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Executives

Kim Rogers - Genesis Select, Investor Relations

Nick Carter - President and Chief Executive Officer

Connie Cook - Chief Financial Officer

Simon Upfill-Brown - President, Southampton Resources

Analysts

Gunnar Hansen - Sidoti

John Curtis - Singular Research

Mitch Sacks - Grand Slam Asset Management

Tom Harenburg - Carl M. Hennig Incorporated

John Curtis - Singular Research

George Gasper - Private Investor

Arabian American Development Company (ARSD) Q1 2013 Earnings Conference Call May 2, 2013 4:30 PM ET

Operator

Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to the Arabian American Development First Quarter 2013 Earnings Conference Call. During today’s presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened by for questions.

I would now like to turn the conference over to Kim Rogers with Genesis Select IR for Arabian American Development. Please go ahead.

Kim Rogers - Genesis Select, Investor Relations

Thank you, Jessy, and good afternoon everyone. Welcome to the Arabian American Development Company’s first quarter 2013 financial results earnings call. The earnings release is distributed over the wire service approximately 30 minutes ago and should be available on most financial websites.

On the call with us today will be Mr. Nick Carter, President and Chief Executive Officer, Connie Cook, Chief Financial Officer and Simon Upfill-Brown, President of Southampton Resources.

Following management’s prepared comments there will be a formal Q&A session opened to participants on the call. As a reminder, this webcast is accompanied by a slide presentation that is accessible on the Arabian American website at www.arabianamericandev.com. For those who want to participate in the Q&A you must do so through the dialing provided in the release today and on April 18.

Before we get started today I'm going to review the Safe Harbor statement which is Slide two in the presentation. Statements in this conference that are not descriptions of historical facts are forward looking statements relating to future events. And as such, all forward-looking statements are made pursuant to the Securities Litigation Reform Act of 1995.

These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially including the following. A downturn in economic environment, the company’s failure to meet growth and productivity objectives, fluctuations in revenues and purchases, impact of local legal economic political and health conditions, competitive conditions, impact of relationships with critical suppliers, impact of changes in market liquidity conditions and customer credit risks on receivable, the company’s ability to successfully manage acquisitions and alliances, industry cycles, specialty petrochemical product and mineral prices, feedstock availability, technological developments, regulatory changes, foreign government instability, foreign legal and political concept and foreign currency fluctuations as well as other risks. Further information on potential factors that could affect the company’s financial results may be found on the company’s reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission which can be reviewed at www.sec.gov.

And now I’ll the call over to President and CEO, Nick Carter for his comments. Nick?

Nick Carter - President and Chief Executive Officer

Thank you, Kim. I’d like to thank all of you who have joined us for the conference call today to discuss our first quarter 2013 financial results. As Kim mentioned slides are available on the website and Slide three identifies our agenda for today’s call. I will start with an overview of our financial and operational highlights Connie Cook will our CFO will follow with a discussion in the financial details and Simon Upfill-Brown who is President of Southampton will discuss the Southampton Resources operational effects. We will then conclude with an operational update of AMAK planning activities.

Now let’s turn to slide four. Our first quarter revenues were $52.7 million, which was a 7% decrease from the $56.8 million we recorded in the first quarter of 2012. The volume of our petrochemical products was 14.7 million gallons compared to 16.2 million gallons, a decrease from 9.3% for the first quarter of 2012. Sequentially our volume was up almost 700,00 gallons and revenues were up 6% from $49.9 million in the fourth quarter of 2012.

Now let’s turn to slide five. We’re happy to see an uptick in our volume sequentially last year’s first quarter was an exceptionally strong quarter particularly volume was making this year’s comparison a little tough as we discussed on our last call, our competitor had experienced operational difficulties in the fourth quarter of 2011 which put us in the position of supplying virtually the entire market. This issue was a result that carried into the first quarter of 2012.

Secondly, a large customer suffered a fire and extended shutdown in 2012 and we therefore asked considerable volume to that incident and into the current year. That customer is still currently not in operation but is expected to be back in the second quarter of 2013.

And lastly a large oilsand customer continues to progress in their final startup and commissioning phase of production during the quarter, they were accepting product for inventory throughout the first quarter of 2012 so that had increased our volume of sales last year. This customer began and taking shipments again in March of 2013 which help to increase revenues sequentially.

We remain cautiously optimistic on their order flow for the remainder of 2013 as they work through their startup issues. Now turning to the slide six. this slide shows the movement of our feedstock price over the last four years we don’t feel the tunnel price for competitive reasons we are looking to movement of the price to overcome in the last six quarters the prices fluctuated within a range and this quarter continuing that trend although we saw a short-lived price gone for a couple of weeks in February. We remain focused on sales and service and believe where our margins have been stabilized adequately with our formula pricing structure we’ve been using and the careful monitoring of price postings.

