Calumet Inc. (CLMT) Q3 2026 Earnings Call Transcript

Operator: Good day, and welcome to the Calumet Inc. Third Quarter 26 Financial Results Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to John Kompa, Investor Relations for Calumet. Please go ahead.

John Kompa: Thank you, Keith. Good morning, everyone, and welcome to Calumet's third quarter 26 Earnings Call. As a reminder, this conference is being recorded. With me on today's call are Louis Todd Borgmann, CEO David Lunin, EVP and Chief Financial Officer Bruce A. 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 IR section of our website at calumet.com. Also, a webcast replay of this call will be available on our site within a few hours. Turning to the presentation on slide 2, you can find our cautionary statements. I would 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. As we turn to Slide 3, I will now pass the call to Todd.

Louis Todd Borgmann: Thanks, John. Good morning, all, and welcome to today's call. The third quarter was an exceptional 1 for Calumet. The company generated $347 million of adjusted EBITDA with tax attributes our deleveraging and growth strategy is accelerating by years. Both our specialties and renewables businesses are producing stellar results at the same time. Anchored by $248 million of adjusted EBITDA on our Specialty Products and Solutions segment and a record $80 million at Montana Renewables. In its first full quarter of operations since the set RVO was set earlier this year. The market gave our industry an opportunity this quarter, and we are seeing years of positioning allowing us to make the most of it. An integrated specialist system built on advantaged crude, domestic crude, and world class customers, a renewable platform that is now ramping at the right time, continued demonstration of our industry leading commercial excellence platform, and a growing culture of operational reliability is both increasingly evident in our results and also provides a real opportunity to further extend our performance. And financially, we are converting these results into permanent value. In the past 4 months, Calumet's retired roughly $265 million of debt saving approximately $26 million of annual cash interest and we expect to continue this trend going forward. Which has been at the heart of our strategy for some time now. Let's turn to slide 4. At quarter end, consolidated net leverage stood at approximately 3x. Down from over 9x at the beginning of last year. And net recourse leverage at the restricted group was approximately 2.3 times, after paying down nearly $550 million of recourse notes and revolver borrowings over the same time period. After our most recent debt call, we have a $175 million of 28's outstanding also look ahead to the 2029 to become callable at par in January. Every bond we retire converts high cost interest into free cash flow. Net compounding is the value driver that transfers this growing cash flow stream from large debt payments to lasting shareholder value. Turning to slide 5. We will talk about the specialties market. You have heard others in industry citing US refining utilization in the high nineties. The highest since 2019, and distillate cracks near record levels. Fuels and specialties are different markets. what is common right now is they are both in extremely short supply globally, it will take serious time to normalize. How long that is? Is a question we get a lot. And while it is impossible to predict, the durability of the market is certainly something that is been proven time and time again on the specialty side. Currently, more than 10% of the world's paraffinic base oil capacity is damaged. 3 are from Group 1. A third is Middle Eastern capacity from the Iranian conflict and roughly a third of Europe's group 1 capacity through the Russia Ukraine war. This is physical plant damage. Not a short term trading decision as a high-processing complex Takes quarters to repair, recommission and requalify. And even once capacity returns, the supply chain has to rebuild inventories that have been drawn down for most of the year. Supply chains rebuild slowly. And they refill a price that did not incentivize it. As we have talked about previously, a lot of the globally impacted capacity is in the Group 3 market. Which we do not directly produce. But with our paraffinic lube selling at roughly $200 a barrel over WTI, and our solvent selling over a $100 per barrel in WTI. We see that it is an interconnected specialty market. And we see global crudes trading at huge premium to domestic crudes, and shipping costs sometimes adding another $20 a barrel, it is clear that this is an infrastructure and supply chain story. Meanwhile, demand has been blanked. We posted our 8th consecutive quarter of specialty sales volumes above 20 thousand barrels a day. Some may remember that this used to be a real accomplishment on the commercial side. And we now think of the 20 thousand barrels a day of specialties as a floor. This is a combination of our commercial team's continued success selling every barrel that can be produced, and also the result of the smaller liability investments that have been made. Which we are excited to continue. Quite frankly, during recent periods, our commercial team could have recognized higher margins in the spot markets but we are focused on a long term. And will continue to support our loyal customers many of whom have been with us for