Q3 2025 Calumet Earnings Call

Speaker #3: Good morning and welcome to the Calumet, Inc third quarter 2025 results conference call . All participants will be in listen only mode . Should you need assistance , please signal a conference specialist by pressing the star key , followed by zero .

Speaker #3: After today's presentation , there will be an opportunity to ask questions . Please note this event is being recorded . I would now like to turn the conference over to John Kompa Investor Relations for Calumet, Inc .

Speaker #3: Please go ahead .

Speaker #4: Thanks , Chloe . Good morning everyone . Thank you for joining our call today . With me on today's call are Todd Borgman , CEO David Lunin EVP and Chief Financial Officer .

Speaker #4: Bruce Fleming , EVP , Montana Renewables and Corporate Development . And Stottlemyer EVP of specialties . You may now download the slides that accompany the remarks made on today's conference call , which can be accessed in the IR section of our website at Calumet, Inc .

Speaker #4: Also, a webcast replay of this call will be available on our site within a few hours. Turning to the presentation on slide two, you can find our cautionary statements.

Speaker #4: I'd like to remind everyone that during this call , we may provide various forward looking statements . Please refer to our press release that was issued this morning , as well as our latest filings with the Securities and Exchange Commission .

Speaker #4: For a list of factors that may affect our results and cause them to differ from our expectations . As we turn to slide three , I'll now pass the call to Todd .

Speaker #4: Thanks .

Speaker #5: John, and welcome to Calumet, Inc.'s third quarter 2025 earnings call. This past quarter was a strong one, both financially and strategically.

Speaker #5: Calumet generated $92.5 million of adjusted EBITDA with tax attributes and strategically . We're hitting the key milestones laid out earlier this year at Montana Renewables .

Speaker #5: We remain on schedule for our expansion in the first half of 2026 , and our SaaS marketing plan is pacing well ahead of schedule as the team has roughly 100 million gallons of post-expansion volumes placed through contracts , which are fully complete or in the final review step within our Doe process across Calumet , our cost and reliability initiatives are outperforming expectations , and our commercial organization continues to sell , growing production in sustainable , high margin accounts .

Speaker #5: Let me dig deeper into these themes , starting with cost , before turning it over to David for the financials in the third quarter .

Speaker #5: Calumet removed another $24 million of operating costs from the system versus the same quarter last year . Quite frankly , operations improved rapidly throughout 2024 , so much so that while we expected year over year progress to continue , we did expect a little tapering in the second half .

Speaker #5: Instead , the rate of savings accelerated this past quarter , which is a testament to the talent we have throughout the country and their willingness to take this initiative head on .

Speaker #5: Year to date , operating costs are $60 million lower versus last year , and we've mapped out a couple more years worth of excellence opportunities to continue moving the ball forward from here .

Speaker #5: Deeply connected to cost and just as important as reliability , which is advanced as well , year to date , production is up nearly 600,000 barrels versus last year , much of which is in our specialties business .

Speaker #5: On a unit basis . The combination of costs and reliability initiatives have reduced operating costs by $3.37 a barrel throughout the system , specifically to our specialty products and solutions segment .

Speaker #5: The third quarter marked a record production quarter , and despite softness reported across much of the broader specialty chemicals world over the past year , our commercial team again sold over 20,000 barrels a day of margins , well above $60 per barrel , we'll also rebuilding some inventory following the Shreveport turnaround .

Speaker #5: We also saw strong fuel on both the margin and volume front . This reinforces the core advantage of Calumet's integrated model . Specialties provide stable , strong , and growing baseline earnings , while fuels deliver more variable upside .

Speaker #5: Today , that excess cash flow is being used to reduce debt over time . It will fund further specialties growth last in specialties .

Speaker #5: I'd be remiss to not note continued growth in our performance brand segment . Year to date , EBITDA is up versus last year .

Speaker #5: Despite divesting the Royal Purple industrial business earlier in 2025 . We've implemented our top tier commercial excellence program across our brands and leveraged our deep specialty footprint , which is yielding tremendous results .

