SECURITIES
          AND EXCHANGE COMMISSION
 WASHINGTON,
          D. C. 20549
 FORM
          10-Q
 
 
 (Mark
          One)
 
 x
              Quarterly
                  report pursuant to Section 13 or 15 (d) of the Securities Exchange
                  Act of
                  1934 
 For
          the
          quarterly period ended March 31, 2006
 
 o
              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.)
 
 4400
                    Post Oak Pkwy Ste 2700 , Houston, Texas 77027(Address
                    of principal executive office & Zip
                    Code)
 
 
 Registrant's
          telephone number, including area code (713)
          881-3600
 
 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 x NO o
 
 Indicate
          by check mark whether the registrant is a large accelerated filer, an
          accelerated filer or a non-accelerated filer. See definition of “accelerated
          filer and large accelerated filer” in Rule 126-2 of the Exchange Act. (Check
          one)
 
 Large
          accelerated filer o Accelerated filer o Non-accelerated filer x
 
 Indicate
          by check mark whether the registrant is a shell company (as defined in
          Rule
          12b-2 of the Exchange Act). YES o NO x
 
 A
          total
          of 4,217,596 shares of Common Stock were outstanding at May 1,
          2006.
  - -
  **PART
          1 - FINANCIAL INFORMATION**
 
 **Item
          1. Financial Statements**
 
 **ADAMS
          RESOURCES & ENERGY, INC. AND SUBSIDIARIES**
 **UNAUDITED
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**
 **(In
          thousands, except per share data)**
 
 Three
                    Months EndedMarch
                    31,2006
                
                2005**REVENUES:**Marketing
                
                $
                468,488
                
                $
                512,155Transportation
                
                
                14,941
                
                
                13,049Oil
                    and gas
                
                
                4,599
                
                
                2,439488,028
                
                
                527,643**COSTS
                    AND EXPENSES:**Marketing
                
                
                464,530
                
                
                507,891Transportation
                
                
                12,646
                
                
                11,295Oil
                    and gas
                
                
                1,197
                
                
                440General
                    and administrative
                
                
                2,116
                
                
                2,152Depreciation,
                    depletion and amortization
                
                
                2,042
                
                
                1,393482,531
                
                
                523,171Operating
                    earnings
                
                
                5,497
                
                
                4,472Other
                    income (expense):Interest
                    income
                
                
                85
                
                
                21Interest
                    expense
                
                
                (28
                )
                
                (20
                )Earnings
                    from continuing operationsbefore
                    income taxes
                
                
                5,554
                
                
                4,473Income
                    tax provision
                
                
                1,910
                
                
                1,563Earnings
                    from continuing operations
                
                
                3,644
                
                
                2,910Loss
                    from discontinued operation, net of tax benefit of $30
                
                
                -
                
                
                (59
                )Net
                    earnings
                
                $
                3,644
                
                $
                2,851**EARNINGS
                    (LOSS) PER SHARE:**From
                    continuing operations
                
                $
                .86
                
                $
                .69From
                    discontinued operation
                
                
                -
                
                
                (.01
                )Basic
                    and diluted net earningsper
                    common share
                
                $
                .86
                
                $
                .68**DIVIDENDS
                    PER COMMON SHARE**
                
                $
                -
                
                $
                -
 
 
 *The
          accompanying notes are an integral part of these financial
          statements.*
  - -
 1
  **ADAMS
          RESOURCES & ENERGY, INC. AND SUBSIDIARIES**
 **UNAUDITED
          CONDENSED CONSOLIDATED BALANCE SHEETS**
 **(In
          thousands)**
 
 March
                    31,
                
                December
                    31,2006
                
                2005**ASSETS**Current
                    assets:Cash
                    and cash equivalents
                
                $
                24,811
                
                $
                18,817Accounts
                    receivable, net of allowance for doubtfulaccounts
                    of $571 and $608, respectively
                
                
                204,811
                
                
                217,727Inventories
                
                
                10,569
                
                
                11,692Risk
                    management receivables
                
                
                9,060
                
                
                13,324Income
                    tax receivables
                
                
                834
                
                
                1,304Prepayments
                
                
                4,795
                
                
                7,586Total
                    current assets
                
                
                254,880
                
                
                270,450Property
                    and equipment
                
                
                102,858
                
                
                98,861Less
                    - accumulated depreciation,depletion
                    and amortization
                
                
                (60,875
                )
                
                (58,965
                )41,983
                
                
                39,896Other
                    assets:Risk
                    management assets
                
                
                13
                
                
                47Other
                    assets
                
                
                2,287
                
                
                2,269$
                299,163
                
                $
                312,662**LIABILITIES
                    AND SHAREHOLDERS’ EQUITY**Current
                    liabilities:Accounts
                    payable
                
                $
                201,521
                
                $
                213,668Risk
                    management payables
                
                
                7,571
                
                
                11,542Accrued
                    and other liabilities
                
                
                3,514
                
                
                4,790Current
                    deferred income taxes
                
                
                838
                
                
                1,129Total
                    current liabilities
                
                
                213,444
                
                
                231,129Long-term
                    debt
                
                
                11,475
                
                
                11,475Other
                    liabilities:Asset
                    retirement obligations
                
                
                1,095
                
                
                1,058Deferred
                    income taxes and other
                
                
                3,836
                
                
                3,296Risk
                    management liabilities
                
                
                13
                
                
                48229,863
                
                
                247,006Commitments
                    and contingencies (Note 6)Shareholders’
                    equity:Preferred
                    stock - $1.00 par value, 960,000 sharesauthorized,
                    none outstanding
                
                
                -
                
                
                -Common
                    stock - $.10 par value, 7,500,000 sharesauthorized,
                    4,217,596 shares outstanding
                
                
                422
                
                
                422Contributed
                    capital
                
                
                11,693
                
                
                11,693Retained
                    earnings
                
                
                57,185
                
                
                53,541Total
                    shareholders’ equity
                
                
                69,300
                
                
                65,656$
                299,163
                
                $
                312,662
 
 *The
          accompanying notes are an integral part of these financial
          statements.*
  - -
 2
  **ADAMS
          RESOURCES & ENERGY, INC. AND SUBSIDIARIES**
 **UNAUDITED
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(In
          thousands)**
 Three
                    Months EndedMarch
                    31,2006
                
                2005CASH
                    PROVIDED BY OPERATIONS:Earnings
                    from continuing operations
                
                $
                3,644
                
                $
                2,910Adjustments
                    to reconcile net earnings to net cashprovided
                    by (used in) operating activities -Depreciation,
                    depletion and amortization
                
                
                2,042
                
                
                1,393Gains
                    on property sales
                
                
                (32
                )
                
                (612
                )Impairment
                    on non-producing oil and gas properties
                
                
                259
                
                
                103Other,
                    net
                
                
                (22
                )
                
                (17
                )Decrease (increase) in accounts receivable
                
                
                12,916
                
                
                (13,103
                )Decrease (increase) in inventories
                
                
                1,123
                
                
                (1,982
                )Risk management activities
                
                
                292
                
                
                (20
                )Decrease
                    (increase) in tax receivable
                
                
                470
                
                
                (672
                )Decrease (increase) in prepayments
                
                
                2,791
                
                
                5,668Increase
                    (decrease) in accounts payable
                
                
                (11,866
                )
                
                14,038Increase (decrease) in accrued liabilities
                
                
                (1,276
                )
                
                (2,036
                )Deferred
                    income taxes
                
                
                252
                
                
                183Net
                    cash provided by continuing operations
                
                
                10,593
                
                
                5,853Net
                    cash provided by discontinued operations
                
                
                -
                
                
                6Net
                    cash provided by operating activities
                
                
                10,593
                
                
                5,859INVESTING
                    ACTIVITIES:Property
                    and equipment additions
                
                
                (4,631
                )
                
                (3,490
                )Proceeds
                    from property sales
                
                
                32
                
                
                755Net
                    cash (used in) investing activities
                
                
                (4,599
                )
                
                (2,735
                )FINANCING
                    ACTIVITIES:Net
                    borrowings under credit agreements
                
                
                -
                
                
                -Net
                    cash used in financing activities
                
                
                -
                
                
                -Increase
                    in cash and cash equivalents
                
                
                5,994
                
                
                3,124Cash
                    at beginning of period
                
                
                18,817
                
                
                19,942Cash
                    at end of period
                
                $
                24,811
                
                $
                23,066Supplemental
                    disclosure of cash flow information:Interest
                    paid during the period
                
