs increased by $0.4 million during the year ended December 31, 2022 as compared to 2021, primarily due to an increase in insurance premiums in 2022. Maintenance expense increased by $1.4 million during the year ended December 31, 2022 as compared to 2021, primarily due to repairs and maintenance for older tractors and trailers in our fleet and escalating prices of parts, repairs and maintenance.

Depreciation and amortization expense decreased by $0.6 million during the year ended December 31, 2022 as compared to 2021, primarily as a result of the timing of purchases and leases of new tractors and trailers in 2021 and 2022.

Our transportation operating earnings increased by $3.8 million during the year ended December 31, 2022 as compared to 2021, primarily due to higher revenues as a result of increased transportation rates and revenues from new terminals, partially offset by higher fuel costs, maintenance costs, driver commissions and insurance costs.

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Equipment additions and retirements for the transportation fleet were as follows for the periods indicated:

	Year Ended December 31,
	2023	2022	2021
New tractors purchased	11 units	3 units	28 units
New tractors leased	40 units	10 units	—
Tractors retired	73 units	4 units	79 units
New trailers purchased	20 units	1 unit	67 units
New trailers leased	23 units	13 units	—
Trailers retired	74 units	85 units	33 units

The sales of retired equipment in our transportation segment produced gains of approximately $1.7 million, $0.8 million and $0.4 million during the years ended December 31, 2023, 2022 and 2021, respectively.

Our customers are primarily in the domestic petrochemical industry. Customer demand is affected by low natural gas prices (a basic feedstock cost for the petrochemical industry) and high export demand for petrochemicals.

Pipeline and Storage

Our pipeline and storage segment revenues, operating losses and selected costs were as follows for the periods indicated (in thousands):

	Year Ended December 31,
	2023		2022		Change (1)		2021		Change (1)
Segment revenues (2)	$	3,267	$	3,804	(14.1	%)	$	4,524	(15.9	%)
Less: Intersegment revenues (2)	(2,944)		(3,804)		(22.6	%)	(3,860)		(1.5	%)
Revenues	$	323	$	—	0.0	%	$	664	(100.0	%)
Operating losses	(3,855)		(3,579)		7.7	%	(2,487)		43.9	%
Depreciation and amortization	1,071		1,077		(0.6	%)	1,025		5.1	%
Insurance	842		772		9.1	%	726		6.3	%

____________________

(1)Represents the percentage increase (decrease) from the prior year.

(2)Segment revenues include intersegment revenues from our crude oil marketing segment, which are eliminated due to consolidation in our consolidated statements of operations.

Volume information was as follows for the periods indicated (in barrels per day):

	Year Ended December 31,
	2023	2022	2021
Pipeline throughput	9,140	11,084	7,670
Terminalling	10,026	11,296	8,132

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2023 compared to 2022. Pipeline and storage segment revenues decreased by $0.5 million during the year ended December 31, 2023 as compared to 2022. Intersegment revenues, which are revenues earned from GulfMark, an affiliated shipper, decreased by $0.9 million for the year ended December 31, 2023 as compared to 2022, primarily due to lower volumes transported by GulfMark during 2023. All pipeline and storage revenues earned from GulfMark are eliminated in consolidation, with the offset to marketing costs and expenses in our consolidated statements of operations. During the year ended December 31, 2022, all pipeline and storage segment revenues were earned from GulfMark, while during the year ended December 31, 2023, approximately $0.3 million of revenues were earned from third party customers.

We are currently constructing a new pipeline connection between the VEX Pipeline System and the Max Midstream pipeline system, and we expect to place the assets into commercial service during the second half of 2024. In addition, we are exploring new connections with other pipeline systems, for new crude oil supply opportunities both upstream and downstream of the pipeline, to enhance the crude oil supply and take-away capability of the system.

Our pipeline and storage operating losses increased by $0.3 million during the year ended December 31, 2023 as compared to 2022, primarily due to increases in operating salaries and wages and related personnel costs, materials and supplies and outside service costs in 2023, partially offset by an increase in third party revenues in 2023.

2022 compared to 2021. Pipeline and storage segment revenues decreased by $0.7 million during the year ended December 31, 2022 as compared to 2021. Intersegment revenues, which are revenues earned from GulfMark, an affiliated shipper, decreased by $0.1 million for the year ended December 31, 2022 as compared to 2021, primarily due to lower volumes transported by GulfMark during 2022. All pipeline and storage revenues earned from GulfMark are eliminated in consolidation, with the offset to marketing costs and expenses in our consolidated statements of operations. During the year ended December 31, 2022, all pipeline and storage segment revenues were earned from GulfMark, while during the year ended December 31, 2021, approximately $0.7 million of revenues were earned from third party customers.

Our pipeline and storage operating losses increased by $1.1 million during the year ended December 31, 2022 as compared to 2021, primarily due to the third-party revenue contract ending, which resulted in lower revenues of $0.7 million, and increases in operating salaries and wages and related personnel costs, materials and supplies, outside service costs and insurance costs in 2022.

Logistics and Repurposing

Our logistics and repurposing segment revenues, operating (losses) earnings and selected costs were as follows for the periods indicated (in thousands):

	Year Ended December 31,
	2023		2022 (1)
Revenues	$	61,256	$	22,348
Operating (losses) earnings	(934)		303
Depreciation and amortization	6,473		2,394
Driver commissions	8,927		3,767
Insurance	2,559		776
Fuel	3,673		1,796

____________________

(1)Represents the period from acquisition, August 12, 2022 through December 31, 2022.

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On August 12, 2022, we acquired all of the equity interests of Firebird and Phoenix. Firebird is an interstate bulk motor carrier of crude oil, condensate, fuels, oils and ͏other petroleum products. At the time of acquisition, Firebird had six terminal locations throughout Texas and owned 123 tractors and 216 trailers largely in the Eagle Ford basin. Phoenix ͏recycles and repurposes off-specification fuels, lubricants, crude oil and other chemicals from ͏producers in the U.S. See Note 6 in the Notes to Consolidated Financial Statements for further information regarding the acquisition.

