Q2 2026 Calumet Inc Earnings Call

August 7, 2026

Speaker #1: Good day and welcome to the Calumet, Inc second quarter 2026 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.

Operator: Good day. Welcome to the Calumet, Inc. Q2 2026 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. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to John Kompa, investor relations. Please go ahead.

Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchtone phone.

Speaker #1: To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn. The conference over to John Kompa, investor relations.

Speaker #1: Please go ahead.

Speaker #2: Thanks, David. Good morning. Thank you for joining our second quarter 2026 earnings call. With me on today's call are Todd Borgman, CEO; David Lunin, EVP and Chief Financial Officer; Bruce Fleming, EVP Montana Renewables Incorporate Development; and Scott Obermeier, President Specialties.

John Kompa: Thanks, David. Good morning. Thank you for joining our Q2 2026 earnings call. With me on today's call are Todd Borgmann, CEO, David Lunin, EVP and Chief Financial Officer, Bruce Fleming, EVP, Montana/Renewables and Corporate Development, and Scott Obermeier, President, Specialties. You may now download the slides that accompany the remarks made on today's conference call, which can be accessed in the investor relations section of our website at calumet.com. 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. I'd like to remind everyone that during this call, we may provide various forward-looking statements.

John Kompa: Thanks, David. Good morning. Thank you for joining our Q2 2026 Earnings call. With me on today's call are Todd Borgmann, CEO, David Lunin, EVP and Chief Financial Officer, Bruce Fleming, EVP, Montana/Renewables and Corporate Development, and Scott Obermeier, President, Specialties. You may now download the slides that accompany the remarks made on today's conference call, which can be accessed in the investor relations section of our website at calumet.com. 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. I'd like to remind everyone that during this call, we may provide various forward-looking statements.

Speaker #2: You may now download the slides of the accompanying remarks made on today's conference call, which can be accessed in investor relations section of our website at calumet.com.

Speaker #2: 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 #2: 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 SEC for a list of factors that may affect our actual results, and cause them to differ from our expectations.

John Kompa: Please refer to our press release that was issued this morning, as well as our latest filings with the SEC for a list of factors that may affect our actual results and cause them to differ from our expectations. As we turn to Slide 3, I'll now pass the call to Todd.

Speaker #2: As we turn to slide three, I'll now pass the call to Todd.

Speaker #3: Thanks, John. Good morning and welcome to today's call. The last time we were together, we expressed that this year was setting up a lot like 2022, and the second quarter delivered on that with 175 million dollars of adjusted EBITDA with tax attributes.

Todd Borgmann: Thanks, John. Good morning and welcome to today's call. The last time we were together, we expressed that this year was setting up a lot like 2022, and Q2 delivered on that with $175 million of adjusted EBITDA with tax attributes, despite starting the period with three planned turnarounds in Princeton, Cotton Valley, and Montana Renewables. Just as important as the quarterly earnings is what they mean for Calumet's strategic positioning. Our restricted group leverage ratio is now below 4x, and with the phase I of our MaxSAF 150 expansion behind us and strong cash flows in all businesses, we're expecting to surpass 3x next quarter. About a month ago, we called $100 million of notes, and last week we terminated the sale leaseback of our CMR truck rack with $115 million repurchase, eliminating that high interest debt.

Speaker #3: Despite starting the period with three planned turnarounds in Princeton, Cotton Valley, and Montana Renewables. Just as important as the quarterly earnings is what they mean for Calumet's strategic positioning.

Speaker #3: Our restricted group leverage ratio is now below four times, and with the first phase of our Max Cap 150 expansion behind us and strong cash flows in all businesses, we're expecting to surpass three times next quarter.

Speaker #3: About a month ago, we called 100 million dollars of notes, and last week we terminated a sale leaseback of our CMR truck rack with 115 million dollar repurchase, eliminating that high interest debt.

Speaker #3: The outlook is for continued and accelerated deleveraging from here, so the conversation today is increasingly about what our self-funding and growing platform does next.

Todd Borgmann: The outlook is for continued and accelerated deleveraging from here. The conversation today is increasingly about what our self-funding and growing platform does next. Let's turn to Slide 4, and we'll start with our specialties business. We've long talked about our integrated specialties strategy, and this quarter we saw it in spades. Our routinely high-margin specialty products are exposed to an extremely favorable market dynamic we'll hit on momentarily. As we've discussed previously, our specialty products are sourced from crude oil, which is a competitive advantage since relying on sourcing intermediates in the current market is a challenging position given the value of those intermediates to fuels processors and the scarcity of them in general. Further, processing crude to generate specialties means we're exposed to the fuels and asphalt co-products that are generated during production as well.

Speaker #3: Let's turn to slide four, and we'll start with our specialties business. We've long talked about our integrated specialty strategy, and this quarter we saw it in spades.

Speaker #3: Our routinely high margin specialty products are exposed to an extremely fair favorable market dynamic, we'll hit on momentarily. As we've discussed previously, our specialty products are sourced from crude oil, which is a competitive advantage since relying on sourcing intermediates in the current market is a challenging position given the value of those intermediates to fuels processors.

Speaker #3: And the scarcity of them in general. Further, processing crude to generate specialties means we're exposed to the fuels and asphalt co-products that are generated during production as well.

Speaker #3: I'll take us a little deeper into the underlying drivers of the current specialty markets. Last quarter, we talked about the disruptions in the global energy market and their expected impact on diesel, which drives solvents pricing at Cotton Valley, and lubes, which we make in varying forms at Shreveport and Princeton, and then upgrade further at other sites.

Todd Borgmann: I'll take us a little deeper into the underlying drivers of the current specialty markets. Last quarter, we talked about the disruptions in the global energy market and their expected impact on diesel, which drives solvents pricing at Cotton Valley, and lubes, which we make in varying forms at Shreveport and Princeton and then upgrade further at other sites. We've now seen this impact of global disruptions on the market in real time. Historically, our industry produces a little over 700,000 barrels per day of paraffinic base oil globally. At the highest level, it's been well balanced with demand. Today, over 10% of that capacity is offline, leaving the market structurally imbalanced. Historically, the Middle East and United States were the two large export hubs, each of which were supplying about half of the base oils imported elsewhere throughout the world.

Speaker #3: We've now seen this impact of global disruptions on the market in real time. Historically, our industry produces a little over 700,000 barrels per day of paraffinic base oil globally, and at the highest level it's been well balanced with demand.

Speaker #3: Today, over 10% of that capacity is offline, leaving the market structurally imbalanced. Historically, the Middle East and United States were the two large export hubs, each of which were supplying about half of the base oils imported elsewhere throughout the world.

Speaker #3: With a third of Middle Eastern capacity fully or partially offline from the Iranian War, that export capability has turned upside down. A disproportionate share of that is group three, which is an even worse shape than the broader lube oil market, although the shortfall in group three has meant changes in formulations increasing group two demand in motor oil segment.

Todd Borgmann: With a third of Middle Eastern capacity fully or partially offline from the Iranian war, that export capability is turned upside down. A disproportionate share of that is Group III, which is in even worse shape than the broader lube oil market, although the shortfall in Group III has meant changes in formulations, increasing Group II demand in motor oil segment. About half of Calumet's paraffinic base oils are Group II. Europe has lost roughly a third of its Group I base oil production during the Russia-Ukraine War, creating a shortage of that grade as well. Group I's typically tailored to industrial applications and represents the other half of Calumet's paraffinic base oil production. Pre-war, Europe was essentially balanced in supply and demand, but has now joined Asia as an extremely short market. In short, there's simply not enough base oil to go around.

Speaker #3: About half of Calumet's paraffinic base oils are group two. Further, Europe, has lost roughly a third of its group one base oil production, during the Russia-Ukraine war, creating a shortage of that grade as well.

Speaker #3: Group ones typically tailored to industrial applications, and represents the other half of Calumet's paraffinic base oil production. Pre-war, Europe was essentially balanced in supply and demand, but has now joined Asia as an extremely short market.

Speaker #3: In short, there's simply not enough base oil to go around. Further, logistics costs to ship oil around the globe have ballooned, given the shortage of vessels and skyrocketing insurance costs.

Todd Borgmann: Logistics costs to ship oil around the globe have ballooned given the shortage of vessels and skyrocketing insurance costs. Combine these elements with the refining industry already running at record utilization with no room to process more, and you have a setup that is unlikely to be resolved quickly. Calumet is fortunate to have landed on the right side of each of these global dynamics. Our crude supply is largely domestic, nearby, and readily available. Our customers, while often being major global companies as a whole, are typically domestic ship-tos. We're a fully integrated producer, so we capture the intermediate value that non-integrated suppliers have to pay for.

Speaker #3: Combine these elements with refining industry already running at record utilization, with no room to process more, and you have to set up that is unlikely to be resolved quickly.

Speaker #2: Calumet's fortunate to have landed on the right side of each of these global dynamics. Our crude supply is largely domestic, nearby, and readily available.

Speaker #2: Our customers will also often be major global companies as a whole, are typically domestic shippees. And we're a fully integrated producer, so we capture the intermediate value that non-integrated suppliers have to pay for.

