SPRAGUE RESOURCES LP Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

As used in this Quarterly Report on Form 10-Q ("Quarterly Report"), unless the
context otherwise requires, prior to May 28, 2021, references to "Sprague
Resources," the "Partnership," "we," "our," "us," or like terms, refer to
Sprague Resources LP and its subsidiaries; references to our "General Partner"
refer to Sprague Resources GP LLC; references to "Axel Johnson" or the "Sponsor"
refer to Axel Johnson Inc. and its controlled affiliates, collectively, other
than Sprague Resources, its subsidiaries and its General Partner; and references
to "Sprague Holdings" refer to Sprague Resources Holdings LLC, a wholly owned
subsidiary of Axel Johnson and the owner of our General Partner. Prior to May
28, 2021, our General Partner was a wholly owned subsidiary of Axel Johnson.
As used in this Quarterly Report, unless the context otherwise requires,
effective May 28, 2021, references to "Sprague Resources," the "Partnership,"
"we," "our," "us," or like terms, refer to Sprague Resources LP and its
subsidiaries; references to our "General Partner" refer to Sprague Resources GP
LLC; references to "Hartree" or the "Sponsor" refer to Hartree Partners, LP and
its controlled affiliates, collectively, other than Sprague Resources, its
subsidiaries and its General Partner; and references to "Sprague Holdings" refer
to Sprague HP Holdings, LLC, a wholly owned subsidiary of Hartree and the owner
of our General Partner. Effective May 28, 2021, our General Partner is a wholly
owned subsidiary of Hartree.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report and any information incorporated by reference, contains
statements that we believe are "forward-looking statements". Forward looking
statements are statements that express our belief, expectations, estimates, or
intentions, as well as those statements we make that are not statements of
historical fact, including, among other things, statements relating to the
Merger (as defined below) and the expected benefits thereof. Forward-looking
statements provide our current expectations and contain projections of results
of operations, or financial condition, and/ or forecasts of future events. Words
such as "may", "assume", "forecast", "position", "seek", "predict", "strategy",
"expect", "intend", "plan", "estimate", "anticipate", "believe", "project",
"budget", "outlook", "potential", "will", "could", "should", or "continue", and
similar expressions are used to identify forward-looking statements. They can be
affected by assumptions used or by known or unknown risks or uncertainties which
could cause our actual results to differ materially from those contained in any
forward-looking statement. Consequently, no forward-looking statements can be
guaranteed. You are cautioned not to place undue reliance on any forward-looking
statements.

Factors that could cause actual results to differ from those in the
forward-looking statements include, but are not limited to: (i) our ability to
complete the Merger in a timely manner, or at all; (ii) greater than expected
operating costs, customer loss, business disruption and employee attrition as a
result of the proposed Merger; (iii) diversion of management time on the
proposed Merger and changes in management and other personnel before the closing
of the Merger; (iv) changes in federal, state, local, and foreign laws or
regulations including those that permit us to be treated as a partnership for
federal income tax purposes, those that govern environmental protection and
those that regulate the sale of our products to our customers; (v) changes in
the marketplace for our products or services resulting from events such as
dramatic changes in commodity prices, increased competition, increased energy
conservation, increased use of alternative fuels and new technologies, changes
in local, domestic or international inventory levels, seasonality, changes in
supply, weather and logistics disruptions, or general reductions in demand; (vi)
security risks including terrorism and cyber-risk, (vii) adverse weather
conditions, particularly warmer winter seasons and cooler summer seasons,
climate change, environmental releases and natural disasters; (viii) adverse
local, regional, national, or international economic conditions, including but
not limited to, public health crises that reduce economic activity, affect the
demand for travel (public and private), as well as impacting costs of operation
and availability of supply (including the coronavirus COVID-19 outbreak),
unfavorable capital market conditions and detrimental political developments
such as the inability to move products between foreign locales and the United
States; (ix) nonpayment or nonperformance by our customers or suppliers; (x)
shutdowns or interruptions at our terminals and storage assets or at the source
points for the products we store or sell, disruptions in our labor force, as
well as disruptions in our information technology systems; (xi) unanticipated
capital expenditures in connection with the construction, repair, or replacement
of our assets; (xii) our ability to integrate acquired assets with our existing
assets and to realize anticipated cost savings and other efficiencies and
benefits; (xiii) our ability to successfully complete our organic growth and
acquisition projects and/or to realize the anticipated financial and operational
benefits; and, (xiv) the inability to amend or extend the maturity of our Credit
Agreement. These are not all of the important factors that could cause actual
results to differ materially from those expressed in our forward-looking
statements. Other known or unpredictable factors could also have material
adverse effects on future results. Consequently, all of the forward-looking
statements made in this Quarterly Report are qualified by these cautionary
statements, and we cannot assure you that actual results or developments that we
anticipate will be realized or, even if realized, will have the expected
consequences to or effect on us or our business or operations. In light of these
risks, uncertainties and assumptions, the forward-looking events discussed in
this Quarterly Report may not occur.