On May 4, 2023, we acquired approximately 10.6 acres of land in the Gulf Inland Industrial Park, located in Dayton, Texas, for approximately $1.8 million to build a new processing facility for Phoenix with rail spur and siding, product storage, and truck rack. Phoenix intends to build new infrastructure to service its existing customers and to create opportunities for growing the business. Phoenix also plans to relocate its headquarters from Humble, Texas to this new location.

2023 compared to 2022. Revenues earned from Firebird operations were approximately $28.2 million during the year ended December 31, 2023, while revenues earned from Phoenix operations were approximately $33.1 million during the same period. Revenues earned from Firebird operations were approximately $9.5 million for the period from the August 12, 2022 acquisition date through December 31, 2022, while revenues earned from Phoenix operations were approximately $12.9 million during the same period.

Operating expenses during the year ended December 31, 2023 include driver commissions of $8.9 million, fuel costs of $3.7 million, maintenance expenses of $2.4 million and insurance costs of $2.6 million. Depreciation expense was $5.4 million and amortization expense related to intangible assets was $1.1 million during the current year. Operating losses during the year ended December 31, 2023 were $0.9 million.

General and Administrative Expense

General and administrative expenses decreased by $2.8 million during the year ended December 31, 2023 as compared to 2022, primarily due to an adjustment in 2023 of the $2.6 million contingent consideration accrual related to the Firebird and Phoenix acquisition in 2022 (see Note 6 in the Notes to Consolidated Financial Statements for further information), and lower salaries and wages and related personnel costs and legal fees, partially offset by higher insurance costs, outside service costs, audit fees and banking fees primarily related to outstanding letters of credit. The 2022 period also includes approximately $0.6 million of costs related to the repurchase of our common shares from an affiliate (see Note 10 in the Notes to Consolidated Financial Statements for further information) and approximately $0.5 million of acquisition related costs for the purchase of Firebird and Phoenix.

General and administrative expenses increased by $4.0 million during the year ended December 31, 2022 as compared to 2021, primarily due to higher salaries and wages and related personnel costs, audit fees, legal fees, outside service costs and insurance costs. As described above, 2022 also includes approximately $0.6 million of costs related to the repurchase of our common shares from an affiliate and approximately $0.5 million of acquisition related costs for the purchase of Firebird and Phoenix.

Interest Expense

Interest expense increased by $2.1 million during the year ended December 31, 2023 as compared to 2022, primarily due to an increase in interest expense of $1.6 million as a result of higher borrowings under the revolving portion of the Credit Agreement and the outstanding borrowings under the Term Loan of $21.9 million under our Credit Agreement. Interest expense also increased approximately $1.0 million related to our entry into new finance leases in 2023 (see Note 17 in the Notes to Consolidated Financial Statements for further information). The 2022 period includes the write off of debt issuance costs of $0.4 million related to the Wells Fargo credit agreement that we terminated in October 2022 (see Note 12 in the Notes to Consolidated Financial Statements for further information).

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Interest expense increased by $0.5 million during the year ended December 31, 2022 as compared to 2021, primarily due to the write off of debt issuance costs of $0.4 million related to the Wells Fargo credit agreement that we terminated in October 2022, and an increase of $0.3 million related to the outstanding Term Loan under our Credit Agreement. We entered into the Credit Agreement with Cadence Bank in October 2022 and used the proceeds from the Term Loan to partially fund the repurchase of shares from KSA Industries, Inc. (“KSA”) and certain of its affiliates on October 31, 2022 (see Note 10 in the Notes to Consolidated Financial Statements for further information).

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.

On March 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.

The NOL carryback provision in the CARES Act resulted in a cash benefit to us for the fiscal years 2018, 2019 and 2020. We carried back our NOL for the fiscal year 2018 to 2013 and received a cash refund of approximately $2.7 million in June 2020. We carried back our NOL for the fiscal year 2019 to 2014 and received a cash refund of approximately $3.7 million in April 2021. We carried back our NOL for the fiscal year 2020 to 2015 and 2016 and received a cash refund of approximately $6.9 million in June 2022.

We account for interest and penalties related to uncertain tax positions as part of our provision for federal and state income taxes. At December 31, 2023 and 2022, we have not recorded any uncertain tax benefits.

For the years ended December 31, 2023 and 2022, our effective tax rate was approximately 56.4 percent and 35.5 percent, respectively, which is higher than our statutory tax rate primarily due to non-deductible expenses, the mix of earnings in states with higher tax rates and less earnings before income taxes as compared to prior years.

At December 31, 2023 and 2022, we had deferred tax liabilities of approximately $12.9 million and $15.4 million, respectively. We recorded net tax liabilities in 2022 of approximately $6.2 million related to the tax effect of our estimated fair value allocations related to the purchase of Firebird and Phoenix (Note 6 in the Notes to Consolidated Financial Statements for further information).

See Note 14 in the Notes to Consolidated Financial Statements for further information.

Liquidity and Capital Resources

General

Our primary sources of liquidity are (i) our cash balance, (ii) cash flow from operating activities, (iii) borrowings under our 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.

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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):

	December 31,
	2023		2022		2021
Cash and cash equivalents	$	33,256	$	20,532	$	97,825
Working capital	21,684		19,083		87,199

Our cash balance at December 31, 2023 increased by 62.0 percent from December 31, 2022, as discussed further below.

We have in place a Credit Agreement with Cadence Bank. The Credit Agreement provides for (a) a revolving credit facility that allows for borrowings up to $60.0 million in aggregate principal amount from time to time, and (b) a term loan in aggregate principal amount of $25.0 million (the “Term Loan”). We may also obtain letters of credit under the revolving credit facility up to a maximum amount of $30.0 million, which reduces availability under the revolving credit facility by a like amount. Borrowings under the revolving credit facility may be, at our option, base rate loans (defined by reference to the higher of the prime rate, the federal funds rate or an adjusted term secured overnight financing rate (“SOFR”) for a one month tenor plus one percent) or SOFR loans, in each case plus an applicable margin, the amount of which is determined by reference to our consolidated total leverage ratio, and is between 1 percent and 2 percent for base rate loans and between 2 percent and 3 percent for SOFR loans.