Speaker #3: Given this strong backdrop, accelerated deleveraging in action, and a constructive outlook, we're also closely examining a pipeline of low-risk high-return growth projects that we've been accumulating over the years, as the majority of our discretionary capital was pointed towards building Montana Renewables and deleveraging.

Todd Borgmann: Given this strong backdrop, accelerated deleveraging in action, and a constructive outlook, we're also closely examining a pipeline of low-risk, high-return growth projects that we've been accumulating over the years, as the majority of our discretionary capital was pointed towards building Montana Renewables and deleveraging. While we won't take our eye off completing the deleveraging, that's occurring more quickly than previously anticipated. We're progressing this growth pipeline in a parallel and disciplined fashion. We're expecting a good chunk of this pipe to clear the FEL process and be deployed in 2027 and 2028. I thank our specialties team for the execution to date. It's great to be talking about high-return growth CapEx again in this business, and having a team that's rebuilt our operational and commercial foundation so successfully, albeit with little capital, adds to our conviction.

Speaker #3: While we won't take our eye off completing the deleveraging—which is occurring more quickly than previously anticipated—we’re progressing this growth pipeline in a parallel and disciplined fashion.

Speaker #3: We're expecting a good chunk of this pipe to clear the FEL process and be deployed in 2027 and 2028. I thank our specialties team for the execution today.

Speaker #3: It's great to be talking about high-return growth capex again in this business, and having a team that's rebuilt our operational and commercial foundation so successfully, albeit with little capital, adds to our conviction.

Speaker #2: Turning to slide five, we see a similarly strong market at Montana Renewables, as the RVO is working out exactly as expected. The index margin has moved sharply higher, as it has to, because the mandate requires biodiesel capacity to come back online.

Todd Borgmann: Turning to slide five, we see a similarly strong market at Montana Renewables, as the RVO is working out exactly as expected. The index margin has moved sharply higher, as it has to, because the mandate requires biodiesel capacity to come back online. As we said on prior calls, biodiesel producers have long memories and won't restart until they're confident. That's precisely what we're seeing. A measured, rational restart that supports margin, which is what the administration intended to do when it set the RVO. Step back and the pattern's clear. There have been two decades of RVO targets since 2006, and every single one of them, except the 2024 Set 1 error, EPA set the target at existing capacity plus growth, and let American ingenuity fill the gap. Plenty of opponents called the Set 2 policy too big and unreachable. What we've actually seen with the Set 2.

Speaker #2: And as we set on prior calls, biodiesel producers have long memories and won't restart until they're confident.

Speaker #3: That's precisely what we're seeing—a measured, rational restart that supports margin, which is what the administration intended to do when it set the RVO.

Speaker #3: Step back in a pattern's clear. There have been two decades of RVO targets since 2006, and every single one of them, except the 2024 set one error, EPA set the target at existing capacity plus growth, and let American ingenuity fill the gap.

Speaker #3: Plenty of opponents called this set two policy too big and unreachable. What we've actually seen with the set two rule is a 70% increase in biomass-based diesel production this year, as the industry reignites.

Todd Borgmann: 2 rule is a 70% increase in biomass-based diesel production this year as the industry reignites. The agriculture community is crushing more crop than ever. Soybean and canola crush are both at record levels, and we're seeing about 5% more crush capacity being added this year. Throughout the value chain, we're seeing a lot more American jobs making American energy. You can see it on the RINs data on this slide, and this dynamic is why this critical ag and energy policy has been a long-standing and bipartisan issue. Last, let's turn to slide six and talk Montana Renewables growth. David will walk through the financials in a segment review, but the gist at MRL is we made $17 million of adjusted EBITDA tax attributes in Q2, despite over $40 million of foregone margin while we were offline completing the first stage of the MaxSAF 150 expansion.

Speaker #3: Also, the agriculture community is crushing more crop than ever. Soybean and canola crush are both at record levels, and we're seeing about 5% more crush capacity being added this year.

Speaker #3: Throughout the value chain, we're seeing a lot more American jobs making American energy. You can see it on the RENS data on this slide, and this dynamic is why this critical ag and energy policy has been a longstanding and bipartisan issue.

Speaker #2: And last, let's turn to slide six and talk Montana Renewables growth. David will walk through the financials and segment review, but the gist at MRL is we made $17 million of adjusted EBITDA, with tax attributes, in Q2, despite over $40 million of foregone margin while we were offline completing the first stage of the max SAF 150 expansion.

Speaker #2: And with July as an indication, we're on track to pace well ahead of this second quarter, even after normalizing for the downtime.

Todd Borgmann: With July as an indication, we're on track to pace well ahead of this Q2, even after normalizing for the downtime. Since we last talked, we completed our performance test of the newly installed MaxSAF catalyst, and it met or exceeded expectations across the board. With the first step of MaxSAF behind us, we'll turn our efforts to the next steps of the expansion. I'll remind everyone that as we improve our project, we're also working with the DOE to ensure the supporting documents are updated. This is progressing well, and we'll disclose more details when that process concludes, which we expect will occur before our next call. Until then, I'll give a little more insight into how we're envisioning expansion in Montana, and we'll limit our comments on the further details until the full package is announced.

Speaker #3: Also, since we last talked, we completed our performance test of the newly installed max SAF catalyst, and it met or exceeded expectations across the board.

Speaker #3: With the first step of max SAF behind us, we'll turn our efforts to the next steps of the expansion.

Speaker #2: First, I'll remind everyone that as we improve our project, we're also working with the DOE to ensure the supporting documents are updated.

Speaker #3: This is progressing well, and we'll disclose more details when that process concludes, which we expect will occur before our next call.

Speaker #2: Until then, I'll give a little more insight into how we're envisioning expansion in Montana, and we'll limit our comments on a further details until the full package is announced.

Speaker #3: Importantly, rather than a massive mega-project, which includes transporting a second reactor from the Gulf Coast, we've identified a novel expansion that's much cheaper, faster, lower risk, and carries a much higher IRR.

Todd Borgmann: Importantly, rather than a massive mega project, which includes transporting a second reactor from the Gulf Coast, we've identified a novel expansion that's much cheaper, faster, lower risk, and carries a much higher IRR. We plan to reconfigure some assets that CMR is already operating in Great Falls, with the anchor asset being a second reactor. Lining up this second reactor in SAF production will provide best-in-class SAF yields. The current industry standard practice for SAF production involves fractionating and isomerizing renewable diesel, which creates SAF, but also creates less valuable byproducts like naphtha and fuel gas. In times of strong renewable diesel margins, the net act of converting renewable diesel to SAF plus byproducts balances at an economic optimum of lower SAF output. In fact, that's why you may hear industry participants at times saying the economics favor making RD even though there's a SAF premium.

Speaker #3: We plan to reconfigure some assets that CMR is already operating in Great Falls, with the anchor asset being a second reactor.

Speaker #2: Lining up this second reactor in SAF production, we'll provide best-in-class SAF yields. The current industry standard practice for SAF production involves fractionating and isomerizing renewable diesel, which creates SAF, but also creates less valuable byproducts, like naps and fuel gas.

Speaker #3: In times of strong renewable diesel margins, the net act of converting renewable diesel to SAF plus byproducts balances at an economic optimum of lower SAF output.

Speaker #3: In fact, that's why you may hear industry participants at times saying the economics favor making RD, even though there's a SAF premium. This second phase of our max SAF 150 project differentiates us by deploying the second reactor in a more severe cracking, which means minimal byproducts, and in turn an economic optimization that occurs at a much higher SAF output.

Todd Borgmann: This second phase of our MaxSAF 150 project differentiates us by deploying the second reactor in a patent-pending polishing service instead of more severe cracking, which means minimal byproducts, and in turn, an economic optimization that occurs at a much higher SAF output. Because the second reactor is repurposed from the crude refinery, we plan to have it running this winter. This reactor ultimately provides the capability to produce roughly 200 million gallons of SAF when we expand total fresh feed rate to 17,000 barrels a day over the next two years, for a fraction of the capital originally expected. More imminently, it will pair with our existing reactor, ramping up late this year, and then producing 120 to 150 million gallons of SAF next spring at an industry-leading yield and cost structure.

Speaker #2: Furthermore, because the second reactor is repurposed from the crude refinery, we plan to have it running this winter. This reactor ultimately provides the capability to produce roughly 200 million gallons of SAF when we expand total fresh feed rate to 17,000 barrels a day, over the next two years, for a fraction of the capital originally expected.

Speaker #3: More imminently, it will pair with our existing reactor, ramping up late this year and then producing 120 to 150 million gallons of SAF next spring, at an industry-leading yield and cost structure.

Speaker #2: And long-term, we still have our Gulf Coast reactor, which will now be known as the third reactor, available to us after we step through the series of project nodes that we'll discuss in more detail soon.

Todd Borgmann: Long term, we still have our Gulf Coast reactor, which will now be known as the third reactor, available to us after we step through the series of project nodes that we'll discuss in more detail soon. Swapping the reactor from fossil to renewable service requires about 2 weeks of downtime on the fossil side, and we're going to take that early this winter. In fact, we originally planned to do this tie-in mid-year, in the current market environment, we're expecting to earn over $50 million of EBITDA at CMR between now and the reconfiguration, which is a major upgrade to the original plan. We'll capture that and run a 60-million-gallon SAF run rate for a few months as we finish out the retail asphalt season.