Speaker #5: Further , fuel is on track for another record EBITDA year . Even in a year that has been void of major Gulf Coast weather events .

Speaker #5: As the brand continues to grow, its position as a leader is benefiting from capturing space in over 4,000 new Walmart stores.

Speaker #5: Let's turn to slide four and dig a little deeper into Montana Renewables . During the quarter , we saw more key regulatory signals towards the industry recovery and specifically to MRL .

Speaker #5: We continue to fortify the advantage we have in all margin environments with great logistics costs and product mix . While the future is bright , the industry continued to see weakness in renewable diesel margins .

Speaker #5: In fact , during the third quarter realized margins across the industry were actually a bit lower than even the normal index margin formula would suggest .

Speaker #5: As the feedstock physical basis widened out , which means feedstocks were about $0.20 a gallon more expensive than a traditional cbot marker would suggest .

Speaker #5: Across the industry . We've seen this revert back during October , and we're back to the more normal environment where Cbot index margin is a correct industry signal .

Speaker #5: On an industry level , biomass based diesel production remains cut back at roughly 60% utilization . 2025 industry production volumes seem to be stabilizing just about 350 million gallons a month , which on an annualized basis is right about is right for the currently roughly 4.5 billion gallon implied rvo , which is made up of about 3.5 billion gallons of rvo plus roughly a billion gallons of shortfall .

Speaker #5: Another Rin classes , which are ultimately covered by deference . Separately , the Carry forward of 2024 Rins , which will expire shortly , creates temporary length in the deepwater in market .

Speaker #5: Against this backdrop of low industry utilization , we continue to see shutdowns occurring in industry . We look forward to an environment where biomass based diesel demand increases through a stronger rvo .

Speaker #5: Further , the regulators appear to be bullish on reallocation of the small refinery exemptions , which would add to the Rvo . These steps are expected to increase demand to the point where idled facilities would need to restart to meet the mandated demand .

Speaker #5: These restart decisions mean biodiesel producers need to be convinced they can confidently cover fixed costs . If not , the Rin will need to go higher or feedstock lower than them .

Speaker #5: This is a stark contrast to the past two years , where we've seen massive shutdowns , but also many hanging on at the margin and barely covering variable costs .

Speaker #5: With the expectation of an improved future environment . Of course , in the past , we routinely saw stable margins incentivizing the small biodiesel players to run in order to fill the d-4 Rin gap , and we're optimistic that when we see the finalized rvo margins will revert positively as they've done historically before the prior administrations .

Speaker #5: 2023 Rvo air Next . During the quarter , we completed our first $25 million PTC sale , moving this method of monetizing PTC is viable as expected , we subsequently sold another $15 million in October and continue to see our credits trending towards a more normal tax credit environment .

Speaker #5: After the 45 credit was extended through the Big Beautiful bill . Finally , momentum continues to build as we approach the launch of our expansion in the first half of next year .

Speaker #5: During the third quarter , we completed a test run to confirm our ability to generate 120 to 150 million gallons of SaaS to complete this test , we slowed down the plant for about a week , which cost us a couple million dollars worth of volume .

Speaker #5: But the test is successful and confirmed our ability to meet 120 to 150 million gallon target and supplied important data . That's being used in the final detailed engineering and optimization of our project .

Speaker #5: In addition to the technical work to de-risk the staff project , the team also is tracking well ahead of plan in placing the expanded volume .

Speaker #5: As I mentioned earlier , we have approximately 75% of our Max SAP expansion . Either contracted or within the final Doe review process .

Speaker #5: As we sit here today and we're comfortably positioned to have all of the volume placed the next time we talk . Like we mentioned last quarter , our offtake is shaping up to be a diversified slate of direct physical customers .

Speaker #5: Airlines , Fbos and scope three customers of varying sizes , some of which are large multinationals who routinely envision . When you think of carbon reduction initiatives , and some of which are more boutique customers in many ways , the SAP business highly resembles our specialty products business , where the ability to be flexible on logistics go to market and varying ways to suit a wide range of customer needs , and selling all types of sizes make us preferred and differentiated supplier .