The Term Loan amortizes on a 10-year schedule with quarterly payments beginning December 31, 2022, and matures October 27, 2027. Proceeds of the Term Loan were used, together with additional cash on hand, to fund the repurchase of shares from KSA and certain of its affiliates on October 31, 2022. The Term Loan bears interest at the SOFR loan rate plus the applicable margin for SOFR loans.

We are required to maintain compliance with certain financial covenants under the Credit Agreement, including a consolidated leverage ratio, an asset coverage ratio and a consolidated fixed charge coverage ratio. We were in compliance with these covenants as of December 31, 2023.

On August 2, 2023, we entered into an amendment to the Credit Agreement. The amendment (i) clarifies our ability to exclude crude oil inventory valuation losses (and, to the extent included in our consolidated net income, inventory liquidation gains) from the calculation of Consolidated EBITDA (as defined in the Credit Agreement) for purposes of the related financial covenants, (ii) provides for the exclusion of unusual and non-recurring losses and expenses from the calculation of Consolidated EBITDA, not to exceed ten percent (10%) of Consolidated EBITDA for the period, and (iii) amends the definition of Consolidated Funded Indebtedness to include letters of credit and banker’s acceptances only to the extent such letters of credit or banker’s acceptances have been drawn, for purposes of the Consolidated Total Leverage Ratio calculation (as defined in the Credit Agreement). The Amendment applies to our fiscal period ending June 30, 2023 and thereafter.

At December 31, 2023, we had $21.9 million outstanding under the Credit Agreement, representing the remaining principal balance of the Term Loan, with a weighted average interest rate of 7.69 percent. We also had $13.0 million of letters of credit issued under the Credit Agreement at a fee of 2.25 percent per annum. No amounts were outstanding under the revolving credit facility. See Note 12 in the Notes to Consolidated Financial Statements for further information.

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On December 23, 2020, we entered into an At Market Issuance Sales Agreement (“ATM Agreement”) with B. Riley Securities, Inc., as agent (the “Agent”). Pursuant to the ATM Agreement, we may offer to sell shares of our common stock through or to the Agent for cash from time to time. The total number of shares of common stock to be sold, if any, and the price the shares will be sold at will be determined by us periodically in connection with any such sales, though the total amount sold may not exceed the limitations stated in the applicable registration statement. We filed a registration statement initially registering an aggregate of $20.0 million of shares of common stock for sale under the ATM Agreement. During the year ended December 31, 2023, we received net proceeds of approximately $0.5 million (net of offering costs to the Agent of $27 thousand) from the sale of 14,680 of our common shares at an average price per share of approximately $40.74 under the ATM Agreement. In December 2023, we filed a new registration statement which replaced our prior shelf registration statement and restored the aggregate of $20.0 million of shares of common stock for sale under the ATM Agreement. The registration statement was declared effective on January 5, 2024. The full capacity of the ATM agreement remains unsold.

We utilize cash from operations to make discretionary investments in our four business segments. With the exception of operating and finance lease commitments primarily associated with storage tank terminal arrangements, leased office space, tractors, trailers and other equipment, our future commitments and planned investments can be readily curtailed if operating cash flows decrease. See below for information regarding our operating and finance lease obligations. 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.

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.”

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):

	Year Ended December 31,
	2023		2022		2021
Cash provided by (used in):
Operating activities	$	30,275	$	13,777	$	81,026
Investing activities	(3,112)		(36,003)		(10,096)
Financing activities	(12,984)		(54,024)		(15,678)

Operating activities. Net cash flows provided by operating activities was $30.3 million for the year ended December 31, 2023 as compared to $13.8 million for the year ended December 31, 2022. The increase in net cash flows from operating activities of $16.5 million was primarily due to changes in our working capital accounts, including a decrease in the price of our crude oil inventory, which decreased from $78.39 per barrel at December 31, 2022 to $72.35 per barrel at December 31, 2023, and a decrease of 18.5 percent in the number of barrels held in inventory. Early payments made to suppliers decreased by approximately $9.5 million in 2023, while early payments received from customers decreased by approximately $12.4 million in 2023. Earnings also decreased by $3.3 million in 2023 as compared to 2022.

Net cash flows provided by operating activities was $13.8 million for the year ended December 31, 2022 as compared to $81.0 million for the year ended December 31, 2021. The decrease in net cash flows from operating activities of $67.2 million was primarily due to lower earnings of $8.4 million in 2022 and changes in our working capital accounts. Early payments received from customers decreased by approximately $7.6 million in 2022, and early payments made to suppliers increased by approximately $8.3 million in 2022. In addition, crude oil inventory increased by $8.0 million at December 31, 2022, primarily due to an increase in the price of our crude oil inventory, which increased from $71.86 per barrel at December 31, 2021 to $78.39 per barrel at December 31, 2022, and an increase of 26.6 percent in the number of barrels held in inventory.

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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.

Early payments received from customers and prepayments made to suppliers were as follows at the dates indicated (in thousands):

	December 31,
	2023		2022		2021
Early payments received	$	32,850	$	45,265	$	52,841
Early payments to suppliers	4,546		14,055		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. The timing of payments and receipts of these early pays received and paid can have a significant impact on our cash balance.

Investing activities. Net cash used in investing activities for the year ended December 31, 2023 decreased by $32.9 million when compared to 2022. This decrease in net cash flows used in investing activities was primarily due to a payment of $33.1 million for the acquisition of Firebird and Phoenix in August 2022 (see Note 6 in the Notes to Consolidated Financial Statements for further information) and an increase of $5.7 million in cash proceeds from sales of assets, partially offset by an increase of $4.4 million in capital spending for property and equipment (see “Capital Spending” below) and a decrease of $1.5 million in insurance and state collateral refunds in 2023.

