Q1 2020 Earnings Call

Thursday

dead dead, ladies and gentlemen, thank you for standing by the conference is scheduled to begin momentarily until that time your lines will again be placed on music hold. Thank you for your patience dead dead.

Dead dead dead.

Okay, ladies and gentlemen, thank you for standing by and welcome to the Calumet specialty product Partners first quarter earnings results conference call.

Swimming EVP of strategy and growth and Scott overmyer of commercial before we proceed allow me to remind everyone that during the course of this call. We may provide various forward-looking statements within the meaning of section 21e of the Securities Exchange Act of 1934. Such statements are based on the beliefs of our management as well as assumptions made by them and in each case based on information currently available to them off or management believes that the expectations reflected in such forward-looking statements are reasonable neither the partnership, it's General partner nor management can provide any assurances that the expectations will prove to be correct.

Returning as many of our employees back to work as makes sense, of course based on local circumstances.

It also comes from a culture built around commercial and operational excellence. So despite the uncertainty that the pandemic has introduced to the global economy. There are a number of considerations that give us confidence in our ability to manage our business effectively as we move forward.

Outside of continuity planning a new safety measures. We also took Swift action to fortify our business. We are actively managing our business to generate positive free cash flow and maintain healthy liquidity off. This includes meaningful actions to control costs strengthen our cash flows and maintain that liquidity.

At this time, all participants are in a listen-only mode after the speakers remarks. There will be a question-and-answer session to ask a question during the session. You will need to press star one on your telephone. If you would like to walk by your question, press the pound key if you

Just as I said Leah federal and state authorities have deemed a business essential to the National Economic infrastructure, and we've maintained our operations serving our customers and stakeholders.

First week. I tell the capital budget for the year, which we now expect to be in the range of fifty to sixty million dollars down from our original guidance of eighty to ninety million and at this stage our forecast. I'm almost entirely focused on safety environmental and sustaining Camp X.

Seconds, especially product formulations go into a vast array of products and that end Market diversity provides an inherently more stable performance particular issue when economic disruption is uneven across business sectors and third we increased our hedging activity earlier in the year two down from the volatility of our fuels business the Hedge book contains meaningfully to our plan to stabilize earnings. And finally we see signs of a recovery, which I'll talk about further at the end.

Please refer to the Partnerships press release that was issued this morning as well. As our latest filings with the Securities and Exchange Commission for a list of factors that may affect our actual results and could cause them to differ from our forward-looking statements just call as a reminder. You may now Download a pdf of the presentation slide that will accompany the remarks maintenance phase conference calls as indicated in the press release we issued earlier today, you may access the issue lies in the investor relations section of the website at Calumet specialty also a webcast replay of this call will be available on our site within a few hours and you can contact our group formed relations support at 312-445-2870 with that I'll pass the call to Steve Steve. Good morning everyone and thank you for joining us off. As you know, our company transition the c r o c o roll over to me earlier this year. And while this is my first time speaking to our unit holders and analysts as our chief executive. I'm not new to the cowling that team.

Next we accelerated twenty million dollar question a reductions that were previously announced as part of our twenty-twenty self-help initiatives this included reducing our use of optional Services some corporate staff reductions and other facility fixed costs.

Lastly we identified and have begun implementing new actions that we believe will drive an additional 20 to 30 million dollars of run rate savings for us by the M20.

Ultimately, no new uncertainties have been introduced into our world, but we're confident that the Calumet of the day is much better position to whether this Black Swan event in the near-term off. So on to the quarter, please turn to slide or where we provide a snapshot of our results and first quarter highlights Calumet delivered another solid quarter of financial performance package. I focused execution against our specialty product strategy during the first quarter Calumet delivered eighty three point seven million dollars of adjusted ebitdar, excluding non-cash inventory adjustments that Consolidated result was comprised of 64.5 million in the adjusted ebitdar delivered by Archos specially segment and 39.6 million dollars from the fuel segment. Both of which were upset by Twenty million dollars of net costs in the corporate segment. These corporate segment results reflect the 15 million dollar drop in sg&a.