                $
                28
                
                $
                20Income
                    taxes paid during the period
                
                $
                1,001
                
                $
                2,021
 
 
 *The
          accompanying notes are an integral part of these financial
          statements* *.*
 
  - -
 3
   **ADAMS
          RESOURCES & ENERGY, INC. AND SUBSIDIARIES**
 **NOTES
          TO UNAUDITED CONDENSED**
 **CONSOLIDATED
          FINANCIAL STATEMENTS**
 
 
 
 Note
          1 -
          Basis of Presentation
 
 The
          accompanying condensed consolidated financial statements are unaudited
          but, 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 March 31, 2006 and December 31, 2005, its results of operations
          and
          its cash flows for the three months ended March 31, 2006 and 2005. Certain
          information and note disclosures normally included in annual financial
          statements prepared in accordance with generally accepted accounting principles
          have been condensed or omitted pursuant to Securities and Exchange Commission
          rules and regulations. Although the Company believes the disclosures made
          are
          adequate to make the information presented not misleading, it is suggested
          that
          these consolidated financial statements be read in conjunction with the
          financial statements, and the notes thereto, included in the Company's
          latest
          annual report on Form 10-K. The interim statement of operations is not
          necessarily indicative of results to be expected for a full year.
 
 
 Note
          2 -
          Summary of Significant Accounting Policies
 
 *Principles
          of Consolidation*
 
 The
          accompanying consolidated financial statements include the accounts of
          Adams
          Resources & Energy, Inc., a Delaware corporation, and its wholly owned
          subsidiaries (the "Company") after elimination of all significant intercompany
          accounts and transactions. Certain reclassifications have been made to
          prior
          year amounts in order to conform to current year presentation related to
          discontinued operations.
 
 *Nature
          of Operations*
 
 The
          Company is engaged in the business of crude oil, natural gas and petroleum
          products marketing, as well as tank truck transportation of liquid chemicals
          and
          oil and gas exploration and production. Its primary area of operation is
          within
          a 1,000-mile radius of Houston, Texas.
 
 *Cash
          and Cash Equivalents*
 
 Cash
          and
          cash equivalents include any treasury bill, commercial paper, money market
          fund
          or federal funds with maturity of 30 days or less. Included in the cash
          balance
          at March 31, 2006 and December 31, 2005 is a deposit of $2 million to
          collateralize the Company's month-to-month crude oil letter of credit facility.
 
 *Inventories*
 
 Crude
          oil
          and petroleum product inventories are carried at the lower of cost or market.
          Petroleum products inventory includes gasoline, lubricating oils and other
          petroleum products purchased for resale and valued at cost determined on
          the
          first-in, first-out basis, while crude oil inventory is valued at average
          cost.
          Components of inventory are as follows ( **in
          thousands** ):
  - -
 4
  
 March
                    31,
                
                December
                    31,2006
                
                2005Crude
                    oil
                
                $
                8,491
                
                $
                9,924Petroleum
                    products
                
                
                2,078
                
                
                1,768$
                10,569
                
                $
                11,692
 
  *Property
          and Equipment*
 
 Expenditures
          for major renewals and betterments are capitalized, and expenditures for
          maintenance and repairs are expensed as incurred. Interest costs incurred
          in
          connection with major capital expenditures are capitalized and amortized
          over
          the lives of the related assets. When properties are retired or sold, the
          related cost and accumulated depreciation, depletion and amortization
          ("DD&A") is removed from the accounts and any gain or loss is reflected in
          earnings.
 
 Oil
          and
          gas exploration and development expenditures are accounted for in accordance
          with the successful efforts method of accounting. Direct costs of acquiring
          developed or undeveloped leasehold acreage, including lease bonus, brokerage
          and
          other fees, are capitalized. Exploratory drilling costs are initially
          capitalized until the properties are evaluated and determined to be either
          productive or nonproductive. Such evaluations are made on a quarterly basis.
          If
          an exploratory well is determined to be nonproductive, the capitalized
          costs of
          drilling the well are charged to expense. Costs incurred to drill and complete
          development wells, including dry holes, are capitalized. As of March 31,
          2006,
          the Company had no unevaluated or suspended exploratory drilling
          costs.
 
 Producing
          oil and gas leases, equipment and intangible drilling costs are depleted
          or
          amortized over the estimated recoverable reserves using the units-of-production
          method. Other property and equipment is depreciated using the straight-line
          method over the estimated average useful lives of three to twenty years
          for
          marketing, three to fifteen years for transportation and ten to twenty
          years for
          all others.
 
 The
          Company is required to periodically review long-lived assets for impairment
          whenever there is evidence that the carrying value of such assets may not
          be
          recoverable. This consists of comparing the carrying value of the asset
          with the
          asset’s expected future undiscounted cash flows without interest costs.
          Estimates of expected future cash flows represent management’s best estimate
          based on reasonable and supportable assumptions. Proved oil and gas properties
          are reviewed for impairment on a field-by-field basis. Any impairment recognized
          is permanent and may not be restored. In addition, management evaluates
          the
          carrying value of non-producing properties and may deem them impaired for
          lack
          of drilling activity. Such evaluations are made on a quarterly basis.
          Accordingly, a $259,000 and a $103,000 impairment provision on non-producing
          properties was recorded in the three-month period ended March 31, 2006
          and 2005,
          respectively.
 
 *Other
          Assets*
 
 Other
          assets primarily consist of cash deposits associated with the Company’s business
          activities. The Company has established certain deposits to support its
          participation in its liability insurance program and such deposits totaled
          $817,000 as of March 31, 2006. In addition, the Company maintains certain
          deposits to support the collection and remittance of state crude oil severance
          taxes. Such deposits totaled $970,000 as of March 31, 2006.
 
  - -
 5
  *Revenue
          Recognition*
 
 Commodity
          purchases and sales associated with the Company’s natural gas marketing
          activities qualify as derivative instruments under Statement of Financial
          Accounting Standards (“SFAS”) No. 133. Therefore, natural gas purchases and
          sales are recorded on a net revenue basis in the accompanying financial
          statements in accordance with Emerging Issues Task Force (“EITF”) 02-13 “Issues
          Involved in Accounting for Derivative Contracts Held for Trading Purposes
          and
          Contracts Involved in Energy Trading and Risk Management Activities”. In
          contrast, a significant portion of crude oil purchases and sales qualify,
          and
          have been designated as, normal purchases and sales. Therefore, crude oil
          purchases and sales are primarily recorded on a gross revenue basis in
          the
          accompanying financial statements. Those purchases and sales of crude oil
          that
          do not qualify as “normal purchases and sales” are recorded on a net revenue
          basis in the accompanying financial statements. For “normal purchase and sale”
activities, the Company’s customers are invoiced monthly based on contractually
          agreed upon terms and revenue is recognized in the month in which the physical
          product is delivered to the customer. Where required, the Company recognizes
          fair value or mark-to-market gains and losses related to its natural gas
          and
          crude oil trading activities. A detailed discussion of the Company’s risk
          management activities is included later in this footnote.
 
 Substantially
          all of the Company’s petroleum products marketing activity qualify as a “normal
          purchase and sale” and revenue is recognized in the period when the customer
          physically takes possession and title to the product upon delivery at their
          facility. The Company recognizes fair value or mark to market gains and
          losses
          on refined product marketing activities that do not qualify as “normal purchases
          and sales”.
 
 Transportation
          customers are invoiced, 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.
 
 Included
          in marketing segment revenues and costs is the gross proceeds and costs
          associated with certain crude oil buy/sell arrangements. Crude oil buy/sell
          arrangements result from a single contract or concurrent contracts with
          a single
          counterparty to provide for similar quantities of crude oil to be bought
          and
          sold at two different locations. Such contracts may be entered into for
          a
          variety of reasons, including to effect the transportation of the commodity,
          to
          minimize credit exposure, and to meet the competitive demands of the customer.
          In September 2005, the EITF of the Financial Accounting Standards Board
          (“FASB”)
          reached consensus in the issue of accounting for buy/sell arrangements
          as part
          of its EITF Issue No. 04-13, “Accounting for Purchases and Sales of Inventory
          with the Same Counterparty” (“Issue 04-13”). As part of Issue 04-13, the EITF is
          requiring that all buy/sell arrangements be reflected on a net basis, such
          that
          the purchase and sale are netted and shown as either a net purchase or
          a net
          sale in the income statement. This requirement is effective for new arrangements
          entered into after March 31, 2006. However, the Company adopted Issue 04-13
          effective January 1, 2006. Prior period amounts for marketing revenues
          and
          marketing costs and expenses in the accompanying condensed consolidated
          statements of operations were not restated to reflect the requirements
          of Issue
          04-13.
 