When considering these forward-looking statements, please note that we provide
additional cautionary discussion of risks and uncertainties in our Annual Report
on Form 10-K for the year ended December 31, 2021, as filed with the U.S.
Securities and Exchange Commission ("SEC") on March 4, 2022 (the "2021 Annual
Report"), in Part I, Item 1A "Risk Factors", in Part II, Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of Operations", and
in Part II, Item 7A "Quantitative and Qualitative Disclosures About Market
Risk". In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this Quarterly Report may not occur.

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Forward-looking statements contained in this Quarterly Report speak only as of
the date of this Quarterly Report (or other date as specified in this Quarterly
Report) or as of the date given if provided in another filing with the SEC. We
undertake no obligation, and disclaim any obligation, to publicly update, review
or revise any forward-looking statements to reflect events or circumstances
after the date of such statements. All forward looking statements attributable
to us or any person acting on our behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in our existing
and future periodic reports filed with the SEC.
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Overview

We are a Delaware limited partnership formed in June 2011 by Sprague Holdings
and our General Partner. We engage in the purchase, storage, distribution and
sale of refined products and natural gas, and provide storage and handling
services for a broad range of materials. In October 2013, we became a publicly
traded master limited partnership ("MLP") and our common units representing
limited partner interests are listed on the New York Stock Exchange ("NYSE")
under the ticker symbol "SRLP".

Our Predecessor was founded in 1870 as the Charles H. Sprague Company in Boston,
Massachusetts; and, in 1905, the company opened the Penobscot Coal and Wharf
Company, a tidewater terminal located in Searsport, Maine. By World War II, the
company was operating eleven terminals and a fleet of two dozen vessels
transporting coal and other products throughout the world. As fuel needs
diversified in the United States, the company expanded its product offerings and
invested in terminals, tankers, and product handling activities. In 1959, the
company expanded its oil marketing activities via entry into the distillate oil
market. In 1970, the company was sold to Royal Dutch Shell's Asiatic Petroleum
subsidiary; and, in 1972, Royal Dutch Shell sold the company to Axel Johnson
Inc., a member of the Axel Johnson Group of Stockholm, Sweden.

On April 20, 2021, the Partnership and Hartree Partner, LP ("Hartree") announced
that Sprague Holdings entered into an agreement to sell to Sprague HP Holdings,
LLC (a wholly-owned subsidiary of Hartree) the interest of Sprague Holdings in
the General Partner, the incentive distribution rights and all of the common
units representing limited partner interests that Sprague Holdings owned in the
Partnership (the "Transaction"). The Transaction was completed and effective on
May 28, 2021.

On June 2, 2022, in response to an unsolicited non-binding proposal received
from Hartree on January 11, 2022, the Partnership, and our General Partner
entered into an Agreement and Plan of Merger (the "Merger Agreement") with
Sprague Holdings and Sparrow HP Merger Sub, LLC ("Merger Sub"), pursuant to
which Merger Sub will merge with and into the Partnership, with the Partnership
surviving as a direct wholly owned subsidiary of our General Partner and Hartree
(the "Merger"). Under the terms of the Merger Agreement, at the effective time
of the Merger, each issued and outstanding common unit, other than those held by
Sprague Holdings or its permitted transferees, will be converted into the right
to receive $19.00 per Common Unit in cash without any interest thereon (the
"Merger Consideration"). The common units and incentive distribution rights in
the Partnership held by Sprague Holdings and its permitted transferees and the
General Partner immediately prior to the effective time of the Merger shall be
unaffected by the Merger and shall remain outstanding. The closing of the
transactions contemplated by the Merger Agreement are expected to occur in the
third quarter of 2022.