Net cash used in investing activities for the year ended December 31, 2022 increased by $25.9 million when compared to 2021. This increase in net cash flows used in investing activities was primarily due to a payment of $33.1 million for the acquisition of Firebird and Phoenix in August 2022, partially offset by a decrease of $4.9 million in capital spending for property and equipment (see “Capital Spending” below), an increase of $0.8 million in cash proceeds from sales of assets and an increase of $1.5 million in insurance and state collateral refunds in 2022.

Financing activities. Net cash used in financing activities for the year ended December 31, 2023 decreased by $41.0 million when compared to 2022. The change in net cash flows from financing activities was primarily due to the following cash outflows and inflows:

•borrowings and repayments under revolving credit agreements in place during each year (see Note 12 in the Notes to Consolidated Financial Statements for further information). During 2023, we borrowed and repaid $76.0 million under the revolving credit facility under our Credit Agreement with Cadence Bank, while during 2022, we borrowed and repaid $92.0 million under the credit agreements with Cadence Bank or Wells Fargo in place during 2022. Borrowings were primarily used for working capital purposes.

•borrowing under our Term Loan. During 2022, we borrowed $25.0 million under the Term Loan with Cadence Bank to partially fund the repurchase of the shares from KSA and affiliates (see Note 10 in the Notes to Consolidated Financial Statements for further information). During the years ended December 31, 2023 and 2022, we made principal payments of $2.5 million and $0.6 million, respectively, on the Term Loan.

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•cash payment to repurchase shares. During 2022, we made a cash payment in October 2022 of $69.9 million for the repurchase of an aggregate of 1,942,433 shares of our common stock from KSA and affiliates (see Note 10 in the Notes to Consolidated Financial Statements for further information).

•principal repayments under finance lease obligations. During 2023, we had an increase of $3.8 million in principal repayments made for finance lease obligations (see “Material Cash Requirements” below for information regarding our finance lease obligations).

•net proceeds from the sale of equity. During 2023, we had a decrease of $1.2 million in net proceeds from the sale of common shares under the ATM program as compared to 2022. During the year ended December 31, 2023, we received net proceeds of approximately $0.5 million from the sale of 14,680 of our common shares, while during the year ended December 31, 2022, we received net proceeds of approximately $1.7 million from the sale of 46,524 of our common shares.

•payment of debt issuance costs. During 2022, we made payments of $1.7 million for debt issuance costs related to our entry into the Credit Agreement with Cadence Bank.

•cash payment of dividends. During both of the years ended December 31, 2023 and 2022, we paid aggregate cash dividends of $0.96 per common share, or totals of $2.5 million and $3.8 million, respectively. On October 31, 2022, the number of common shares outstanding decreased by 1.9 million as a result of the repurchase of the shares from KSA and affiliates.

Net cash used in financing activities for the year ended December 31, 2022 increased by $38.3 million when compared to 2021. The change in net cash flows from financing activities was primarily due to the following cash outflows and inflows:

•a cash payment in October 2022 of $69.9 million for the repurchase of an aggregate of 1,942,433 shares of our common stock from KSA and affiliates;

•an increase in 2022 of $0.4 million in principal repayments made for finance lease obligations (see “Material Cash Requirements” below for information regarding our finance lease obligations);

•a decrease in 2022 of $1.1 million in net proceeds from the sale of common shares under the ATM program. During the year ended December 31, 2022, we received net proceeds of approximately $1.7 million from the sale of 46,524 of our common shares, while during the year ended December 31, 2021, we received net proceeds of approximately $2.8 million from the sale of 97,623 of our common shares.

•an increase in 2022 in net borrowings under our credit agreements with Wells Fargo and Cadence Bank. During 2022, we borrowed and repaid $92.0 million under the credit agreements, primarily for working capital purposes. We also borrowed $25.0 million under the Term Loan with Cadence Bank to partially fund the repurchase of the shares from KSA and affiliates, and made a principal repayment of $0.6 million in December 2022 on the Term Loan. During the year ended December 31, 2021, 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, and repaid the $8.0 million during 2021.

•a cash outflow in 2022 of $1.7 million for debt issuance costs related to the Credit Agreement with Cadence Bank;

•a cash outflow in 2022 as a result of the payment of the $10.0 million outstanding payable related to the purchase of the VEX Pipeline System in October 2020;

•a decrease in 2022 in cash dividends paid on our common shares. During both of the years ended December 31, 2022 and 2021, we paid aggregate cash dividends of $0.96 per common share, or totals of $3.8 million and $4.1 million, respectively. On October 31, 2022, the number of common shares outstanding decreased by 1.9 million as a result of the repurchase of the shares from KSA and affiliates.

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Capital Spending

We use cash from operations and existing cash balances to make discretionary investments in our businesses. Capital spending was as follows for the periods indicated (in thousands):

	Year Ended December 31,
	2023		2022		2021
Crude oil marketing (1)	$	1,185	$	4,534	$	3,245
Transportation (2)	5,130		1,608		7,960
Pipeline and storage	1,503		1,050		1,169
Logistics and repurposing (3)	3,967		282		—
Other (4)	112		17		8
Capital spending	$	11,897	$	7,491	$	12,382

_______________

(1)Amounts for the years ended December 31, 2023, 2022 and 2021, do not include approximately $8.0 million, $5.1 million and $2.1 million, respectively, of tractors, trailers and other equipment acquired under finance leases.

(2)Amounts for the years ended December 31, 2023 and 2022, do not include approximately $8.6 million and $2.8 million, respectively, of tractors and trailers acquired under finance leases.

(3)Amount for the year ended December 31, 2023 does not include approximately $1.3 million of tractors acquired under finance leases. Amount for the year ended December 31, 2022 does not include approximately $33.1 million of capital spending related to the acquisition of Firebird and Phoenix.