decades. Calumet remains on the right side of every 1 of these global dynamics. Our crude is domestic, nearby and readily available. And because we are fully integrated from crude, we capture the full intermediate value uplift that nonintegrated producers are paying up for in a scarce intermediate market. So what we will not point to this quarter is the new long term norm. The underlying structure that produced this 1 does not resolve quickly. It will take rebuilt plants, and refilled inventories. And that is a 2027-and-beyond story. Looking at our own facilities, Calumet's well positioned to meet the market needs. We just completed a major turnaround at Shreveport on time and on budget in early November. We looked into this turnaround as we tried to hold off as long as we could given the market and we are excited about our increased volume potential as we close out this year and step into 2027. During this turnaround, we took some steps to further harden reliability on a little less than half of our units. And late next year, we will do the same on our own. Let's turn to slide 6 and talk Montana renewables. Which delivered a record $80.4 million of adjusted EBITDA with tax attributes. At 80% in the quarter. that is $1.86/gallon. Quite frankly, we left a little on the table. Many will remember the significant power outage Great Falls had in April, while we thought we had fully moved beyond that, found some lasting catalyst damage during this quarter and we dialed back rates and staff just bit to ensure we hit the scheduled downtime. We have in November to tie in our MaxSAF assets. This tie in has now began. And we have timed this to line up with the winding down of the retail asphalt season. The timing decision discussed last quarter worked out well as CMR captured $41 million of EBITDA during the third quarter. In the renewables market, we are seeing the RVO continue to work exactly as designed. Biomass based diesel production across the industry continues to remain strong, and the agriculture complex is crushing more crop than ever. We laid out this policy piece just a year ago, and it is turned into the industry consensus. American capacity is back online, putting American feedstocks to work. Producing more diesel at a time when the world needs it. Our view of the long term balance has not changed. Over time, the market settles around what it takes to incentivize the marginal biodiesel producer. Montana renewables is advantaged across that entire range. With its top quartile cost position feedstock and product flexibility, and a strong geographical footprint. We are adding the advantage with our recently announced expansion Let's turn to slide 7 and visit this project. In September, we unveiled the improved MaxSAF expansion plan, which included the amended DOE loan guarantee the 6 small controllable steps, and the economics. Which were roughly 70% of the originally expected benefit of $137 million. Or less than 15% of the originally planned Phase 2 capital. Further, yesterday, we announced the last element of this project, which was the completion of the CMR lease for the related critical assets MRL will use and the accelerated expansion and an associated amendment to our deal with our partner, Warburg Pincus. David will review that. I want to thank Warburg Pincus for their partnership. For 4 years into this investment, and they have been agile, brought real industry perspective and expertise, And together with the DOE, we have created a transaction that positions MRL significantly better. Than the originally contemplated MaxSAF project did. The next step of this expansion is tying in the leased CMR equipment. Including our hydrotreater. This began this week as planned. And we are expecting to be back online this month to increase rate, improve our naphtha yields, and ramp up SAF production. Our new SAF polishing process. As discussed last quarter, this dual-stage SAF polishing service will allow Montana Renewables to process SAF at lower severity than the industry standard cracking service. Allowing us to generate SAF while minimizing volume loss volume loss in naphtha production. This underpins our path to reach an 80 million annual gallon SAF run rate by year end, 120 million plus by spring, 120 to 150 million by the end of 2027, and ultimately, to 200 million gallons in 2028. In addition, we will capture and sell RIN generating renewable NGLs significantly reduce our water usage, and creep up throughput to 17 thousand barrels a day throughout the project. SAF receives a lot of limelight and we are excited about the level to which these other steps find our competitive advantage as well. Higher volumes bring more margin and economies of scale. Capturing propane, butane, and selling them into renewable markets, generating RINs, is a tremendous upgrade. And making all of our products with an enhanced pretreatment unit that provides even more feedstock flexibility than we currently enjoy. Our long term differentiating advantages. Before I hand it to David, 1 more thank you. This quarter asked a lot of our people. The Calumet team carried a record pace at nearly every site. Our 2 largest sites did so while planning a major turnaround in project, and our commercial team continues to demonstrate what makes them so special. We are grateful for the 1.6 thousand employees that are executing every day in driving these results. With that, I will turn the call over to David.