Speaker #5: Unlike a large fuels business , this volume doesn't all just go in a pipe and disappear . It's concerted sales effort where we work with one airport at a time , one airline at a time , or one sassy credit buyer at a time and a supply chain .

Speaker #5: We've managed individual rail cars and trucks carefully controlled quality and blend the product through a deep logistical network . That creates value in this business .

Speaker #5: And we have been doing it for decades . In fact , you may have seen a press release last week where our physical truck rack opened for SaaS sales in Montana .

Speaker #5: What this means is that we can sell physical barrels in truckload volumes , and in some cases to the same regional outlets we've been selling for years .

Speaker #5: We can deliver the full physical barrel and leave the credits with the customer . Our pull off the scope one and scope three credits sell those and generate the same staff premium and save a lot of money on logistics .

Speaker #5: Of course , we also continue to sell physical SAP barrels via rail into the West Coast , Midwest and Canada , and we expect it to continue as a large and important piece of our business .

Speaker #5: We could sell all of our volume to either of these markets , and at the end of the day , we're optimizing across them to find the most diversified , stable and highest netback customer base for Montana renewables .

Speaker #5: And we continue to place the volume with the staff in the 1 to $2 per gallon range . We've discussed historically , this premium is 1 to 3 , received a lot of discussion over time .

Speaker #5: We've discussed the chart on this slide before , which suggests that global supply and demand is largely balanced . In 2025 , and that turns to a supply deficit in 2026 .

Speaker #5: That gap grows each year as the European mandates and other global mandates step up . Interestingly , early on we received questions around this outlook , which really fit into three general categories .

Speaker #5: One was Will Europe really increase their volume mandate ? Two , will voluntary demand grow ? And three , weren't we underestimating new supply ?

Speaker #5: Let's start from the back . Our view and modeling the supply demand balance was very conservative on voluntary demand . And therefore the base model also doesn't add new build supply .

Speaker #5: We conservatively assume that voluntary demand remained unchanged from 2024 throughout the ground. If that's the case, we wouldn't expect new supply to come online.

Speaker #5: In reality , what's occurred is a bit more bullish . We've seen cancellations and delays of global mega projects is a pause and observe international growth and domestic tariffs , and Rin policy .

Speaker #5: Also , we've seen voluntary demand growing nicely . I mentioned earlier that we've adjusted our strategy to take advantage of this . As we see a real opportunity with truck and railcar quantities as fast as voluntary markets across a broad range of airports and fbos .

Speaker #5: And we're selling quite a few scope three credits to airlines and large multinationals on a voluntary basis . In fact , Montana renewables staff has set up on every major scope one and scope three registry that exists .

Speaker #5: We believe this readiness, the relationships, and the progress on logistics all equate to a meaningful early mover advantage. We look forward to capturing this immediately upon the startup of our back shop.

Speaker #5: 150 project . The last question I mentioned above is European demand . And I think we've seen clear signs that volume mandates are in fact increasing in Europe .

Speaker #5: In fact , we've seen European prices increase approximately 60% over the past six months . While feedstock prices have remained essentially flat . We've even seen meaningful fines defined for participants that don't meet their quotas , which have been said to be up to $2,700 per ton .

Speaker #5: Or for us imperial measurement thinkers , nearly $8 a gallon . And even then , the participant doesn't shed the requirement to purchase this at .

Speaker #5: We believe these developments mean that the SaaS premiums were contracting . Will continue to be strong , and we look forward to relying on our roots as a customer focused and service oriented provider .

Speaker #5: And parlaying that with our first mover advantage into a rapidly expanding leadership position in sustainable aviation . Fuel . With that , I'll turn the call over to David to take us deeper into the quarter .

Speaker #5: David . Thanks , Todd . Before I get into the quarter results .

Speaker #4: Let me address an error .

Speaker #6: In our in our reported Q1 and Q2 2025 cash flow statements , which we discussed in an eight K filing this morning in accounting for a series of transactions during the first quarter , we misclassified debt extinguishment costs and inventory financing flows as cash flow from operating activities rather than cash flow from financing activity .

