カルメット（CLMT）2026年第3四半期決算説明会：EBITDAは3億4,720万ドル、デレバレッジ加速

要点

• カルメットが創出した税務属性を含む調整後EBITDAは3億4,720万ドルとなり、2026年第3四半期はスペシャリティと再生可能エネルギーの双方が好調な業績に支えられました。
• スペシャリティ製品・ソリューション部門の調整後EBITDAは3倍超の2億4,810万ドルへと急増し、前年同期の8,020万ドルから大幅に拡大しました。スペシャリティ材料マージンは1バレルあたり108ドル超へ上昇し、前年同期の同62ドルを上回りました。
• モンタナ・リニューアブルズは税務属性を含む調整後EBITDAとして過去最高の100%ベースで8,040万ドルを計上しました。これは1ガロンあたり1.86ドルに相当し、MaxSAF拡張の初期フェーズ後で初となるフル四半期に達成されました。
• カルメットは約2億6,500万ドルの負債を過去4か月間で返済し、年間支払利息（現金ベース）を約2,600万ドル削減しました。連結純レバレッジ比率は四半期末時点で約3.0倍となり、前年期首の9.0倍超から低下しました。
• 経営陣は、スペシャリティ市場の需給引き締まりが短期的には続くと予想しているものの、第3四半期の収益性を恒常的な実力値と見なすべきではないと注意を促しました。
• 同社は、モンタナ・リニューアブルズの年換算SAF生産ペースが2026年末までに8,000万ガロン、2027年春までに1億2,000万ガロン超、そして最終的には2028年に2億ガロンに達すると見込んでいます。

主要財務データ

事業および営業実績

スペシャリティ製品・ソリューション

スペシャリティ製品・ソリューション部門が最大の収益貢献部門となりました。カルメットはスペシャリティ製品の販売量が8四半期連続で日量2万バレルを上回り、経営陣は現在これを例外的な水準ではなく基準値と見なしています。

経営陣は、価格の堅調さは世界的な供給制約によるものだと説明しました。中東の生産能力の約3分の1、欧州のグループI生産能力の約3分の1を含め、世界のパラフィン系ベースオイル生産能力の10%以上が損傷または操業停止状態にあるとされています。同社は、設備の修復、生産の再開、在庫の再構築には時間を要するため、需給の引き締まった市場環境が2027年以降まで長期化する可能性があると述べています。

カルメットは11月初旬、シュリーブポート製油所の大規模定期修繕（ターンアラウンド）を予定どおりのスケジュールかつ予算内で完了しました。定期修繕前の生産量は日量4万バレル半ばで推移し、ベースオイルの一部を外部調達していました。経営陣は、設備の信頼性向上と原料の内製化に支えられ、今回の修繕完了後は日量5万バレル台へと引き上げられると見込んでいます。

モンタナ・リニューアブルズとMaxSAF

モンタナ・リニューアブルズは、4月にグレートフォールズで発生した停電による触媒の損傷が尾を引いていたにもかかわらず、過去最高の四半期収益性を達成しました。同社は11月に予定されている作業に備えて操業を維持するため、第3四半期中に稼働率とSAFの生産量を引き下げました。

MaxSAFの第1段階の接続には、水素化処理装置、ナフサ分離装置、およびCMRからリースされた水素プラントが含まれます。経営陣によると、これらの資産によってナフサ得率の低下、残余ナフサの販売価格改善、新たなSAF精製プロセスの支援が可能となり、処理能力が日量約1,000バレル拡大する見通しです。

プロジェクト全体では、処理能力を日量1万7,000バレル近くまで引き上げ、RIN（再生可能燃料識別番号）を創出可能な再生可能プロパンやブタンを回収し、水消費量を削減するとともに原料調達の柔軟性を拡大することが見込まれています。

改定された取り決めに基づき、MRLはCMRに対して年間推定3,000万ドルのリース料を支払います。ウォーバーグ・ピンカスの優先リターンは11.5%に引き上げられる一方、同社が現在保有する13.2%の普通株式持分は、株式価値7億5,000万ドルを行使価格としてMRL株の8%を取得できる新株予約権（ワラント）へと変更されます。カルメットによると、この枠組みにより当初の拡張計画と比較して約10億ドルの資本が節約されるとのことです。