Speaker #3: Swapping the reactor from fossil to renewable service requires about two weeks of downtime on the fossil side, and we're going to take that early this winter.

Speaker #2: In fact, we originally planned to do this tie-in mid-year, but in the current market environment, we're expecting to earn over $50 million of EBITDA at CMR between now and the reconfiguration, which is a major upgrade to the original plan.

Speaker #3: So we'll capture that and run it at $60 million gallon SAF run rate for a few months as we finish out the retail asphalt season.

Speaker #2: While the Great Falls site reconfiguration will repurpose some CMR equipment for a step-change increase in profitability, we'll continue to operate at CMR, keeping the jobs in the community, providing the shared services for MRL, and producing world-class asphalt.

Todd Borgmann: While the Great Falls site reconfiguration will repurpose some CMR equipment for a step change increase in profitability, we'll continue to operate at CMR, keeping the jobs in the community, providing the shared services for MRL, and producing world-class asphalt. In summary, this capital-efficient project saves hundreds of millions of capital dollars, accelerates both increased SAF and throughput by years, de-risks the construction, and doing the site reconfiguration this winter allows us to capture an extra $50 million of unexpected CMR upside. We expect to make an economically optimum 60-million-gallon run rate of SAF until we reconfigure later this year. Coming out of that, we expect to quickly ramp up to 80 to 100-million-gallon run rate by year-end, and we'll be run rating over 120 million gallons by spring of 2027.

Speaker #3: In summary, this capital-efficient project saves hundreds of millions of capital dollars, accelerates both increased SAF and throughput by years, de-risks the construction, and doing the site reconfiguration this winter allows us to capture an extra $50 million of unexpected CMR upside.

Speaker #2: We expect to make an economically optimum $60 million gallon run rate of SAF until we reconfigure later this year, coming out of that, we expect to quickly ramp up to 80 to 100 million gallon run rate by year-end, and we'll be running run rating over 120 million gallons by spring of 2027.

Speaker #3: And most importantly, we're gaining another lasting competitive advantage at Montana Renewables, adding best-in-class SAF production yields to our top-tier position in location, feedstock flexibility, operating costs, and our first SAF first-mover SAF marketing advantage.

Todd Borgmann: Most importantly, we're gaining another lasting competitive advantage at Montana Renewables, adding best-in-class SAF production yields to our top-tier position in location, feedstock flexibility, operating costs, and our first-mover SAF marketing advantage. We look forward to sharing the full details of our expansion, the cost details, and more on the multi-step reconfiguration soon. With that, I'll turn the call over to David. David?

Speaker #2: We look forward to sharing the full details of our expansion, the cost details, and more on the multi-step reconfiguration soon. And with that, I'll turn the call over to David.

Speaker #2: David?

Speaker #4: Thanks, Todd. And good morning, everyone. I'll start with the headline. We delivered $175 million of adjusted EBITDA with tax attributes this quarter, and we're very proud of that result.

David Lunin: Thanks, Todd, good morning, everyone. I'll start with the headlines. We delivered $175 million of adjusted EBITDA with tax attributes this quarter, and we're very proud of that result. Both of our businesses, Specialties and Montana Renewables, performed well, and we continue to operate in an incredibly attractive part of the market. Every segment participated, led by Specialty Products and Solutions. In SPS, we executed across the board, both on a commercial and operational side, despite a heavy turnaround period. That performance shows up not just in earnings, but in cash generation, and we drove over $90 million of cash flow from operations during the quarter, which speaks to the underlying strength of the portfolio. This is while we built $70 million of working capital as the value of our receivables increased substantially, which will naturally unwind itself.

Speaker #4: Both of our businesses, specialties and Montana Renewables, perform well, and we continue to operate in an incredibly attractive part of the market. Every segment participated, led by specialty products and solutions.

Speaker #4: In SPS, we executed across the board, both on the commercial and operational side, despite a heavy turnaround period. That performance shows up not just in earnings, but in cash generation. We drove over $90 million of cash flow from operations during the quarter, which speaks to the underlying strength of the portfolio. And this is while we built $70 million of working capital, as the value of our receivables increased substantially, which will naturally unwind itself.

Speaker #4: I do want to talk through a few tactical items that affected the quarter, because they were deliberate choices rather than surprises. First, we saw an offset from fuel hedges of around $20 million.

David Lunin: I do want to talk through a few tactical items that affected the quarter because they were deliberate choices rather than surprises. First, we saw an offset from fuel hedges of around $20 million. As I mentioned last quarter, we put these hedges in place, roughly 20% of our fuels production intentionally, to protect our cash flow and support our debt paydown commitments at historically attractive spreads, essentially trading some upside for certainty as we work through our de-leveraging plan. We have 10,000 barrels a day of hedges on through early 2028, with 2027 levels at approximately $28 per barrel on a CBOB basis. This, combined with the near-term margin environment, provides ample confidence that our ultimate de-leveraging success is in plain sight.

Speaker #4: As I mentioned last quarter, we put these hedges in place roughly 20% of our fuel production intentionally, to protect our cash flow and support our debt paydown commitments at historically attractive spreads, essentially trading some upside for certainty as we work through our deleveraging plan.

Speaker #4: We have 10,000 barrels a day of hedges on through early 2028, with 2027 levels at approximately $28 per barrel on a CBOB basis. This, combined with the near-term margin environment, provides ample confidence that our ultimate deleveraging success is in plain sight.

Speaker #4: In fact, this quarter we saw restricted group leverage fall below four times, and that's before we retired 115 more debt and expect to accelerate that through the second half of this year.

David Lunin: In fact, this quarter, we saw restricted group leverage fall below four times. That's before we retired $115 million more debt and expect to accelerate that through the H2 of this year. Second, we had a working capital draw, and it's worth breaking that into its components because they tell very different stories. About $30 million is from intentionally holding higher levels of crude inventory than normal. That was a deliberate decision to de-risk our operations in an incredibly dynamic and evolving market for global oil. We expect that build to unwind naturally over time. Another $30 million came from an increase in accounts receivable, which was simply a function of higher prices across all of our SPS businesses. In other words, a good problem to have and not a sign of collection or credit issues. We've captured attractive margins across base oils, solvents, Enrico, and fuels.

Speaker #4: Second, we had a working capital draw, and it's worth breaking that into its components because they tell very different stories. About $30 million is from intentionally holding higher levels of crude inventory than normal.

Speaker #4: That was a deliberate decision to de-risk our operations in an incredibly dynamic and evolving market for global oil. We expect that bill to unwind naturally over time.

Speaker #4: Another $30 million came from an increase in accounts receivable, which was simply a function of higher prices across all of our SPS businesses. In other words, a good problem to have, and not a sign of collection or credit issues.

Speaker #4: We've captured attractive margins across base oils, solvents, Puerto Rico, and fuels. We also saw roughly $20 million of billed at MRL as the business ramped up and built inventory and accounts receivable following the completion of our expansion project.

David Lunin: We also saw roughly $20 million of build at MRL as the business ramped up and built inventory and accounts receivable following the completion of our expansion project. With Montana Renewables now back operating consistently at higher rates, that build should come down. All of these actions are concrete steps towards de-leveraging. In July, we called $100 million of our 2028 Mirror Notes and also retired our sale-leaseback at the truck rack at CMR. Given our strong business performance and outlook for the rest of the year, we expect to continue at this accelerated pace. Taken together, we see this quarter as a continuation of the operational momentum we've built with a few timing-related working capital items that we expect to normalize and a continued unwavering focus on completing our debt reduction. With that, let me walk through the performance by segment.

Speaker #4: With Montana Renewables now back operating, consistently at higher rates, that bill should come down. All of these actions are concrete steps towards deleveraging. In July, we called $100 million of our 2028 mirror notes and also retired our sale lease back at the truck rack at CMR.

Speaker #4: Given our strong business performance and outlook for the rest of the year, we expect to continue at this accelerated pace. Taken together, we see this quarter as a continuation of the operational momentum we've built, with a few timing-related working capital items that we expect to normalize and a continued unwavering focus on completing our debt reduction.

Speaker #4: With that, let me walk through the performance by segment. Turning to specialty products and solutions, adjusted EBITDA of $161.7 million more than double that of the prior year.

David Lunin: Turning to Specialty Products and Solutions, adjusted EBITDA of $161.7 million more than doubled that of the prior year. The strong results came from both sides of the integrated model. The more than 20 specialty price increases our commercial team pushed through during the Q1's spike reached full realization with Shreveport running clean all quarter. Further, we started the quarter with turnarounds at Princeton and Cotton Valley, both of which were completed on time and on budget. We have no turnarounds scheduled for the Q3, and Shreveport will do its turnaround in the Q4. This quarter also marked our seventh consecutive quarter of specialty sales volume above 20,000 barrels per day, and more importantly, a record specialty production quarter. Year to date in 2026, our specialties volume has increased over 5% from the high milestone achieved last year in 2025.