 
 *Earnings
          Per Share*
 
 The
          Company computes and presents earnings per share in accordance with SFAS
          No.
          128, “Earnings Per Share”, which requires the presentation of basic earnings per
          share and diluted earnings per share for potentially dilutive securities.
          Earnings per share are based on the weighted average number of shares of
          common
          stock and potentially dilutive common stock shares outstanding during the
          period. The weighted average number of shares outstanding was 4,217,596
          for the
          three-month periods ended March 31, 2006 and 2005. There were no potentially
          dilutive securities during those periods in 2006 and 2005.
  - -
 6
  *Use
          of Estimates*
 
 The
          preparation of financial statements in conformity with accounting principles
          generally accepted in the United States requires management to make estimates
          and assumptions that affect the reported amounts of assets and liabilities
          at
          the date of the financial statements and the reported amounts of revenues
          and
          expenses during the reporting period. Actual results could differ from
          those
          estimates. Examples of significant estimates used in the accompanying condensed
          consolidated financial statements include the accounting for depreciation,
          depletion and amortization, oil and gas property impairments, the provision
          for
          bad debts, income taxes, contingencies and price risk management
          activities.
 
 
 *Price
          Risk Management Activities*
 
 SFAS
          No.
          133, “Accounting for Derivative Instruments and Hedging Activities”, as amended
          by SFAS No. 137 and No. 138, establishes accounting and reporting standards
          that
          require every derivative instrument (including certain derivative instruments
          embedded in other contracts) to be recorded on the balance sheet as either
          an
          asset or liability measured at its fair value, unless the derivative qualifies
          and has been designated as a normal purchase or sale. Changes in fair value
          are
          recognized immediately in earnings unless the derivatives qualify for,
          and the
          Company elects, cash flow hedge accounting. The Company had no contracts
          designated for hedge accounting under SFAS No. 133 during any current reporting
          periods.
 
 The
          Company’s trading and non-trading transactions give rise to market risk, which
          represents the potential loss that may result from a change in the market
          value
          of a particular commitment. The Company closely monitors and manages its
          exposure to market risk to ensure compliance with the Company’s risk management
          policies. Such policies are regularly assessed to ensure their appropriateness
          given management’s objectives, strategies and current market
          conditions.
 
 The
          Company’s forward crude oil contracts are designated as normal purchases and
          sales. Natural gas forward contracts and energy trading contracts on crude
          oil
          and natural gas are recorded at fair value, depending on management’s
          assessments of the numerous accounting standards and positions that comply
          with
          generally accepted accounting principles. The undiscounted fair value of
          such
          contracts is reflected on the Company’s balance sheet as risk management assets
          and liabilities. The revaluation of such contracts is recognized in the
          Company’s results of operations. Current market price quotes from actively
          traded liquid markets are used in all cases to determine the contracts’ fair
          value. Risk management assets and liabilities are classified as short-term
          or
          long-term depending on contract terms. The estimated future net cash inflow
          based on market prices as of March 31, 2006 is $1,489,000, all of which
          will be
          received during the remainder of 2006 through July 2007. The estimated
          future
          cash inflow approximates the net fair value recorded in the Company’s risk
          management assets and liabilities.
 
 The
          following table illustrates the factors impacting the change in the net
          value of
          the Company’s risk management assets and liabilities for the three-month period
          ended March 31, 2006 and 2005 **(in
          thousands):**
 
 2006
                
                2005Net
                    fair value on January 1,
                
                $
                1,781
                
                $
                630Activity
                    during the period-Cash
                    paid (received) from settled contracts
                
                
                (894
                )
                
                (520
                )-Net
                    realized gain from prior years’ contracts
                
                
                107
                
                
                115**-**Net
                    unrealized gain from prior years’ contracts
                
                
                -
                
                
                63-Net
                    unrealized (loss) from prior years’ contracts
                
                
                (57
                )
                
                --Net
                    unrealized gain from current year contracts
                
                
                552
                
                
                362Net
                    fair value on March 31,
                
                $
                1,489
                
                $
                650
 
  - -
 7
  
 *Asset
          Retirement Obligations*
 
 SFAS
          No.
          143 “Accounting for Asset Retirement Obligations” established an accounting
          model for accounting and reporting obligations associated with retirement
          of
          tangible long-lived assets and associated retirement costs. SFAS No. 143
          requires that the fair value of a liability for an asset's retirement obligation
          be recorded in the period in which it is incurred and the corresponding
          cost
          capitalized by increasing the carrying amount of the related long-lived
          asset.
          The liability is accreted to its then present value each period, and the
          capitalized cost is depreciated over the useful life of the related asset.
          If
          the liability is settled for an amount other than the recorded amount,
          a gain or
          loss is recognized. A summary of the recording of the estimated fair value
          of
          the Company’s asset retirement obligations is presented as follows (in
          thousands):
 
 2006
                
                2005Balance
                    on January 1,
                
                $
                1,058
                
                $
                723-Liabilities incurred
                
                
                10
                
                
                6-Accretion of discount
                
                
                27
                
                
                21-Liabilities settled
                
                
                -
                
                
                (6
                )-Revisions to estimates
                
                
                -
                
                
                -Balance
                    on March 31,
                
                $
                1,095
                
                $
                744
 
 In
          addition to an accrual for asset retirement obligations, the Company maintains
          $75,000 in escrow cash, which is legally restricted for the potential purpose
          of
          settling asset retirement costs in accordance with certain state regulations.
          Such cash deposits are included in other assets on the accompanying balance
          sheet.
 
 In
          March
          2005, the FASB issued Interpretation No. (“FIN”) 47. FIN 47 clarifies that an
          entity must record a liability for a “conditional” asset retirement obligation
          if the fair value can be reasonably estimated. The adoption of FIN 47 had
          no
          impact on the Company’s financial statements.
 
 *New
          Accounting Pronouncements*
 
 In
          December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment”, which
          established accounting standards for all transactions in which an entity
          exchanges its equity instruments for goods and services. SFAS No. 123(R)
          focuses
          primarily on accounting for such transactions with employees. As of March
          31,
          2006, the Company had no stock-based employee compensation plans, nor any
          other
          share-based payment arrangements.
 
 In
          November 2004, the FASB issued SFAS No. 151, “Inventory Costs”. This statement
          clarifies the accounting for abnormal amounts of idle facility expense,
          freight,
          handling costs, and wasted material (spoilage). SFAS No. 151 requires that
          these
          items be charged to expense regardless of whether they meet the “so abnormal”
criterion outlined in Accounting Research Bulletin 43. This statement was
          effective for inventory costs incurred during fiscal years beginning after
          June
          15, 2005. The adoption of this statement did not have any material effect
          on the
          Company’s financial position, results of operations or cash flows.
 
 In
          May
          2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”.
          This statement establishes new standards on the accounting for and reporting
          of
          changes in accounting principles and error corrections. SFAS No. 154 requires
          retrospective application to the financial statements of prior periods
          for all
          such changes, unless it is impracticable to do so. SFAS No. 154 is effective
          for
          the Company in the first quarter of 2006.
  - -
 8
  
 Note
          3 -
          Discontinued Operations
 
 Effective
          September 30, 2005, the Company sold its ownership in its offshore Gulf
          of
          Mexico crude oil gathering pipeline. The sale was completed to eliminate
          abandonment obligations and because the Company was no longer purchasing
          crude
          oil in the affected region. The operating results for the pipeline for
          the first
          quarter of 2005 have been reflected in the accompanying unaudited condensed
          consolidated statement of operations as income from discontinued operations.
          As
          of September 30, 2005, the Company had no assets or liabilities associated
          with
          this former operation.
 