Everyday we read and hear about the boom and production of natural gas and oil with North America becoming the leader in developing and producing shale gas. The outlook for the U.S. energy market has improved dramatically in the last several years with the country importing 90% was a slight weaker than it did a decade ago and natural gas being produced in abundance. With the increased North American oil production we believe we’re entering a stage of more stable pricing in the U.S. petroleum market which would be good for many petroleum-related businesses such as ourselves.

Now, I’ll hand the call over to Connie Cook, our CFO who will review our financial results for the quarter. Connie?

Connie Cook - Chief Financial Officer

Thank you, Nick. In reporting these numbers I would like to remind you that we have converted to the equity method of accounting for our investment in AMAK, therefore our prior year results had been restated to incorporate the change. For our first quarter 2013 we were unable to obtain AMAK’s results for press time therefore their first quarter results are not included in our statement.

For filing purposes we were allowed to report their result one quarter in over years. We have however included the accretion for the quarter that was discussed in the end of the year call and a small adjustment to their end of the year result.

Beginning on slide seven, we will address results for the first quarter. Quarterly revenue decreased 7% to $52.7 million compared to revenue of $56.8 million for the same period in 2012. Petrochemical product sales represented $51.6 million or 97.9% of total revenues for the first quarter of 2013 versus $55.8 million or 98.4% of total revenues for the same period last year. We recorded $1.1 million in toll processing fees during the quarter up from $966,000 an increase of 16% from a year ago due to an increase in production by one tolling customer and an increase in fees associated with the new contract with another.

The cost of sales and processing including depreciation was $46 million versus 50.1 million in the same period in 2012 due to lower volume and a decrease in the average cost per gallon of raw material. Average raw material price per gallon decreased 4.2% and volume decreased 4.6% from the first quarter of 2012 to 2013.

Total gross profit for the first quarter of 2013 was $6.68 million as compared to the $6.72 million in the same period last year. Our gross profit margin for the quarter was 12.7% compared to a 11.8% (Technical Difficulty). Specifically, our gross profit margin (Technical Difficulty) has volume increased however during Q1 both margins were up (Technical Difficulty) average raw material price (Technical Difficulty) decreased as mentioned previously. G&A costs for the first quarter of 2013 were $3.6 million versus $3.1 million for 2012. The increase was primarily due to increases in insurance premiums, property taxes, consulting fees and accounting fees. We reported net income attributable to Arabian American in the first quarter of approximately $2.1 million or $0.09 per basic and diluted share compared to the restated $2 million or $0.08 per basic and diluted share in the first quarter of 2012. EBITDA for the first quarter of 2013 was $4.3 million compared to $4.2 million last year.

Moving on to slide eight. Long-term debt was approximately $9.9 million at quarter end compared to $14.2 million for year end 2012. During 2013 we drew $6 million on our line of credit for the capital contribution for AMAK and working capital purposes. However we made principle payments of 350,000 on our term debt. We had $29.4 million in working capital at March 31, 2013 compared to $29.2 million at year end 2012. And we ended the quarter with the current ratio of 3.5 to 1. Stockholder’s equity increased to $85.5 million from $83 million at December 31, 2012.

That concludes the financial review and I would like to now turn the call back over to Nick. Nick.

Nick Carter - President and Chief Executive Officer

Thank you, Connie. Turning to the slide nine I would like to add some detail to our sales and operational activities for the quarter. As we have reported we enjoyed volume increase from Q4 2012 to Q1 2013 and we expected to continue going forward. We have had some small gains in sales but primary factors of the large oil sands customer resuming orders in March and along with the victim of the refinery pair coming back in the near future.

On the international petrochemical side Q1 revenue was $13.3 million which is down 9.5% compared to $14.7 million in the year ago period. Volumes were also down to the 3.4 million gallons versus 4.1 million gallons in 2012. Part of the decrease related to the oil sands customer buying throughout Q1 of 2012 then only purchasing during the last month of Q1 2013.

During our last call we introduced Simon Upfill-Brown during Q1 we announced he had been named as President of our wholly-owned petrochemical subsidiary South Hampton Resources, Inc. effective April 1, 2013. I had previously held this position since Arabian American had acquired South Hampton in 1987. Simon continues to dedicate himself to the first buying in our product line broadening our customer base and growing current opportunities both domestically and internationally. And we are delighted with the progress he has made in his short 10 year with the company.

And now Simon will update you on his progress. Simon.