Speaker #6: The correction of the error will result in approximately $80 million increase to cash flows from operations for the first quarter , total free cash flow .

Speaker #6: The income statement , balance sheet and adjusted EBITDA all remain unchanged , and we will restate Q1 and Q2 financials alongside our Q3 filing .

Speaker #6: With that , let's get into the quarter . We reported $92.5 million of adjusted EBITDA during the quarter , which was the strongest quarter in a number of years .

Speaker #6: We were able to reduce our restricted group debt by over 40 million , despite the third quarter being our largest cash interest period of the year .

Speaker #6: Deal continues to be a strategic priority , which we expect to continue in Q4 , given the strong business performance further , during the quarter and after the ruling on the small refinery exemptions , we reduced our outstanding balance sheet rate obligation by over 320 million .

Speaker #6: As Todd mentioned, we also sold our first $25 million of peaks at MRL, demonstrating the ability to turn those into cash as the market has opened up and started to normalize following the passage of the One Big Beautiful Bill Act.

Speaker #6: We look forward to more ratable monetization over of our tax credits over the coming periods . Turning to slide five . Our specialty products and Solutions segment generated $80.2 million of adjusted EBITDA during the quarter .

Speaker #6: The third quarter of 2025 reflected the strong commercial momentum in our specialty products portfolio , as well as the benefits of our overall improved reliability and cost discipline .

Speaker #6: This was the fourth consecutive quarter that our specialty products posted . Sales volume exceeding 20,000 barrels per day , and coupled with strong margins , we continue to demonstrate the resiliency of our specialty business despite broad industry chatter over the years , specialty markets have been a little soft .

Speaker #6: Our sales team has demonstrated the continued ability to take advantage of our integrated asset base and diversified , diversified markets to continue to place our products at over $60 a barrel .

Speaker #6: Further , we posted third quarter production volume gains of 8% compared to the prior year . Our production has growing reliably over the past few years as we've improved our operating discipline , and we look forward to continuing that trend through the remainder of the year and into next year .

Speaker #6: Our steady production environment also enabled the capture of stronger crack environment as fuel margins increase significantly year over year , which we view as upside in our integrated model .

Speaker #6: As we continually optimize and product yields to capture market opportunities . To begin this year , we gained access to a new crude oil supply chain , including the ability to target specific segregated or blended crudes in Cushing and further north in the DJ basin .

Speaker #6: At the same time reducing our pipeline tariff year to date . This improvement has driven $15.3 million decrease in transportation costs and provides even further ability to dial in our assets and feed to a specific use .

Speaker #6: We remain focused on driving additional operational improvements in the segment , and look to further reduce our costs per barrel in the segment .

Speaker #6: As we said during our second quarter earnings call , strong operations to not only increase volume and reduce costs , but also supports increased margin as well as it allows our commercial teams to place more volume to secure contracted homes rather than relying on spot market sales .

Speaker #6: Moving to slide six and our performance brand segment , we are pleased to post another strong quarter driven driven by our Commercial excellence program and growing recognition of our brands .

Speaker #6: You'll remember that we sold the Royal Purple Industrial business earlier this year , and despite that EBITDA being fully reflected in the prior year financials and not this quarter's , the segment was essentially flat year over year .

Speaker #6: We also continue to benefit from our integration strategy as we gear up to target markets that best unlock the intrinsic value that exists in our ability to vertically integrate where and when it makes sense to do so .

Speaker #6: Last , as Todd mentioned earlier , the third quarter results reflected strong volumes and margins in our truth brand . Not only is true fuel growing on the shelves and with brand awareness , it's also benefiting from favorable procurement initiatives and successfully leverage its growing volume over the past couple of years .

Speaker #6: Moving to slide seven , our Montana Renewables segment generated adjusted EBITDA with tax attributes of 17.1 million in the third quarter , compared to 14.6 million in the prior year period .

Speaker #6: Montana Renewables specifically hosted slightly negative EBITDA , with tax attributes of 3.5 million for our 87% share . As I mentioned earlier , we successfully monetized 25 million of Dtcs during this third .