David Lunin: Thanks, Todd, and good morning, everyone. Let's turn to slide 8 and talk about our Montana Renewables segment. Before I get into the financial details, I wanted to walk through our announcement from yesterday. We announced in that in a connected deal, with the Department of Energy, Warburg Pincus and Calumet have agreed on a lease structure between CMR and MRL for the equipment and a revision to the MRL Warburg agreement. This deal will provide an expected $30 million annual lease payment to CMR from MRL for the use of the equipment necessary for the past expansion. Accordingly, Warburg's preferred rate of return on their investment will increase to 11.5%, and their equity position will decrease from its current 13.2% of common equity in MRL. To a warrant to purchase 8% of MRL's common equity at a $750 million equity value strike price. All in, the structure provides MRL the assets it needs to expedite the expansion and save roughly $1 billion of capital compared to the original plan. While also providing CMR a fixed cash flow stream for these key assets and simplifying the capital structure to provide maximum strategic flexibility Montana renewables going forward. Moving on to the financials. Montana Renewables segment reported adjusted EBITDA with tax attributes of 111 million Todd covered MRL's $80.4 million at 100% in its first full quarter following the initial phase of the MaxSAF expansion and the strong index margin environment. Proud of that performance and our first full quarter of showing the financial capability of the business. On the refining side, CMR delivered the outsized seasonal quarter we foreshadowed with $40.8 million of adjusted EBITDA, as it captured peak asphalt season and the elevated fuels margins ahead of the reconfiguration. As part of that reconfiguration, the treater hydrogen plant, and naphtha splitter moved to MRL under the $30 million lease and CMR will continue to operate, produce high quality retail asphalt and retain all of its employees. Moving to slide 9. We see that specialty products and solutions segment adjusted EBITDA was 248 million more than triple the prior year's 80.2 million Specialty Materials margin reached over $108 per barrel versus $62 a barrel a year ago. And fuels and asphalt margin were almost $38 a barrel. Execution matched the market. This was our 8th consecutive quarter of specialty sales above 20 thousand barrels per day and we achieved it while deliberately extending Shreveport's production runway ahead of the turnaround that began in October. Turnaround has been completed and positions Shreveport to run safely, reliably, and full into 2027. Turning to Performance Brands. Adjusted EBITDA was $9.1 million down from $13.2 million in the prior year period. The team continued to deliver on volume growth a healthy 6.8 million gallons versus 6.3 million gallons sold a year ago. The story is unchanged from last quarter. Input costs rose faster than our retail channel pricing could follow. As that channel carries a typical 60 to 90 day price lag. Pricing actions are flowing through now, once again, which have been a recurring theme this year. As soon as input costs stabilize, we would expect margins to normalize as the increases have been implemented. Of course, the same input costs move squeezing Performance Brands is a major contributor to our SPS segment and with SDS production roughly 35x the size of Performance Brands, that is a trade we will take every quarter. Additionally, offsetting some of those cost headwinds were the $7 million insurance claim related to winter storm Uri that was realized during the period. In closing, we enter the fourth quarter with real momentum Specialties pricing remained strong. Shreveport turnaround is now complete. Montana Renewables enters the quarter fully operational and will complete its tie in November. And the balance sheet is stronger than it has been in this company's modern history. Our job from here is to run safely, reliably, and full, complete the reconfiguration in at Great Falls, and keep converting earnings and cash flow into reducing debt and interest expense thereby continuing to build permanent shareholder value. With that, I will turn the call back to the operator for questions.

Operator: Yes. Thank you. We will now begin the question and answer session. And today's first question comes from Connor Fitzpatrick from Bank of America.