Speaker #4: The strong results came from both sides of the integrated model. The more than $20 specialty price increases our commercial team pushed through during the first quarter's spike, reached full realization, with three port running clean all quarter.

Speaker #4: Further, we started the quarter with turnarounds at Princeton and Con Valley, both of which were completed on time and on budget. We have no turnarounds scheduled for the third quarter, and Shreveport will do its turnaround in the fourth quarter.

Speaker #4: This quarter also marked our seventh consecutive quarter of specialty sales volume above $20,000 barrels per day, and more importantly, a record specialty production quarter.

Speaker #4: Year-to-date in 2026, our specialties volume has increased over 5% from the high milestone achieved last year in 2025. As we've highlighted in the past, our integrated business allows us to produce fuels and take advantage of the attractive high-margin fuel environment.

David Lunin: As we've highlighted in the past, our integrated business allows us to produce fuels and take advantage of the attractive high-margin fuel environment. The price increases that we've already implemented, plus the elevated fuel margin environment, continue to position us well for what we believe will be a strong H2 2026. Turning to Performance Brands, adjusted EBITDA was $6.3 million, down about $6.2 million versus the prior year. This is timing, not demand. Volumes were up 18% in the quarter. Input costs spiked before our pricing actions caught up, as we discussed last quarter, our retail-oriented customer base carries a typical 60 to 90-day lag before price increases flow through to margin.

Speaker #4: The price increases that we've already implemented, plus the elevated fuel margin environment, continue to position us well for what we believe will be a strong second half of 2026.

Speaker #4: Turning to performance brands, adjusted EBITDA was $6.3 million down about $6.2 million versus the prior year. This is timing, not demand. Volumes were up 18% in the quarter.

Speaker #4: Input costs spiked before our pricing actions caught up, and as we discussed last quarter, our retail-oriented customer base carries a typical 60 to 90-day lag before price increases flow through to margin.

Speaker #4: It's also worth remembering that all of our businesses are on a LIFO accounting, so the rapid cost inflation flowed straight into the quarter's cost of goods rather than being smoothed the way a typical FIFO finished products business would report it.

David Lunin: It's also worth remembering that all of our businesses are on a LIFO accounting, the rapid cost inflation flowed straight into the quarter's cost of goods rather than being smoothed the way a typical FIFO finished products business would report it. That was a $7 million headwind for PB during the quarter. As pricing action catches up and the inventory effect reverses, we expect the segment to recover. Frankly, this quarter is evidence that the same input cost move squeezing Performance Brands is what's benefiting the rest of Calumet. With SPS production 35 times greater than Performance Brands, it's a condition we'll gladly accept. Looking ahead to Q3, we continue to remain vigilant on the pricing front with select actions going forward.

Speaker #4: That was a $7 million headwind for PV during the quarter. As pricing action catches up and the inventory effect reverses, we expect the segment to recover. And frankly, this quarter is evidence that the same input cost moves squeezing Performance Brands are what's benefiting the rest of Calumet.

Speaker #4: With SPS production 35 times greater than performance brands, it's a condition we'll gladly accept. Looking ahead to the third quarter, we continue to remain vigilant on the pricing front with select actions going forward.

Speaker #4: In our Montana/Renewables segment, Todd covered Montana Renewables' performance with $17 million of adjusted EBITDA with tax attributes despite the site being down all of April and half of May.

David Lunin: In our Montana/Renewables segment, Todd covered Montana Renewables' performance with $17 million of adjusted EBITDA with tax attributes, despite the site being down all of April and half of May. With roughly $40 million of lost opportunity between the MaxSAF expansion and the turnaround, as well as the power outage. Index margins are strong, approximately $2.60 per gallon and rising today, we are excited as we've ever been to have MRL meaningfully contributing, and we expect Q3 to be meaningfully higher as we show a full quarter of production and earnings. Strategically, we were pleased to complete the first step of our MaxSAF 150 expansion on time and stepping into the market that is extremely positive for both renewable diesel and SAF. Our industry-leading low-cost structure and geographic advantage continues to underpin Montana Renewables' competitive advantage in the industry.

Speaker #4: With roughly $40 million of lost opportunity between the max staff expansion and turnaround, as well as the powder outage, index margins are strong, approximately $2.60 per gallon and rising today.

Speaker #4: So, we are as excited as we've ever been to have MRL meaningfully contributing, and we expect the third quarter to be meaningfully higher as we show a full quarter of production and earnings.

Speaker #4: Strategically, we were pleased to complete the first step of our max staff-150 expansion on time and step into a market that is extremely positive for both renewable diesel and SAF.

Speaker #4: Our industry-leading low-cost structure and geographic advantage continues to underpin Montana Renewables' competitive advantage in the industry. On the refining side, CMR generated $12.2 million of adjusted EBITDA, up about $10.9 million sequentially, as the margin environment is well known.

David Lunin: On the refining side, CMR generated $12.2 million of adjusted EBITDA, up about $10.9 million sequentially as the margin environment is well known. Asphalt margins lagged early in the quarter as rapid crude escalation squeezed asphalt margins. Pricing has caught up, Q3 is peak asphalt season, as Todd noted, CMR is set up for an outsized run between now and the November downtime. In closing, let me reiterate, we enter H2 2026 with real momentum. The specialties environment is carrying forward. Q3 is turnaround-free, Montana Renewables is ramping its strong index margins with the SAF share of our slate growing. Our priorities are simple: run safely, reliably, and full to capture this market.

Speaker #4: Asphalt margins lagged early in the quarter, as rapid crews’ escalation squeezed asphalt margins. Pricing has caught up, and the third quarter is peak asphalt season, so as Todd noted, CMR is set up for an outsized run between now and the November downtime.

Speaker #4: In closing, let me reiterate we entered the second half of 2026 with real momentum. The specialties environment is carrying forward the third quarter as turnaround-free and Montana Renewables is ramping its strong index margins with the SAF share of our slate growing.

Speaker #4: Our priorities are simple: run safely, reliably, and full to capture this market. Finish the DOE modification and lay out the complete expansion funding and site reconfigure details which we expect to do well before our next earnings call, and continue deleveraging ahead of schedule while we begin deploying capital into high-return growth with discipline.

David Lunin: Finish the DOE modification and lay out the complete expansion funding and site reconfigure details, which we expect to do well before our next earnings call, continue deleveraging ahead of schedule while begin deploying capital into high return growth with discipline. Thank you for your time today. With that, I'll turn the call back to the operator for questions.

Speaker #4: Thank you for your time today and, with that, I'll turn the call back to the operator for questions.

Speaker #1: We will now begin the question-and-answer session to ask a question you may press star, then 1 on your touchstone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

David Lunin: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. 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 and then two. Our first question comes from Conor Fitzpatrick with Bank of America. Please go ahead.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. 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 and then two. Our first question comes from Conor Fitzpatrick with Bank of America. Please go ahead.

Speaker #1: If at any time your question has been addressed and you would like to withdraw your question, please press star and then 2. Our first question comes from Connor Fitzpatrick with Bank of America.

Speaker #1: Please go ahead.

Speaker #5: Hi, everybody. Thanks for taking my question. Across the energy sector, there have been pretty divergent outcomes as a result of the Iran war. Refined product crack spreads are around record levels, and the strip declines only gradually into the future as capacity would struggle to rebuild inventories.

Conor Fitzpatrick: Hi, everybody. Thanks for taking my question. Across the energy sector, there have been pretty divergent outcomes as a result of the Iran war. Refined product crack spreads are around record levels, the strip declines only gradually into the future as capacity would struggle to rebuild inventories. Petrochemicals margins have normalized more rapidly, mostly as a result of crude and feedstock prices and availability normalizing as well. Base oil cracks are extremely high and have remained high, I wanted to get your perspective on how durable high base oil cracks will be. Damage tends to interrupt operations only for a couple of months at a time at the fuel refinery level, but under capacity slows inventory rebuild. Is there kind of a similar story playing out for specialties and base oils?

Speaker #5: Petrochemicals margins have normalized more rapidly, mostly as a result of crude and feedstock prices and availability. Normalizing as well. Base oil cracks are extremely high and have remained high, but I wanted to get your perspective on how durable high base oil cracks will be.

Speaker #5: Damaged tends to interrupt operations only for a couple of months at a time, at the fuel refinery level, but under capacity slows inventory rebuild.

Speaker #5: Is there kind of a similar story playing out for specialties and base oils? And how much of global margin gains in base oils are just to pass through of feed costs, like VGO?

Conor Fitzpatrick: How much of global margin gains in base oils are just the pass-through of feed costs like VGO?

Speaker #6: Yeah. This is Scott. Let me start with, you know, I think right now across the whole portfolio, and I'll get into base oils here in a second, but I think across our whole portfolio, I'd say, you know, we're certainly firing on all cylinders.

Scott Obermeier: Yeah, this is Scott. Let me start with, I think right now, across the whole portfolio, and I'll get into base oils here in a second, but I think across our whole portfolio, I'd say, we're certainly firing on all cylinders. As touched on in the script, production's been great, execution's been great, et cetera. We think about the fuel crack market being historic. Specialties, again, across our whole portfolio are doing really well. Feel good about that. We think, in this current environment, it's not just a short-term situation. There's been a lot of structural impacts, if you will, that will take months and months to stabilize. We don't view the overall market as just a short-term situation. Our outlook in the coming months is that, I think results will be similar to how they were here in Q2.