 
 Note
          4 -
          Segment Reporting
 
 The
          Company is primarily engaged in the business of marketing crude oil, natural
          gas
          and petroleum products; tank truck transportation of liquid chemicals;
          and oil
          and gas exploration and production. Information concerning the Company’s various
          business activities is summarized as follows ( **in
          thousands** ):
 
 Segment
                
                Depreciation
                
                Property
                    andOperating
                
                Depletion
                    and
                
                EquipmentRevenues
                
                Earnings
                
                Amortization
                
                AdditionsFor
                    the three months endedMarch
                    31, 2006Marketing
                
                $
                468,488
                
                $
                3,637
                
                $
                321
                
                $
                1,101Transportation
                
                
                14,941
                
                
                1,171
                
                
                1,124
                
                
                614Oil
                    and gas
                
                
                4,599
                
                
                2,805
                
                
                597
                
                
                2,916$
                488,028
                
                $
                7,613
                
                $
                2,042
                
                $
                4,631For
                    the three months endedMarch
                    31, 2005Marketing
                
                $
                512,155
                
                $
                3,940
                
                $
                324
                
                $
                67Transportation
                
                
                13,049
                
                
                1,169
                
                
                585
                
                
                1,845Oil
                    and gas
                
                
                2,439
                
                
                1,515
                
                
                484
                
                
                1,578$
                527,643
                
                $
                6,624
                
                $
                1,393
                
                $
                3,490
 
 Identifiable
          assets by industry segment are as follows **(in
          thousands)** :
 
 March
                    31,
                
                December
                    31,2006
                
                2005Marketing
                
                $
                220,294
                
                $
                240,309Transportation
                
                
                28,437
                
                
                28,412Oil
                    and gas
                
                
                22,216
                
                
                20,780Other
                
                
                28,216
                
                
                23,161$
                299,163
                
                $
                312,662
 
 Intersegment
          sales are insignificant. Other identifiable assets are primarily corporate
          cash,
          accounts receivable, and properties not identified with any specific segment
          of
          the Company’s business. All sales by the Company occurred in the United
          States.
  - -
 9
  Segment
          operating earnings reflect revenues net of operating costs and depreciation,
          depletion and amortization. Segment earnings reconcile to earnings from
          continuing operations before income taxes as follows **(in
          thousands)** :
 
 Three
                    months endedMarch
                    31,2006
                
                2005Segment
                    operating earnings
                
                $
                7,613
                
                $
                6,624-
                    General and administrative
                
                
                (2,116
                )
                
                (2,152
                )Operating
                    earnings
                
                
                5,497
                
                
                4,472-
                    Interest income
                
                
                85
                
                
                21-
                    Interest expense
                
                
                (28
                )
                
                (20
                )Earnings
                    from continuing operationsbefore
                    income taxes
                
                $
                5,554
                
                $
                4,473
 
 
 Note
          5 -
          Transactions with Affiliates
 
 Mr.
          K. S.
“Bud” Adams, Jr., Chairman and Chief Executive Officer, and certain of his
          family limited partnerships and affiliates have participated as working
          interest
          owners with the Company’s subsidiary, Adams Resources Exploration Corporation.
          Mr. Adams and such affiliates participate on terms no better than those
          afforded
          other non-affiliated working interest owners. In recent years, such related
          party transactions tend to result after the Company has first identified
          oil and
          gas prospects of interest. Due to capital budgeting constraints, typically
          the
          available dollar commitment to participate in such transactions is greater
          than
          the amount management is comfortable putting at risk. In such event, the
          Company
          first determines the percentage of the transaction it wants to obtain,
          which
          allows a related party to participate in the investment to the extent there
          is
          excess available. Such related party transactions are individually reviewed
          and
          approved by a committee of independent directors on the Company’s Board of
          Directors. As of March 31, 2006, the Company owed a combined net total
          of
          $159,349 to these related parties. In connection with the operation of
          certain
          oil and gas properties, the Company also charges such related parties for
          administrative overhead primarily as prescribed by the Council of Petroleum
          Accountants Society (“COPAS”) Bulletin 5. Such overhead recoveries totaled
          $28,670 during the first three months of 2006.
 
 David
          B.
          Hurst, Secretary of the Company, is a partner in the law firm of Chaffin
&
Hurst. The Company has been represented by Chaffin & Hurst since 1974 and
          plans to use the services of that firm in the future. Chaffin & Hurst
          currently leases office space from the Company. Transactions with Chaffin
&
Hurst are on the same terms as those prevailing at the time for comparable
          transactions with unrelated entities.
 
 The
          Company also enters into certain transactions in the normal course of business
          with other affiliated entities. These transactions with affiliated companies
          are
          on the same terms as those prevailing at the time for comparable transactions
          with unrelated entities.
  - -
 10
  Note
          6 -
          Commitments and Contingencies
 
 In
          March
          2004, a suit styled *Le
          Petit Chateau De Luxe, et. al. vs Great Southern Oil &*  *Gas
          Co., et. al* .
          was
          filed in the Civil District Court for Orleans Parish, Louisiana against
          the
          Company and its subsidiary, Adams Resources Exploration Corporation, among
          other
          defendants. The suit alleges that certain property in Acadia Parish, Louisiana
          was environmentally contaminated by oil and gas exploration and production
          activities during the 1970s and 1980s. An alleged amount of damage has
          not been
          specified. Management believes the Company has consistently conducted its
          oil
          and gas exploration and production activities in accordance with all
          environmental rules and regulations in effect at the time of operation.
          Management notified its insurance carrier about this claim, and thus far
          the
          insurance carrier has declined to offer coverage. The Company is litigating
          this
          matter with its insurance carrier. In any event, management does not believe
          the
          outcome of this matter will have a material adverse effect on the Company’s
          financial position or results of operations.
 
 From
          time
          to time as incident to its operations, the Company becomes involved in
          various
          lawsuits and/or disputes. Primarily as an operator of an extensive trucking
          fleet, the Company may be a party to motor vehicle accidents, worker
          compensation claims or other items of general liability as would be typical
          for
          the industry. Except as disclosed herein, management of the Company is
          presently
          unaware of any claims against the Company 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 the Company’s financial
          position or results of operations.
 
 Note
          7 -
          Guarantees
 
 Pursuant
          to arranging operating lease financing for truck tractors and tank trailers,
          individual subsidiaries of the Company may guarantee the lessor a minimum
          residual sales value upon the expiration of a lease and sale of the underlying
          equipment. Aggregate guaranteed residual values for tractors and trailers
          under
          operating leases as of March 31, 2006 are as follows **(in
          thousands):**
 
 2006
                
                2007
                
                2008
                
                2009
                
                2010
                
                Thereafter
                
                TotalLease
                    residual values
                
                $
                122
                
                $
                -
                
                $
                304
                
                $
                1,474
                
                $
                -
                
                $
                704
                
                $
                2,604
 
 In
          connection with certain contracts for the purchase and resale of branded
          motor
          fuels, the Company has received certain price discounts from its suppliers
          toward the purchase of gasoline and diesel fuel. Such discounts have been
          passed
          through to the Company’s customers as an incentive to offset a portion of the
          costs associated with offering branded motor fuels for sale to the general
          public. Under the terms of the supply contracts, the Company and its customers
          are not obligated to return the price discounts, provided the gasoline
          service
          station offering such product for sale remains as a branded station for
          periods
          ranging from three to ten years. The Company has a number of customers
          and
          stations operating under such arrangements and the Company’s customers are
          contractually obligated to remain a branded dealer for the required periods
          of
          time. Should the Company’s customers seek to void such contracts, the Company
          would be obligated to return a portion of such discounts received to its
          suppliers. As of March 31, 2006, the maximum amount of such potential obligation
          is approximately $1,048,000. Management of the Company believes its customers
          will adhere to their branding obligations and no such refunds will
          result.
  Presently,
          the Company and its subsidiaries have no other types of guarantees outstanding
          that in the future would require liability recognition under the provisions
          of
          FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees,
          Including Indirect Guarantees of Indebtedness of Others”.
  - -
 11
  Adams
          Resources & Energy, Inc. frequently issues parent guarantees of commitments
          resulting from the ongoing activities of its subsidiary companies. The
          guarantees generally result from subsidiary commodity purchase obligation,
          subsidiary lease commitments and subsidiary bank debt. The nature of such
          guarantees is to guarantee the performance of the subsidiary companies
          in
          meeting their respective underlying obligations. Except for operating lease
          commitments and letters of credit, all such underlying obligations are
          recorded
          on the books of the subsidiary companies and are included in the consolidated
          financial statements included herein. Therefore, no such obligation is
          recorded
          again on the books of the parent. The parent would only be called upon
          to
          perform under the guarantee in the event of a payment default by the applicable
          subsidiary company. In satisfying such obligations, the parent would first
          look
          to the assets of the defaulting subsidiary company. As of March 31, 2006,
          the
          amount of parental guaranteed obligations are as follows **(in
          thousands):**
 