Speaker #6: During the third quarter and continue to monetize Ptcs at improving price levels as we continue to expect to trend towards roughly 95% capture on those sales .

Speaker #6: Earlier , you heard about the SaaS test run that was important de-risking our project . And this run meant the unit slowed down temporarily during the quarter , resulting in a couple million dollars of loss margin , alongside some wider than normal feedstock basis , which increased feed costs temporarily more than ran offsets .

Speaker #6: And this as reset to a more normal level . More normal levels here recently . While we've gained a lot of regulatory clarity this year , the industry is now just waiting for the rules to be finalized .

Speaker #6: With that in hand , we believe the business is set up for a strong recovery in 2026 . Based on the preliminary rvo targets that were announced by the Trump EPA .

Speaker #6: Fortunately , the core building blocks of our renewables business are key customers cost advantaged asset , unmatched feedstock and end market proximity , and an improving yield .

Speaker #6: Slate remain intact . Combined with our relentless focus on cost and reduction , we remain well positioned for the expect to inevitably occur once we see the EPA land the proverbial plane on the Rvo .

Speaker #6: In fact , our operating costs , excluding SG&A , reached $0.40 per gallon rebound that we was our eighth straight quarter of improvement , excluding a turnaround in the fourth quarter of 2024 .

Speaker #6: In the interim, we continue to increase our outlets for SaaS, as demonstrated by our recent announcement on site blending and shipping capabilities.

Speaker #6: Initial distribution is through Egts fuels network , and they are already proving to be a strong partner on site blending capabilities enables sales from the truck rack to local and regional service .

Speaker #6: Further broadens the staff market outside of major airports . This investment also allows us to strip credits and monetize staff outside of direct off takers .

Speaker #6: On the Montana asphalt side , the third quarter is typically a good one . This quarter . In particular , we saw one of the strongest quarters in recent memory , and a $14 million year over year gain .

Speaker #6: Our polymer modified asphalt business continues to be an advantage , as well as the niche fuels distribution . And with costs dramatically improved , we were pleased to see the impact on the bottom line this quarter .

Speaker #6: Thank you for your time today . We remain focused on driving meaningful free cash flow generation as we conclude 2025 , while steadily marching towards major value , creating opportunities at rest ahead for our shareholders .

Speaker #6: With that , I'll turn the call back to the operator for any questions . .

Speaker #3: We will now begin the question and answer session to ask a question . You may press star , then one on your touch tone phone .

Speaker #3: If you're using a speakerphone , please pick up your handset before pressing the keys . If at any time your question has been addressed and you would like to withdraw your question , please press star then two .

Speaker #3: At this time we will pause momentarily to assemble our roster . The first question comes from Alexa Petric with Goldman Sachs . Please go ahead .

Speaker #7: Hey good morning , team , and thank you for taking our question . My first question is just on as we think about the Max app expansion .

Speaker #7: And I think you've also talked about being on track to do 120 to 150 million gallons of annualized production in two . Q what are the gating items and just , you know , as we think about operations on the ground , what are what are some of the checklist items ?

Speaker #5: Hey .

Speaker #8: Alexa , this is Bruce . Very little . Frankly , you know , the the unit as we stood it up back in 2022 was known to have some latent capacity .

Speaker #8: And we've got a couple of tactical constraint removal things that we'll do during the scheduled turnaround . A few tens of millions of dollars .

Speaker #8: So , you know , we're we're pretty excited about the leverage that implies on our cost of goods sold , including the capital charge and the reason we've raised the output is , you know , we'll we'll see about catalyst performance in the new configuration .

Speaker #8: Probably we're being a little conservative there , but give us you know , give us some room to grow into that . Maybe .

Speaker #7: Okay . That sounds good . And then can you talk a little bit about some of these offtake agreements ? I think there's also some commentary that you've been in some final conversations as well .

Speaker #7: Where do those stand ?

Speaker #8: So the Bruce again , thank you . The the way that we've set this up is the same thing we did in 2022 .