Simon Upfill-Brown - President, Southampton Resources

Thank you, Nick. In terms of our current facility in Silsbee we continued good progress during this last quarter. We upgraded catalyst in one set of reactors and modified a few distillation towers that will lead us to our goal of 7,000 barrel to feet per day. We will test our new maximum throughput during this current quarter, the quarter we are in now. Additionally we continued the expansion of our loading system by giving all four prime product pipelines from the plants to the loading area into service and setting in place three additional 4,000 barrel storage tanks.

We also fully upgraded our distribution control system DCS to the latest version of software and hardware to help us maintain optimal plant performance. In line with our strategic plan I have specifically been charged with analyzing ARSD’s opportunities but domestically and internationally determine where we should focus for future growth.

Some of the alternatives we are considering include building and additional train, detrain at Silsbee and/or constructing a separate facility for example in Corpus Christi to take advantage of Eagle Ford condensate supply. A plant in Canada to support oil sands requirements and a plant in the Middle East to support growth there and in Asia are both under consideration. We are also working with the highly regarded firm to find an acquisition target that fits our existing business model niche markets with the high service component.

Finding the right target will take time. We will be thorough and naturally we’ll keep you updated on our progressed. We continue to build our custom processing expertise and the solid reputation to increase this business as well. We announced in the quarter we have extended our contract with Gevo for Bio-Jet production and to construct the second demonstration unit to produce renewable paraxylene a green PET, polyethylene terephthalate.

We have a number of other projects under discussion. I see custom processing is a potential area of growth for us. We are agile and nimble which allows us to respond rapidly to our customer needs. And to deliver on the high quality exceptional service reputation we have earned from how many Fortune 500 customers. I look forward to exploring further opportunities to help Arabian American grow.

With that I would like to turn the call back to Nick. Nick.

Nick Carter - President and Chief Executive Officer

Thank you, Simon. Turning to the slide 10 demand continues to progress well but continuing to produce zinc and copper concentrate dilate. We feel development is proceeding as planned it simply a matter of keeping everything running on schedule at this point and of course we would like to say the metal process recovered from the recent drops.

Our sources say that the average for the year are is predicted to be higher than current levels. So there is an expectation of higher prices in the last half of the year. AMAK ship cargos in January and February and we’ll have a copper shipment again in early May and a zinc shipment scheduled for a bill later in May. Last quarter the mill processed about a 166,000 tons of ore and produced approximately 10,000 tons of zinc concentrate and 9,000 tons of copper concentrate. It was a good quarter operationally that we will be seeing considerable fluctuations going forward as AMAK is still progressing processing development ore which can vary and grade significantly as they build different tunnels and rooms near the main ore bodies.

AMAK is projecting approximately 34,000 tons of zinc and 33,000 tons of copper for the fiscal 2013. They will be processing development ore until the end of this year or sometime next year they are currently working on the second of the three ore bodies and probably won’t have the third fully developed until next year. Unfortunately, there is no firm news on the applications for the additional leases obviously we’re following the progress of that situation very closely and we will report any significant events.

In summary for the year and going forward, we’ll move to slide 11. We are pleased with our financial results in the quarter and feel that the outlook for our industry this year as well as the macro backdrop for abundant natural gas bode well for the company’s long-term prospects. We are working on diverged by in our customer base and expand in our geographical footprint with additional opportunities in the Mid East our oil sands projects to Canada and the Asia-Pacific area. We are optimistic about the potential for international business to continue to grow. We are focused on evaluate in the best approach for capacity expansion so that we benefit from the ethylene capacity projects which have been announced by the leading petrochemical companies. Ethylene production will ultimately leads to polyethylene and polyethylene is one of our most important markets.

The AMAK is now producing entity as milestones are met it continues to encourage us with this potential as well as the growth potential in those surrounding area. AMAK is actively exploring current ore bodies of the existing lease and when the time is right we’ll start to explore in the neighboring areas. It should continue to grow and prosper over time. From a financial perspective shareholders with ultimately benefit from the equity income stream from that line.

This concludes my prepared remarks. And at this time, I would like to open the call for questions. Operator, please open the call for questions.

Question-and-Answer session

Operator

Thank you. Ladies and gentlemen we will now have the question and answer session. (Operator Instructions). Thank you. Our first question comes from the line of Gunnar Hansen with Sidoti. Please go ahead.

Gunnar Hansen - Sidoti

Hey guys. Just a couple of quick questions. I guess Connie just kind of looking at the gross margin I think I may have missed it but could you give us a little more insight in terms of the gross margin kind of contracting on a sequential basis even though saw some higher volumes there?