パフォーマンス・ブランズ

パフォーマンス・ブランズ部門の販売量は増加したものの、調整後EBITDAは910万ドルに減少しました。経営陣はこの減益について、通常60〜90日の遅れを伴って改定される小売価格に対し、原材料コストの上昇ペースが上回ったためと説明しました。

価格改定が進められており、経営陣は原材料コストが安定すればマージンは正常化すると見込んでいます。また、当四半期には700万ドルの保険金収入（寒波「ウリ」関連）も計上されました。

経営陣の見通し

経営陣によると、例年の季節的な減速はあるものの、第4四半期初頭のスペシャリティ需要は引き続き堅調に推移しています。マージンは当面ほぼ同水準を維持すると予想されるものの、同社は第3四半期のスペシャリティ製品・ソリューション部門のEBITDA（約2億5,000万ドル）が恒常的な基準になるとは考えていません。

カルメットは、モンタナ・リニューアブルズの年換算SAF生産目標として以下を提示しました。

• 2026年末までに8,000万ガロン
• 2027年春までに1億2,000万ガロン超
• 2027年末までに1億2,000万〜1億5,000万ガロン
• 2028年に2億ガロン

第4四半期の操業には、シュリーブポートとモンタナ双方の施設での操業停止（ダウンタイム）が反映される見通しです。経営陣は、それぞれの停止期間は1か月弱にとどまる見込みであるものの、いずれも該当月の稼働日数に少なからぬ影響を及ぼすと述べています。

負債削減は引き続き同社の資本配分の最優先事項です。カルメットは未償還の2028年満期債1億7,500万ドルを抱えており、2027年1月に額面でのコールが可能となる2029年満期債への対応に先立ち、営業キャッシュフローを用いてこの2028年満期債を削減する計画です。

リスクおよび注視事項

• 第3四半期のスペシャリティマージンは高水準に達したものの、経営陣は現在の収益性を恒常的な実力値と見なさないよう注意を促しました。
• シュリーブポートおよびモンタナの施設では第4四半期に予定された操業停止が控えており、足元の処理能力が制限される見込みです。
• モンタナ・リニューアブルズでは、4月にグレートフォールズで発生した停電に伴う触媒の損傷が依然として尾を引いています。
• パフォーマンス・ブランズ部門は、原材料コストの上昇から小売価格への転嫁までに60〜90日の遅れが生じるリスクを依然として抱えています。
• 世界のスペシャリティ供給は、設備の損傷や停止により依然として制限されています。設備の修理、再稼働、在庫補充の時期には不確実性が伴います。
• ウォーバーグの金融商品および特定のグループ内融資契約に対する利息は、米エネルギー省（DOE）の融資保証契約に基づくプロジェクト完了まで、引き続き現物支給（PIK）で支払われます。

アナリスト質疑応答の要点

経営陣は、再生可能燃料政策やSAFに対する自主的な需要は超党派の支持を得ており、今後もその支援が続くと予想していると述べました。また、再生可能燃料義務量（RVO）は設計どおりに機能しており、米国内の再生可能ディーゼル生産と農業原料需要を下支えしているとの見解を維持しました。

スペシャリティ市場について幹部は、停戦や政治的解決が実現したとしても、損傷した精製能力が直ちに回復するわけではないと指摘しました。施設の修復と再認定が必要となるほか、枯渇したサプライチェーンにおいて在庫を再構築する必要があるためです。

モンタナ・リニューアブルズに関して経営陣は、将来的な資産の現金化（マネタイズ）が長期的に最も可能性の高い結末であることに変わりはないものの、制限グループのデレバレッジ（負債削減）を加速させるための主要手段としてはもはや必須ではないと述べました。IPO（新規株式公開）は引き続き選択肢の一つであるものの、今後数か月以内の実施は見込んでいません。

カルメットは自社主導のプロジェクトや潜在的なM&Aの検討を継続するものの、経営陣はデレバレッジ計画の完了が引き続き最優先事項であると強調しました。

決算説明会 全文書き起こし

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good day, and welcome to the Calumet, Inc. Third Quarter 2026 Financial Results Conference Call. [Operator Instructions]

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 2026 earnings call. As a reminder, this conference is being recorded. 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 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'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. As we turn to Slide 3, I'll now pass the call to Todd.