I said as a director on a boat for the last four years advising the company on a wide range of matters Calumet accomplished a significant amount over the last few years off. My previous has to Tim go not only build a strong executive management team, but also Stewart at a very substantial transformation of our business this work significantly changed our business focus of strengthens our asset base and helped us develop a culture of self-help and operations Excellence all of which fortified the strong Foundation that we have today. This Foundation is going to be able to help us both navigate these uncertain times in the short-term and win in our markets over the long term. We are fortunate that a strong team that I already know. Well, I'm all the world around us has gone through some significant change over the last few months. Our vision for Calumet has not changed. We remain focused on completing the last steps on our path to becoming a dog

This is last year's first quarter, including five million and self-help actions.

During the code that we elected to close or Farmingdale New Jersey blending facility further consolidating our footprint as we bring the production of our bel-ray brand of lubricating products into other blending and packaging facilities.

Next we were successful across the number of key points of emphasis of strategy on the balance sheet and financing side. We finish the code with over three hundred twenty six million dollars of June twenty between our cash on hand and and roll and availability on our revolving credit facility our leverage metric to find in our credit agreements as net debt to trailing 12-month adjusted ebitdar off declined by half a ton on a year-over-year basis.

Especially Products company while the leveraging our balance sheet and driving improved long-term returns for our unit holders. So let's begin our presentation starting on slide three.

before

Do we get into the specifics of the quarter? I'd like to update you on the Swift and decisive actions. We've taken to stay ahead of the ongoing covid-19 pandemic. So our top priority has been and will continue to pass the safety and health of our employees and our customers.

Operationally we delivered strong capacity utilization particularly at our Great Falls Refinery appeals throughput results represented a 12% increase per month or per folio divestitures the strong fruit what is reflective of the structural changes, we have made to improve the competitiveness of our operations as well as the benefits of recent improvements at 6 in the fourth quarter regarding our portfolio. We continue to advance the review of strategic items for the Great Falls Refinery, which we announced last quarter. We've had good interest in Great Falls given the choice. I call it to the asset and it's consistent performance even in the face of these current uncertain conditions.

When we realize that the pandemic would reach our Shores we activated our crisis teams and crisis plans this included establishing new protocols at our facilities to further protect the health and safety of our workers with those staff members that have the ability have been working remotely since we activated our contingency plans those who work directly within our refining and Manufacturing facilities are following guidance.

another key

Like for the quarter was a margin performance in our core, especially business which displayed solid growth across the quarter the 19.7% adjusted ebitdar margin in our core specially business increased three hundred thousand points versus last year's first quarter and specially segment adjusted gross profit was $41.32 per barrel a figure that grew up at 16% versus the prior Year's quarter would be strong margin results reflect much of the commercial efforts. We've undertaken in recent years that had the effect of improving the unit profitability in our Core Business primarily through sales mix in Richmond on just like five. I'd like to take a moment to touch on some of the things that I giving us confidence in Calumet ability to navigate this period of uncertainty

The resilience in our business is supported by the fact that we have a highly Diversified course, especially business with a portfolio products that touch and extremely wide range of end markets and industries wage. Is this slight highlights? This includes roughly 3,400 products shipped to 2700 customers across twelve thousand locations in more than ninety countries many of the industries and businesses that we sell are formulations to have also been deemed essential to the nation's economic infrastructure, which has a stabilizing effect on demand for our products.

Over the last two years we've revamped our food supply strategy to focus on developing the right mix of Niche producer relationships while maintaining Supply optionality wage understanding Supply quality back to the well head is important for a specialty producer or in terms of maximizing margin and product quality. And this is yielded us material benefits at the same time. We have enough connection to the broader markets to be able to capitalize on the discounts and pricing anomaly that we saw in March and on into the second quarter on the phone not finding side are grateful for funding continues to benefit from healthy local economics as the rookies region remains. One of the best markets for fuels margins also have no is the Great Falls prestige a particularly high quality asphalt which continues to attract the man from Far Beyond its local market and come ons good pricing across the country. This asphalt production has the ability to serve as a natural hedge to authors.