Connie Cook

Well. What we had looked at originally was the comparison from year-over-year first quarter last year, the first quarter this year and it actually went up a little bit and the reason for that was with our formula pricing as prices go up our margins tend to get squeezed. But what happened here was the prices went up and then took a little bit of a dip back down. So we were able to actually make a little more gross margin loss because of that and the raw material prices actually worked in our favor quarter-over-quarter.

Gunnar Hansen - Sidoti

And I guess kind of going forward how have those kind of trended the first month of the quarter so far, raw material prices that is?

Connie Cook

Well raw material prices are all over the place typically. So, it's very hard make any kind of predictions as far as what they’re going to do it's totally market based and so it's very, very difficult to make any comparison.

Nick Carter

And as I mentioned we saw price spike in February and other than that the process really since first of the year pretty well been pretty flat within a range. We saw a price spike in February and then towards the end of March they start dropping off and so they’re still kind of within the range that we deal with over the last six quarters or whatever it is.

Gunnar Hansen - Sidoti

Great and I also may have missed it well Simon I think maybe start talking about capacity and utilization there did you maybe just kind of repeat what you said – I think you said at the end of the, by the end of the quarter here you guys will kind of be at full capacity run rate is that right?

Simon Upfill-Brown

No what I said was kind of was we’re going to test our max throughput rates is the plan. We made some modifications which we feel should give us additional throughput and now we just want to prove that and that's what we’re going to be doing over the next few months.

Gunnar Hansen - Sidoti

Okay great and is there any kind of additional upgrades you guys are looking to make or just kind of a standard kind of capacity that you guys are looking to kind of achieve and then kind of move forward from there?

Simon Upfill-Brown

Right this is a sort of a standard process that one likes to follow in a plant, you test your max throughput rates you find the bottleneck and you see if you can do anything about the bottleneck and then move on to the next one until you kind of go any further in which case then you have to do a significant expansion.

Gunnar Hansen - Sidoti

Great and just in terms of the oil sands customer have they started to make order at this point?

Simon Upfill-Brown

They have taken some and they are just in the process of starting up. So we are not really going to know at what sort of rate they’re going to take it going forward but they are starting up now finally and so over the next months, quarters we should see what their rate above uptake will be.

Gunnar Hansen - Sidoti

Great, thanks so much guys.

Simon Upfill-Brown

Thanks.

Operator

Thank you, one moment please while we queue up the next questioner. Our next question comes from the line of John Curtis, Singular Research. Please go ahead.

John Curtis - Singular Research

Good afternoon everyone.

Nick Carter

Hi, John.

Simon Upfill-Brown

John.

John Curtis - Singular Research

Wanted to know what the overall utilization rate for the facility was first quarter of this year versus last?

Connie Cook

First quarter of this year was, and this is based on 6,000 barrels per day it was 71.6% first quarter this year. First quarter last year was 74.1%.

John Curtis - Singular Research

71.1% I am sorry.

Connie Cook

74.1%, now fourth quarter of 2012 was like 64.3% so it's up from the fourth quarter but it's down a little bit from the first quarter of last year.

John Curtis - Singular Research

I'm sorry was 71.1% in the first quarter of this year?

Connie Cook

71.6% and 74.1% last year’s first quarter.

John Curtis - Singular Research

Kind of the expectations as we head into the second quarter now with the oil sands customer beginning shipments and the customer that had the refinery fire that's been out of commission should we like expect to see volumes kind of be more or less equal to last year’s quarter a little better?

Nick Carter

I think it's kind of hard to tell right now John part of the – part of our normal increases that we see in those spring as when warm weather gets here and frankly the cooler temperatures have been around the country kind of kept some of the demand dampened in the polyethylene industry. We normally get it auto demand starting in the second quarter whenever warmer weather gets here and we've seen that probably be a little slower than what would call normal. But we haven’t really seen anything else it would hold back second and third quarter still been the strongest quarters. So our expectations or any how the second quarter is still going to be good that's hard to tell if it's going to meet last year but with these big customer coming to back on the stream we kind of think it would so we’re still up in this because at this point in time that the volumes are going to be good.

John Curtis - Singular Research

I know on the last call you talked about probably running several months during the middle part of the year where you’ve been running close to 100% even though you’ve had cooler weather or at least at the beginning of the second quarter does that enable you to build up a little extra inventory in anticipation or you don’t want to particularly take on that at a inventory risk?

Nick Carter

We built up some additional inventory actually at the end of the first quarter because we had some shutdown equipment shutdown schedule for early April. And so if you look at balance sheet you’ll see the inventories were higher at the end of the first quarter. We have not necessarily made the decision try to carry those higher inventories on through but we do have enough tankage now that we could do that if it looks like would be beneficial but as we’re looking at it right now we’re not particularly trying to carry higher inventory is a normal but don’t get fooled about what happened at the end of the first quarter because that was an anticipation of the maintenance work that we’re going to do early April.