Speaker #8: Pre-commissioning of the whole business . So last April , I asked our marketing team to go ahead and pre sell the increase in staff that will be coming in spring .

Speaker #8: So we're you know , we're halfway through that 12 month program to get it placed . And we're well above halfway through signing people up .

Speaker #8: So you know there's a mixture of executed and in service contracts . There are a couple of material contracts that are effectively complete , but require the Doe to approve them .

Speaker #8: And so they're with the Doe . And then we've got a pipeline of additional origination that we're pretty excited about . So as I as I said a second ago , as we probably grow into maybe more capability than we've advertised , we've got the customer standing by to pick that up .

Speaker #8: You know , the market shows every characteristic of being supply short . And we're we're again , I can't I can't overemphasize how exciting this is .

Speaker #7: Sounds great . Thank you guys I'll turn it back .

Speaker #3: The next question comes from Amit Dalal with H.C. Wainwright . Please go ahead .

Speaker #9: Thank you . Good morning . Everyone . Congrats on the pretty solid results from Montana Renewables . I know you touched on it a little bit , but the gross margin issue is it primarily stemming from the current market conditions or is there anything in the sort of production ramp that you are playing with that may be causing near-term pressure ?

Speaker #5: Hey man , it's Todd . No , I think nothing outside of of what I talked about in the prepared remarks earlier . You know , we I'd say there were a couple of things .

Speaker #5: Abnormal to the quarter . One one to us and one to industry as a whole . The one to us was , you know , we talked about something , the volume a little bit to to run the tests that that Bruce was talking about .

Speaker #5: But you've given us a lot of confidence around our ability going forward on max staff . So a couple of million gallons and obviously that's that's back to the full capacity .

Speaker #5: And then the other one that was more, I'd say, just broader industry, as typically all feeds just trade off of an index to CBOT.

Speaker #5: And there's always a little bit of lag . And , you know , there can be volatility from time to time . That over time just balances out .

Speaker #5: And what we saw during the quarter was a blowout into physical basis . So feedstock was extended to call earlier about $0.20 a gallon more expensive than our normal index margin .

Speaker #5: You know thinking would imply . So so basically $0.20 outside of severity . Now that's fixed . They'll be times when it's a little bit better than that .

Speaker #5: Right . So there's a little bit of volatility of course between the grades . And that's something that gives us the ability gives us an advantage to switch quite frankly over time .

Speaker #5: But industry did see that . In the in the quarter . And again you kind of add that to the downtime . And volume .

Speaker #5: And that really speaks to the probably the difference between this quarter and last quarter .

Speaker #9: Thank you for that . And , you know , just another just a follow up sort of on that . What's the primary feedstock you're using for the MRL right now .

Speaker #8: A I'm at this is Bruce . You know , there's there's not a primary feedstock . One of our key competitive advantages is short supply chains that can access any of the principal classes of feed .

Speaker #8: And we are very , very dynamic as we re-optimize each month , we think that we're we're gaining competitive advantage versus some of our peers with longer supply chains .

Speaker #8: And , you know , we shift gears very , very quickly . With that said , you know , if you wanted to think broadly , you can think one third vegetable oil , one third corn oil , and one third tallow and cooking oils .

Speaker #9: Okay . That's helpful , Bruce . Thank you . Just last one for me . You know , when you sort of look at 20 , 26 , it looks like the operating side of the story is , you know , running pretty well .

Speaker #9: Most of the risks and opportunities based on , you know , how the macro plays out for you guys .

Speaker #5: Yeah , I think as a whole , as we step into 2026 , we're quite excited for a number of reasons . One , and you mentioned it operationally .

Speaker #5: We've we've made some real improvements and expect to to not only keep those but build on those improvements going forward . And then of course , as we look at the regulatory environment , the overhang that's been in Montana , renewables specifically and all of , you know , biofuels , quite frankly , is , is being removed .

Speaker #5: So so the rvo that's plagued us for 24 to 25 , you know , is , is going to get finalized here soon .

Speaker #5: And , and will , as we've said , kind of routinely expect to lift up industry margins . And and that's a major deal .