Unknown Speaker

Thanks, John. Good morning, all, and welcome to today's call. The third quarter was an exceptional one for Calumet. The company generated $347.2 million of Adjusted EBITDA with tax attributes, and 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 $248.1 million of Adjusted EBITDA in our Specialty Products and Solutions segment, and a record $80.4 million at Montana Renewables in its first full quarter of operations since the SET2 RVO was set earlier this year. The market gave our industry an opportunity this quarter, and we're seeing years of positioning allowing us to make the most of it. An integrated specialty system built on advantaged, domestic crude, and world-class customers, a renewable platform that's now ramping at the right time, continued demonstration of our industry-leading commercial excellence platform, and a growing culture of operational reliability that's both increasingly evident in our results and also provides a real opportunity to further extend our performance. And financially, we're converting these results into permanent value.

In the past four 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 2.3x 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 $175 million of 2028s outstanding and also look ahead to the 2029s that become callable at par in January. Every bond we retire converts high-cost interest into free cash flow. And that compounding is a value driver that transfers this growing cash flow stream from large debt payments to lasting shareholder value.

Turning to Slide 5, we'll talk about the specialties market. You've heard others in industry citing U.S. refining utilization in the high 90s, the highest since 2019, and distillate cracks near record levels. Fuels and specialties are different markets, but what's common right now is they're both in extremely short supply globally, and it will take serious time to normalize. How long that is, is a question we get a lot. And while it's impossible to predict, the durability of the market is certainly something that's been proven time and time again on the specialty side. Currently, more than 10% of the world's paraffinic base oil capacity is damaged or offline, 1/3 of Middle Eastern capacity from the Iranian conflict, and roughly 1/3 of Europe's Group I capacity through the Russia-Ukraine war. This is physical plant damage, not a short-term trading decision as a hydroprocessing complex takes quarters to repair, recommission, and requalify. And even once that capacity returns, the supply chain has to rebuild inventories that have been drawn down for most of a year.

Supply chains refill slowly, and they refill at prices that incentivize it. As we've talked about previously, a lot of the globally impacted capacity is in the Group III market, which we don't directly produce. But with our paraffinic lube selling at roughly $200 a barrel over WTI, and our solvent selling at over $100 a barrel to WTI, we see that it's an interconnected specialties market. And when you see global crude trading a huge premium to domestic crudes, and shipping costs sometimes adding another $20 a barrel, it's clear that this is an infrastructure and supply chain story. Meanwhile, demand hasn't blinked. We posted our eighth consecutive quarter of specialty sales volumes above 20,000 barrels a day. Some may remember that this used to be a real accomplishment on the commercial side, and we now think of the 20,000 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 small reliability 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're focused on the 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 one of these global dynamics. Our crude is domestic, nearby, and readily available. And because we're fully integrated from crude, we capture the full intermediate value uplift that non-integrated producers are paying up for in a scarce intermediate market. So while we won't point to this quarter as the new long-term norm, the underlying structure that produced this one doesn't resolve quickly. It'll take rebuilt plants and refilled inventories, and that's a 2027 and beyond story.

Looking at our own facilities, Calumet is well positioned to meet the market needs. We just completed a major turnaround at Shreveport on time and on budget in early November. We limped into this turnaround as we tried to hold off as long as we could, given the market, and we're 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'll do the same on the rest. Let me turn to Slide 6 and talk Montana Renewables, which delivered a record $80.4 million of Adjusted EBITDA with tax attributes at 100% in the quarter. That's $1.86 a gallon. And quite frankly, we left a little on the table. Many will remember the significant power outage Great Falls had in April.