The Partnership is one of the largest independent wholesale distributors of
refined products in the Northeast United States based on aggregate terminal
capacity. We own, operate and/or control a network of refined products and
materials handling terminals and storage facilities predominantly located in the
Northeast United States from New York to Maine and in Quebec, Canada that have a
combined storage tank capacity of approximately 14.3 million barrels for refined
products and other liquid materials, as well as approximately 2.0 million square
feet of materials handling capacity. We also have access to approximately 44
third-party terminals in the Northeast United States through which we sell or
distribute refined products pursuant to rack, exchange and throughput
agreements.

We operate under four business segments: refined products, natural gas,
materials handling and other operations. See Note 8 - Segment Reporting to our
Condensed Consolidated Financial Statements for a presentation of financial
results by reportable segment and see Part I, Item 2 Management's Discussion and
Analysis of Financial Condition and Results of Operations-Results of Operations
for a discussion of financial results by segment.

In our refined products segment we purchase a variety of refined products, such
as heating oil, diesel fuel, residual fuel oil, kerosene, jet fuel and gasoline
(primarily from refining companies, trading organizations and producers), and
sell them to our customers. We have wholesale customers who resell the refined
products we sell to them and commercial customers who consume the refined
products directly. Our wholesale customers consist of approximately 900 home
heating oil retailers and diesel fuel and gasoline resellers. Our commercial
customers include federal and state agencies, municipalities, regional transit
authorities, drill sites, large industrial companies, real estate management
companies, hospitals, educational institutions, and asphalt paving companies.
Our customers also include businesses engaged in the development of natural gas
resources in Pennsylvania and surrounding states.

In our natural gas segment we purchase natural gas from natural gas producers and trading companies and sell and distribute natural gas to approximately 14,000 commercial and industrial customer locations across 13 states in the Northeast and Mid-Atlantic United States and Canada.

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Our materials handling segment is generally conducted under multi-year
agreements as either fee-based activities or as leasing arrangements when the
right to use an identified asset (such as storage tanks or storage locations)
has been conveyed in the agreement. We offload, store and/or prepare for
delivery a variety of customer-owned products, including asphalt, clay slurry,
salt, gypsum, crude oil, residual fuel oil, coal, petroleum coke, caustic soda,
tallow, pulp and heavy equipment. Historically, a majority of our materials
handling activity has generated qualified income.

Our other operations segment primarily includes the marketing and distribution
of coal conducted in our Portland, Maine terminal, and commercial trucking
activity conducted by our Canadian subsidiary.
We take title to the products we sell in our refined products and natural gas
segments. In order to manage our exposure to commodity price fluctuations, we
use derivatives and forward contracts to maintain a position that is
substantially balanced between product purchases and product sales. We do not
take title to any of the products in our materials handling segment.

As of June 30, 2022, our Sponsor, through its ownership of Sprague Holdings,
owns 19,548,849 common units representing an aggregate of 74.5% of the limited
partner interest in the Partnership. Sprague Holdings also owns the General
Partner, which in turn owns a non-economic interest in the Partnership. Sprague
Holdings currently holds incentive distribution rights ("IDRs") which entitle it
to receive increasing percentages of the cash the Partnership distributes from
distributable cash flow in excess of $0.7676 per unit per quarter, up to a
maximum of 50.0%. The maximum distribution of 50% does not include any
distributions that Sprague Holdings may receive on any limited partner units
that it owns.

Going Concern Assessment and Management's Plans

Pursuant to FASB ASC 205-40, Presentation of Financial Statements - Going
Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity's Ability
to Continue as a Going Concern, the Partnership is required to assess its
ability to continue as a going concern for a period of one year from the date of
the issuance of these condensed consolidated financial statements. Substantial
doubt about an entity's ability to continue as a going concern exists when
relevant conditions and events, considered in the aggregate, indicate that it is
probable that the entity will be unable to meet its obligations as they become
due within one year from the financial statement issuance date. This evaluation
initially does not take into consideration the potential mitigating effect of
management's plans that have not been fully implemented as of the date the
financial statements are issued. When substantial doubt exists under this
methodology, the Partnerships's management evaluates whether the mitigating
effect of its plans sufficiently alleviates substantial doubt about the
Partnerships's ability to continue as a going concern. The mitigating effect of
the Partnerships's plans, however, is only considered if both (1) it is probable
that the plans will be effectively implemented within one year after the date
that the financial statements are issued and (2) it is probable that the plans,
when implemented, will mitigate the relevant conditions or events that raise
substantial doubt about the entity's ability to continue as a going concern
within one year after the date that the financial statements are issued.

