Adams Resources & Energy, Inc. (“AE”), a Delaware corporation organized in the opinion of the Company's management, include all adjustments (consisting of normal recurring accruals) necessary for the fair presentation of its financial position at September 30, 2016, its results of operations for the nine months ended September 30, 2016 and 20151973, and its cash flows for the nine months ended September 30, 2016 and 2015. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles (‟GAAP”) have been condensed or omitted pursuant to Securities and Exchange Commission rules and regulations.  The impact on the accompanying financial statements of events occurring after September 30, 2016, was evaluated through the date of issuance of these financial statements.

Historically, we have operated and reported in three business segments: (i) crude oil marketing, transportation and storage, (ii) tank truck transportation of liquid chemicals and dry bulk and ISO tank container storage and transportation, and (iii) oil and natural gas exploration and production. Its primary areaWe exited the oil and natural gas exploration and production business during the third quarter of operation is within a 1,000 mile radius2017 with the sale of Houston, Texas.  Theour oil and natural gas exploration and production assets.

Our results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of results expected for the full year of 2017. In the opinion of management, the accompanying unaudited condensed consolidated financial statements includereflect all adjustments consisting of normal recurring accruals necessary for fair presentation.  The condensed consolidated financial statements and the accountsaccompanying notes are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and the rules of Adams Resources & Energy, Inc., a Delaware corporation,the U.S. Securities and its wholly owned subsidiariesExchange Commission (“SEC”). Certain information and footnote disclosures required by GAAP for complete annual financial statements have been omitted and, therefore, these interim financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 (the ‟Company”“2016 Form 10-K”) after elimination of allfiled with the SEC on March 31, 2017. All significant intercompany accountstransactions and transactions.balances have been eliminated in consolidation.

The preparation of our financial statements in conformity with GAAP requires management to time.  Cashuse estimates and cash equivalents are maintained with major financial institutions and such deposits may exceedassumptions that affect the reported amount of federally backed insurance provided.  Whileassets and liabilities and disclosure of contingent assets and liabilities at the Company regularly monitorsdate of the financial stabilitystatements and the reported amounts of such institutions,revenues and expenses during the reporting period. We base our estimates and judgments on historical experience and on various other assumptions and information we believe to be reasonable under the circumstances. Estimates and assumptions about future events and their effects cannot be perceived with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes. While we believe the estimates and assumptions used in the preparation of these condensed consolidated financial statements are appropriate, actual results could differ from those estimates.

The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash and cash equivalents, ultimately remainaccounts receivable and accounts payable approximates fair value because of the immediate or short-term maturity of these financial instruments. Marketable securities are recorded at risk subject tofair value based on market quotations from actively traded liquid markets.

A three-tier hierarchy has been established that classifies fair value amounts recognized in the financial viabilitystatements based on the observability of inputs used to estimate such institutions.fair values.  The hierarchy considers fair value amounts based on observable inputs (Levels 1 and 2) to be more reliable and predictable than those based primarily on unobservable inputs (Level 3).  At each balance sheet reporting date, we categorize our financial assets and liabilities using this hierarchy.

We maintain a Credit and Security Agreement with Wells Fargo Bank, National Association to provide up to a $60 million stand-by letter of credit facility used to support crude oil purchases within our crude oil marketing operations.  Crudesegment. This facility is collateralized by the eligible accounts receivable within our crude oil inventory is carried at the lower of average cost or market.marketing segment.

The components of prepayments areand other current assets were as follows (inat the dates indicated (in thousands):

ExpendituresWe capitalize expenditures for major renewals and betterments, are capitalized, and we expense expenditures for maintenance and repairs are expensed as incurred. InterestWe capitalize interest costs incurred in connection with major capital expenditures are capitalized and amortizedamortize these costs over the lives of the related assets. When properties are retired or sold, the related cost and accumulated depreciation, depletion and amortization is removed from the accounts and any gain or loss is reflected in earnings.earnings, and is included in operating costs and expenses.

OilWe accounted for oil and gas exploration and development expenditures are accounted for in accordance with the successful efforts method of accounting. DirectWe capitalized direct costs of acquiring developed or undeveloped leasehold acreage, including lease bonus, brokerage and other fees, are capitalized. Exploratoryfees. We initially capitalized exploratory drilling costs are initially capitalized until the properties arewere evaluated and determined to be either productive or nonproductive. Such evaluations arewere made on a quarterly basis. If an exploratory well iswas determined to be nonproductive, the costs of drilling the well arewere charged to expense. Costs incurred to drill and complete development wells, including dry holes, arewere capitalized. As ofAt September 30, 2016, the Company2017, we had no unevaluated or suspended exploratory drilling costs. Effective in April 2017, our oil and natural gas subsidiary was deconsolidated and was accounted for as a cost method investment, as a result of its bankruptcy filing (see Note 3 for further information).

Depreciation,We calculated depreciation, depletion and amortization of the cost of proved oil and gas properties is calculated using the unit-of-productionunits-of-production method. The reserve base or denominator used to calculate depreciation, depletion and amortization for leasehold acquisition costs and the cost to acquire proved properties iswas the sum of proved developed reserves and proved undeveloped reserves. For lease and well equipment, development costs and successful exploration drilling costs, the reserve base includesincluded only proved developed reserves. The numerator for suchthese calculations iswas actual production volumes for the period. All other property and equipment is depreciated using the straight-line method over the estimated average useful lives of three to twenty years.