(4)Amounts relate to the purchase of a company vehicle and office and computer equipment, which are not attributed or allocated to any of our reporting segments.

As a result of the uncertainty relating to the economic environment resulting from the COVID-19 pandemic, we significantly reduced our capital spending in 2023, 2022 and 2021 and, as a result, entered into finance lease agreements for the use of tractors and trailers. See “Material Cash Requirements” below for information regarding our finance lease obligations.

Crude oil marketing. Capital expenditures during 2023 were for the purchase of various field equipment. Capital expenditures during 2022 were for the purchase of 20 tractors, 10 trailers and other field equipment, and during 2021, were for the purchase of 16 tractors, 2 trailers and other field equipment.

Transportation. Capital expenditures during 2023 were for the purchase of eleven tractors, twenty trailers and various field equipment. Capital expenditures during 2022 were for the purchase of three tractors, one trailer and other field equipment, and during 2021, were for the purchase of 28 tractors, 67 trailers and computer software and equipment.

Pipeline and storage. Capital expenditures during 2023 were for the continued construction of a pipeline connection, which is expected to be placed in commercial service during the second half of 2024. Capital expenditures during 2022 were for the purchase of land and easements in connection with a planned pipeline connection, and during 2021, were for the purchase of computer equipment and field equipment.

Logistics and repurposing. Capital expenditures during 2023 were for the purchase of approximately 10.6 acres of land in the Gulf Inland Industrial Park, located in Dayton, Texas, for approximately $1.8 million to build a new processing facility for Phoenix, 15 tractors, four trailers and various field equipment. Capital expenditures for 2022 were for the purchase of field equipment.

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Material Cash Requirements

The following table summarizes our contractual obligations with material cash requirements at December 31, 2023 (in thousands):

			Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Credit Agreement (1)	$	26,942	$	4,094	$	7,612	$	15,236	$	—
Finance lease obligations (2)	29,198		7,463		12,899		8,836		—
Operating lease obligations (3)	6,168		3,009		2,320		821		18
Purchase obligations:
Crude oil marketing — crude oil (4)	137,257		137,257		—		—		—
Tractors and trailers (5)	7,632		7,632		—		—		—
Total contractual obligations	$	207,197	$	159,455	$	22,831	$	24,893	$	18

___________________

(1)Represents scheduled future maturities for amounts due under the Term Loan under our Credit Agreement plus estimated cash payments for interest. Interest payments are based upon the principal amount of the amount outstanding and the applicable interest rate at December 31, 2023. See Note 12 in the Notes to Consolidated Financial Statements for further information about our Credit Agreement.

(2)Amounts represent our principal contractual commitments, including interest, outstanding under finance leases for tractors, trailers, tank storage and throughput arrangements and other equipment.

(3)Amounts represent rental obligations under non-cancelable operating leases and terminal arrangements with terms in excess of one year.

(4)Amount represents commitments to purchase certain quantities of crude oil substantially in January 2024 in connection with our crude oil marketing activities. These commodity purchase obligations are the basis for commodity sales, which generate the cash flow necessary to meet these purchase obligations.

(5)Amount represents commitments to purchase nine new tractors and thirteen new trailers in our transportation business, 28 new tractors in our crude oil marketing business, and two new trailers in our logistics and repurposing segment.

We maintain certain lease arrangements with independent truck owner-operators for use of their equipment and driver services on a month-to-month basis. In addition, we enter into office space and certain lease and terminal access contracts in order to provide tank storage and dock access for our crude oil marketing business. These storage and access contracts require certain minimum monthly payments for the term of the contracts.

Rental expense was as follows for the periods indicated (in thousands):

	Year Ended December 31,
	2023		2022		2021
Rental expense	$	26,503	$	23,176	$	21,604

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Insurance

Our primary insurance needs are workers’ compensation, automobile and umbrella liability coverage for our trucking fleet and medical insurance for our employees. See Note 18 in the Notes to Consolidated Financial Statements for further information. Insurance costs were as follows for the periods indicated (in thousands):

	Year Ended December 31,
	2023		2022		2021
Insurance costs	$	18,986	$	18,777	$	15,610

Related Party Transactions

For information regarding our related party transactions, see Note 10 in the Notes to Consolidated Financial Statements included under Part II, Item 8 of this annual report.

Recent Accounting Developments

For information regarding recent accounting developments, see Note 2 in the Notes to Consolidated Financial Statements included under Part II, Item 8 of this annual report.

Outlook

One of our primary opportunities for 2024 will be to expand our relationships with existing customers by providing additional services to them through our recently acquired new lines of business. We also plan to expand on our other businesses by capitalizing on integration opportunities we can offer our customers. In addition, we will continue to focus on expanding our core businesses while delivering value to our shareholders. We will work to achieve positive results in markets with strong competition and margin pressures throughout all segments of our business. We also plan to continue to focus on cutting costs to combat inflation by negotiating with suppliers and by operating efficiently.

Our major objectives for 2024 are as follows:

•Crude oil marketing – We plan to focus on increasing margins to maximize cash flow and capturing midstream opportunities in an inflationary market. We will continue to take advantage of our recently upgraded fleet dispatch and maintenance software system to help drive more efficiency in our fleet operations and lower our operating costs, which we believe will help drive increased profitability. In addition, we will look for opportunities to increase our trucking fleet to add to our overall ability to gather and distribute crude oil.

•Transportation – We plan to continue to increase truck utilization, upgrade our fleet quality and enhance driver retention and recruitment. We also plan to continue to capitalize on our recent acquisitions and organic expansions to improve quality of revenue through improved efficiencies. We will continue to look for ways to expand our terminal footprint to put us in a position to better compete for new business.

•Pipeline and storage – We will focus on opportunities to increase our pipeline and storage utilization, by identifying opportunities with our existing and new customers to increase volumes. In addition, we will look to capitalize on our new pipeline connection, scheduled to come on-line in the second half of 2024, as well as continuing to look for 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.