And while we thought we had fully moved beyond that, we found some lasting catalyst damage during this quarter. And we dialed back rates and SAF just a bit to ensure we hit the scheduled downtime we have in November to tie in our MaxSAF assets. This tie-in has now begun, and we've timed this to line up with the winding down of the retail asphalt season. The timing decision discussed last quarter worked out well. CMR captured $40.8 million of EBITDA during the third quarter. In the renewables market, we're 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's turned into the industry consensus. American capacity is back online, putting American feedstocks to work, and producing more diesel at a time when the world needs it. Our view of the long-term balance hasn't changed. Over time, the market settles around what it takes to incentivize the marginal biodiesel producer, and Montana Renewables is advantaged across that entire range with its top quartile cost position, feedstock and product flexibility, and a strong geographical footprint. We're adding to that 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 for $137 million, or less than 15% of the originally planned phase new 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, and I want to thank Warburg Pincus for their partnership. We're 4 years into this investment, and they've been agile, brought real industry perspective and expertise, and together with the DOE, we've created a transaction that positions MRL significantly better than the originally contemplated MaxOut 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're expecting to be back online this month to increase rate, improve our naphtha yields, and ramp up SAF production with 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 and 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 million to 150 million by the end of '27, and ultimately to 200 million gallons in 2028. In addition, we'll capture and sell RIN-generating renewable NGLs, significantly reduce our water usage, and creep up throughput to 17,000 barrels a day throughout the project.

SAF receives a lot of limelight, and we're excited about the level to which these other steps widen our competitive advantage as well. Higher volumes bring more margin and economies of scale. Capturing propane and butane and selling them into renewable markets to generate a RIN 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 are long-term differentiating advantages. Before I hand it to David, one 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 and projects, and our commercial team continues to demonstrate what makes them so special. We're grateful for the 1,600 employees that are executing every day and driving these results. With that, I'll turn the call over to David.

John Kompa

Thanks, Todd, and good morning, everyone. Let me 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 that in a connected deal with the Department of Energy, Warburg Pincus has 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 MaxSAF 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 for Montana Renewables going forward. Moving on to the financials, Montana/Renewables segment reported Adjusted EBITDA with Tax Attributes of $110.6 million. Todd covered MRL's $80.4 million at 100% in its first full quarter following the initial phase of the MaxSAF expansion and a strong index margin environment. We're 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 hydrotreater, 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 $248.1 million, more than triple the prior year's $80.2 million. Specialty material margin reached over $108 per barrel versus $62 a barrel a year ago, and fuels and asphalt margin was almost $38 a barrel. Execution matched the market. This was our eighth consecutive quarter of specialty sales above 20,000 barrels per day, and we achieved it while deliberately extending Shreveport's production runway ahead of the turnaround that began in October. The 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 with 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'd expect margins to normalize as the increases have been implemented. Of course, the same input cost moves squeezing Performance Brands is a major contributor to our SPS segment. And with SPS production roughly 35x the size of Performance Brands, that's a trade we'll take every quarter. Additionally, offsetting some of those cost headwinds was a $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 remains strong. The Shreveport turnaround is now complete. Montana Renewables enters the quarter fully operational and will complete its tie-in in November, and the balance sheet is stronger than it has been in this company's modern history. Our priority from here is to run safely, reliably, and full, complete the reconfiguration at Great Falls, and keep converting earnings and cash flow into reducing debt and interest expense, and thereby continuing to build permanent shareholder value. With that, I'll turn the call over to the operator for Q&A.

Operator

[Operator Instructions] Today's first question comes from Conor Fitzpatrick from Bank of America. Please go ahead.

質疑応答

Conor Fitzpatrick

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 U.S. might be affected. There was kind of a wave of voluntary airline company-level mandates that happened 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?