 
 2006
                
                2007
                
                2008
                
                2009
                
                2010
                
                Thereafter
                
                TotalBank
                    debt
                
                $
                -
                
                $
                1,434
                
                $
                5,738
                
                $
                4,303
                
                $
                -
                
                $
                -
                
                $
                11,475Operating
                    leases
                
                
                3,287
                
                
                4,239
                
                
                4,039
                
                
                1,717
                
                
                727
                
                
                297
                
                
                14,306Lease
                    residual values
                
                
                122
                
                
                -
                
                
                304
                
                
                1,474
                
                
                -
                
                
                704
                
                
                2,604Commodity
                    purchases
                
                
                22,428
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                22,428Letters
                    of credit
                
                
                27,200
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                27,200$
                53,037
                
                $
                5,673
                
                $
                10,081
                
                $
                7,494
                
                $
                727
                
                $
                1,001
                
                $
                78,013
  - -
 12
  
 Item
          2.  MANAGEMENT'S
          DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
          OPERATIONS
 
 Results
          of Operations
 
 -
                *Marketing*
 
 Marketing
          segment revenues, operating earnings and depreciation are presented as
          follows
          ( **in
          thousands** ):
 
 Three
                    Months EndedMarch
                    31,2006
                
                2005Revenues
                
                $
                468,488
                
                $
                512,155Operating
                    earnings
                
                $
                3,637
                
                $
                3,940Depreciation
                
                $
                321
                
                $
                324
  Marketing
          segment revenues result from sales of crude oil, natural gas and refined
          products such as gasoline and diesel. Required reporting for certain sales
          transactions is on a gross revenue basis as title passes to the customer,
          while
          other sales transactions are reported on a net revenue basis (i.e. the
          commodity
          acquisition cost is netted against gross sales value). Components of marketing
          segment revenues are as follows ( **in
          thousands** ):
 
 Three
                    Months EndedMarch
                    31,2006
                
                2005Crude
                    oil sales, net of proceeds from buy/sell arrangements
                
                $
                427,154
                
                $
                314,335Crude
                    oil sales proceeds from buy/sell arrangements
                
                
                -
                
                
                164,065Natural
                    gas sales
                
                
                3,089
                
                
                1,659Refined
                    product sales
                
                
                38,245
                
                
                32,096$
                468,488
                
                $
                512,155
 
 Prior
          to
          January 1, 2006, proceeds from transactions involving crude oil buy/sell
          arrangements were reported on a gross revenue basis. Beginning this year,
          such
          buy/sell transactions are reported on a net revenue basis. The table above
          shows
          this comparison. This required accounting change in 2006 for the presentation
          of
          revenue transactions has no impact on reported earnings from operations
          or net
          earnings.
 
 As
          reflected above, crude oil sales net of proceeds from buy/sell arrangements
          increased by 36 percent to $427,154,000 for the comparative current quarter
          primarily due to an increase in the commodity price for crude oil. This
          relationship is reflected in the table of operating statistics shown below.
          For
          the Company, natural gas sales are presented on a net revenue basis and
          the
          current period revenue increase to $3,089,000 reflects improved gross margins
          consistent with the analysis for operating earnings presented below. The
          refined
          product sales increase to $38,245,000 for the current period also reflects
          higher commodity prices consistent with the trend for crude
          oil.
  - -
 13
  Supplemental
          volume and price information is as follows:
 
 Three
                    Months EndedMarch
                    31,2006
                
                2005Field
                    Level Purchase Volumes - Per day(1)Crude
                    oil - barrels
                
                
                66,250
                
                
                70,700Natural
                    gas - mmbtu’s
                
                
                343,300
                
                
                337,000Average
                    Purchase PriceCrude
                    Oil - per barrel
                
                $
                60.40
                
                $
                47.61Natural
                    Gas - per mmbtu
                
                $
                7.63
                
                $
                6.13
 _____________________________
 (1)  Reflects
          the volume purchased from third parties at the oil and gas field
          level.
 
 
 The
          components of marketing segment operating earnings are as follows ( **in
          thousands** ):
 
 Three
                    Months EndedMarch
                    31,2006
                
                2005Crude
                    Oil
                
                $
                1,461
                
                $
                3,411Natural
                    Gas
                
                
                1,791
                
                
                737Refined
                    Products
                
                
                385
                
                
                (208
                )$
                3,637
                
                $
                3,940
 
 Crude
          oil
          operating earnings were primarily reduced for the three months ended March
          31,
          2006 because during the first quarter of 2005 the Company recognized a
          $2,144,000 gain from liquidating relatively lower priced crude oil inventories
          into a higher priced market. During 2005, crude oil prices rose from the
          $43 per
          barrel range as of January 1, 2005 to the $52 per barrel range as of March
          31,
          2005. A similar but less dramatic situation recurred in the first quarter
          of
          2006 as crude oil prices rose from the $59 per barrel range as of January
          1,
          2006 to the $62 per barrel range as of March 31, 2006, producing a $539,000
          liquidation gain for the first quarter of 2006. As of March 31, 2006, the
          Company held 136,724 barrels of crude oil valued at $62.10 per barrel.
          The first
          quarter of 2005 for crude oil also benefited from $860,000 of cost recovery
          from
          the cash collection of certain previous disputed and fully reserved items.
          Such
          items did not recur in 2006.
 
 The
          Company has reinitiated its prior practice of speculative trading of forward
          crude oil positions. From 1998 through 2001, the Company had previously
          engaged
          in the trading of forward crude oil contracts as a complement to its overall
          crude oil acquisition business. Financial constraint beginning in 2002
          caused
          the Company to cease its speculative trading activity at that time. However,
          current market conditions are favorable toward such efforts and the Company
          re-hired its former personnel to perform this function. The Company has
          a
          written statement of policies and procedures to govern this area. During
          the
          first quarter of 2006, such speculative crude oil trading activity produced
          a
          net gain of approximately $375,000 which is included in crude oil
          sales.
  - -
 14
  Operating
          earnings from natural gas improved by 143 percent to $1,791,000 for the
          first
          quarter of 2006 due to improved per unit margins. The 2006 margin improvement
          resulted from the Company redirecting its available natural gas supply
          to end
          markets offering better pricing. Operating earnings from motor fuels and
          other
          refined product sales improved from a first quarter of 2005 operating loss
          to
          2006 operating earnings of $385,000 due to improved per unit margins.
 
  -
                *Transportation*
 
 Transportation
          segment revenues, earnings and depreciation are as follows ( **in
          thousands** ):
 
 Three
                    Months EndedMarch
                    31,
                
                Increase2006
                
                2005
                
                (Decrease)Revenues
                
                $
                14,941
                
                $
                13,049
                
                
                14.5
                %Operating
                    earnings
                
                $
                1,171
                
                $
                1,169
                
                
                -
                %Depreciation
                
                $
                1,124
                
                $
                585
                
                
                92.1
                %
 
 Transportation
          segment revenues improved by 14.5 percent to $14,941,000 for the first
          three
          months of 2006 due to improved customer demand and higher freight rates.
          Operating earnings were flat however, due to disproportionate increases
          in
          operating costs associated with an expanded fleet, and escalating driver
          wages
          and fuel costs. By comparison, fuel cost increased by 28 percent for the
          comparative first quarter to $2,724,000, while depreciation increased by
          92
          percent to $1,124,000.
 
 Demand
          for the Company’s trucking service has remained strong and may in fact be
          improving. However, continued escalated cost of service combined with a
          shortage
          of qualified drivers, tempers projected net earnings growth.
 