Speaker #5: Right . We've we've barely been floating above above break even this year , which we're happy to do in a in extreme depressed , extremely depressed environment .

Speaker #5: But as , as the whole industry returns with with better , better macro environment , we're really going to be able to take advantage of that .

Speaker #5: And then of course , third is outside of index margin . Just the ability to add staff is is a major ability , right ?

Speaker #5: It's it's major upside . And it's also major de-risking because we'll be less susceptible to just general RT index margins going forward because of the Saft premium .

Speaker #9: Yes . Understood . Thank you guys . That's all I have .

Speaker #4: Thank you .

Speaker #3: The next question comes from Jason Gabelman with TD Cohen . Please go ahead .

Speaker #10: Yeah . Hey . Morning . Thanks for taking my questions . I don't believe there was much talk about small refinery exemptions in your prepared remarks .

Speaker #10: So, just wondering how that impacts one. Your financials directly. And to your view on the Rin balances moving forward.

Speaker #8: Hey , Jason . Bruce , I think that's probably a two parter , but redirect me if I if I'm off target . The you know , our two small refineries you could you could call them micro refineries by industry scale have always qualified on the merits .

Speaker #8: We we're confident we will continue to do so . When you come to carry forward you know we're we're all waiting for the the EPA to process the public comments , which I'm sure they've received 17TB of .

Speaker #8: But , you know , that's a that's a policy question . And we'll all find out together . Am I am I responsive to your interest .

Speaker #10: Yeah, I guess I'm just wondering more directly if there's any impact from the exemptions that were granted. If there was any financial impact to you, positive or negative?

Speaker #8: Well , David , David covered that . You know , as you're as you're aware , the the balance sheet has had a , an inventory accounting style accrual .

Speaker #8: While all of our cases were pending . Now that they've been resolved generally favorably , you know , we've we've extinguished 80 plus percent of that and figure I believe David was 329 million .

Speaker #6: So yeah Jason and I so you'll see that we reduced our outstanding in obligation related to the granted small refinery exemptions . And so it was kind of roughly a $320 million reduction in that outstanding obligation .

Speaker #6: As reported on the balance sheet .

Speaker #10: Okay . Got it . Thank you for that . And then on the comments around kind of feedstocks impacting three q MRL results , it sounds like that's been alleviated in the near term here , but I'm wondering what do you think caused that feedstock tightness .

Speaker #10: And if we get a ramp up in renewable diesel capacity as a result of a more bullish 2026 Rvo , is there a potential that feedstock prices can tighten again and and impact your margins , or do you see the three Q impacts as very transitory in nature ?

Speaker #5: Hey Jason , it's Tom . I'll start off and see if Bruce wants to jump in . We think as a transitory event it happens , right ?

Speaker #5: The there's there's general lag on the physical side that happens from time to time . We see the same thing in the crude oil markets .

Speaker #5: When you get an Overbuild or shortness just due to kind of a physical near-term , you know , glut or shortage . And like Cushing for example .

Speaker #5: So I don't think that it's anything that that we should think about changing any sort of long term view . In fact , you know , if you go back over time , you know , there's never been a lasting , you know , difference to seaboard outside of outside of CI parity .

Speaker #5: And we wouldn't expect that to change . So so this is kind of just normal volatility . We've seen times where it's where it's helpful this quarter .

Speaker #5: It you know it was it was it was negative for the industry . But I don't see anything that would impact that going forward .

Speaker #5: In fact you know we have so much more capacity and availability of feedstocks than than even the the current currently forecasted rvo would suggest that it's hard to imagine a feedstock shortage , even if there was , you should see that play out through kind of the base .

Speaker #5: Margin and not not some sort of physical basis . Differential .

Speaker #10: Okay , great . Thanks for the answers .

Speaker #5: You bet .

Speaker #3: Again , if you have a question , please press star then one the next question comes from Greg Brody with Bank of America .

Speaker #3: Please go ahead .

Speaker #11: Hey guys , I don't normally do this , but congrats . A lot of lot of great developments this quarter in particular . Probably removing the Greg Brody slide is is one of the big ones .