Conor Fitzpatrick: Good morning, everybody. Thanks for taking my question. The midterm elections have come and gone, and it looks like control of federal and state arms of the government have changed in a few places. I was wondering maybe if you could give an update or possible outlook on how SAF voluntary demand in The United States might be there was kind of a wave of voluntary airline company level mandates, that had happened, at in the last kind of, political upcycle for the fuel. I was wondering how that unfolded last time and maybe it could unfold possibly going forward. And then, does it change the policy environment for LCFS expansions in new states as well?

Bruce A. Fleming: Hey. Hey, Connor. it is Bruce. I will take a shot at that. So the view from here is that these are bipartisan initiatives, both administrations, both sides of the aisle have been supportive of RVO directions. They know that ties back to ag policy. In terms of the voluntary SAF, you know, the, I think that is probably also a bit independent of which party is in the driver's seat. You know, they have both been supportive through, for example, the PTC. You know, we expect that to continue.

Conor Fitzpatrick: Okay. Thanks. And then I see in the slides, you still have an estimated 10% or so of specialty products. Capacity offline globally. Looks like a lot of it in the Middle East. If you look at different consultants' estimates, some of their specialty products refinery damage, is 6+ months to repair. I was wondering, like, even if we see a ceasefire or peace in the near term, how long a market short could last-- could outlast that just because of the damage across the world?

Scott Obermeier: Conor, this is Scott. You know, I think we agree with what you mentioned and what is been published out there. We, you know, we view the impact globally as not a quick fix. Right, and so a lot of the damage as we are talking base oils in particular plus other refining Middle East, as you mentioned, but also Russia. A lot of refinery impact in Russia and base oil impact there as well. So you know, we. Our outlook is certainly this is gonna be tighter market for longer because it is gonna take time to get rebuilt and then replenish global supply chains.

Conor Fitzpatrick: Great. For taking my questions.

Operator: Thank you. Thank you. And the next question comes from Amit Dayal with H. C. Wainwright.

Amit Dayal: Hey, good morning guys. Thanks for taking my questions. Congrats on the solid quarter. Just to follow-up on the prior question, So are you seeing similar strength in margins and volumes from specialty for Q4 so far as you did in Q3?

Scott Obermeier: Yes. This is Scott. I would say, that our outlook here for the fourth quarter, which was normally you know, has seasonality to it. So it is normally a little bit slower quarter. For specialties. We have seen demand customer demand remain durable. I think there. there is a lot of attention, a lot of focus, a lot of prioritization around business continuity, security, supply of raw materials. And so know, certainly, at this time in the quarter, we still see demand solid, strong.

Louis Todd Borgmann: This is Todd. Amit, I will follow on a little bit which is our ability to produce. Ramping up in the fourth quarter. So we obviously have the Shreveport had the Shreveport turnaround And that 1's behind us, and we are pretty excited about our ability going forward. When you think about kind of third quarter volumes, we were quite literally limping into that turnaround. We were running in kind of the mid forties. As far as thousand barrels a day, buying a little bit of base oil on the market, to supplement what we are making. And coming out of that turnaround now, there was a lot of really good work done and we are expecting to be running in the fifties of thousands barrels a day making our own feedstock. So not only do we expect the market to be strong, like Scott said, we are excited to see, you know, our ability to just immediate continue to increase.

Amit Dayal: Thank you, guys. And then on that Warburg transaction, did you see $750 million at 8% equity? And is that for the MRL asset or is that for Calumet Inc?

Louis Todd Borgmann: No, that was at the MRL asset. So the way it worked was you know, today or, I guess, prior, Warburg had 13.2% of $1 equity in my January renewables in the future. They will have an 8% warrant to per or option to purchase, you know, 8% of Montana renewables at a $750 million equity strike price. So hopefully that clears that up.

Amit Dayal: Yes. Thank you, Todd. that is helpful. And then just the performance brand seem to be lagging a little bit, relative to the other segments. Last quarter, you said there will be some catch up Is that still on the table? Or is there some other sort of an overhang for that segment?

Scott Obermeier: Yes. This is Scott. You know, so when we think about performance brand segment, couple of things. 1, overall we have been really pleased. I mean, our volumes are up again this year. We have been on really good growth trajectory. You know, I think that the challenge is as we have mentioned before, there is generally a 90-day price lag out there. And so what. what is going on over the last 4 or 5 months is just the business continuing to chase pricing up. Our costs up, I should say. But we have been successful in pushing through increases, but there is just this lag. And until input raw material costs stabilize, it is a little bit of just chasing after our cost increases.