phenomics when other fields products see deteriorating margins

And finally, we stress test a host of scenarios in order to guide how we respond operational and commercially to events that negatively impact their mom. And as of right now the current environment where observe remains within our stress testing and contingencies. So presently we remain confident in our ability to not only whether the pandemic but participate in any subsequent rebound off. So with that I'll now turn the call over to keep it will give a more detailed look of our financial results for the quarter. Thank you Steve reflects or a headline Consolidated wage for the first quarter as you may have garnered from a release. We have harmonized our adjusted ebitda calculations to a single measure which excludes LCM and lipo impacts took the quarter revenue and adjusted leave it out or 692.5 million and 83.7 million respectively.

revenues decline nineteen

Percent versus the prior-year specialty declined 7% and fuels 27% this performance primarily reflected our actions to move away from less-profitable volumes. The specialty segment impacts related to the divestiture of some of the San Antonio Refinery and softening demands towards insulting the band towards the end of the quarter.

Despite the decline in revenues or even a 40% year-over-year and 68% sequentially adjusted earnings per unit of $0.28 Groom, meaning of versus the adjusted net loss of $0.07 in the prior-year and $0.23 of adjusted net loss in the prior quarter. These results are not only representative of our strategic emphasize profitable growth through focusing on value of a volume as Steve mentioned earlier, but diligence and controlling our operating costs.

157 we provide a detailed range of our consulate adjusted even the results relative to the prior-year.

The primary driver in the year-over-year increase was improved margin performance across both of our businesses our specialty segment margins grew by thirty eight million and fuels margins grew by 15.5 million compared to the prior-year specialty margins were driven by base oils and finish lubricants fuels margins were driven primarily by the improved WCS differential this meaningful year-over-year margin Tailwind in our businesses was partially offset by the 31.5 million Consolidated volume decrease the 19 million year-over-year volume reduction and loss statement reflects the impact of or divestment of the San Antonio Refinery as well as deterioration in the demand for gasoline and jet fuel towards the end of the end of the quarter the 12.5 off and volume reduction in our specialty business captures, primarily the impact form or mix rationalization efforts.

We had eight point 1 million. We had an eight point 1 million headwind of higher operating costs, which was primarily a function of the year-over-year impact from a friend's prices this more than offset operating and transportation cost improvements which were marginally lower compared to the prior-year.

Finally our sg&a results showed 7.1 million year-over-year benefit as we took actions to accelerate our sg&a reductions and better align or corporate operating costs will reduce portfolio took the San Antonio divestiture a fraction of the benefits were captured this year. But a majority of the cost savings will be captured across the rest of the year.

83.7 million up and leave it out for the first quarter is a solid reflection of the quality and stability of our business and the efforts we have made to continually improve our financial performance Friday highlight to a core especially segment operating results for the quarter, of course quarter, either the result of 64.5 million m x growth of 10% compared to the prior year and 50.7% sequentially specialty adjusted ebitda margins of 19.7% or strong results on an absolute and in a basis for the quarter margins grew by 310 basis points compared to the results from the first quarter last year and five hundred and ten basis points off and close relative to see so many weak or fourth quarter. First quarter goes profitable results of $41.32 per barrel marked a milestone Improvement going by 15.5

percent year-over-year and by

33.5% compared to Q4

this improved profitability across from our specialty business was driven by a number of factors including continued realization of our sales mix rationalization efforts. Marja capture from declining raw material cost fixed cost average from sales volume growth in solvents and waxes and cost reduction from crude sourcing optimization efforts, which drove margin performance across all product categories.

Trying to slide nine. We Bridge or first quarter Specialty Products and just leave it up to the prior-year.

Specialty margin growth contributed eighteen point five million in ebitda growth and more than offset, the 12.5 million Headway from lower volumes. Our operating costs across the business increase light bulb year-over-year these slightly higher operating expenses were offset by 1.3 million combined improvement from Target cost reductions in transportation and sg&a expenses bringing our first app order adjusted even a total of 64.5 million.

Improving the margin performance of our specialty business has been a key focal point of our transformation strategy. The result of this Focus has been apparent in our performance on the last few Quarters off flight ten highlights were a few segments results for the quarter.

Adjusted either results of 39.2 million increased compared to both historical periods growing 51.4% and 36.6% respectively compared to the prior-year and that's your quarters production volume averaged 64700 barrels per day of throughput which was a decline of 16% and 5.5% compared to the prior-year and the sequential quarter respectively. Please decline in production volumes as long as your function of the development of our San Antonio Refinery, which was sold at the end of October and the prior quarter.