The Partnership's Credit Agreement matures on May 19, 2023 and has not been
renewed as of the date of the issuance of these condensed consolidated financial
statements. On June 2, 2022, the Partnership entered in a Merger Agreement with
Sprague Holdings and Merger Sub, pursuant to which Sprague Holdings will acquire
the common units that it does not already own. As the Merger Agreement is
subject to customary closing conditions and because the pending Merger may
affect how, or if, the Partnership elects to obtain a maturity extension,
management has deferred the process to extend the maturity date of its Credit
Agreement..

While we plan to renew or extend the terms of the Credit Agreement prior to the
stated maturity date, until such time as we have executed an agreement to
refinance or extend the maturity of the Credit Agreement, we cannot conclude
that it is probable we will do so. Accordingly, the Partnership concluded that
there is substantial doubt about its ability to continue as a going concern for
a period of at least twelve months from the date of issuance of these financial
statements.

The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the ordinary course of business. The financial statements do not
include adjustments relating to the recoverability and classification of
recorded asset amounts or other amounts and classifications of liabilities,
other than obligations under the Credit Agreement classified as current, that
might result from the outcome of the uncertainties described above.

COVID-19

In 2022, a wide array of sectors continue to be affected by COVID-19, its
variants and the related supply chain disruptions brought on by the pandemic,
including but not limited to energy, transportation, manufacturing and
commercial and retail businesses and global economic conditions continue to be
volatile. With the easing of restrictions, health advancements and other ongoing
measures to alleviate the pandemic in 2021 and through the second quarter of
2022, demand for refined products
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appears to have normalized. In order to continue to mitigate the effects of the
pandemic, we continue to focus on the safety of employees and other stakeholders
as well as initiatives relating to cost reduction, liquidity and operating
efficiencies.

The Partnership makes estimates and assumptions that affect the reported amounts
on these consolidated financial statements and accompanying notes as of the date
of the financial statements. The Partnership assessed accounting estimates that
require consideration of forecasted financial information, including, but not
limited to, the allowance for credit losses, the carrying value of goodwill,
intangible assets, and other long-lived assets. This assessment was conducted in
the context of information reasonably available to the Partnership, as well as
consideration of the future potential impacts of COVID-19, and its variants, on
the Partnership's business as of June 30, 2022. While market conditions for our
products and services appear to have stabilized as compared to a year ago, the
pandemic remains fluid, indicating that the full impact may not have been
realized across our business and operations. The economic and operational
landscape has been altered, and it is difficult to determine whether such
changes are temporary or permanent, with challenges related to staffing, supply
chain, and transportation globally. Accordingly if the impact is more severe or
longer in duration than the partnership has assumed, such impact could
potentially result in impairments and increases in credit allowances. As we
strategize with regard to fiscal year 2022 and beyond, we continue to monitor
the evolving impacts of COVID-19 and its variants closely and adapting our
operations to changing demand patterns and the potential impact of the COVID-19
pandemic on future cash flows and access to adequate liquidity.

How Management Evaluates Our Results of Operations

Our management uses a variety of financial and operational measurements to analyze our performance. These measurements include: (1) adjusted EBITDA and adjusted gross margin, (2) operating expenses, (3) selling, general and administrative (or SG&A) expenses and (4) heating degree days.

EBITDA, adjusted EBITDA and adjusted gross margin used in this Quarterly Report are non-GAAP financial measures.

EBITDA and Adjusted EBITDA

Management believes that adjusted EBITDA is an aid in assessing repeatable
operating performance that is not distorted by non-recurring items or market
volatility and the ability of our assets to generate sufficient revenue, that
when rendered to cash, will be available to pay interest on our indebtedness and
make distributions to our unitholders.

We define EBITDA as net income before interest, income taxes, depreciation and
amortization. We define adjusted EBITDA as EBITDA adjusted for the change in
unrealized hedging gains (losses) with respect to refined products and natural
gas inventory, and natural gas transportation contracts, adjusted for changes in
the fair value of contingent consideration, and adjusted for the impact of
acquisition related expenses.