John Curtis - Singular Research

With respect to AMAK I saw on the slide that the equity raise has not been completed any expectation for when that will be completed?

Nick Carter

Well we've got one of the current shareholders that has not yet paid their money and frankly it was supposed have been here on May the 1st and I haven’t gotten a word yet did they received it or didn’t receive it. So I expect in this coming week we’ll find out for sure but that should be cleared up pretty quick we’re thinking matter of days.

John Curtis - Singular Research

You mentioned that the mine or the well produced 10,000 tons of zinc and 9,000 tons of copper those will be for May shipment do you know what the shipments were in the first quarter ended March 31?

Nick Carter

Well that 10,000 and 9,000 those were actually production numbers not necessarily shipment numbers okay the…

John Curtis - Singular Research

Those were production numbers for the first quarter?

Nick Carter

Right those were production numbers not shipment numbers. The shipments like in January and February I think the one in January is like 7,500 tons and one in February was like 8,500 tons the typical shipment just because of ship sizes and all that kind of stuff is going to be generally speaking 7,500 to 8,000 tons and that's with tons.

John Curtis - Singular Research

And the 7500 was that a…

Nick Carter

I am sorry.

John Curtis - Singular Research

Was the 7500 zinc or copper?

Nick Carter

That was copper in January. And I think the one in February about 8,000 tons and that was zinc.

John Curtis - Singular Research

Question for Connie on the…

Nick Carter

In March we shipped in March we shipped 9,700 tons to, and that was zinc I believe.

John Curtis - Singular Research

When do you anticipate getting financial statement or numbers from AMAK for the first quarter this is likely to drag off into the second quarter when you file your amended 10-K?

Connie Cook

We think we’ll probably have number within the next couple of weeks.

John Curtis - Singular Research

You got to hold off on filing the Q until then?

Connie Cook

No we’re going go ahead and file the Q because if not I mean if, we’re set to go on the Q we just to got to get the XVRL tagging and all of that sort of thing lined out. If we waited two more weeks it would be the delinquent. So we’re going to go ahead and file the Q. And then we may do a release of some sort just explaining what AMAK numbers came in at but then it will actually be filed with the second quarter Q.

John Curtis - Singular Research

The loss that you’re – the earning that you’re showing in this first quarter that’s a combination of the accretion and an adjustment to the year end numbers?

Connie Cook

Right, there was like a $39,000 adjustment to the year end numbers it was a little more expense and that we wanted thru up basically for the end of the year and then the accretion amount which was the $337,000 for the quarter.

John Curtis - Singular Research

Alright. Capital spending for the quarter excluding the purchase of AMAK stock?

Connie Cook

CapEx was $1.5 million.

John Curtis - Singular Research

I notice that you’re still carrying the receivable from AMAK I thought that was maybe going to get paid in the first quarter that likely to get paid later this year.

Connie Cook

As soon as the capital raise is complete at AMAK they are supposed to start paying back shareholder loans. As soon as that is all finalized we should get our money back.

John Curtis - Singular Research

And that – the G&A expense were about $3.5 million that kind of a good number to be thinking about for subsequent quarters $3.4 million to $3.5 million.

Connie Cook

Right, I’d probably ran it around 3.5. We had a pretty uptake in insurance cost pretty much across the board and then property taxes were up in accounting fees because of all other changes to the equity method we had some additional fees accounting wise or some of that were something that’s probably a fair number.

John Curtis - Singular Research

Question for Simon, in terms of the potential for new international customers at some point during this year.

Simon Upfill-Brown

Yeah, we hope so. Some of these sales are long lead-time items there are lot of testing that has to go through so it’s a little bit hard to predict John but yeah I mean we’re working hard on that front.

John Curtis - Singular Research

So you’re testing with a lot of different people?

Simon Upfill-Brown

Yes.

John Curtis - Singular Research

Okay. That’s all I have for now. Thank you.

Nick Carter

Thank you, John.

Simon Upfill-Brown

Thanks John.

Operator

Our next question comes from the line of Mitch Sacks with Grand Slam Asset Management. Please go ahead.

Mitch Sacks - Grand Slam Asset Management

Hey guys.

Nick Carter

Hi, Mitch.

Mitch Sacks - Grand Slam Asset Management

Most of my questions have been answered. Quick question in terms of thinking about volumes from the two customers that are coming back on line this quarter, if we look at the volumes they were doing previously where do that put you in terms of capacity?