Unknown Speaker

Thanks. Hey, Conor, it's Bruce. I'll take a shot at that. So the view from here is that these are bipartisan initiatives. You know, both administrations, both sides of the aisle have been supportive of RVO directions. They know that that ties back to ag policy. In terms of the voluntary SAF, you know, I think that's probably also a bit independent of which party is in the driver's seat. You know, they've both been supportive through, for example, the PTC. So 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. It looks like a lot of it in the Middle East. If you look at different consultants' estimates, some of the specialty products refinery damage is 6-plus months to repair. I was wondering, 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. Thanks.

Scott Obermeier

Hey, Conor, this is Scott. I think we agree with what you mentioned and what's been published out there. We view the impact globally as not a quick fix, right? And so a lot of the damage as we're talking base oils in particular, plus other refining, as you mentioned, but also Russia. A lot of refinery impact in Russia and base oil impact there as well. So, you know, our outlook is certainly this is going to be a tighter market for longer because it's going to take time to get rebuilt and then replenish global supply chains.

Conor Fitzpatrick

Great. Thanks for taking my questions.

Scott Obermeier

Thank you.

Operator

Thank you. The next question comes from Amit Dayal with H.C. Wainwright. Please go ahead.

Amit Dayal

Just to follow up on the prior question, so are you seeing similar strength in margins and volumes from specialty for 4Q so far as you did in 3Q?

Scott Obermeier

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

Unknown Speaker

And I mean, it's kind of, I follow on a little bit here with just our ability to produce ramping up in the fourth quarter. So we obviously had the Shreveport turnaround, and that one's behind us, and we're pretty excited about our ability going forward. When you think about kind of third quarter volumes, you know, we were quite literally limping into that turnaround. We were running in kind of the mid-40s as far as thousands of barrels a day, buying a little bit of base oil on the market to supplement what we're making. And I think coming out of that turnaround now there was a lot of really good work done. And we're expecting to be running in the 50s of thousands of barrels a day, making our own feedstock. So not only do we expect the market to be strong, like Scott said, we're excited to see our ability to just meet it continue to increase.

Amit Dayal

Thank you, guys. And then on that Warburg transaction, did you say $750 million at 8% equity and is that for the MRL asset or is that for cash?

Unknown Speaker

That was the MRL asset. So the way it worked was, you know, today, or I guess prior, you know, Warburg had 13.2% of dollar-one equity in Montana Renewables. In the future they'll have an 8% warrant to, or option to purchase, 8% of Montana Renewables at a $750 million equity strike price. So hopefully that clears that up.

Amit Dayal

Yes, thank you, Todd, that's helpful. And then just Performance Brands seems 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 overhang for that segment?

Scott Obermeier

Yes, this is Scott. You know, so when we think about Performance Brands segment, a couple things. One, overall, we've been really pleased. I mean, our volumes are up again this year. We've been on a really good growth trajectory. I think that the challenge is – as we've mentioned before, there is generally a 90-day price lag out there. And so what's gone on over the last 4 to 5 months, it's just the business continuing to chase pricing up, costs up, I should say, but we've been successful in pushing through increases, but there's just this lag, and until input raw material costs stabilize, it's a little bit of just chasing after our cost increases. One other quick comment that David alluded to in his prepared remarks, you know, obviously it's a big headwind for Performance Brands and chasing the cost increases up, but on the SPS side, obviously, it's super beneficial.

Amit Dayal

Yes, understood. Thank you, guys. That's all I have.

Operator

Thank you. The next question comes from Josiah Knight with Goldman Sachs. Please go ahead.

Josiah Knight

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 increase SAF volumes and total throughput?

Unknown Speaker

Yes, sure, I'll start, and let me see if Bruce jumps in. You know, we've laid out the multiple steps of the MaxSAF expansion, and the first step's underway right now. So immediately what's happening is the hydrotreater, the naphtha splitter from CMR, and the hydrogen plant, 5 million hydrogen plant, are being tied into MRL. So right off the bat, that's going to allow a couple different things, right? It's going to 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 renewable diesel, and it'll allow us to enter into this new SAF polishing service that we've talked about the last couple of quarters that we think is really just a lasting advantage on naphtha production costs around SAF. And then of course, hydrogen is kind of the rate limiter of throughput. So we're going to put that extra 5 million to work at MRL and increase throughput 1,000 barrels a day as well.