Speaker #6: As touched on in the script, production's been great. Execution's been great, etc. And we think about the fuel crack market being historic. Specialties, again, across our whole portfolio, are doing really well.

Speaker #6: So I feel good about that. We think, you know, in this current environment, it's not just a short-term situation. There's been a lot of structural impacts, if you will, that will take months and months to sort of stabilize.

Speaker #6: So we don't view the overall market as just a short-term situation. You know, our outlook in the coming months is that I think results will be similar to how they were here in Q2.

Scott Obermeier: Just to touch a little bit further on base oils, and maybe it'll be helpful if I zoom out. It was touched by Todd in the script, Calumet produces Group I and Group II base oils. A lot of the early headlines with the Iran war was on Group III, Middle East capacity, and refineries being taken offline, et cetera. That has had some impact on Group I and Group II as customers and companies look to formulate up Group I and Group II. The demand's been really strong to try to replace some of the gap in Group III. In addition, you have some of the larger global, I'll call it more commodity refineries that make base oils as well that have been diverting to distillate due to the historic crack spread.

Speaker #6: Just to touch a little bit further on base oils, and maybe it'll be helpful if I zoom out, it was touched by Todd in the script.

Speaker #6: But, you know, so Calumet produces Group I and Group II base oils. A lot of the early headlines with the Iran war were on Group III.

Speaker #6: Middle East capacity and refineries being taken offline, etc. That has had some impact on Group 1 and Group 2 as customers and companies look to formulate up Group 1 and Group 2 so the demand's been really strong to try to replace some of the gap in Group 3.

Speaker #6: In addition, you have some of the larger global occult more commodity refineries that make base oils as well that have been diverting to distillate due to the historic crack spread.

Speaker #6: And the third piece on base oils that we see going on—in fact, there were more reports this week of Russian refineries that were impacted by drone strikes from Ukraine.

Scott Obermeier: The third piece on base oils that we see going on, in fact, there was more reports this week of Russian refineries that were impacted by drone strikes from Ukraine. There's a significant amount of capacity that just in the past couple of months has been taken offline. Long story short, I think overall and also specifically for base oils, we view the market as being tight, and we expect that to continue certainly into the coming months here through 2026.

Speaker #6: So there's a significant amount of capacity that just in the past couple of months has been taken offline. So long story short, you know, I think overall, and also specifically for base oils, you know, we view the market as being tight, and we expect that to continue certainly into the coming months here through 2026.

Speaker #5: Thanks. And I guess a follow-up is, capital structure has improved by over $100 million, and MRL run-rate operations should accelerate that further going forward, at least in the near term.

Conor Fitzpatrick: Thanks. I guess a follow-up is, capital structure has improved by over $100 million, and MRL run rate operations should accelerate that further going forward, at least in the near term, along with specialties margins in surplus. In the event that your de-leveraging targets are achieved organically soon, does that change your approach to MRL regarding monetization or other options?

Speaker #5: Along with Specialty's margins and surplus. So, in the event that your deleveraging targets are achieved organically soon, does that change your approach to MRL regarding monetization or other options?

Speaker #6: Hey, Connor and Scott. That's a good question. I think the answer is no, not long-term. You know, we still expect that separating and monetizing Montana Renewables is the right long-term path for this business.

Todd Borgmann: Hey, Todd, it's Todd. It's a good question. I think the answer is no, not long term. We still expect that separating, monetizing Montana Renewables is the right long-term path for this business. I'd say what has changed, and you pointed this out in your question, is we no longer have to do it as a prerequisite to grow our specialties business, which I think is critical. Our business cash flow allows us to pay down debt much more quickly than we ever planned. We're looking at MRL monetization purely through the lens of shareholder value optimization, which is exactly where you want to be when approaching a potential transaction of that size with the value creation potential that it has.

Speaker #6: I'd say what has changed, and you pointed this out in your question, is we no longer have to do it as a prerequisite to grow our specialties business, which I think is critical.

Speaker #6: Our business cash flow allows us to pay down debt much more quickly than we ever planned. So we're looking at MRL monetization purely through the lens of shareholder value optimization.

Speaker #6: Which is exactly where you want to be. When approaching a potential transaction and of that size with the value creation potential that it has.

Speaker #5: Great. Thanks for taking my question. That's great color.

Conor Fitzpatrick: Great. Thanks for taking my question. That's great color.

Speaker #6: Thank you.

Todd Borgmann: Thank you.

Speaker #1: And the next question comes from Amit Dale with HC Wainwright. Please go ahead.

Todd Borgmann: The next question comes from Amit Dayal with H.C. Wainwright. Please go ahead.

Operator: The next question comes from Amit Dayal with H.C. Wainwright. Please go ahead.

Speaker #4: Thank you. Good morning, guys. Amazing results. Congratulations on the execution. For 3Q26, you know, what is your confidence level to see sort of the full benefits of MRL come through?

Amit Dayal: Thank you. Good morning, guys. Amazing results. Congratulations on the execution. For Q3 2026, what is your confidence level to see sort of the full benefits of MRL come through? I know it's been start and stop over the last two years roughly. For Q3 2026 and maybe for H2 of this year, can we expect the full contribution from MRL to come through?

Speaker #4: I know it's been start and stop, you know, over the last two years, roughly. But, you know, for Q3 '26 and maybe for, you know, the second half of this year, can we expect, you know, the full contribution from MRL to come through?

Speaker #6: Hey, it's Scott again. I'll start off and then see if Bruce wants to jump in. I think the answer is absolutely yes. You know, in July we saw earnings continue to ramp positively.

Todd Borgmann: Hey, it's Todd again. I'll start off and then see if Bruce wants to jump in. I think the answer is absolutely yes. In July, we saw earnings continue to ramp positively. Obviously, we were down April, H1 of May for the MaxSAF turnaround, which you don't shed the fixed costs in that environment. Earlier we talked about probably a normalized run rate Q2 you would've thought about in the $60 million range to $17 million we did, plus a little over $40 million on foregone margin while we were down. I think you extend that to what we're seeing into Q3. We certainly expect to continue picking up on that pace in a meaningful way. Already demonstrating really strong margins return. It's great to see that. We've been talking about it for a while. We saw the RVO change, the market's reacting as we expected.

Speaker #6: Obviously, we were down April first half of May for the max cap turnaround, which, you know, you don't shed the fixed costs in that environment.

Speaker #6: So earlier, we talked about probably a normalized run-rate Q2. You would have thought about in a $60 million range to $17 million. We did, plus a little over $40 on kind of foregone margin while we were down.

Speaker #6: So I think you extend that to what we're seeing in the Q3. We certainly expect to continue picking up on that pace in a meaningful way.

Speaker #6: So already demonstrating really strong margins return. It's great to see that. We've been talking about it for a while. We saw the RVO change.

Speaker #6: The market's reacting as we expected. We're seeing the increase happen and the impact of that. And going forward, we expect to continue that improvement.

Todd Borgmann: We're seeing the increased SAF and the impact of that. Going forward, we expect to continue that improvement.

Speaker #4: Thank you, John. And then just, you know, sort of a follow-up to that. The Gulf Coast Reactor, just to clarify, could that allow you to go beyond the $200 million gallons?

Amit Dayal: Thank you, Todd. Just sort of a follow-up to that, the Gulf Coast reactor, just to clarify, could that allow you to go beyond the 200 million gallons?

Speaker #6: Yeah, it could. It's, you know, no reason it couldn't do what, you know, it was originally scheduled to do when we talked about this project, right?

Todd Borgmann: Yeah, it could. No reason it couldn't do what it was originally scheduled to do when we talked about this project, right? I don't want to miscommunicate that the numbers that we talked about today are the end of the road or anything like that. What we're saying is the next step in the growth process here. Really looking forward to sharing more details on this, particularly cost, et cetera, because it's just so much more capital efficient than we were planning on doing. We're going to have the ability to increase to 17,000 barrels a day of total throughput and up to 200 million gallons of SAF.

Speaker #6: So I don't want to miscommunicate that the numbers that we talked about today are the end of the road or anything like that. What we're saying is, you know, the next step in the growth process here and looking really looking forward to sharing more details on this particularly cost, etc., because it's just so much more capital efficient than we were planning on doing.

Speaker #6: But we're going to have the ability to increase to $17,000 barrels a day of total throughput and up to $200 million gallons of SAF.

Speaker #6: Much more quickly, much more economically than previously planned. And from there, sure, we have the ability to add the third reactor if we want.

Bruce A. Fleming: Much more quickly, much more economically than previously planned. From there, sure, we have the ability to add the third reactor if we want, and we'll make that decision as time gets closer.

Todd Borgmann: Much more quickly, much more economically than previously planned. From there, sure, we have the ability to add the third reactor if we want, and we'll make that decision as time gets closer.

Speaker #6: And we'll make that decision as time gets closer.

Speaker #4: Understood. I'll step back. Thank you. I'll take my other questions offline. Thank you so much.