The Company reviews itsWe review our long-lived assets for impairment whenever there is evidence that the carrying value of such assets may not be recoverable. Any impairment recognized is permanent and may not be restored. Property and equipment is reviewed at the lowest level of identifiable cash flows. Producing oil and gas properties arewere reviewed on a field-by-field basis. Fields with carrying values in excess of their estimated undiscounted future net cash flows arewere deemed impaired. For properties requiring impairment, the fair value is estimated based on an internal discounted cash flow model. Cash flows are developed based on estimated future production, and prices are then discounted using a market based rate of return consistent with that used by the Companyus in evaluating cash flows for other assets of a similar nature.  At times during 2016, the commodity price for crude oil has been in decline which, if it continues, may require the recording of future impairments in the carrying value of oil and gas properties.

On a quarterly basis, management evaluateswe evaluated the carrying value of non-producing oil and gas leasehold properties and may deemhave deemed them impaired based on remaining lease term, area drilling activity and the Company’sour plans for the property. This fair value measure dependsdepended highly on management’sour assessment of the likelihood of continued exploration efforts in a given area. Therefore, such data inputs are categorized as ‟unobservable”“unobservable” or ‟Level“Level 3” inputs.  (See ‟Fair Value Measurements” below)inputs (see Note 8 for further information). Importantly, this fair value measure only applies to the write-down of capitalized costs and will never result in an increase to reported earnings.

Certain commodity purchase and sale contracts utilized by the Company’sour crude oil marketing business qualify as derivative instruments with certain specifically identified contracts also designated as trading activity. From the time of contract origination, such trading activity contracts are marked-to-market and recorded on a net revenue basis in the accompanying consolidated financial statements.

Most crude oil purchase contracts and sale contracts qualify and are designated as non-trading activities, and the Company considerswe consider such contracts as normal purchases and sales activity. For normal purchases and sales, the Company’sour 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. Such sales are recorded on a gross basis in the financial statements because the Company takeswe take title, hashave risk of loss for the products, isare the primary obligor for the purchase, establishesestablish the sale price independently with a third party and maintainsmaintain credit risk associated with the sale of the product.

Certain crude oil contracts may be with a single counterparty to provide for similar quantities of crude oil to be bought and sold at different locations. These contracts are entered into for a variety of reasons, including effecting the transportation of the commodity, to minimize credit exposure, and/or to meet the competitive demands of the customer. Such buy/sell arrangements are reflected on a net revenue basis in the accompanying unaudited condensed consolidated financial statements.

Reporting suchthese crude oil contracts on a gross revenue basis would increase the Company’sour reported revenues as follows (infor the periods indicated (in thousands):

Transportation segment customers are invoiced based upon contractually agreed upon terms, and the related revenue is recognized as the service is provided. Oil and gas revenue from the Company’s interests in producing wells is recognized as title and physical possession of the oil and gas passes to the purchaser.

The core principle in the new guidance is that a company should recognize revenue recognition.  The amendments are based on the principlein a manner that revenue should be recognized to depictfairly depicts the transfer of promised goods or services to customers in an amountamounts that reflectsreflect the consideration to which the entitycompany expects to be entitled in exchangereceive for those goods or services.  TheIn order to apply this core principle, companies will apply the following five steps in determining the amount of revenues to recognize: (i) identify the contract; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the performance obligation is satisfied. Each of these steps involves management’s judgment and an analysis of the material terms and conditions of the contract.

Our implementation activities related to ASC 606 are ongoing. We do not anticipate that there will be material differences in the amount or timing of revenues recognized following the new standard’s adoption date. Although total consolidated revenues may not be materially impacted by the new guidance, we do anticipate significant changes to our disclosures based on the additional requirements prescribed by ASC 606. These new disclosures include information regarding the significant judgments used in evaluating when and how revenue is effective for annual periods ending after December 15, 2017.  Early adoption is permitted.  The amendments may be applied retrospectively(or will be) recognized and data related to each prior period presented or retrospectively withcontract assets and liabilities. Additionally, we are currently evaluating our business processes, systems and controls to ensure the cumulative effect recognized asaccuracy and timeliness of the date of initial application.  Management is currently evaluatingrecognition and disclosure requirements under the impact of these amendments on the Company’s consolidated financial statements as well as the transition alternatives.new revenue guidance.

The new standard introduces two lease accounting models, which result in a lease being classified as either a “finance” or “operating” lease on the basis of an entity’s ability to continuewhether the lessee effectively obtains control of the underlying asset during the lease term. A lease would be classified as a going concern withinfinance lease if it meets one yearof five classification criteria, four of which are generally consistent with current lease accounting guidance. By default, a lease that does not meet the criteria to be classified as a finance lease will be deemed an operating lease. Regardless of classification, the initial measurement of both lease types will result in the balance sheet recognition of a ROU asset representing a company’s right to use the underlying asset for a specified period of time and a corresponding lease liability. The lease liability will be recognized at the present value of the datefuture lease payments, and the financial statements are issued.  ROU asset will equal the lease liability adjusted for any prepaid rent, lease incentives provided by the lessor, and any indirect costs.

The standard also provides guidancesubsequent measurement of each type of lease varies. Leases classified as a finance lease will be accounted for using the effective interest method. Under this approach, a lessee will amortize the ROU asset (generally on determining whena straight-line basis in a manner similar to depreciation) and how to disclose going concern uncertaintiesthe discount on the lease liability (as a component of interest expense). Leases classified as an operating lease will result in the financial statements.  Therecognition of a single lease expense amount that is recorded on a straight-line basis (or another systematic basis, if more appropriate).

We are in the process of reviewing our lease agreements in light of the new guidance. Although we are in the early stages of our ASC 842 implementation project, we anticipate that this new lease guidance is effective forwill cause significant changes to the annual period ending after December 15, 2016,way leases are recorded, presented and interim periods thereafter, with early adoption permitted.  Management does not expect the adoption of this guidance to have a material impact on thedisclosed in our consolidated financial statements.