However, it is worth noting that the negative volume impacts of removing San Antonio from the portfolio was partially offset by improved throughput Shreveport after its fourth-quarter around activity combined a record quarterly throughput at Great Falls this production volume increase at Shreveport and Great Falls reflects our investments to improve throughput came across these assets these though muted this quarter by the divestiture of San Antonio. These are valuable improvements or ongoing capabilities.

Gross profit from our results of $4.63 per barrel for the first quarter reflected the meaningful margin expansion. We delivered in the quarter improving 250% and 32.3% compared to the prior-year and the sequential quarters respectively. Our improved fuels adjusted either results was the beneficiary of white include them at the WCS WTI differential widened by over $7 compared to the prior-year this combined with the improved through for the performance drove driving fixed cost average wage is Martin Grove on a profile basis also benefited from the whitening WCS differential and better product mix at the Shreveport refinery.

11:00 we Bridge the fuels adjusted fee with a performance to the prior-year the most significant driver for performance was a $38 million Improvement in fuels product margins driven primarily by The Wider a wider WCS differential.

This improves margin performance was partially offset by lower fuel volumes driven largely by the divestment of the San Antonio Refinery the four point four million headwind of higher wage primarily reflects increase in rent cost compared to the last year and slightly higher maintenance costs. These are partially offset by a two and a half million dollar Improvement in transportation expenses and finally continued Improvement in sg&a for the segment runs out of our total adjusted even a result of $39 for the quarter. These are strong results for the business given the fluctuation in Chrome pieces fall into line for transportation fuels and the deterioration in fuel crack spreads. We observed during the quarter slide twelve.

Here, we reconcile our sources and uses of cash across the quarter as those of you who have been following your attorney note since 2016. We have emphasized cash flow performance to measure the results initiatives and improvements across our business. We open 2020 with 19 million of cash on hand. We generated 73.8 million from cash operating earnings, which was off by changes in net working capital which presented a headwind of 76.1 million due mostly to the significant volatility improved prices. We saw across the quarter and its impact on our payables and inventory home use

Capital expenditure Capital expenditures with a quarter where 24.5 million and we use ten point two million of cash for settling the working capital true up on the Samsung charger and acquiring problem requiring prologix.

In order to ensure we maintain a healthy balance of liquid capital on our balance sheet to deploy at our discretion we incurred.

122 million of net debt by accumulating cash leaving or quarter in cash balance at all. Almost a hundred and four million.

After the close of the quarter, we receive $31 million in funds on April 30th from five applications of the Small Business Administration. Payroll Protection Program.

513 this provides a snapshot for a key credit metrics which, which continue to show Improvement maintaining adequate liquidity is a key over point for our company as we navigate the current environment and as a quarter and we have roughly $326 of liquidity between the approximately $104 million of cash in hand and the $220 billion of available capacity on our revolving credit facility given the uncertainty that the covid-19 demek is introduced to the global economy and to reinforce the pursuit of our Management's intent to deliver positive free cash flow in twenty-twenty. We revised or capital investment forecast for the year after devouring after deferring several growth-oriented projects 2008. Our capital investment forecast is not expected to range between fifty to sixty million down for more original for past. Eighty to ninety million. We have also taken urgent actions wage.

the cost side in order to maintain some

Financial Health including the acceleration of our sg&a reduction efforts and implementing actions to capture a further twenty Thirty million of cost reductions bringing our cost opportunities to 4:50 million our leverage ratio of 4.4 times that the trailing-twelve-month adjusted ebit up increased sequentially and you're over a year or four point four times. The average level represents a half attorney improvement from the 4.9 times 4.9 times several. We saw in a year ago.

Our fixed charge coverage ratio improved the 2.1 * 0.1 turn on the two times racial a year ago and has consistently been above two times dating back to life indicative of our efforts to improve or cash flows relatives or fixed call.