Louis Todd Borgmann: 1 other quick comment that was David alluded to in his prepared remarks, the Obviously, it is a big headwind for performance brands and chasing the cost increase up. But on the SPS side, obviously, it is super beneficial.

Amit Dayal: Yeah. Understood. Okay, guys, that is all I have.

Operator: Thank you. The next question comes from Josiah Knight with Goldman Sachs.

Josiah Knight: Hey, good morning team. Thanks for taking our question. Maybe just on the CMR asset tie in announced yesterday, Can you just walk us through the moving pieces and how this agreement will enable MRL to kind of you know, increase that volumes and total throughput?

Louis Todd Borgmann: Yeah. Sure. I will start, and let's see if Bruce jumps in. We have laid out the multiple steps of the MaxSAF expansion. And the first 1's -- the first step's underway right now. So immediately, what is happening is the hydrotreater, the naphtha splitter, from CMR, are in a hydrogen plant, a 5 hydrogen plant, are being tied into MRL. So right off the bat, that is going to allow a couple different things, right? it is gonna allow us to reduce naphtha yield, with the naphtha splitter, improve the price on the remaining naphtha that we do have. The rest will be blended into to renewable diesel. And it will allow us to activate or enter into this new SAF polishing service that we have talked about the last couple of quarters that we think's, you know, really just a lasting advantage on kind of production costs around SAF. And then, of course, hydrogen is kind of the rate limiter of throughput. So we are gonna put that extra 5 to work at MRL and increase throughput a thousand barrels a day well. So that is the first step. And then there is a handful of other steps that will occur over the next couple years. 1 of the other assets that is that is being you know, leased or will be available you know, next year is the asset that will help us capture the renewable propane and renewable butane. Out of the stream and Montana renewables and sell that. So it is a multipart lease, basically, MRL has the act. Has the ability to use everything they need that is been identified in the MaxSAF expansion so far. So yeah, hopefully, that helps understand kind of the first step.

Josiah Knight: No. that is super helpful. And then on the balance sheet. Net leverage is now 3x, which is nice to see. I guess maybe for the remaining 175 million of the 2028 notes, any updated commentary or any color on how you guys are thinking about that and the 2029, the longer term debt targets?

David Lunin: Yeah. So, it is David. Yeah. I think our plan continues to be the same use cash generated across all our businesses to reduce you know, high cost capital. So right in front of us is the 20 eighth. there is a 175 million outstanding. We will we will use cash generated from operations and continue to chip away at that. You know, right behind those nodes are the 20 nines which become callable at par in January of 27. And so know, we continue to have a ramp. We are excited about the you know, $260 million we have already paid down in the additional, you know, 26 million or so of interest that will save on an annual basis. So you know, strategy will remain the same.

Josiah Knight: Makes sense. Turn it back.

Operator: Thank you. Thank you. Next question comes from Jason Gabelman with TD Cowen.

Jason Gabelman: Yes. Hey, good morning. Thanks for taking my questions. I wanted to go back to the updated agreement and just trying to understand what the cash outflows are now from MRL to both the parent and then to Warburg as well. Is it is it simply just kind of as I look at slide 8, adding up the intercompany interest that is, like, $40 million, a $30 million lease payment. And then the 11.5% on the pref units to Warburg. Is that what is flowing out on an annual basis from MRL? Or is it a bit more nuanced than that?

David Lunin: Yeah. Jason, I think you are close, so let me just clarify a bit. So there is both services. Ongoing service provided under the and so MRL will continue to pay Calumet for those. You can think about that as you know, shared services, employees, utilities, essentially op cost. And those will continue in normal course and nothing's changed there. Related to the lease, that is a $30 million annual payment. The op cost related to those assets will be handled by MRL. And so that. that is what I think about as the kind of immediate cash flow that is gonna come out in normal course. The interest rates, that are described on the kind of intercompany financing arrangements as well as the Warburg arrangement those are picking, and those will continue to pick until project completion. Just under the loan guarantee agreement.