EBITDA and adjusted EBITDA are used as supplemental financial measures by external users of our financial statements, such as investors, trade suppliers, research analysts and commercial banks to assess:

•The financial performance of our assets, operations and return on capital without regard to financing methods, capital structure or historical cost basis;

•The ability of our assets to generate sufficient revenue, that when rendered to cash, will be available to pay interest on our indebtedness and make distributions to our equity holders;

•Repeatable operating performance that is not distorted by non-recurring items or market volatility; and

•The viability of acquisitions and capital expenditure projects.

EBITDA and adjusted EBITDA are not prepared in accordance with GAAP and should
not be considered alternatives to net income or operating income, or any other
measure of financial performance presented in accordance with GAAP. EBITDA and
adjusted EBITDA exclude some, but not all, items that affect net income and
operating income.

The GAAP measure most directly comparable to EBITDA and adjusted EBITDA is net
income. EBITDA and adjusted EBITDA should not be considered as alternatives to
net income or cash provided by (used in) operating activities, or any other
measure of financial performance or liquidity presented in accordance with GAAP.
EBITDA and adjusted EBITDA are not presentations made in accordance with GAAP
and have important limitations as analytical tools and should not be considered
in isolation or as substitutes for analysis of our results as reported under
GAAP. Because EBITDA and adjusted EBITDA exclude some, but not all, items that
affect net income and are defined differently by different companies, our
definitions of EBITDA and adjusted EBITDA may not be comparable to similarly
titled measures of other companies.
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We recognize that the usefulness of EBITDA and adjusted EBITDA as evaluative tools may have certain limitations, including:

•EBITDA and adjusted EBITDA do not include interest expense. Because we have
borrowed money in order to finance our operations, interest expense is a
necessary element of our costs and impacts our ability to generate profits and
cash flows. Therefore, any measure that excludes interest expense may have
material limitations;

•EBITDA and adjusted EBITDA do not include depreciation and amortization expense. Because capital assets, depreciation and amortization expense is a necessary element of our costs and ability to generate profits, any measure that excludes depreciation and amortization expense may have material limitations;

•EBITDA and adjusted EBITDA do not include provision for income taxes. Because
the payment of income taxes is a necessary element of our costs, any measure
that excludes income tax expense may have material limitations;

•EBITDA and adjusted EBITDA do not reflect capital expenditures or future requirements for capital expenditures or contractual commitments;

•EBITDA and adjusted EBITDA do not reflect changes in, or cash requirements for, working capital needs; and

•EBITDA and adjusted EBITDA do not allow us to analyze the effect of certain recurring and non-recurring items that materially affect our net income or loss.

Adjusted Gross Margin

Management purchases, stores and sells energy commodities that experience market
value fluctuations. To manage the Partnership's underlying performance,
including its physical and derivative positions, management utilizes adjusted
gross margin. In determining adjusted gross margin, management adjusts its
segment results for the impact of the changes in unrealized gains and losses
with regard to refined products and natural gas inventory, and natural gas
transportation contracts, which are not marked to market for the purpose of
recording unrealized gains or losses in net income. Adjusted gross margin is
also used by external users of our consolidated financial statements to assess
our economic results of operations and our commodity market value reporting to
lenders.

We define adjusted gross margin as net sales less cost of products sold
(exclusive of depreciation and amortization) adjusted for the impact of the
changes in unrealized gains and losses with regard to refined products and
natural gas inventory, and natural gas transportation contracts, which are not
marked to market for the purpose of recording unrealized gains or losses in net
income. Adjusted gross margin has no impact on reported volumes or net sales.

Adjusted gross margin is used as a supplemental financial measure by management to describe our operations and economic performance to investors, trade suppliers, research analysts and commercial banks to assess:

•The economic results of our operations;

•The market value of our inventory and natural gas transportation contracts for financial reporting to our lenders, as well as for borrowing base purposes; and

•Repeatable operating performance that is not distorted by non-recurring items or market volatility.

Adjusted gross margin is not prepared in accordance with GAAP and should not be considered as an alternative to net income or operating income or any other measure of financial performance presented in accordance with GAAP.

We define adjusted unit gross margin as adjusted gross margin divided by units
sold, as expressed in gallons for refined products and in MMBtus for natural
gas.