 -**
                *Oil
                    and Gas*
 
 Oil
          and
          gas segment revenues and operating earnings are primarily a function of
          crude
          oil and natural gas prices and volumes. Comparative amounts for revenues,
          operating earnings and depreciation and depletion are as follows ( **in
          thousands** ) **:**
 
 Three
                    Months EndedMarch
                    31,2006
                
                2005
                
                IncreaseRevenues
                
                $
                4,599
                
                $
                2,439
                
                
                88.6
                %Operating
                    earnings
                
                $
                2,805
                
                $
                1,515
                
                
                85.1
                %Depreciation
                    and depletion
                
                $
                597
                
                $
                484
                
                
                23.3
                %
 
 Oil
          and
          gas segment revenues and operating earnings improved for the three months
          ended
          March 31, 2006 as a result of improved volumes and pricing as shown in
          the table
          below. Exploration expense for comparative periods was consistent at $328,000
          and $369,000 for the first quarter of 2006 and 2005, respectively. The
          prior
          year first quarter also benefited from a $601,000 gain realized on the
          sale of
          certain oil and gas properties. Such property sales did not occur in the
          first
          quarter of 2006.
  - -
 15
  Production
          volumes and price information is as follows:
 
 Three
                    Months EndedMarch
                    31,2006
                
                2005Crude
                    OilVolume
                    - barrels
                
                
                19,800
                
                
                13,800Average
                    price per barrel
                
                $
                61.20
                
                $
                46.88Natural
                    gasVolume
                    - mcf
                
                
                396,000
                
                
                270,000Average
                    price per mcf
                
                $
                8.55
                
                $
                6.64
 
 During
          the first three months of 2006, the Company participated in the drilling
          of
          eleven wells. Three of the wells were successful, two wells are completing,
          with
          one dry hole and five wells currently in process. In addition, three of
          the six
          wells that were in process at year-end 2005 have been brought on production
          in
          the first quarter of 2006 with the remaining three wells tested as productive
          but await facilities hook up. Participation in the drilling of approximately
          40
          wells is planned for the remainder of 2006 on the Company’s prospect acreage in
          Alabama, Louisiana and Texas.
 
 In
          the
          Southern UK North Sea, seismic interpretation work continues on the Company’s
          acreage block and completion of a prospect package is expected by mid 2006.
          The
          Company’s acreage position is a “Promote Block” that does not require a
          commitment to drill a well. The Company plans to seek a partner to drill
          the
          initial wells on a promoted basis. The Company holds a 40 percent interest
          in
          the Southern sector block.
 
 
 *-*  *Income
          tax*
 
 The
          provision for income taxes is based on Federal and State tax rates and
          variations are consistent with taxable income in the respective accounting
          periods.
 
 
 -  *Discontinued
          operations*
 
 Effective
          September 30, 2005, the Company sold its ownership in its offshore Gulf
          of
          Mexico crude oil gathering pipeline. The sale was completed to eliminate
          abandonment obligations and because the Company was no longer purchasing
          crude
          oil in the affected region. The first quarter 2005 operating results for
          the
          pipeline are included herein as discontinued operations.
 
 
 *-*  *Outlook*
 
 Company
          management is currently working to develop adequate procedures, controls
          and
          documentation in order to comply with the reporting and auditing requirements
          set forth in Section 404 of the Sarbanes-Oxley Act of 2002. Presently,
          the
          Company’s Section 404 reporting compliance deadline is December 31, 2007.
          However, recent appreciation in the market price of the Company’s common stock
          may accelerate the Company’s Section 404 requirements to December 31, 2006. The
          stock valuation measurement day for triggering such compliance acceleration
          is
          June 30, 2006. Management anticipates hiring outside consultants and incurring
          additional administrative expenses totaling $1 million during 2006 in order
          to
          meet this requirement. Further, there are no assurances that the Company
          will
          meet all Section 404 requirements within the required time frame should
          the
          deadline be accelerated.
  - -
 16
  The
          operating trends occurring in the first quarter of 2006 appear to be holding
          steady into the second quarter. No significant variations in current operations
          are presently anticipated aside from the added administrative burden to
          comply
          with Sarbanes-Oxley Section 404.
 
 
 Liquidity
          and Capital Resources
 
 During
          the first three months of 2006, net cash provided by operating activities
          totaled $10,593,000 versus $5,853,000 provided by operations during the
          first
          three months of 2005. Management
          generally balances the cash flow requirements of the Company’s investment
          activity with available cash generated from operations. Over time, cash
          utilized
          for property and equipment additions, tracks with earnings from continuing
          operations plus the non-cash provision for depreciation, depletion and
          amortization. Presently, management intends to restrict investment decisions
          to
          available cash flow. Significant, if any, additions to debt are not anticipated.
          A summary of this relationship follows **(in
          thousands):**
 
 Three
                    Months EndedMarch
                    31,2006
                
                2005Earnings
                    from continuing operations
                
                $
                3,644
                
                $
                2,910Depreciation,
                    depletion and amortization
                
                
                2,042
                
                
                1,393Property
                    and equipment additions
                
                
                (4,631
                )
                
                (3,490
                )Cash
                    available for other uses
                
                $
                1,055
                
                $
                813
 
 Capital
          expenditures during the first three months of 2006 included $1,101,000
          for
          marketing equipment additions, $614,000 for trailer purchases within the
          transportation operation and $2,916,000 in property additions associated
          with
          oil and gas exploration and production activities. For the remainder of
          2006,
          the Company anticipates expending approximately $11 million on oil and
          gas
          exploration projects to be funded from operating cash flow and available
          working
          capital. In addition, approximately $1.5 million will be expended toward
          additional equipment purchases within the Company’s marketing and transportation
          businesses with funding from available cash flow.
 
 
 *-
          Banking Relationships*
 
 The
          Company’s primary bank loan agreement with Bank of America provides for two
          separate lines of credit with interest at the bank’s prime rate minus 1⁄4 of 1
          percent. The working capital loan provides for borrowings up to $10,000,000
          based on 80 percent of eligible accounts receivable and 50 percent of eligible
          inventories. Available capacity under the line is calculated monthly and
          as of
          March 31, 2006 was established at $10,000,000 with $7,500,000 of such amount
          outstanding at March 31, 2006. The oil and gas production loan provides
          for
          flexible borrowings subject to a borrowing base established semi-annually
          by the
          bank. The borrowing base is established at $10,000,000 as of March 31,
          2006 with
          $3,975,000 of such amount outstanding at March 31, 2006. The line of credit
          loans are scheduled to expire on October 31, 2007, with the then present
          balance
          outstanding converting to a term loan payable in eight equal quarterly
          installments.
  - -
 17
  The
          Bank
          of America revolving loan agreement, among other things, places certain
          restrictions with respect to additional borrowings and the purchase or
          sale of
          assets, as well as requiring the Company to comply with certain financial
          covenants, including maintaining a 1.0 to 1.0 ratio of consolidated current
          assets to consolidated current liabilities, maintaining a 3.0 to 1.0 ratio
          of
          pre-tax net income to interest expense, and consolidated net worth in excess
          of
          $48,581,000. Should the Company’s net worth fall below this threshold, the
          Company may be restricted from payment of additional cash dividends on
          the
          Company’s common stock. The Company was in compliance with these restrictions as
          of March 31, 2006.
 
 The
          Company’s Gulfmark Energy, Inc. subsidiary maintains a separate banking
          relationship with BNP Paribas in order to support its crude oil purchasing
          activities. In addition to providing up to $40 million in letters of credit,
          the
          facility also finances up to $6 million of crude oil inventory and certain
          accounts receivable associated with crude oil sales. Such financing is
          provided
          on a demand note basis with interest at the bank’s prime rate plus one percent.
          As of March 31, 2006, the Company had $6 million of eligible borrowing
          capacity
          under this facility. No working capital advances were outstanding as of
          March
          31, 2006. Letters of credit outstanding under this facility totaled
          approximately $19.7 million as of March 31, 2006. BNP Paribas has the right
          to
          discontinue the issuance of letters of credit under this facility without
          prior
          notification to the Company.
 
 The
          Company’s Adams Resources Marketing subsidiary also maintains a separate banking
          relationship with BNP Paribas in order to support its natural gas purchasing
          activities. In addition to providing up to $25 million in letters of credit,
          the
          facility finances up to $4 million of general working capital needs on
          a demand
          note basis. Such financing is provided on a demand note basis with interest
          at
          the bank’s prime rate plus one percent. No working capital advances were
          outstanding under this facility as of March 31, 2006. Letters of credit
          outstanding under this facility totaled $7.5 million as of March 31, 2006.
          Under
          this facility, BNP Paribas has the right to discontinue the issuance of
          letters
          of credit under this facility without prior notification to the
          Company.
 