Jason Gabelman: Okay. that is that is helpful color. And then the, other part of this, which is the exercise of the 8% warrants at 750 million equity strike. Is that kind of at Warburg's discretion Do you need to have mutual agreement to do that?

David Lunin: No. It. it is their warrants. They will they will have the right to exercise them like any other warrant.

Jason Gabelman: Okay. And then just on the near term on Q4, given it sounds like there was a bit more maintenance activity both at Shreveport and then with the MRL tie in are you able to provide guidance on kind of throughput expectations for the quarter?

Louis Todd Borgmann: Hey, Jason. it is Todd. I think, you could think about both of those as a little bit less than a month. So the Shreveport turnaround is a big 1. it is behind us. You know, it was a good chunk of October. You know, and like we were saying earlier, back on now. Montana renewables and CMR that tie in just began and that will be back on. It will not be all of November. But you know, last week or so of November. So yeah, I think conservatively, if you set a month for each of those, that would be you know, a bit overshooting. But it is it is a good chunk of the month.

Jason Gabelman: Alright. Great. I will leave it there. Thanks for the answers.

Operator: Thank you. Thank you. And the next question comes from Gregg Brody with Bank of America.

Gregg Brody: Good morning, guys. Just to turn back to the Specialty Materials business. So how should we think about, I think, some folks have asked this. So just curious if can you guide to where you think the proper margin is during this period of supply constraints? And then ultimately, do you think this changes your long term view on where mid cycle should be for this business?

Louis Todd Borgmann: The thanks for the question. I think as Scott said, we are expecting margins to remain pretty similar here. For the foreseeable future. We are certainly not calling for you know, $150 million of SPS to be, the new norm forever. Type of thing. it is certainly a little bit of an elevated market. No doubt. But we are also not seeing that come down in the near term. So there will be a slow creep over time. Hard to predict exactly when that creep would occur. But kind of like we talked about earlier in the Q&A, and in the script remarks, we do not see that happening in the near future just given how much infrastructures offline and how long it is gonna take to respond to that. So I think kind of going forward other than the turnaround that we just talked about in Shreveport for a month, you should be and the seasonality that Scott mentioned earlier, although we really seen any yet, you should be thinking that what we did here is pretty reasonable to look at going forward. As far as the mid cycle, I do think that our mid cycle has increased. Hard to put a specific dollar amount on that, but it is increased in 2 ways. 1, in a huge way, on cash generation. Right? When you think about just the amount of additional cash that we are unlocking through the accelerated deleveraging I think our ability to you know, generate cash flow in this business is substantially higher in the mid cycle than it was when we had all of the debt. On the balance sheet going forward or looking backwards. Twofold, I would say, just our reliability and some of the small reliability investments that we have made, we expect those to continue to pay. And quite frankly, continue to get better. So, I mean, if we thought about before our mid cycle you know, levels, we would certainly look at going forward even outside of the current margin environment to be building on with some of the improvements that we have made just in the base reliability. And then, obviously, we have talked about before, we have also got some pretty interesting and exciting growth capital in the specialty business, which we have not spent any on in many years. So that will be adding to the mid cycle as well, and we will put some of this excess gas flow to good use there.

Gregg Brody: Thank you. And just what the remaining legacy Montana facility how should we think about the piece that is not part of this lease? In terms of EBITDA generation and seasonality throughout the year?

Louis Todd Borgmann: Yeah, I think it is a good question. We have not gone too far in the you know, guidance of what that asset can do. What I can tell you is the asphalt business has been a really nice 1, so we think the least the $30 million value for the lease, is basically kind of a reasonable range to compensate long term for what CMR has generated. Obviously, the current margin environment is better than that. So we do expect CMR to generate you know, positive EBITDA going forward. It certainly will not be as much as it was operating at a full refinery. So do not wanna put a specific number on it, but it is you know, it is not as high as the historic range, but it is also certainly positive. And there will be a little bit of seasonality just given it is gonna be more heavily weighted towards you know, asphalt, but it will still be a positive contributor to the business.