Nick Carter

Well, I think that our thought process is that there will be – there is potentially launch during the second, third quarters that we will be pretty close to 100% of capacity. No, we’re not going to average that annually but there will be certain times so I assume they’ll get to normal how whether and now that comes to that we’ll see pretty close to capacity at certain time during second and third quarters. Those are historically our strongest quarters and with the additional business from these guys come to back on stream and that’s definitely picked up over the last year, year and a half we’re going to be pushed in a pretty good that’s the reason Simons was talking about the debottlenecking and stuff it’s – those are generally relatively fast there is small increments but they’re fast fixes for the mot part.

Mitch Sacks - Grand Slam Asset Management

So that 6000 is sort of a number that we should use and then maybe some variation up so you have ability to debottleneck some of the processes.

Nick Carter

I think it’s good to be with him.

Simon Upfill-Brown

Yeah, that’s good.

Mitch Sacks - Grand Slam Asset Management

And then in terms of CapEx add it shows the location to increase capacity, is there any thoughts towards that or are you looking towards trying to take capacity even 6000 to some margin number?

Simon Upfill-Brown

Well, we’ve just started doing the detailed engineering on the detrain and putting together what that would cost us Mitch.

Mitch Sacks - Grand Slam Asset Management

Okay. And if those of you, what’s the detrain?

Simon Upfill-Brown

But that, that would a detrain would be potentially another 50% increase in capacity.

Mitch Sacks - Grand Slam Asset Management

Right, okay. That’s it from me. Thank you very much.

Simon Upfill-Brown

Thanks, Mitch.

Operator

Our next question comes from the line of (indiscernible) Partners. Please go ahead.

Unidentified Analyst

Yeah. Hi. Could you give us a bit of guidance on what the extraction cost per ton or per pound are at the AMAK mine and how they’re expected to trend over time?

Nick Carter

No, we can’t do that right now the – I know that question has come up and really the best answer we’ve got is you need to look on our website and look at what the feasibility study has said because we’re still so deeply in the development stage that’s part of what in these statements out are so it’s hard to sort out which should be capitalized and what’s expanded and all that tough stuff and frankly are cost reducing aren’t very clear right now. And so we’re trying to avoid M&A numbers until we get a better picture really where we’re at on actual operating cost and I’d just recommend that you use the numbers for the time being that were in the feasibility study. We will say that the revenues are tracking that feasibility study right away and I don’t have any reason to doubt it ultimately as we get into – get out of this development stage and get into a stable operation that the expenses should be in that ballpark also but we can’t really give you any better information at this time.

Unidentified Analyst

Okay, that’s helpful. Do you have any expectations on when that kind of information would start being available to shareholders?

Nick Carter

I would think in later part of this year, we’ve got ways to go in as development yet and of course over time we’re going to get it better paid on our expenses and we’ll be able to get a better hand along it but right now it’s too early by the side I’m looking for third, fourth quarter timeframe.

Unidentified Analyst

Okay. And lastly when do you expect that your internal strategically new process would be complete that you could give us some guidance on what decisions you make regarding your acquisitions/expansion are there overseas or addition to the existing plant or in Canada?

Nick Carter

We’ll target only expansion direction is would be at the end of the third quarter not later than at the end of the year, the acquisition type thing as one would say it could be, it could happen next week or it could happen three years from now I’d say whenever we found the right person to do a deal with and so just it was kind of a two different timeframes.

Unidentified Analyst

Okay, great. Thank you. That’s all from me.

Nick Carter

For the expansion it’s probably not later than the end of the year.

Operator

Thank you. Our next question comes from the line of Tom Harenburg with Carl M. Hennig Incorporated. Please go ahead.

Nick Carter

Hi, Tom.

Tom Harenburg - Carl M. Hennig Incorporated

Hey, good afternoon fellows. I just walked in here so I just got that the last question, it looks like you guys did a good quarter. Question I have is the company used to be named Arabian Shield Development Corp, then you changed the name to Arabian American Development Company, I'm not a alphabet soup person but Arabian I think is hindering the market ability certainly here in the U.S. for the stock and I mean I think if you call the company South Hampton Resources or South Hampton Refining, the stock would probably there would be a whole lot more interest in it. So is there any thought or any possibility that we could change that name I mean if it was AADC or something like that.

Nick Carter

Well, that question comes up pretty often time and we take to ground and discussed it and we’ve kind of gotten back to the point that as you know probably 50% of our shareholders are Saudis.

Tom Harenburg - Carl M. Hennig Incorporated

Right.

Nick Carter

And so that being the case it’s been difficult for us to say okay we want to change the name and kind of distance our sales from that name but I don’t know we haven’t arrived at a good conclusion, the – probably the most promising thought and you brought it up is that maybe we could just do it with ARSD anchor I do see anchor some like that and kind of shortnet there is seem to be the trend with a lot of people now they used to go with some initials that still they got stretched at aim lock there.