 Critical
          Accounting Policies and Use of Estimates
 
 -  *Fair
          Value Accounting*
 
 As
          an
          integral part of its marketing operation, the Company enters into certain
          forward commodity contracts that are required to be recorded at fair value
          in
          accordance with Statement of Financial Accounting Standards No. 133, “Accounting
          for Derivative Instruments and Hedging Activities” and related accounting
          pronouncements. Management believes this required accounting, known as
          mark-to-market accounting, creates variations in reported earnings and
          the
          reported earnings trend. Under mark-to-market accounting, significant levels
          of
          earnings are recognized in the period of contract initiation rather than
          the
          period when the service is provided and title passes from supplier to customer.
          As it affects the Company’s operation, management believes mark-to-market
          accounting impacts reported earnings and the presentation of financial
          condition
          in three important ways.
 
 1.
              Gross
                  margins, derived from certain aspects of the Company’s ongoing business,
                  are front-ended into the period in which contracts are executed.
                  Meanwhile, personnel and other costs associated with servicing
                  accounts as
                  well as substantially all risks associated with the execution of
                  contracts
                  are expensed as incurred during the period of physical product
                  flow and
                  title passage. 
 2.
              Mark-to-market
                  earnings are calculated based on stated contract volumes. A significant
                  risk associated with the Company’s business is the conversion of stated
                  contract or planned volumes into actual physical commodity movement
                  volumes without a loss of margin. Again the planned profit from
                  such
                  commodity contracts is bunched and front-ended into one period
                  while the
                  risk of loss associated with the difference between actual versus
                  planned
                  production or usage volumes falls in a subsequent period. 3.
              Cash
                  flows, by their nature, match physical movements and passage of
                  title.
                  Mark-to-market accounting, on the other hand, creates a divergence
                  between
                  reported earnings and cash flows. Management believes this complicates
                  the
                  picture of stated financial conditions and
                  liquidity. 
 The
          Company attempts to mitigate the identified risks by only entering into
          contracts where current market quotes in actively traded, liquid markets
          are
          available to determine the fair value of contracts. In addition, substantially
          all of the Company’s forward contracts are less than 18 months in duration.
          However, the reader is cautioned to develop a full understanding of how
          fair
          value or mark-to-market accounting creates differing reported results relative
          to those otherwise presented under conventional accrual accounting.
 
 *-*  *Trade
          Accounts*
 
 Accounts
          receivable and accounts payable typically represent the single most significant
          assets and liabilities of the Company. Particularly within the Company’s energy
          marketing and oil and gas exploration and production operations, there
          is a high
          degree of interdependence with and reliance upon third parties, (including
          transaction counterparties) to provide adequate information for the proper
          recording of amounts receivable or payable. Substantially all such third
          parties
          are larger firms providing the Company with the source documents for recording
          trade activity. It is commonplace for these entities to retroactively adjust
          or
          correct such documents. This typically requires the Company to either absorb,
          benefit from, or pass along such corrections to another third
          party.
 
 Due
          to
          the volume and the complexity of transactions and the high degree of
          interdependence with third parties, this is a difficult area to control
          and
          manage. The Company manages this process by participating in a monthly
          settlement process with each of its counterparties. Ongoing account balances
          are
          monitored monthly and the Company attempts to gain the cooperation of such
          counterparties to reconcile outstanding balances. The Company also places
          great
          emphasis on collecting cash balances due and paying only bonafide properly
          supported claims. In addition, the Company maintains and monitors its bad
          debt
          allowance. Nevertheless a degree of risk always remains due to the customs
          and
          practices of the industry.
 
 *-*  *Oil
          and Gas Reserve Estimate*
 
 The
          value
          of capitalized costs of oil and gas exploration and production related
          assets
          are dependent on underlying oil and gas reserve estimates. Reserve estimates
          are
          based on many subjective factors. The accuracy of reserve estimates depends
          on
          the quantity and quality of geological data, production performance data
          and
          reservoir engineering data, changed prices, as well as the skill and judgment
          of
          petroleum engineers in interpreting such data. The process of estimating
          reserves requires frequent revision of estimates (usually on an annual
          basis) as
          additional information becomes available. Estimated future oil and gas
          revenue
          calculations are also based on estimates by petroleum engineers as to the
          timing
          of oil and gas production, and there is no assurance that the actual timing
          of
          production will conform to or approximate such estimates. Also, certain
          assumptions must be made with respect to pricing. The Company’s estimates assume
          prices will remain constant from the date of the engineer’s estimates, except
          for changes reflected under natural gas sales contracts. There can be no
          assurance that actual future prices will not vary as industry conditions,
          governmental regulation and other factors impact the market price for oil
          and
          gas.
 
 The
          Company follows the successful efforts method of accounting, so only costs
          (including development dry hole costs) associated with producing oil and
          gas
          wells are capitalized. Estimated oil and gas reserve quantities are the
          basis
          for the rate of amortization under the Company’s units of production method for
          depreciating, depleting and amortizing of oil and gas properties. Estimated
          oil
          and gas reserve values also provide the standard for the Company’s periodic
          review of oil and gas properties for impairment.
  - -
 18
  *-*  *Contingencies*
 
 In
          March
          2004, a suit styled *Le
          Petit Chateau De Luxe, et. al. vs Great Southern Oil &*  *Gas
          Co., et. al* .
          was
          filed in the Civil District Court for Orleans Parish, Louisiana against
          the
          Company and its subsidiary, Adams Resources Exploration Corporation, among
          other
          defendants. The suit alleges that certain property in Acadia Parish, Louisiana
          was environmentally contaminated by oil and gas exploration and production
          activities during the 1970s and 1980s. An alleged amount of damage has
          not been
          specified. Management believes the Company has consistently conducted its
          oil
          and gas exploration and production activities in accordance with all
          environmental rules and regulations in effect at the time of operation.
          Management notified its insurance carrier about this claim, and thus far
          the
          insurance carrier has declined to offer coverage. The Company is litigating
          this
          matter with its insurance carrier. In any event, management does not believe
          the
          outcome of this matter will have a material adverse effect on the Company’s
          financial position or results of operations.
 
 From
          time
          to time as incident to its operations, the Company becomes involved in
          various
          accidents, lawsuits and/or disputes. Primarily as an operator of an extensive
          trucking fleet, the Company may be a party to motor vehicle accidents,
          worker
          compensation claims or other items of general liability as would be typical
          for
          the industry. In addition, the Company has extensive operations that must
          comply
          with a wide variety of tax laws, environmental laws and labor laws, among
          others. Should an incident occur, management would evaluate the claim based
          on
          its nature, the facts and circumstances and the applicability of insurance
          coverage. To the extent management believes that such event may impact
          the
          financial condition of the Company, management will estimate the monetary
          value
          of the claim and make appropriate accruals or disclosure as provided in
          the
          guidelines of Statement of Financial Accounting Standards No. 5, “Accounting for
          Contingencies”.
 
 
 Item
          3.
          Quantitative and Qualitative Disclosures about Market Risk
 
 The
          Company is exposed to market risk, including adverse changes in interest
          rates
          and commodity prices.
 
 *-*
                *Interest
                    Rate Risk*
 
 Total
          long-term debt at March 31, 2006 included $11,475,000 of floating rate
          debt. As
          a result, the Company’s annual interest costs fluctuate based on interest rate
          changes. Because the interest rate on the Company’s long-term debt is a floating
          rate, the fair value approximates carrying value as of March 31, 2006.
          A
          hypothetical 10 percent adverse change in the floating rate would not have
          had a
          material effect on the Company’s results of operations for the three-month
          period ended March 31, 2006.
 
 *-*
                *Commodity
                    Price Risk*
 
 The
          Company’s major market risk exposure is in the pricing applicable to its
          marketing and production of crude oil and natural gas. Realized pricing
          is
          primarily driven by the prevailing spot prices applicable to oil and gas.
          Commodity price risk in the Company’s 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, the Company enters into forward contracts
          to
          minimize or hedge the impact of market fluctuations on its purchases of
          crude
          oil and natural gas. The Company may also enter into price support contracts
          with certain customers to secure a floor price on the purchase of certain
          supply. In each instance, the Company locks 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
          one-year term with no contracts extending longer than three years in duration.
          The Company monitors all commitments, positions and endeavors to maintain
          a
          balanced portfolio.
  - -
 19
  Certain
          forward contracts are recorded at fair value, depending on management’s
          assessments of numerous accounting standards and positions that comply
          with
          generally accepted accounting principles. The undiscounted fair value of
          such
          contracts is reflected on the Company’s balance sheet as risk management assets
          and liabilities. The revaluation of such contracts is recognized on a net
          basis
          in the Company’s results of operations. Current market price quotes from
          actively traded liquid markets are used in all cases to determine the contracts’
fair value. Regarding net risk management assets, all of the presented
          values as
          of March 31, 2006 and 2005 were based on readily available market quotations.
          Risk management assets and liabilities are classified as short-term or
          long-term
          depending on contract terms. The estimated future net cash inflow based
          on
          year-end market prices is $1,489,000, all of which will be received during
          the
          remainder of 2006 through July 2007. The estimated future cash inflow
          approximates the net fair value recorded in the Company’s risk management assets
          and liabilities.
 