Well overall level of equality is down year-over-year. Please keep in mind that our asset-based has been shrunk significantly through multiple non-core divestitures. This needed to fuel refineries that require higher levels of liquidity subsequent to the end of the quarter. We apply for and receive $31 million dollars of SBA Loans as part of the paycheck protection program at April thirtieth or liquidity was roughly $240 this step down in liquidity of the end of April, which is the traditional low point in our annual equation model reflected wage base redetermination reduction of approximately seventy million dollars the April interest payments and significant crude settlements on April on April 20th. Our stress testing of required liquidity in an extreme event has this operating our business with a Target minimum level of 250 million. This pandemic is an extreme stress event and we believed

Operating profile will be low supported by our available liquidity and cash flows with that. I will turn the call back over to Steve, please. Thanks, Keith.

I think it's important to help our investors understand where we are today given the challenges of the pandemic. We talked about the resilience of our business model and the diverse in markets and customer base that supports that so on slide 14. We provided a summary view of what we've been observing as we enter the second quarter across a snapshot of end markets that we serve.

We've listed 20 and markets here and our current perspective on how they're performing attempting to use GDP as a reference Benchmark based on today's conditions. The reality is that these twenty markets likely have another 20 plus sub-segments within them based on the bespoke nature of many of our products. So again, this is just a high-level overview and an attempt inform investors on how we're looking at our business. We understand that this broadcast is an exact and even the reference point of GDP contraction is very imprecise. However, we hope that they will give you a directional field for our experience.

as you can see on this graphic as

We attempt to align with economic activity. There are no real surprises. We have a mix of demand patterns or a line with what has been deemed essential. This is what has been slowed or stopped dead. We expect the stronger performing markets will hold their demand but pricing may feel some pressure moving forward. We do have examples of strong growth whether it be agricultural or check oils that are used to protect health and safety of fruit and vegetable crops up and Rico petrol items used in Pharmaceuticals and personal-care or are true fuel products used in landscaping equipment and people have been a home a lot during the pandemic. So there's been good demand there a Sheltering policies are reduced. We expect varying degrees of recovery patterns. Some will have fairly long rebounds and others will take longer to return to a more normal state of demand will continue to actively monitor this new and evolving landscape across our business and will respond as appropriate.

We have a solid base line of demand from customers that have been deemed essential and our position in their supply chain is to provide critical formulations and components necessary for them to continue making products and serving their respective customers consequently. We feel cautiously optimistic about our base level of utilization across most of our businesses.

Coming to slide sixteen where we've outlined our updated outlook for the rest of the year in our course specially business. We expect that our performance and growth will generally be in alignment with our end markets while we expect to face headwinds in the second quarter. Some of this downside volatility will be mitigated by the underlying diversity of our product mix and the wide collection of end markets that may serve.

And finally, we will continue to diligently manage the commercial an operational sides of the business with the purpose of maintaining cash flow positive throughout the remainder of the year.

And a few of business we know that our performance will benefit from some of our hedging activity, which has allowed us to lock in WCS differentials levels that are substantial wage than what is currently employed by commodity pricing. Notably. The Rockies pad for region continues to be a strong Niche refining Market with good economics package plan to run our Great Falls Refinery at high utilization rates. Finally a treat for the commercial execution of both the crude Supply team and products marketing has given us the flexibility to run the facility at High rates.

How close are prepared remarks on flight Seventeen which gives us a brief look of Calumet plus 100. It's timeline that really illustrates the pedigree we built in this business over the last century. We've spent the last forty-five years getting back to our true Roots as a Specialty Products company and there's a reason why we've been in this business for such a long time, although off Market space an element of uncertainty in the near-term Calumet business has weathered storms like this in the past and overcome periods in our markets and our economy's that was uncertain as what we face today. We not only have the people practices and business in place the weather the global pandemic, but we have one hundred years of learning and tribal knowledge under our belt. We will emerge from the other side, but we all emerge on the other side from a position of strength ready to restart our specialty growth with that. I'd like to turn the call over to the operator to open up the line for Q&A operate birth.

Have the reminder if you would like to ask a question, please press star then the number one on your telephone keypad.

Star one to ask a question. We will pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Greg Brody with Bank of America. Good morning guys. Can you hear me? Okay.

Yeah, I hear you. Good morning Grace. Welcome to your first call. See you up just a few here for you. You touched on the liquidity. So I'm just the first question is the PPP loans. Is that is that secured on a first-name basis? What is that? And then I think you said that 250 million is what you're targeting for Thursday. Can you expect any further adjustments in the borrowing base from here or or downwards or do you think it's fully Marxism to the market?