For a reconciliation of adjusted gross margin and adjusted EBITDA to the GAAP
measures most directly comparable, see the reconciliation tables included in
"Results of Operations." See Note 8 - Segment Reporting to our Condensed
Consolidated Financial Statements for a presentation of our financial results by
reportable segment.

Management evaluates our segment performance based on adjusted gross margin.
Based on the way we manage our business, it is not reasonably possible for us to
allocate the components of operating expenses, selling, general and
administrative expenses and depreciation and amortization among the operating
segments.
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Operating Expenses

Operating expenses are costs associated with the operation of the terminals and
truck fleet used in our business. Employee wages, pension and 401(k) plan
expenses, boiler fuel, repairs and maintenance, utilities, insurance, property
taxes, services and lease payments comprise the most significant portions of our
operating expenses. Employee wages and related employee expenses included in our
operating expenses are incurred on our behalf by our General Partner and
reimbursed by us. These expenses remain relatively stable independent of the
volumes through our system but can fluctuate depending on the activities
performed during a specific period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") include employee salaries
and benefits, discretionary bonus, marketing costs, corporate overhead,
professional fees, information technology and office space expenses. Employee
wages, related employee expenses and certain rental costs included in our SG&A
expenses are incurred on our behalf by our General Partner and reimbursed by us.

Heating Degree Days

A "degree day" is an industry measurement of temperature designed to evaluate
energy demand and consumption. Degree days are based on how much the average
temperature departs from a human comfort level of 65°F. Each degree of
temperature above 65°F is counted as one cooling degree day, and each degree of
temperature below 65°F is counted as one heating degree day. Degree days are
accumulated over the course of a year and can be compared to a monthly or a
long-term average ("normal") to see if a month or a year was warmer or cooler
than usual. Degree days are officially observed by the National Weather Service
and archived by the National Climate Data Center. In order to incorporate more
recent average information and to better reflect the geographic locations of our
customer base, we report degree day information for Boston and New York City
(weighted equally) with a historical average for the same geographic locations
over the previous ten-year period.

Hedging Activities

We hedge our inventory within the guidelines set in our risk management
policies. In a rising commodity price environment, the market value of our
inventory will generally be higher than the cost of our inventory. For GAAP
purposes, we are required to value our inventory at the lower of cost or net
realizable value. The hedges on this inventory will lose value as the value of
the underlying commodity rises, creating hedging losses. Because we do not
utilize hedge accounting, GAAP requires us to record those hedging losses in our
income statements. In contrast, in a declining commodity price market we
generally incur hedging gains. GAAP requires us to record those hedging gains in
our income statements.

The refined products inventory market valuation is calculated using daily
independent bulk market price assessments from major pricing services (either
Platts or Argus). These third-party price assessments are primarily based in
large, liquid trading hubs including but not limited to, New York Harbor (NYH)
or US Gulf Coast (USGC), with our inventory values determined after adjusting
these prices to the various inventory locations by adding expected cost
differentials (primarily freight) compared to one of these supply sources. Our
natural gas inventory is limited, with the valuation updated monthly based on
the volume and prices at the corresponding inventory locations. The prices are
based on the most applicable monthly Inside FERC, or IFERC, assessments
published by Platts near the beginning of the following month.

Similarly, we can hedge our natural gas transportation assets (i.e., pipeline
capacity) within the guidelines set in our risk management policy. Although we
do not own any natural gas pipelines, we secure the use of pipeline capacity to
support our natural gas requirements by either leasing capacity over a pipeline
for a defined time period or by being assigned capacity from a local
distribution company for supplying our customers. As the spread between the
price of gas between the origin and delivery point widens (assuming the value
exceeds the fixed charge of the transportation), the market value of the natural
gas transportation contracts assets will typically increase. If the market value
of the transportation asset exceeds costs, we may seek to hedge or "lock in" the
value of the transportation asset for future periods using available financial
instruments. For GAAP purposes, the increase in value of the natural gas
transportation assets is not recorded as income in the income statements until
the transportation is utilized in the future (i.e., when natural gas is
delivered to our customer). If the value of the natural gas transportation
assets increase, the hedges on the natural gas transportation assets lose value,
creating hedging losses in our income statements. The natural gas transportation
assets market value is calculated daily based on the volume and prices at the
corresponding pipeline locations. The daily prices are based on trader assessed
quotes which represent observable transactions in the market place, with the
end-month valuations primarily based on Platts prices where available or adding
a location differential to the price assessment of a more liquid location.