Tom Harenburg - Carl M. Hennig Incorporated

Right, well.

Nick Carter

That amounting some…

Tom Harenburg - Carl M. Hennig Incorporated

And again I realize you kind of between Iraq and a hard place on it but these four Saudi shareholders would certainly benefit if the company became more marketable because it had a better name I think that there is certain shareholders that just they will won’t buy this company because I should say share certain the investors they just they won’t buy this company because of the name and.

Nick Carter

Yeah, I think that’s probably true. And as probably something we’ll need to address we can do that quarter on that’s a good suggestion.

Tom Harenburg - Carl M. Hennig Incorporated

Okay, well looks like pretty good quarter avenue we’ve gone through the total figures here now looking forward to listening to the replay of the call somewhat good. And good luck in the next quarter.

Nick Carter

Thank you, Tom.

Simon Upfill-Brown

Thank you. Thank you.

Operator

Our next question comes from the line of John Curtis with Singular Research. Please go ahead.

John Curtis - Singular Research

Yeah just a follow up just want to get a may be an update on CapEx for this year. And I think you referenced to the release that it’s going to be less than last year there has been an increase in production?

Nick Carter

Well the CapEx budget that we improved was like $2 million for this year some of that that Connie had spoke to earlier that $1.5 million was a carryover of that pipeline project that was approved last year and it’s been in progress. And that’s the reason that number even though we’re only four months ended the year seems to be kind of hard compared to our total budget and that’s what that we actually approved on a regular budget I don’t know of $2 million for CapEx this year. Now the only other project that we’ve got that were just getting into in a groundbreaking couple of days ago as a matter of fact what that we’re in a process of building a new control room we had we’ve been in design stage with that for about a year and we’ve got other headed groundbreaking and then we’d be working on that over next several months but that’s probably the one year duration project and that’s going to cost $1.3 million and that is not in that CapEx number or that budgeted number either that’s kind of like exception to that number and so that kind of situation on that.

John Curtis - Singular Research

And then in terms of reaching the 100% capacity rates during may be during the summer where a part of the year is that 100% on 6700 barrels a day or is that a 100% on the 7, expected 7,000 barrel?

Nick Carter

6,000, on 6,000 we’re using as a base case on these capacities. Because that’s 6,000 covers a spectrum of feedstock the feedstock varies and how much you can really process that depend on watching the feedstock and we picked 6,000 as a measurement point just because that cover general base case the 6700 works the feedstocks get to right conditions sometimes we can we make 6300 sometimes it’s near where we’re targeting in 7,000 so it’s kind of a I won’t say it’s a moving target but got to these qualifications to every number that you name so.

Simon Upfill-Brown

We end up using different feedstocks to produce, product for different customers so like if you’re doing something for one of the petrochemical facilities down in the Gulf poly for one of the polystyrene customers versus the oilsand better refined customers.

Nick Carter

Well that’s okay you go ahead.

John Curtis - Singular Research

That’s just my question or is it really just kind of depends on availability on pricing as to which feedstock you use I mean that kind of interchangeable?

Nick Carter

We the pricing is pretty much all those signing because the natural gas oil that we use it’s a commodity material and it’s priced on a regular market price but the market really doesn’t have real clear specifications as to how much actual pentane and how much normal pentane all that kind of stuff that might be in it and so you might get natural gasoline coming out of month abu under the pipeline that it may be 60% actual pentane and the next time you pump up it may be 50% that changes generally not that significant but you get those kind of changes and that what’s your total throughput that you can run really depends on what the composition is and so that’s why we’ve said 6,000 because that’s a pretty much no matter what feedstock looks like we can run that volume and that’s how they work.

Simon Upfill-Brown

And we’re trying to get that to 7,000.

Nick Carter

Right, trying to get that base case to 7,000.

John Curtis - Singular Research

And that for Simon again, could you just go over what’s you guys did in the first quarter I did if I fairly quickly in terms of what you did your CapEx and improvement there.

Simon Upfill-Brown

Okay. We then we upgraded one of the catalyst which we think will and one reactor system which we think was the lowest to get slightly higher rates we modified them distillation towers which were a bottleneck previously and during the next few months we’ll prove whether those actually helped us but they look pretty good thus far but we haven’t pushed the full rates yet. So those were the two major ones on throughput and then we did a couple of other things at our loading area where we’ve got the pipelines fully into service for prime products and we added some additional storage there which allows for flexibility and improved customer service by having the additional storage they’re actually set in place they’re not actually hooked up yet that is in progress now.

John Curtis - Singular Research

Would those things be primarily used for international customers or product and advance of shipment or does that or could it be domestic customers?