So that's the first step. And then there's a handful of other steps that will occur over the next couple of years. One of the other assets that's being leased or will be available next year is the asset that will help us capture the renewable propane and renewable butane out of the stream in Montana Renewables and sell that. So it's a multi-part lease. Basically, MRL has the ability to use everything they need that's been identified in the MaxSAF expansion. So hopefully that helps understand kind of the first step.

Josiah Knight

No, that's super helpful. And the follow-up is 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 2029s and your longer-term debt targets?

John Kompa

Yes, so it's David. Yes, I think our plan continues to be the same. You know, use cash generated across all our businesses to reduce high-cost capital. So right in front of us is the 2028s. There's $175 million outstanding. We'll use cash generated from operations and continue to chip away at that right behind those notes, so the 2029s, which become callable at par in January of '27. And so, you know, we continue to have a ramp. We're excited about the $260 million we've already paid down and the additional $26 million or so of interest that that'll save us on an annual basis. So strategy will remain the same.

Josiah Knight

Got it. Makes sense. Turn it back. Thank you.

Operator

Thank you. The next question comes from Jason Gabelman with TD Cowen. Please go ahead.

Jason Gabelman

I wanted to go back to the updated agreement and just try to understand what the cash outflows are now from MRL to both the parent and then to Warburg as well. Is it simply just as I look at Slide 8, adding up the intercompany instruments that's like $40 million, the $30 million lease payment, and then the 11.5% on the pref units to Warburg, is that what's flowing out on an annual basis from MRL, or is it a bit more nuanced than that?

John Kompa

Yes, Jason, I think you're close, but let me just clarify a bit. There's ongoing services provided under the MSA, and so MRL will continue to pay Calumet for those. You can think about that as shared services, employees, utilities, essentially op costs, and those will continue in normal course. Nothing's changed there. Related to the lease, that's a $30 million annual payment. The op costs related to those assets will be handled by MRL. And so that's what I think about as the kind of immediate cash flow that's going to come out in normal course. The interest rates that are described on the intercompany financing arrangements as well as the Warburg arrangement, those are PIK-ing, and those will continue to PIK until project completion under the loan guarantee agreement.

Jason Gabelman

Got it. Okay, that's helpful color. And then the other part of this, which is the exercise of the 8% warrants at $750 million equity strike, is that at Warburg's discretion, or do you need to have mutual agreement to do that?

John Kompa

You know, it's their warrants, so they'll have the right to exercise them like any other warrant.

Jason Gabelman

Got it. And then near term on 4Q, 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 throughput expectations for the quarter?

Unknown Speaker

Hey, Jason, it's Todd. I think you could think about both of those as a little bit less than a month. The Shreveport turnaround was a big one. It's behind us. It was a good chunk of October. And like we were saying earlier, back on now. Montana Renewables and CMR, that tie-in just began, and that'll be back on. It won't be all of November, but last week or so. Conservatively, if you set a month for each of those, that would be a bit overshooting, but it's a good chunk of the month.

Jason Gabelman

All right, great. I will leave it there. Thanks for the answers.

Unknown Speaker

Thank you.

Operator

Thank you. The next question comes from Gregg Brody with Bank of America. Please go ahead.

Gregg Brody

If I could turn back to the specialty materials business, how should we think about – I think some folks have tried to ask this, so just curious, 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?

Unknown Speaker

Hey, Gregg. Thanks for the question. I think as Scott said, we're expecting margins to remain pretty similar here for the foreseeable future. You know, we're certainly not calling for $250 million of SPS to be like the new norm forever type of thing. It's certainly a little bit of an elevated market, no doubt, but we're also not seeing that come down in the near term. So there'll 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 scripted remarks, we don't see that happening in the near future, just given how much infrastructure is offline and how long it's going to 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 in the seasonality that Scott mentioned earlier, although we haven't 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's increased in 2 ways. One, in a huge way on cash generation, right? When you think about just the amount of additional cash that we're unlocking through the accelerated deleveraging, I think our ability to generate cash flow in this business is substantially higher in the mid-cycle than it was when we had all the debt on the balance sheet looking backwards. And twofold, I'd say just our reliability and some of the small reliability investments that we've made, we expect those to continue to pay and, quite frankly, continue to get better. So if we thought about our prior mid-cycle levels, we certainly look going forward, even outside of the current margin environment, to be building on that with some of the improvements that we've made just in the base reliability. And then obviously, as we've talked about before, we've also got some pretty interesting and exciting growth capital in the specialty business, which we haven't spent any on in many years.