As described above, pursuant to GAAP, we value our commodity derivative hedges
at the end of each reporting period based on current commodity prices and record
hedging gains or losses, as appropriate. Also as described above, and pursuant
to
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GAAP, our refined products and natural gas inventory and natural gas
transportation contract rights, to which the commodity derivative hedges relate,
are not marked to market for the purpose of recording gains or losses. In
measuring our operating performance, we rely on our GAAP financial results, but
we also find it useful to adjust those numbers to reflect the changes in
unrealized gains and losses with regard to refined products and natural gas
inventory, and natural gas transportation contracts. By making such adjustments,
as reflected in adjusted gross margin and adjusted EBITDA, we believe that we
are able to align more closely hedging gains and losses to the period in which
the revenue from the sale of inventory and income from transportation contracts
relating to those hedges is realized.

Trends and Factors that Impact our Business

In addition to the other information set forth in this report, please refer to
our 2021 Annual Report for a discussion of the trends and factors that impact
our business.
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Results of Operations

Our current and future results of operations may not be comparable to our
historical results of operations. Our results of operations may be impacted by,
among other things, swings in commodity prices, primarily in refined products
and natural gas, and acquisitions or dispositions. We use economic hedges to
minimize the impact of changing prices on refined products and natural gas
inventory. As a result, commodity price increases at the end of a period can
create lower gross margins as the economic hedges, or derivatives, for such
inventory may lose value, whereas an increase in the value of such inventory is
disregarded for GAAP financial reporting purposes and recorded at the lower of
cost or net realizable value. Please read "How Management Evaluates Our Results
of Operations."

The following tables set forth information regarding our results of operations
for the periods presented:

                                                          Three Months Ended June 30,                       Increase/(Decrease)
                                                            2022                   2021                     $                      %
                                                                                        (in thousands)
Net sales                                            $      1,278,310          $ 657,672          $          620,638                94  %

Cost of products sold (exclusive of depreciation and amortization)

                                               1,261,935            659,803                     602,132                91  %
Operating expenses                                             22,092             19,148                       2,944                15  %
Selling, general and administrative                            21,941             16,719                       5,222                31  %
Depreciation and amortization                                   8,049              8,258                        (209)               (3) %
Total operating costs and expenses                          1,314,017            703,928                     610,089                87  %
Other operating income                                              -              9,725                      (9,725)                 N/A

Operating loss                                                (35,707)           (36,531)                        824                (2) %
Interest income                                                   115                 77                          38                49  %
Interest expense                                               (9,242)            (8,587)                       (655)                8  %
Loss before income taxes                                      (44,834)           (45,041)                        207                 -  %
Income tax provision                                             (461)              (562)                        101               (18) %
Net loss                                             $        (45,295)         $ (45,603)         $              308                (1) %



                                                            Six months ended June 30,                        Increase/(Decrease)
                                                            2022                   2021                      $                      %
                                                                                         (in thousands)
Net sales                                                  3,091,625            1,693,805          $        1,397,820                 83  %

Cost of products sold (exclusive of depreciation and amortization)

                                              2,991,013            1,584,585                   1,406,428                 89  %
Operating expenses                                            45,327               38,379                       6,948                 18  %
Selling, general and administrative                           50,661               41,958                       8,703                 21  %
Depreciation and amortization                                 16,175               16,741                        (566)                (3) %
Total operating costs and expenses                         3,103,176            1,681,663                   2,819,333                168  %
Other operating income                                             -                9,725                      (9,725)                  N/A
Operating (loss) income                                      (11,551)              21,867                     (33,418)              (153) %
Other (loss) income                                               (1)                   2                          (3)              (150) %
Interest income                                                  143                  143                           -                  -  %
Interest expense                                             (19,814)             (17,402)                     (2,412)                14  %
Income (loss) before income taxes                            (31,223)               4,610                     (35,833)              (777) %
Income tax benefit (provision)                                 3,874               (1,433)                      5,307               (370) %
Net (loss) income                                    $       (27,349)         $     3,177          $          (30,526)              (961) %




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