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•Logistics and repurposing – We will focus on maintaining the relationships that these entities have developed over their years of operations and look to expand the customer base by offering these new services to our other divisions customers. We believe by integrating this business with certain aspects of our other businesses, we can bring additional overall value to both our customers and to our shareholders. We expect to break ground on the Dayton facility during the second quarter of 2024. When completed, this facility will allow us to operate our rail and trucking business more efficiently, as well as open up opportunities to process a wider variety of products.

•Strategic business development – We will deploy a disciplined investment approach to growth in our four segments and funding new growth opportunities that are adjacent and complimentary to existing operating activities.

Critical Accounting Policies and Estimates

In our financial reporting processes, we employ methods, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our financial statements.  These methods, estimates and assumptions also affect the reported amounts of revenues and expenses for each reporting period.  Investors should be aware that actual results could differ from these estimates if the underlying assumptions prove to be incorrect.  The following sections discuss the use of estimates within our critical accounting policies and estimates.

Goodwill and Intangible Assets

We allocate the purchase price of acquired businesses to their identifiable tangible assets and liabilities, such as accounts receivable, inventory, property, plant and equipment, accounts payable and accrued liabilities. We also allocate a portion of the purchase price to identifiable intangible assets, such as non-compete agreements, trade names and customer relationships. Allocations are based on estimated fair values of assets and liabilities. Deferred taxes are recorded for any differences between the assigned values and tax bases of assets and liabilities. Estimated deferred taxes are based on available information concerning the tax bases of assets acquired and liabilities assumed and loss carryforwards at the acquisition date, although such estimates may change in the future as additional information becomes known. We use all available information to estimate fair values including quoted market prices, the carrying value of acquired assets, and widely accepted valuation techniques such as discounted cash flows.

Certain estimates and judgments are required in the application of the fair value techniques, including estimates of future cash flows and the selection of a discount rate, as well as the use of “Level 3” measurements as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 820, Fair Value Measurements and Disclosure. Any remaining excess of cost over allocated fair values is recorded as goodwill. We typically engage third-party valuation experts to assist in determining the fair values for both the identifiable tangible and intangible assets. The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, could materially impact our results of operations.

At December 31, 2023, our goodwill balance was approximately $6.7 million. At December 31, 2023 and 2022, the carrying values of our intangible assets were $8.0 million and $9.7 million, respectively. See Note 6 and Note 8 in the Notes to Consolidated Financial Statements for further information.

Fair Value Accounting

We enter into certain forward commodity contracts that are required to be recorded at fair value, and these contracts are recorded as either an asset or liability measured at its fair value. Changes in fair value are recognized immediately in earnings unless the derivatives qualify for, and we elect, cash flow hedge accounting. We had no contracts designated for hedge accounting during the years ended December 31, 2023, 2022 and 2021.

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We utilize a market approach to valuing our commodity contracts. On a contract by contract, forward month by forward month basis, we obtain observable market data for valuing our contracts that typically have durations of less than 18 months. At December 31, 2023, all of our market value measurements were based on inputs based on observable market data (Level 2 inputs). See discussion under “Fair Value Measurements” in Note 2 and Note 13 in the Notes to Consolidated Financial Statements.

Our fair value contracts give rise to market risk, which represents the potential loss that may result from a change in the market value of a particular commitment. We monitor and manage our exposure to market risk to ensure compliance with our risk management policies. These risk management policies are regularly assessed to ensure their appropriateness given our objectives, strategies and current market conditions.

Liability and Contingency Accruals, including those related to Insurance Liabilities

We establish a liability under the automobile and workers’ compensation insurance policies for expected claims incurred but not reported on a monthly basis. We retain a third-party consulting actuary to establish loss development factors, based on historical claims experience as well as industry experience. We apply those factors to current claims information to derive an estimate of the ultimate claims liability. See Note 18 in the Notes to Consolidated Financial Statements for further information.

From time to time as incidental to our operations, we become involved in various accidents, lawsuits and/or disputes. As an operator of an extensive trucking fleet, we are a party to motor vehicle accidents, worker compensation claims or other items of general liability as are typical for the industry. In addition, we have extensive operations that must comply with a wide variety of tax laws, environmental laws and labor laws, among others. Should an incident occur, we evaluate the claim based on its nature, the facts and circumstances and the applicability of insurance coverage. When our assessment indicates that it is probable that a liability has occurred and the amount of the liability can be reasonably estimated, we make appropriate accruals or disclosure. We base our estimates on all known facts at the time and our assessment of the ultimate outcome, including consultation with external experts and counsel. We revise these estimates as additional information is obtained or resolution is achieved. At December 31, 2023, we do not believe any of our outstanding legal matters would have a material adverse effect on our financial position, results of operations or cash flows.

Revenue Recognition

We account for our revenues under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. ASC 606’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 requires entities to recognize revenue through the application of a five-step model, which includes: identification of the contract; identification of the performance obligations; determination of the transaction price; allocation of the transaction price to the performance obligations; and recognition of revenue as the entity satisfies the performance obligations.

Our revenues are primarily generated from the marketing, transportation, storage and terminalling of crude oil and other related products, the tank truck transportation of liquid chemicals, pressurized gases, asphalt and dry bulk and the recycling and repurposing of off-specification fuels, lubricants, crude oil and other chemicals. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606. To identify the performance obligations, we considered all of the products or services promised in the contracts with customers, whether explicitly stated or implied based on customary business practices. Revenue is recognized when, or as, each performance obligation is satisfied under terms of the contract. Payment is typically due in full within 30 days of the invoice date.

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Crude oil marketing segment. Crude oil marketing activities generate revenues from the sale and delivery of crude oil purchased either directly from producers or on the open market. Most of our crude oil purchase and sale contracts qualify and are designated as non-trading activities, and we consider these contracts as normal purchases and sales activity. For normal purchases and sales, our customers are invoiced monthly based upon contractually agreed upon terms with revenue recognized in the month in which the physical product is delivered to the customer, generally upon delivery of the product to the customer. Revenue is recognized based on the transaction price and the quantity delivered.