Amit Dayal: Understood. I'll take back. Thank you. I'll take my other questions offline. Thank you so much.

Speaker #6: Thank you.

Todd Borgmann: Thank you.

Speaker #1: And the next question comes from Josiah Knight with Goldman Sachs. Please go ahead.

Todd Borgmann: The next question comes from Josiah Nye with Goldman Sachs. Please go ahead.

Operator: The next question comes from Josiah Nye with Goldman Sachs. Please go ahead.

Speaker #5: Good morning, team, and thank you for taking my question. Maybe just on the outlook for SAF more broadly, and I just press release $30 million to the Minneapolis Airport.

Josiah Nye: Good morning, team, and thank you for taking my question. Maybe just on the outlook for SAF more broadly, I know you just pressed release $30 million to the Minneapolis Airport. Can you talk about the demand you're seeing from customers, whether domestically or abroad, a little deeper?

Josiah Knight: Good morning, team, and thank you for taking my question. Maybe just on the outlook for SAF more broadly, I know you just pressed release $30 million to the Minneapolis Airport. Can you talk about the demand you're seeing from customers, whether domestically or abroad, a little deeper?

Speaker #5: Can you talk about the demand you're seeing from customers, whether domestically or abroad, in a little more detail?

Speaker #6: Hey, Josiah. This is Bruce. Yeah, happy to do that. You know, the North American voluntary market and the European mandatory market are introducing some possible trade flows and we've seen cargoes move on the water.

Bruce A. Fleming: Hey, Josiah. This is Bruce. Yeah, happy to do that. The North American voluntary market and the European mandatory market are introducing some possible trade flows, and we've seen cargoes move on the water. There's going to be industry dynamics associated with that. At the moment, and our best understanding from all of our customer conversations is, those markets are going to remain separate and behave separately. We've not found the bottom of the voluntary demand. We expect to continue to ramp sales up. We've pre-positioned our production capability by the project we just installed and by the pivot of some fossil refinery assets that Todd just covered. We're maintaining an attitude of thinking flexibly and being really good at managing the risks in a climate of external volatility.

Bruce Fleming: Hey, Josiah. This is Bruce. Yeah, happy to do that. The North American voluntary market and the European mandatory market are introducing some possible trade flows, and we've seen cargoes move on the water. There's going to be industry dynamics associated with that. At the moment, and our best understanding from all of our customer conversations is, those markets are going to remain separate and behave separately. We've not found the bottom of the voluntary demand. We expect to continue to ramp sales up. We've pre-positioned our production capability by the project we just installed and by the pivot of some fossil refinery assets that Todd just covered. We're maintaining an attitude of thinking flexibly and being really good at managing the risks in a climate of external volatility.

Speaker #6: So, there's going to be industry dynamics associated with that. But at the moment, and our best understanding from all of our customer conversations is those markets are going to remain separate and behave separately.

Speaker #6: And so we've not found the bottom of the voluntary demand. We expect to continue to ramp sales. We've pre-positioned our production capability by the project we just installed and by the pivot of some fossil refinery assets that Todd just covered.

Speaker #6: So we're maintaining an attitude of thinking flexibly and being really good at managing the risks in a climate of external volatility.

Speaker #5: Got it. That's helpful. And then follow-up, just on mid-cycle. I know right now there's a lot going on. Has your view of mid-cycle renewable diesel margins changed at all, or has that been the same?

Josiah Nye: Got it. That's helpful. Follow up, just on mid-cycle, I know right now it's a lot going on. Has your view of mid-cycle renewable diesel margins changed at all, or has that been the same?

Josiah Knight: Got it. That's helpful. Follow up, just on mid-cycle, I know right now it's a lot going on. Has your view of mid-cycle renewable diesel margins changed at all, or has that been the same?

Speaker #6: It has not. I mean, I would draw everybody's attention to we call it the supply stack. It's on slide 5 of the handout. You know, if you want to bring capacity back into the market, which is a bipartisan effort, you know, everybody's on both sides of the aisle is in favor of domestic production.

Bruce A. Fleming: It has not. I would draw everybody's attention to, we call it the supply stack. It's on slide five of the handout. If you want to bring capacity back into the market, which is a bipartisan effort, everybody on both sides of the aisle is in favor of domestic production, and in this case, it's the production of renewables. You're going to need cash margins that cover fully loaded costs, and that's where the market is or above. The market may be a little above at the moment. That's consistent with the 20 years of history, which we also show in here. Yeah, we think last year was an aberration, an error, in the Set 1 rule, and we think going forward, we're going to have typical behavior. On that basis, this remains a strong business for a domestic producer.

Bruce Fleming: It has not. I would draw everybody's attention to, we call it the supply stack. It's on slide five of the handout. If you want to bring capacity back into the market, which is a bipartisan effort, everybody on both sides of the aisle is in favor of domestic production, and in this case, it's the production of renewables. You're going to need cash margins that cover fully loaded costs, and that's where the market is or above. The market may be a little above at the moment. That's consistent with the 20 years of history, which we also show in here. Yeah, we think last year was an aberration, an error, in the Set 1 rule, and we think going forward, we're going to have typical behavior. On that basis, this remains a strong business for a domestic producer.

Speaker #6: And in this case, it’s the production of renewables. You’re going to need cash margins that cover fully loaded costs, and that’s where the market is.

Speaker #6: Or above. I mean, the market may be a little above at the moment. And that's consistent with the 20 years of history, which we also show in here.

Speaker #6: So yeah, we think, you know, last year was an aberration, an error, in the SAT-1 rule. And we think going forward, we're going to have difficult behavior.

Speaker #6: On that basis, you know, this remains a strong business for a domestic producer.

Speaker #5: Got it. That's helpful. I'll turn it back.

Josiah Nye: Got it. That's helpful. I'll turn it back.

Josiah Knight: Got it. That's helpful. I'll turn it back.

Speaker #1: And the next question comes from Jason Gableman with TD Cowen. Please go ahead.

Josiah Nye: The next question comes from Jason Gabelman with TD Cowen. Please go ahead.

Operator: The next question comes from Jason Gabelman with TD Cowen. Please go ahead.

Speaker #6: Yeah, hey, morning. Thanks for taking my questions. I want to ask about the reactor that you're taking from the Montana plant and putting into MRL. Can you share anything around the cost of that project and then the yield that you'll lose at the conventional Montana plant?

Jason Gabelman: Yeah. Hey, morning. Thanks for taking my questions. I want to ask about the reactor that you're taking from the Montana plant, putting into MRL. Can you share anything around the cost of that project and then the yield that you'll lose at the conventional Montana plant?

Speaker #6: Hey, Jason. Todd, let's defer the talk on the extra details for just a little bit here. You know, and like I said, earlier, we expect to be out with more on that soon.

Bruce A. Fleming: Hey, Jason. Todd. Let's defer the talk on the extra details for just a little bit here. Like I said earlier, we expect to be out with more on that soon. I will say, it's safe to say, a good chunk of the EBITDA CMR has made historically will be traded for a much larger number at MRL and the massive cost savings of the project. I'll also say that it's not like CMR is underwater or anything like that. It's somewhere in between. No, I'd keep it to that for now. It's important to our community, it's important to our employees, and quite frankly, it's important to Montana Renewables to continue to provide the shared benefits that MRL receives from sharing the underlying fixed costs and workforce.

Todd Borgmann: Hey, Jason. Todd. Let's defer the talk on the extra details for just a little bit here. Like I said earlier, we expect to be out with more on that soon. I will say, it's safe to say, a good chunk of the EBITDA CMR has made historically will be traded for a much larger number at MRL and the massive cost savings of the project. I'll also say that it's not like CMR is underwater or anything like that. It's somewhere in between. No, I'd keep it to that for now. It's important to our community, it's important to our employees, and quite frankly, it's important to Montana Renewables to continue to provide the shared benefits that MRL receives from sharing the underlying fixed costs and workforce.

Speaker #6: But I will say it's safe to say, you know, a good chunk of the EBITDA CMRs made historically will be traded for a much larger number at MRL, and the massive cost savings of the project.

Speaker #6: So, you know, I'll also say that it's not like CMRs underwater or anything like that. It's somewhere in between. So I'd keep it to that for now.

Speaker #6: It's important to our community. It's important to our employees. And quite frankly, it's important to Montana Renewables to continue to provide the shared benefits that MRL receives from sharing the underlying fixed costs and workforce.

Speaker #6: So CMR is going to be continued piece of the portfolio. But, you know, we are reconfiguring a decent chunk of it for obvious a high multiple of return at MRL.

Bruce A. Fleming: CMR is going to be continued piece of the portfolio. We are reconfiguring a decent chunk of it for obvious, a high multiple of return at MRL.

Todd Borgmann: CMR is going to be continued piece of the portfolio. We are reconfiguring a decent chunk of it for obvious, a high multiple of return at MRL.

Speaker #6: Okay. Understood. Jason, I would. Yeah. I would add to that because you asked about the mix, I think. On the fossil side, we're going to keep the asphalt rack open.

Jason Gabelman: Okay.