Gregg Brody: Thank you. And then just maybe just turning to MRL and the transaction you announced yesterday. Just can you clarify, is the Warburg instrument still a PIC security And do you expect that to pick that? Or do you expect do you think you would start paying that paying that?

Louis Todd Borgmann: Yeah. that is a good question. It is a PIK facility. You know, like we talked about last quarter, the cash in Montana renewables will stay in Montana renewables, although it is building pretty rapidly. We have got a few $100 million built up on the balance sheet there. So you know, but that is going to stay there until project's complete at Montana renewables. We certainly have the ability to pay down that instrument sooner. And you know, that rate I would be shocked to see that instrument you know, around that termination or expiration long term. So, we will see where that goes. But with the cash flow generation that we have throughout the company, it is certainly a potential use of cash to pay that to expedite the payment of that instrument.

Gregg Brody: Are you. Just to be clear, you saying cash the restricted group could be used to pay that down? Or some point assuming you can amend the DOE agreement, you could use cash from MRO?

Louis Todd Borgmann: Either. Either, right? Like, as we look forward and just try to reduce interest cost and you know, kind of look at consolidate that across the board. I think either is an opportunity. We are not fixated on 1 path or the other right now. We will just kinda stay focused on the market and see you know, how things are progressing.

Gregg Brody: But that presumably, that would not interfere with paying down the debt. At the holding company, the remaining 2028s and the 2029s? We think that Correct. Just as you think about that debt target at the parent how has this agreement changed your thoughts about monetizing the asset. Any sort of updates there?

Louis Todd Borgmann: In terms of updating on MRL? Yes. I think our long-term view has changed at all around MRL, you know? It. I think maybe necessity has changed certainly in the in the current margin environment. You know, we have announced kind of the next phase of what we are doing in MaxSAF. We continue to build value there. Certainly, I would say in prior conversations, the key driver to accelerating a sale was you know, accelerating the debt pay down at the restricted group. Obviously, that is not the only requirement right now. Right now, the requirement is what can we do to accelerate or to optimize overall shareholder value and look, we have created a really strong currency here at MRL, and we are gonna use that to create enterprise value. Whichever form it takes. So certainly monetization remains an option. Long term, we think of that as the most likely scenario. But I would say the idea of pushing that solely to drive accelerated deleveraging of the restricted group is not a requirement. Our eyes are on maximizing shareholder value.

Gregg Brody: Does that does that mean that an IPO is not something you are contemplating over near term as well? Or is that.

Louis Todd Borgmann: I know. That was-- I do not know that I would say that it is not something we are contemplating. I would say there is a lot of options there. You know, it is certainly not something I would expect in the imminent few months but it very much remains an option. And as do other strategic options.

Gregg Brody: Great. And then just the last 1, maybe you could just talk about M&A and growth capital opportunities. Probably growth capital being a little easier, but I am just curious also the M&A environment looks like for specialty for your restricted group business and pass possibly Montana Renewable?

Louis Todd Borgmann: Yeah. Look, I can tell you, we look at all of it through the same lens. That we just talked about, and that is shareholder value. Creation. We are not going to take our eye off the ball on finishing the deleveraging. Right? So I think that is the first message. Is just because we have had a couple great quarters here, we still wanna continue to pay down debt, and that is our number 1 priority and carries a huge rate of return. At the same time, we are generating a heck of a lot of cash, and we are gonna value. We are gonna prepare all of our growth opportunities against 1 another, whether that is MRL growth, organic growth, CapEx, you know, inorganic M&A. We will evaluate everything. To you know, to drive shareholder value. Just say we do not wanna get ahead of ourselves and first and foremost is completing that deleveraging and at the same time, we are looking forward and you know, we will keep building that war chest. And when the time is right to strike on something that is usually synergistic, we will take advantage of it. Thank you.

Operator: Thank you. And this concludes our question and answer session. I would like to turn the conference back to John Kompa, Investor Relations for Calumet for any closing comments.

John Kompa: On behalf of Todd and the entire management team, I would like to thank everyone again for their interest in Calumet. Have a great rest of the day.

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