The majority of our crude oil sales contracts have multiple distinct performance obligations as the promise to transfer the individual goods (e.g., barrels of crude oil) is separately identifiable from the other goods promised within the contracts. Our performance obligations are satisfied at a point in time. For normal sales arrangements, revenue is recognized in the month in which control of the physical product is transferred to the customer, generally upon delivery of the product to the customer.

Transportation segment. Transportation activities generate revenue from the truck transportation of liquid chemicals, pressurized gases, asphalt or dry bulk from point A to point B for customers. Each sales order is associated with our master transportation agreements and is considered a distinct performance obligation. The performance obligations associated with this segment are satisfied over time as the goods and services are delivered.

Pipeline and storage segment. Pipeline and storage activities generate revenue by transporting crude oil on our pipeline and providing storage and terminalling services for our customers. Our operations generally consist of fee-based activities associated with the transportation of crude oil and providing storage and terminalling services for crude oil. Revenues from pipeline tariffs and fees are associated with the transportation of crude oil at a published tariff. We primarily recognize pipeline tariff and fee revenues over time as services are rendered, based on the volumes transported. As is common in the pipeline transportation industry, our tariffs incorporate a loss allowance factor. We recognize the allowance volumes collected as part of the transaction price and record this non-cash consideration at fair value, measured as of the contract inception date.

Storage fees are typically recognized in revenue ratably over the term of the contract regardless of the actual storage capacity utilized as our performance obligation is to make available storage capacity for a period of time. Terminalling fees are recognized as the crude oil enters or exits the terminal and is received from or delivered to the connecting carrier or third-party terminal, as applicable.

Logistics and repurposing. Logistics activities generate revenue from the truck transportation of crude oil, condensate, fuels, oils and other petroleum products from point A to point B for customers. Each sales order is associated with our master transportation agreements and is considered a distinct performance obligation. The performance obligations associated with this segment are satisfied over time as the goods and services are delivered.

Recycling and repurposing activities generate revenue by repurposing off-specification fuels, lubricants, crude oil and other chemicals. These recycling and repurposing activities generate revenues from the sale and delivery of product purchased directly from the customer. Our customers are invoiced monthly based upon contractually agreed upon terms with revenue recognized in the month in which the physical product is delivered to the customer, generally upon delivery of the product to the customer. Revenue is recognized based on the transaction price and the quantity delivered.

See Note 3 in the Notes to Consolidated Financial Statements for further information.

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Item 7A.     Quantitative and Qualitative Disclosures About Market Risk.

In the normal course of business, we are exposed to certain risks, including changes in interest rates and commodity prices.

Interest Rate Risk

We are exposed to the risk of changes in interest rates. At December 31, 2023, we had $21.9 million of borrowings outstanding under our Credit Agreement. A hypothetical ten percent change in the average interest rates applicable to the borrowings under our Credit Agreement as of December 31, 2023 would result in a change of approximately $0.2 million annually in interest expense.

Commodity Price Risk

Our major market risk exposure is in the pricing applicable to our crude oil marketing segment. Realized pricing is primarily driven by the prevailing spot prices applicable to crude oil. Commodity price risk in our crude oil marketing operations represents the potential loss that may result from a change in the market value of an asset or a commitment. From time to time, we enter into forward contracts to minimize or hedge the impact of market fluctuations on our purchases of crude oil. In each instance, we lock in a separate matching price support contract with a third party in order to minimize the risk of these financial instruments. Substantially all forward contracts fall within a six-month to twelve-month term.

Certain forward contracts are recorded at fair value, depending on our assessments of numerous accounting standards and positions that comply with GAAP in the U.S. The fair value of these contracts is reflected in the balance sheet as fair value assets and liabilities and any revaluation is recognized on a net basis in our results of operations (see Note 2 and Note 13 in the Notes to Consolidated Financial Statements for further information).

Historically, prices received for crude oil sales have been volatile and unpredictable with price volatility expected to continue. From January 1, 2023 through December 31, 2023, our crude oil monthly average wholesale purchase costs ranged from a monthly average low of $67.27 per barrel to a monthly average high of $86.93 per barrel, while from January 1, 2022 through December 31, 2022, our crude oil monthly average wholesale purchase costs ranged from a monthly average low of $74.96 per barrel to a monthly average high of $113.24 per barrel. A hypothetical ten percent additional adverse change in average crude oil prices, assuming no changes in volume levels, would have reduced earnings by approximately $1.9 million and $2.6 million for the years ended December 31, 2023 and 2022, respectively.

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Item 8.     Financial Statements and Supplementary Data.

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page No.
Report of Independent Registered Public Accounting Firm	51
Consolidated Balance Sheets as of December 31, 2023 and 2022	53
Consolidated Statements of Operations   for the Years Ended December 31, 2023, 2022 and 2021	54
Consolidated Statements of Cash Flows   for the Years Ended December 31, 2023, 2022 and 2021	55
Consolidated Statements of Shareholders’ Equity   for the Years Ended December 31, 2023, 2022 and 2021	56
Notes to Consolidated Financial Statements
Note 1   – Organization and Basis of Presentation	57
Note 2   – Summary of Significant Accounting Policies	57
Note 3   – Revenue Recognition	65
Note 4   – Prepayments and Other Current Assets	68
Note 5   – Property and Equipment	69
Note 6   – Acquisition	70
Note 7   – Other Assets	73
Note 8   – Intangible Assets and Goodwill	73
Note 9  – Segment Reporting	74
Note 10 – Transactions with Affiliates	77
Note 11 – Other Current Liabilities	78
Note 12 – Long-Term Debt	78
Note 13 – Derivative Instruments and Fair Value Measurements	81
Note 14 – Income Taxes	83
Note 15 – Stock-Based Compensation Plan	85
Note 16 – Supplemental Cash Flow Information	88
Note 17 – Leases	88
Note 18 – Commitments and Contingencies	91
Note 19 – Concentration of Credit Risk	92

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Adams Resources & Energy, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Adams Resources & Energy, Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, cash flows, and shareholders’ equity for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 13, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Measurement of accrued liabilities for automobile and workers’ compensation claims

As discussed in Note 18 to the consolidated financial statements, the Company establishes accrued liabilities for automobile and workers’ compensation claims reported plus an estimate for loss development and potential claims that have been incurred but not reported to the Company or its insurance provider. The estimates are based on insurance adjusters’ estimates, historical experience and statistical methods commonly used within the insurance industry. The Company retains a third-party actuary to review its accrued liabilities for such claims. As of December 31, 2023, the accrued liabilities for automobile and workers’ compensation were $5.8 million.