Bruce A. Fleming: Jason, I would

Bruce Fleming: Jason, I would

Amit Dayal: Yeah

Jason Gabelman: Yeah

Bruce A. Fleming: I add to that because you asked about the mix, I think. On the fossil side, we're going to keep the asphalt rack open. We're going to keep the gasoline rack open. We're going to keep the crude run going. We're going to keep the employment. We are going to have some rearrangement in the black oils, the cat feed area. We'll be able to get into that post some DOE activity and imminent conversation around the details.

Bruce Fleming: I add to that because you asked about the mix, I think. On the fossil side, we're going to keep the asphalt rack open. We're going to keep the gasoline rack open. We're going to keep the crude run going. We're going to keep the employment. We are going to have some rearrangement in the black oils, the cat feed area. We'll be able to get into that post some DOE activity and imminent conversation around the details.

Speaker #6: We're going to keep the gasoline rack open. We're going to keep the crude run going. We're going to keep the employment. We are going to have some rearrangement in the black oils.

Speaker #6: You know, the cat feed. Area. And, you know, we'll be able to get into that post some DOE activity and imminent conversation around the details.

Speaker #5: Okay.

Jason Gabelman: Okay. My follow-up is kind of related to that. It's a bit surprising that you're not running at MaxSAF until this other reactor comes online. I think when you laid out the project, you only expected about 1,000 barrels a day of renewable naphtha. Has the yield that you've seen on the current MaxSAF configuration differed from what your expectations were and that's why you're deciding to run at higher renewable diesel until you have this other reactor? Does it have to do with when SAF contracts kick in? Just any more color would be helpful. Thanks.

Speaker #6: My follow-up is kind of related to that. I mean, it's a bit surprising that you're not running at max SAF until this other reactor comes online.

Speaker #6: I think when you laid out the project, you only expected about 1,000 barrels a day of renewable naphtha. So, has the yield that you've seen on the current max SAF configuration differed from what your expectations were?

Speaker #6: And that's why you're deciding to run at higher renewable diesel until you have this other reactor. Does it have to do with when SAF contracts kick in, just any more color would be helpful.

Speaker #6: Thanks. Yeah, you bet. I don't want to say that the yields on renewable naphtha are higher—you crank up without the polishing service. As you crank up severity on the cracking, you know, more and more RDE goes to naphtha.

Todd Borgmann: Yeah, you bet. I wouldn't want to say that the yields on renewable naphtha are higher than originally expected at all. I'd say without the polishing service, as you crank up severity on the cracking, more and more RD goes to naphtha. If we rewind the clock a few months, when RD's less valuable, losing some of that in the cracking process isn't too painful, right? When CMR margins were lower, converting that second reactor sooner wasn't much of a lost opportunity either. I think the reality now, and fortunate for all of us, is the economics are different. We're not incentivized to lose RD until we add the polishing reactor. At that point in time, our yields are going to go from, I'd say, normal industry at the margin to best in class.

Speaker #6: And if we rewind the clock a few months, you know, when RDE is less valuable, losing some of that in the cracking process isn't too painful, right?

Speaker #6: And when CMR margins were lower, converting that second reactor sooner wasn't much of a lost opportunity either. And I think the reality now, and fortunately for all of us, is the economics are different.

Speaker #6: So we're not incentivized to lose RDE until we add the polishing reactor. And at that point in time, our yields are going to go from, I'd say, normal industry at the margin to best in class.

Speaker #6: And we're happy to push that back a few months to capture those big $50 million prizes sitting in front of us at CMR. So you kind of combine all of it to figure out, you know, the step that we're taking here.

Todd Borgmann: We're happy to push that back a few months to capture this big $50 million prize sitting in front of us at CMR. You kind of combine all of it to figure out the step that we're taking here. I'd say altogether, it's a really nice step. As far as the SAF contracts, there's nothing to do with kind of a ramp up or something like that you mentioned in your Scott. We built these things with some flexibility in the first place. We have the ability to ramp up. We have the ability to ramp down.

Speaker #6: But I'd say altogether, it's a really nice step. As far as the SAF contracts, there's nothing to do with kind of a ramp-up or something like that that you mentioned in your gosh, we built these things with some flexibility in the first place.

Speaker #6: We have the ability to ramp up. We have the ability to ramp down. So we'll kind of service the contracts in a way now that says, hey, we'll have $60 million or $60 million gallon run rate being pushed out the door until we make that switch, get the better yields, crank up the SAF, and then we'll exercise the flexibility that we have in them to continue to grow and obviously add more as well.

Todd Borgmann: We'll kind of service the contracts in a way now that says, Hey, we'll have $60 million or 60 million gallon run rate being pushed out the door until we make that switch, get the better yields, crank up the SAF, then we'll exercise the flexibility that we have in them to continue to grow and obviously add more as well.

Jason Gabelman: Got it. That's a good call. If I could just squeeze in one more. The debt paydown subsequent to quarter end, was that funded by cash on hand? Or did you have to draw on the ABL?

Speaker #6: That's a good color. If I could just squeeze in one more: the debt paydown subsequent to quarter-end, was that funded by cash on hand?

Speaker #6: Did you have to draw on the or did you have to draw on the ABL?

Speaker #5: Hey Jason, it's David. It's predominantly cash, generated just from the earnings of the quarter.

David Lunin: Hey, Jason, it's David. It's predominantly cash generated just from the earnings of the quarter.

Speaker #6: All right. Great. I'll leave it there. Thanks.

Jason Gabelman: All right, great. I'll leave it there. Thanks.

Speaker #1: And the next question comes from Greg Brody with Bank of America. Please go ahead.

Jason Gabelman: The next question comes from Gregg Brody with Bank of America. Please go ahead.

Operator: The next question comes from Gregg Brody with Bank of America. Please go ahead.

Speaker #7: Hey, good morning, guys. Just to stay on the question that Jason asked, can you tell us how we should think about the product yields from the max SAF 150 right now?

Gregg Brody: Hey, good morning, guys.

Todd Borgmann: Morning.

Gregg Brody: Just to stay on the question that Jason asked, can you tell us how we should think about the product yields from the MaxSAF 150 right now, how it's running beyond the SAF production?

Speaker #7: How it's running? Beyond the SAF production?

Speaker #6: Yeah, I think the, you know, as far as the SAF and we'll lay out all of the yields and the volumes in more detail kind of as we step through the project here to not do this in the future.

Todd Borgmann: Yeah, I think as far as the SAF, we'll lay out all of the yields and the volumes in more detail kind of as we step through the project here in not too distant future. What we're saying now is we're running at about a 60 million gallon run rate now. Expect that to be the optimum. Obviously if margin dynamics change one way or the other, then we'll be flexible as always. Expect that that's the optimum now through the time when we do the reconfiguration. From there, we'll quickly ramp up. By the end of the year, I think that we'll be 80 to 100 million gallon SAF run rate. By the spring, we'll be at 120 million to 150 million gallon range. Then we'll step through some additional steps that we'll talk about later, ultimately getting to 200 million gallons of SAF by 2028.

Speaker #6: But what we're saying now is we're running at about a 60 million gallon run right now. Expect that to be the optimum. Obviously, if, you know, margin dynamics change one way or the other, then we'll be flexible as always.

Speaker #6: But expect that that's the optimum now through the time when we do the reconfiguration. From there, we'll quickly ramp up by the end of the year.

Speaker #6: I think that we'll be at an 80 to 100 million gallon SAF run rate. By the spring, we'll be in the 120 to 150 million gallon range.

Speaker #6: And then we'll step through some additional steps that we'll talk about later, ultimately getting to 200 million gallons of SAF by 2028. I'd also say at the end of 2028, it's not just more SAF.

Todd Borgmann: I'd also say at the end of 2028, it's not just more SAF, it's more throughput, right? Increasing from 12,000 barrels a day before. Right now, we're just around 13,000 barrels a day, we're going to increase that further to 17,000 barrels a day of total throughput. Number of positives here as we step up and in a much more capital efficient way than we originally had discussed. Greg.

Speaker #6: It's more throughput, right? Increasing from, you know, 12,000 barrels a day before. Right now, we're just around 13,000 barrels a day. And we're going to increase that further to 17,000 barrels a day of total throughput.

Speaker #6: So, a number of positives here as we step up, and in a much more capital-efficient way than we originally had discussed.

Speaker #7: Yeah, that only explains what my question was on today's. The 60-plus SAF, that I'm looking at, what's the yields on the other products? Is it mostly RDE or is there greater NAFTA?

Gregg Brody: No, that only answered my question. My question was on today's, the 50+ SAF that I'm looking at. What's the yields on the other products? Is it mostly RD or is there greater naphtha?

Speaker #6: Yeah, no. It's mostly RDE. Nothing's changed. Nothing's changed there from normal.

Todd Borgmann: No, it's mostly RD. Nothing's changed. Nothing's changed there from normal.

Gregg Brody: Bruce, you were about to say something. I cut you off.

Speaker #7: Bruce, you were about to say something. I cut you off.

Speaker #6: Yeah, I would. So, let's do this chronologically. So, today we've shifted some RDE to SAF. We're going to continue to run that journey as we have been for a couple of years.