So let me answer. The first question. The PPP loan is an unsecured loan. So it's through the small business administration program under the cares off.

In terms of the borrowing base. I think we are marked to a level that we should not fall significantly below going forward. And the reason for that is as follows.

We moved most of our crude Supply through the supply and off-take agreement. What's in the borrowing base is primarily finished goods and off.

accounts receivables for the specialty business

And so as we see that there are still some crude moving through the ADL. But look at we recruiters today. I think that structural mark down isn't going to be a big problem for us going forward. So I think that 70 million while it hurt we are moving most of our crews going forward through this plan off date agreement.

Got it, and you if you think about it, it's recorded. I think you said you wanted to charge of the quiddity. Is that is that the swings and working capital that you see during a month how you came up with that? Number two fifty million is is really a measure of cash on hand and available liquidity through the abl that's how we would measure that number and so, you know, that number was developed was a lot of good work, you know back in 2015 2016 doing our worst time is in and out loss. And so that's a stress number and I believe that we are in a stressful event. So we are testing that theory and we are we are holding off. So the way to think of the two fifty in terms of how we ensuring we are there is a we're holding cash on hand and we're maintaining about a hundred million dollars. That's so odd.

to make sure that we have full discretion over what needs to be paid and

And so forth if you look at the availability under the ADL, we have, you know, a piece of the abl that is tied to the Grateful Dead flesh of a hundred million dollars so that piece you know is fairly fixed and that that won't fluctuate with crude. And so the the moving components that come down to the finished goods inventory a little bit of cruelly move through the abl and the accounts receivable for the Specialty Products. So I think that you know, the 250 is a good Target. We're seeing. It reflects the size of business we have and the type of business we have and we've adjusted how we manage our resources so that we can be a good stance. And and so that's all I think about

Got it. And you you provided you provided the the current Marcos observation and which is very helpful. I think if if you were to try to wait it out average that off that number would you have there for products? Is it your belief that you'll where do you fall in sort of relative to GDP?

How you think of perform this year?

You know we

We tend not to overlook try to you know, say where we will fall right? I think the the power of the slide was a show that we have diverse end markets off. The power of the slide is the share with you some of the observations that we are seeing in the demand for our products. We're not I can't tell you where we're going to come out this year like most companies, you know fighting was in front of us. And so what you see on that slide primarily is really the demand patterns that we are observing in April and May for our products, and so how those end markets would behave overall as a far more complex thing and I wouldn't even Garner to see how we will perform across a year.

Maybe you you would expect to benefit. Are you do you expect to benefit from the drop in crude in your margins this quarter? What when did you how quickly will see you trust your pricing to eliminate that benefit?

So I think the drop in crude as delivered good margins in q1 cuz it was freaking sharp. And and that's March is behaving as expected. I will let Scott address how he is defending our margins in Q2.

Thanks Greg for the question Scott were by her hair. Just maybe a bill. I'm gonna keep touching on we certainly received some additional margin left in in March is the crew dropped especially off of our our Specialty Products a little bit closer to the barrel and there's a there's a light effect. If you will on some of the prices now now the commercial team in the sales team work hard everyday objects to get the full value out of our of our Specialty Products, right and we pay close attention to the pricing but just in general Greg, we're seeing, you know, some volume fall off staying in Q2 overall pricing fall as well. But but we certainly don't expect to get back all the pricing down to the down to the current crude levels.

So I think you I think your number was about $40 per barrel getting back to 35.

I've sort of a good way to think about it or you think you're holding some of that.

Depends on the mix right? We're seeing good continued volumes in our products that are closer to the Branded size. So, you know engineered fuels true few little things have been very sticky and remember that you know on our base oils and solvents business. We had a Blackboard accrued so different, you know, while crude moves that it may affect the margins of different for different players that isn't industry, you know, we you know may come out differently it comes down to mix. So I jumped away from the question on liquidity. I believe you have another fifty million of secured capacity that you could raise.

Am I incorrect in that assumption? Would you actually consider a potentially raising more liquidity?