Speaker #11: But just operationally you guys really should made a lot of improvements . So congrats to everybody . I just to second , maybe you mentioned the deleveraging is still the priority .

Speaker #11: You're starting to generate cash . Can you talk a little bit about what's what you think is next to sort of help address the maturities .

Speaker #11: And just to give us a sense of how you're thinking about it today .

Speaker #5: Yeah , sure . I'll take it and see if David wants to to jump in . You know , I . Think mentioned last quarter , we expect cash flow from cash flow from the business , particularly in the second half , to be strong and and that along with the RPI sale earlier in the year , is adequate to knock out the 26 notes .

Speaker #5: So , so we kind of look past that . And as you think about 27 maturity management after that . And our ability to deliver , you know , it includes cash flows from , from organic operations .

Speaker #5: It includes potential strategic activity . Like we said , as long as it's , you know , accretive to both the debt and the equity and doesn't take away anything from our from our integrated story .

Speaker #5: So that remains an option . And of course , ultimately , it's it's a partial monetization of Montana renewables . So not not a lot to change there .

Speaker #5: We're just working the game plan here as , as you know , we look forward to an ultimate taking that ultimate step on on MRL .

Speaker #5: And as we talked about a lot during the call , you know , the next the next milestone in doing that is , is demonstrating the success of this Max staff expansion and seeing the the Rvo firmed up and think with a couple strong quarters on the heels of those events will be in place to take that final step .

Speaker #11: And you know , sort of refinancing some of the 27 is that that's part of the the patient potentially .

Speaker #5: Yeah . Look , I think , I think Refinancings are always and just managing the timing are always part of just the general , you know , menu .

Speaker #5: As we sit right here today , we don't have anything active or anything . You know , specifically in the plan . But but bigger picture .

Speaker #5: We're looking to execute the longer term deleveraging strategy , which is a reduction of an additional 600 to $800 million of debt . So , you know , we have plenty of opportunities to do that .

Speaker #5: So if there was some sort of opportunity or reason to , you know , have refinancing as , as part of that , then we'd certainly be happy to do that in a step of optimization .

Speaker #5: But most importantly , we're focused on kind of . The organic cash flows , you know , potential strategic activity and and , you know , monetization of Montana renewables to permanently reduce that debt .

Speaker #11: Great . And one last one for you . You mentioned you you've started to be able to monetize the PTC . What's been the realizations on those in terms to the how much of a discount to the actual PTC EBITDA ?

Speaker #11: Are they are you realizing ?

Speaker #6: Yeah . So , you know , you have to go back the PTC were kind of new at the beginning of this year , and kind of weren't fully , clarified until kind of the big beautiful bill .

Speaker #6: And even today , some of the ultimate kind of final rules aren't aren't even completed . I think we expect over time to kind of monetize kind of closer to 95 .

Speaker #6: I think the initial monetizations were probably, you know, closer to 90. And then we continue to kind of close the gap as we monetize more and have more term sheets as we kind of look further out.

Speaker #6: And so , you know , we've seen the market get a lot kind of deeper and a lot more interest as they normalized , you know , earlier in the year , it was , you know , kind of still new for people to digest .

Speaker #11: And it's it seems like the activity picked up in monetization should should we expect it pretty consistently now every quarter , or is there are there are there some market dynamics we need to think about ?

Speaker #6: No , I think , you know , we expect to kind of monetize the more rapidly . Todd mentioned his remarks that we also monetized , you know , a portion in October .

Speaker #6: And so, you know, we're just kind of working through them.

Speaker #11: Yep . All right , guys , thanks for the time . And congrats again .

Speaker #5: Thanks , Craig .

Speaker #3: This concludes our question and answer session . I would like to turn the conference back over to John Kompa Investor Relations for Calumet .

Speaker #3: For any closing remarks .

Speaker #4: Thank you , Chloe . And on behalf of Todd and the entire management team , I'd like to thank our shareholders for joining our call today .

Speaker #4: And continued support . Have a great rest of the day . Thanks .