 The
          following table illustrates the factors that impacted the change in the
          net
          value of the Company’s risk management assets and liabilities for the three
          months ended March 31, 2006 and 2005 ( **in
          thousands** ):
 
 2006
                
                2005Net
                    fair value on January 1,
                
                $
                1,781
                
                $
                630Activity
                    during the period-
                    Cash received from settled contracts
                
                
                (894
                )
                
                (520
                )-
                    Net realized gain from prior years’ contracts
                
                
                107
                
                
                115-
                    Net unrealized gain from prior years’ contracts
                
                
                -
                
                
                63-
                    Net unrealized (loss) from prior years’ contracts
                
                
                (57
                )
                
                --
                    Net unrealized gain from current year contracts
                
                
                552
                
                
                362-
                    Net fair value on September 30,
                
                $
                1,489
                
                $
                650
 
 Historically,
          prices received for oil and gas production have been volatile and unpredictable.
          Price volatility is expected to continue. From January 1, 2006 through
          March 31,
          2006 natural gas price realizations ranged from a monthly low of $5.71
          per mmbtu
          to a monthly high of $13.06 per mmbtu. Oil prices ranged from a low of
          $46.45
          per barrel to a high of $64.40 per barrel during the same period. A hypothetical
          10 percent adverse change in average natural gas and crude oil prices,
          assuming
          no changes in volume levels, would have reduced earnings by approximately
          $1,309,000 for the three-month period ended March 31, 2006.
 
 Forward-Looking
          Statements—Safe Harbor Provisions
 
 This
          report for the period ended March 31, 2006 contains certain forward-looking
          statements intended to be covered by the safe harbors provided under Federal
          securities law and regulation. To the extent such statements are not recitations
          of historical fact, forward-looking statements involve risks and uncertainties.
          In particular, statements under the captions (a) Management’s Discussion and
          Analysis of Financial Condition and Results of Operations, (b) Liquidity
          and
          Capital Resources, (c) Critical Accounting Policies and Use of Estimates,
          (d)
          Quantitative and Qualitative Disclosures about Market Risk, among others,
          contain forward-looking statements. Where the Company expresses an expectation
          or belief to future results or events, such expression is made in good
          faith and
          believed to have a reasonable basis in fact. However, there can be no assurance
          that such expectation or belief will actually result or be
          achieved.
  - -
 20
  A
          number
          of factors could cause actual results or events to differ materially from
          those
          anticipated. Such factors include, among others, (a) general economic
          conditions, (b) fluctuations in hydrocarbon prices and margins, (c) variations
          between crude oil and natural gas contract volumes and actual delivery
          volumes,
          (d) unanticipated environmental liabilities or regulatory changes, (e)
          counterparty credit default, (f) inability to obtain bank and/or trade
          credit
          support, (g) availability and cost of insurance, (h) changes in tax laws,
          and
          (i) the availability of capital, (j) changes in regulations, (k) results
          of
          current items of litigation, (l) uninsured items of litigation or losses,
          (m)
          uncertainty in reserve estimates and cash flows, (n) ability to replace
          oil and
          gas reserves, (o) security issues related to drivers and terminal facilities,
          (p) commodity price volatility, and (q) successful completion of drilling
          activity. For more information, see the discussion under Forward-Looking
          Statements in the annual report on Form 10-K for the year ended December
          31,
          2005.
 
 Item
          4.
          Disclosure Controls and Procedures
 
 The
          Company maintains “disclosure controls and procedures” (as defined in Rule
          13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934,
          as
          amended (the “Exchange Act”), that are designed to ensure that information
          required to be disclosed in the reports that the Company files or submits
          under
          the Exchange Act are recorded, processed, summarized and reported within
          the
          time periods specified in the SEC’s rules and forms and is accumulated and
          communicated to management, including the Company’s Chief Executive Officer and
          Chief Financial Officer, as appropriate, to allow timely discussions regarding
          required disclosure. As of the end of the period covered by this quarterly
          report an evaluation was carried out under the supervision and with the
          participation of the Company's management, including the Company’s Chief
          Executive Officer and Chief Financial Officer, of the effectiveness of
          the
          design and operation of the Company’s disclosure controls and procedures. Based
          upon that evaluation, the Chief Executive Officer and the Chief Financial
          Officer concluded that the design and operation of these disclosure controls
          and
          procedures were effective. During the Company’s first fiscal quarter, there have
          not been any changes in the Company’s internal controls over financial reporting
          (as defined in Rules 13a-13(f) and 15d-15(f) of the Exchange Act) that
          have
          materially affected, or are reasonably likely to materially affect, the
          Company’s internal control over financial reporting.
  - -
 21
  **PART
          II. OTHER INFORMATION**
 Item
          1.
 
 In
          March
          2004, a suit styled *Le
          Petit Chateau De Luxe, et. al. vs Great Southern Oil &*  *Gas
          Co., et. al* .
          was
          filed in the Civil District Court for Orleans Parish, Louisiana against
          the
          Company and its subsidiary, Adams Resources Exploration Corporation, among
          other
          defendants. The suit alleges that certain property in Acadia Parish, Louisiana
          was environmentally contaminated by oil and gas exploration and production
          activities during the 1970s and 1980s. An alleged amount of damage has
          not been
          specified. Management believes the Company has consistently conducted its
          oil
          and gas exploration and production activities in accordance with all
          environmental rules and regulations in effect at the time of operation.
          Management notified its insurance carrier about this claim, and thus far
          the
          insurance carrier has declined to offer coverage. The Company is litigating
          this
          matter with its insurance carrier. In any event, management does not believe
          the
          outcome of this matter will have a material adverse effect on the Company’s
          financial position or results of operations.
 
 From
          time
          to time as incident to its operations, the Company becomes involved in
          various
          lawsuits and/or disputes. Primarily as an operator of an extensive trucking
          fleet, the Company may be a party to motor vehicle accidents, worker
          compensation claims or other items of general liability as would be typical
          for
          the industry. Except as disclosed herein, management of the Company is
          presently
          unaware of any claims against the Company 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 the Company’s financial
          position or results of operations.
 
 Item
          1A.
          - There have bee no material changes in the Company’s risk factors from those
          disclosed in the 2005 Form 10-K.
 
 Item
          2. -
          None
 
 Item
          3. -
          None
 
 Item
          4. -
          None
 
 Item
          5. -
          None
 
 Item
          6. Exhibits
 
 31.1
                Certification
                    of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                    Act of 200231.2
                Certification
                    of Chief Financial officer pursuant to Section 302 of the Sarbanes-Oxley
                    Act of 200232.1
                Certification
                    of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                    of 200232.2
                Certification
                    of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                    Act of 2002
 
  - -
 22
  
 Pursuant
          to the requirements of the Securities Exchange Act of 1934, the registrant
          has
          duly caused this report to be signed on its behalf by the undersigned thereunto
          duly authorized.
 
 
 
 
 
 
 
 ADAMS
                    RESOURCES & ENERGY, INC(Registrant)Date:
                    May 15, 2006
                By/s/K.
                    S. Adams, Jr.K.
                    S. Adams, Jr.Chief
                    Executive OfficerBy/s/Frank
                    T. WebsterFrank
                    T. WebsterPresident
                    & Chief Operating OfficerBy/s/Richard
                    B. AbshireRichard
                    B. AbshireChief
                    Financial Officer
 
  - -
 23
  **EXHIBIT
          INDEX**
 
 
 ExhibitNumber
                Description31.1
                Certificate
                    of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                    Act of 200231.2
                Certificate
                    of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                    Act of 200232.1
                Certificate
                    of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                    Act of 200232.2
                Certificate
                    of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                    Act of
                    2002