So I think when it comes to the Quality, we think we have ample we're defending what we have and working well with it. We do have that assist a million of security office in dentures. And another fifty under the general leans basket on the indentures was probably a hundred million. I think we think about that more along the lines of probably a tool to defend against off the coming, you know maturity in 2022. So if Capital markets do not reopen we have to think about that going current the complex wage of that or how we you know thing to refinance that so that's an arrow in the quiver that I don't think we need to pull here for liquidity cuz I think we are running the business operation on the well, but we also have to keep some of our you know, you know opportunities and levers for other things related to the capital structure.

I'm going to ask a question only because I did this last time I'm going to jump back into Q2. My daughter's ask questions. The last time I did that it wasn't so on behind me. So should I jump in a que or do you should I keep going to go ahead it's a busy day today. So a lot of burning so I'm just just for the details. You said you think things are progressing. They're do you help us understand this Dynamics? Like like who with the type of buyers you said the margins are much better in in the in Montana and that market key just kind of give us some cracks has been very very difficult the last couple of weeks off if you give us a sense of where that is today, and what's driving better the better Market.

Hi Greg, Bruce Bruce. Yeah, I think that was about three questions. I'll try to take all of them off. The process is on track nobody's withdrawn and not you know, what's been interesting to us is as people get in and understand the Dynamics of these markets. They get really excited about this asset Pet Force a good Market. You can pull governments tap on that you can whole state levels that's in Montana and you know in Great Falls, we've got an island in the middle of a sea of storms under the current market conditions. We ran a record Thursday the 27th and barrels a day in the first quarter running 28,000 right now as I speak to you which will be another record and this demonstrates the value of the page on the Strategic buyers are going to see that about it so that the second part of your question was well, where's that come from?

the

I would guide you to the eia stats, you know, they're pretty useful and you'll see that parent or did not get knocked down as far as National averages and the second thing you'll see if you look for it is that that's not a 3-2-1 crack spread Market. That's the market demand is just about balance between Diesel and gasoline and both headlights are talking about the collapse and gasoline, but you need to take a look at these it didn't fall and it didn't fall in the Intermountain region rebuild the diesel machine. That's basically the newest refiner in the country. We go to 30,000 barrel of a train there for years ago. And it's you know, we make two barrels of diesel for every barrel gasoline so Pat or is insulated from the national Dynamics and Great Falls is insulated from Penn or it's it's a really compelling story and then finally is both Steve and Pete referred to age.

We've gone ahead and secured that through the end of the year by head unit. So we're super excited about our position on there.

Got it, and then come down a little bit or tightened a bit WCS. What do you I would think that would probably continue but I took us what you what you think about that. Well, okay been watching that for most of my career and it's volatile, but it's Park $17 a barrel trendline and it doesn't move it's not going up. It's not going on. Everybody says it's about to change and here's all the reasons and nobody's been right yet. So, you know, we certainly like the Canadian crude position other thing to keep in mind is that we're inside any circle of a portion that are or curtailment, you know, where the first stop literally the first stop down the pipeline. So, you know, we don't see any issues with crude Supply pricing sorts itself out, you know with some short-term volatility. But as I said, we've hatched that through the end of the year

Broadcast that is that is a true me thank you for the time.

Thank you as a reminder. If you would like to ask a question, please press star at any number one on your telephone keypad. That is star one to ask a question.

And there are no further questions at this time.

Okay, thank you. So, this is Steve Morgan. So I'd like to close by again. Thanking our employees for the truly impressive job. They did in the first quarter.

We all know how much personal uncertainty family challenges lifestyle changes and simple fear. We've all had to deal with in these last months. So for our employees to be able to cope with all that and yet perform jobs at the highest level is humbling to see in the first quarter. Our safety performance was amongst our best ever and well below industry averages if nothing else shows how the team didn't miss a beat and took it to the next level keydata point at the same time as a new full-time member of the team myself watching this crisis unfold I was deeply impressed how we responded trucks kept running inventory, managed plan set new records and we capitalized on the volatility in the market. So if you want to understand the resilience of our business look no further than our team and what they accomplished in the first quarter. Thank you for your time.

Thank you. Ladies and gentlemen, that does conclude today's conference call. We thank you for your participation.

And then ask that you please disconnect your line.

Thursday Thursday