Simon Upfill-Brown

Yeah they, it could be any one of those, it’s, because we can ship out of there by ISO container, railcar or truck.

John Curtis - Singular Research

Okay, thank you.

Operator

(Operator Instructions) Our next question comes from the line of George Gasper, a Private Investor.

George Gasper - Private Investor

Yes, good afternoon everyone.

Nick Carter

Hi, George.

George Gasper - Private Investor

Just a follow up question I missed the very early part of the call, but could you reiterate again the, your throughput in the past quarter if there was for Canada and what’s your expectation is for the June quarter here have you, can you give us an idea on where you’re on that?

Simon Upfill-Brown

Where we shipped, we did ship some material to Canada in the first quarter and…

George Gasper - Private Investor

Okay.

Simon Upfill-Brown

It looks like we’re going to continue to ship but as I mentioned they’re just starting up George.

George Gasper - Private Investor

Yes.

Simon Upfill-Brown

So it’s hard to predict how they’re going to take in subsequent months.

George Gasper - Private Investor

Alright.

Simon Upfill-Brown

So we’ll know as time goes by what their upticks going to be.

George Gasper - Private Investor

Okay.

Simon Upfill-Brown

But so far looks so good, it looks good and everything we’re getting out of there is that to startup is progressing well so.

George Gasper - Private Investor

Okay. And then a question on the future quarters that’s hopefully going to come about in terms of expansion being twofold as I heard the either through acquisition or cooperation or joint venture or whatever and then a right construction if you were to outline the various possibilities and I know the company has been pretty strong on the possibility of Saudi Arabia in the mix, and then you’ve mentioned United States, Canada and may be even somewhere else but considering that your onshore where you were going on the Canadian side I would assume that that’s like the third spot and the question is, is it because of what’s happening potentially in the Eagle Ford area with a considerable increase in liquids content of the gas what is the more prospective trade to be looking at Texas, West Texas as oppose to Saudi Arabia as a first move or maybe can do in conjunction with one and another could you give us some color around that thought?

Simon Upfill-Brown

Sure. Just a few thoughts I mean the we’re really want to take care of our home market and as Nick mentioned there are seven big ethylene expansions and new construction projects that are been announced in the Gulf Coast area.

George Gasper - Private Investor

Yeah.

Simon Upfill-Brown

So we need to take care of that business too

George Gasper - Private Investor

Yeah.

Simon Upfill-Brown

So doing something in Texas whether it’s a detrain here or some in your Corpus taking advantage of the Eagle Ford those we really have to very seriously consider those.

George Gasper - Private Investor

Okay.

Simon Upfill-Brown

There isn’t as much natural gas liquids fractionation in the Corpus Christi area. So we’d have to partner with somebody maybe who does that as well. So those are the things that we are considering and then at every site you have to consider things like feedstock and local infrastructure and all those kind of things to ship and so there is a lot of work that has to be done before we can get to a final conclusion on any of these.

George Gasper - Private Investor

Okay.

Simon Upfill-Brown

But taking care of our home customers clearly is a very key thing.

George Gasper - Private Investor

Okay. And then third question this is on Gevo on the expansion that if indicated here that is the second I believe you would refer to it as a pilot facility.

Simon Upfill-Brown

Yeah.

George Gasper - Private Investor

Where does that leave Arabian American in terms of ownership of the first pilot facility at this point in time. Was there not some kind of an understanding that after a period of time in the first pilot that asset would become part of Arabian American. Can you give us some thought on where this is going and what the agreement is on this new pilot that you are going to build who is paying for that and what are the circle assets.

Simon Upfill-Brown

It’s the same arrangement as the previous one.

George Gasper - Private Investor

Okay.

Simon Upfill-Brown

Well they are using the equipment they have the rights to use it but as soon as they stop using the equipment. We can take it over.

George Gasper - Private Investor

Oh I see. Okay.

Simon Upfill-Brown

It’s the same we did the same thing as we did with the first demonstration plan.

George Gasper - Private Investor

Okay. And at this point you haven’t taken over the first one and correct because there is no.

Simon Upfill-Brown

No, because they are still running it yeah.

George Gasper - Private Investor

I got you. Okay. Alright. Thank you.

Simon Upfill-Brown

Thanks, George.

Operator

There are no further questions in the queue at this time. I would like to turn the call back to management for closing remarks.

Nick Carter - President and Chief Executive Officer

Yeah. I would like to say that we appreciate everyone’s participation in the call and thank you for your interest. We know that your time is valuable and hope you join us for next call. We also hope that you’ll see the unrecognized value in our stock price and we’ll continue to follow our progress and keep in touch with it. So thank you very much and we’ll see you next time.

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