We identified the assessment of the accrued liabilities for automobile and workers’ compensation claims that have been incurred but not reported as a critical audit matter. Specialized skills and knowledge were required to evaluate the Company’s actuarial models and underlying assumptions made by the Company to estimate these accrued liabilities for incurred but not reported claims. Specifically, the accrued liabilities were sensitive to possible changes to the following key underlying assumptions:

•incurred and paid loss development factors used in the determination of the ultimate loss

•initial expected loss rates

•the selection of estimated loss among estimates derived using different methods.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process to estimate accrued liabilities for automobile and workers compensation claims that have been incurred but not reported, including controls related to the development of the key assumptions listed above. In addition, we involved actuarial professionals with specialized skills and knowledge, who assisted in:

•assessing the actuarial models and procedures used by the Company by comparing them to generally accepted actuarial methods and procedures to estimate the ultimate losses

•evaluating the Company’s key assumptions and judgments underlying the Company’s estimate by developing an independent range of the incurred but not reported claims and comparing it against the Company’s recorded amount.

/s/ KPMG LLP

We have served as the Company’s auditor since 2017.

Houston, Texas

March 13, 2024

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	December 31,
	2023		2022
ASSETS
Current assets:
Cash and cash equivalents	$	33,256	$	20,532
Restricted cash	11,990		10,535
Accounts receivable, net of allowance for doubtful accounts of $117 and $88, respectively	164,295		189,039
Inventory	19,827		26,919
Prepayments and other current assets	3,103		3,118
Total current assets	232,471		250,143
Property and equipment, net	105,065		106,425
Operating lease right-of-use assets, net	5,832		7,720
Intangible assets, net	7,985		9,745
Goodwill	6,673		6,428
Other assets	3,308		3,698
Total assets	$	361,334	$	384,159
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	183,102	$	204,391
Accounts payable – related party	—		31
Derivative liabilities	—		330
Current portion of finance lease obligations	6,206		4,382
Current portion of operating lease liabilities	2,829		2,712
Current portion of long-term debt	2,500		—
Other current liabilities	16,150		19,214
Total current liabilities	210,787		231,060
Other long-term liabilities:
Long-term debt	19,375		24,375
Asset retirement obligations	2,514		2,459
Finance lease obligations	19,685		12,085
Operating lease liabilities	3,006		5,007
Deferred taxes and other liabilities	13,251		15,996
Total liabilities	268,618		290,982
Commitments and contingencies (Note 18)
Shareholders’ equity:
Preferred stock – $1.00 par value, 960,000 shares authorized, none outstanding	—		—
Common stock – $0.10 par value, 7,500,000 shares authorized, 2,547,154 and 2,495,484 shares outstanding, respectively	253		248
Contributed capital	21,802		19,965
Retained earnings	70,661		72,964
Total shareholders’ equity	92,716		93,177
Total liabilities and shareholders’ equity	$	361,334	$	384,159

See Notes to Consolidated Financial Statements.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Year Ended December 31,
	2023		2022		2021
Revenues:
Marketing	$	2,585,355	$	3,232,193	$	1,930,042
Transportation	98,359		112,376		94,498
Pipeline and storage	323		—		664
Logistics and repurposing	61,256		22,348		—
Total revenues	2,745,293		3,366,917		2,025,204
Costs and expenses:
Marketing	2,560,284		3,208,595		1,898,126
Transportation	80,991		89,973		75,295
Pipeline and storage	3,107		2,502		2,126
Logistics and repurposing	55,717		19,651		—
General and administrative	14,932		17,718		13,701
Depreciation and amortization	27,863		22,707		19,797
Total costs and expenses	2,742,894		3,361,146		2,009,045
Operating earnings	2,399		5,771		16,159
Other income (expense):
Interest income	1,471		921		243
Interest expense	(3,384)		(1,287)		(746)
Total other (expense) income, net	(1,913)		(366)		(503)
Earnings before income taxes	486		5,405		15,656
Income tax (provision) benefit:
Current	(2,690)		(4,054)		(5,169)
Deferred	2,416		2,136		1,401
Income tax provision	(274)		(1,918)		(3,768)
Net earnings	$	212	$	3,487	$	11,888
Earnings per share:
Basic net earnings per common share	$	0.08	$	0.86	$	2.78
Diluted net earnings per common share	$	0.08	$	0.85	$	2.75
Dividends per common share	$	0.96	$	0.96	$	0.96

See Notes to Consolidated Financial Statements.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31,
	2023		2022		2021
Operating activities:
Net earnings	$	212	$	3,487	$	11,888
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization	27,863		22,707		19,797
Gains on sales of property	(4,036)		(2,512)		(733)
Provision for doubtful accounts	29		(20)		(6)
Stock-based compensation expense	1,193		1,022		854
Change in contingent consideration liability	(2,566)		—		—
Deferred income taxes	(2,416)		(2,136)		(1,401)
Net change in fair value contracts	(330)		353		(14)
Changes in assets and liabilities:
Accounts receivable	24,715		(46,577)		(37,984)
Accounts receivable/payable, affiliates	(31)		33		(2)
Inventories	7,092		(7,334)		394
Income tax receivable	—		6,424		6,864
Prepayments and other current assets	15		(