Bruce A. Fleming: Let's do this chronologically. Today we've shifted some RD to SAF. We're going to continue to run that journey as we have been for a couple of years. Remember we started at 30 million gallons with Shell back at the outset, and we've been walking that up. What Todd's giving you, and he just said it verbally and I just want to draw your attention to the bottom of slide three, I think there's a note. We're providing additional color about the 150, and breaking that into additional tactical steps that we're taking this year through this winter in order to maximize the site's cash contribution to the corporation. We've got this additional tactical color that flows from accelerating the whole program that was originally designed with the DOE. We're getting more, we're getting faster, and now we're showing some additional step granularity.

Bruce Fleming: Let's do this chronologically. Today we've shifted some RD to SAF. We're going to continue to run that journey as we have been for a couple of years. Remember we started at 30 million gallons with Shell back at the outset, and we've been walking that up. What Todd's giving you, and he just said it verbally and I just want to draw your attention to the bottom of slide three, I think there's a note. We're providing additional color about the 150, and breaking that into additional tactical steps that we're taking this year through this winter in order to maximize the site's cash contribution to the corporation. We've got this additional tactical color that flows from accelerating the whole program that was originally designed with the DOE. We're getting more, we're getting faster, and now we're showing some additional step granularity.

Speaker #6: Remember, we started at 30 million gallons with Shell back at the outset, and we've been walking that up. What Todd's giving you—and he just said it verbally, and I just want to draw your attention to the bottom of slide three.

Speaker #6: I think there's a note. We're providing additional color about the 150. And breaking that into additional tactical steps. That we're taking this year through this winter in order to maximize the site's cash contribution to the corporation.

Speaker #6: So we've got this additional tactical color that flows from accelerating the whole program that was originally designed with the DOE. So we're getting more.

Speaker #6: We're getting faster and now we're showing some additional step granularity. And we wanted that out ahead of what's expected to be a detailed discussion with a lot more color in the relatively near future.

Bruce A. Fleming: We wanted that out ahead of what's expected to be a detailed discussion with a lot more color in the relatively near future.

Bruce Fleming: We wanted that out ahead of what's expected to be a detailed discussion with a lot more color in the relatively near future.

Speaker #7: Got it. Maybe just shifting gears. The 50 million of capital that you're talking about for at a specialties, Scott, congratulations. You've finally got to put that to work.

Gregg Brody: Got it. Maybe just shifting gears. The $50 million of capital that you're talking about at Specialties. Scott, congratulations, you finally got to put that to work. It's been a couple of years since you've been talking about it. I'm flashing back to being in that room in Montana, where we were surprised to have you talk for most of the time we were there. When should we expect that to start to trickle through? Is that this year, or is that over time? Is it over this year or next? Just help me understand how much CapEx is going up at the restricted group.

Speaker #7: It's been a couple of years since you've been talking about it. I'm flashing back to being in that room in Montana. We were surprised to have you talk for most of the time we were there.

Speaker #7: So, when should we expect that to start to trickle through? Is that this year, or is that over time? Is it over this year or next?

Speaker #7: Just help me understand, how much is capex going up at the restricted group?

Speaker #6: I'd say the majority of that comes through next year, right? Pipeline of projects that we're reviewing—these are smaller projects in nature. So, think of it as a portfolio optimization type of thing: debottleneckings, small expansions that have been stacking up.

Todd Borgmann: I'd say the majority of that comes through next year, right? Where we're at right now is we have a pipeline of projects that we're reviewing. These are smaller projects in nature, so think of it as a portfolio optimization type thing, debottleneckings, small expansions that have been stacking up. There's five or six items, actually a little bit more, but five or six of size that make up that portfolio. Those are at the end of the FEL process. We're expecting to clear that, approve those in the not-too-distant future, at least most of those, right? From there, we'd expect that the majority of that $50 million becomes part of the 2027 and 2028 capital budget that we'll announce. We're not expecting additional CapEx out the door this year for growth. Obviously, not all of that gets spent on day one of 2027.

Speaker #6: So there's five or six items actually a little bit more, but five or six of size that make up that portfolio. Those are at the end of the FEL process.

Speaker #6: We're expecting to clear that, approve those, in the not-too-distant future—at least most of those, right? So from there, we'd expect that the majority of that $50 million becomes part of the 2027 and 2028 capital budget that we'll announce.

Speaker #6: So we're not expecting additional capex out the door this year for growth. Obviously, not all of that gets spent on day one of 2027.

Speaker #6: It'll be a staged project. Some of them are things that tie in, for example, to turnarounds that are scheduled at the end of 2027, etc.

Todd Borgmann: It'll be a staged project. Some of them are things that tie in, for example, to turnarounds that are scheduled at the end of 2027, et cetera. I'd say from a cash flow, you're looking at just cash flow out the door. I don't want to give too many specifics, but maybe two-thirds plus 2027, the remainder in 2028.

Speaker #6: So, I'd say from a cash flow perspective, if you're looking at just cash flow out the door, I don't want to give too many specifics, but maybe two-thirds plus in '27.

Speaker #6: The remainder in '28.

Speaker #7: So we won't see that show up in results till '28, most likely.

Gregg Brody: We won't see that show up in results till 2028, most likely.

Speaker #6: That's right. Maybe a little bit trickling in in the second part of '27. But as a whole, I think '28.

Todd Borgmann: That's right. Maybe a little bit trickling in in the second part of 2027, as a whole, think 2028.

Speaker #7: Okay. And then just turning the MRL, so obviously you're set up to generate a lot of cash. Should we expect a fair amount of that to go back to pay back to intercompany payables?

Gregg Brody: Okay. Just turning to MRL, obviously, you said it would generate a lot of cash. Should we expect a fair amount of that to pay back the intercompany payables, to start to work that down?

Speaker #7: To start to work that down?

Speaker #6: We'll talk a little bit more about kind of the cash and the loan and all of that soon. So don't want to get ahead of that.

Todd Borgmann: We'll talk a little bit more about the cash and the loan and all of that soon, don't want to get ahead of that. I'd expect the cash, first and foremost, to be going towards the next steps of the project, which, like we said, are pretty capital efficient. We'll go there first, and then the rest will accumulate. Let's go into more details when we can talk with the full deal in front of us.

Speaker #6: I'd expect the cash, first and foremost, to be going towards kind of the next steps of the project, which, like we said, are pretty capital-efficient.

Speaker #6: So we'll go there first, and then the rest will accumulate. But let's go into more detail when we can talk with the full deal in front of us.

Speaker #7: Got it. And just one last one from a few. Obviously, with a higher stock price and cash flow, M&A is a greater possibility than it was in the past.

Gregg Brody: Got it. Just one last one for you. Obviously, with the higher stock price and cash flow, M&A is a greater possibility than it was in the past. What's your assessment opportunity set out there, and is that something we should expect more of?

Speaker #7: What's your assessment of the opportunity set out there? And is that something we can expect more of?

Speaker #6: Yeah, it's certainly something that we're paying attention to. We're not going to take our eye off finishing the deleveraging, so we've said that.

Todd Borgmann: Yeah, it's certainly something that we're paying attention to. We're not going to take our eye off of finishing the de-leveraging. We've said that. We've also got some nice organic growth CapEx that's pretty low risk, and we carry a lot of confidence in. Absolutely, we'll be watching actively the market and what's going on. As always, if there's opportunities that can create shareholder value, we're going to be all over them. We'll be looking for things that carry synergy with our broader specialties network, and you could say the same thing about Montana Renewables. I think we're in a place to really start to look at what growth looks like in this company, and excited to be stepping into that, but don't want to get ahead of our skis and send the wrong message, right?

Speaker #6: We've also got some nice organic growth CapEx that's pretty low risk, and we carry a lot of confidence in it. But absolutely, we'll be actively watching the market and what's going on.

Speaker #6: And as always, if there are opportunities that can create shareholder value, we're going to be all over them. We'll be looking for things that carry synergy with our broader specialties network.

Speaker #6: And you can say the same thing about Montana Renewables. So I think we're in a place to really start to look at what growth looks like in this company and excited to be stepping into that.

Speaker #6: But don't want to get ahead of our skis and sit in the wrong message, right? We're also going to be disciplined and complete the deleveraging and we're doing those things in parallel.

Todd Borgmann: We're also going to be disciplined and complete the de-leveraging. We're doing those things in parallel.

Speaker #7: Right. Thank you for the time, guys.

Gregg Brody: Great. Thank you for the time, guys.

Speaker #6: Thank you.

Todd Borgmann: Thank you.

Speaker #1: This concludes our question-and-answer session. I would now like to turn the conference back over to John Kompa for any closing remarks.

Todd Borgmann: This concludes our question and answer session. I would like to turn the conference back over to John Kompa for any closing remarks.

Operator: This concludes our question and answer session. I would like to turn the conference back over to John Kompa for any closing remarks.

Speaker #2: Okay, thank you, David. On behalf of Todd and the entire management team, I'd just like to thank everyone again for their interest in Calumet, and have a great rest of the day.

John Kompa: Okay. Thank you, David. On behalf of Todd and the entire management team, I'd just like to thank everyone again for their interest in Calumet, and have a great rest of the day. Thank you.

Speaker #2: Thank

John Kompa: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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