So that will be adding to the mid-cycle as well, and we'll put some of this excess cash flow to good use there.

Gregg Brody

Thank you. And just with the remaining legacy Montana facility, how should we think about the piece that's not part of this lease in terms of EBITDA generation and the seasonality throughout the year?

Unknown Speaker

Yes, I think it's a good question. We haven't gone too far in the guidance of what that asset can do. What I can tell you is the asphalt business has been a really nice one. So we think the lease, the $30 million value for the lease, is basically 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 positive EBITDA going forward. It certainly won't be as much as it was operating at a full refinery.

So I don't want to put a specific number on it, but it's not as high as the historic range, but it's also certainly positive. And there'll be a little bit of seasonality, just given it's going to be more heavily weighted towards spring to fall asphalt, but it'll still be a positive contributor to the business.

Gregg Brody

Thank you. And then just turning to CMR and the transaction yesterday, just to paraphrase, is the Warburg instrument still a PIK security, and do you expect that to PIK or do you think you'd start paying that?

Unknown Speaker

Yes, that's a good question. It is a PIK facility. And like we talked about last quarter, the cash in Montana Renewables will stay in Montana Renewables, although it's building pretty rapidly. We've got a few hundred million dollars built up on the balance sheet there. So that's going to stay there until the project's complete. At Montana Renewables, we certainly have the ability to pay down that instrument sooner, and at that rate, I'd be shocked to see that instrument around at termination or expiration long-term. So we'll see where that goes, but with the cash flow generation that we have throughout the company, it's certainly a potential use of cash to expedite the payment of that instrument.

Gregg Brody

Just to be clear, are you saying cash from the restricted group could be used to pay that down, or at some point, assuming you can amend the DOE agreement, you could use cash from MRL?

Unknown Speaker

Either, right? As we look forward and just try to reduce interest costs and kind of look at consolidated debt across the board, I think either is an opportunity. We're not fixated on one path or the other right now. We'll just stay focused on the market and see how things are progressing.

Gregg Brody

Got it. But that presumably would not interfere with paying down the debt at the holding company, the remaining '28s and the '29s, or do you think that you'll refinance? And 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 in terms of updating MRL?

Unknown Speaker

Yes, I don't think our long-term view has changed at all around MRL. I think maybe necessity has changed, certainly in the current margin environment. We've announced kind of the next phase of what we're doing at MaxSAF. We continue to build value there. Certainly, I'd say in prior conversations, the key driver to accelerating a sale was accelerating the debt paydown at the restricted group. Obviously, that's 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've created a really strong currency here at MRL and we're going to use that to create enterprise value in whichever form it takes.

So certainly monetization remains an option long-term. We think of that as the most likely scenario. But I'd say the idea of pushing that solely to drive accelerated deleveraging of the restricted group isn't the requirement. Our eyes are on maximizing shareholder value.

Gregg Brody

Does that mean that an IPO is not something you're contemplating over the near term as well?

Unknown Speaker

I don't know that I'd say that it's not something we're contemplating. I'd say there's a lot of options there. It's certainly not something I'd expect in the imminent few months, but it very much remains an option, as do other strategic options.

Gregg Brody

Great. And then just the last one, maybe you could just talk about M&A and growth capital opportunities, probably growth capital being a little easier, but I'm just curious also what the M&A environment looks like for your restricted group business and possibly Montana Renewables.

Unknown Speaker

Yes, look, I can tell you we look at all of it through the same lens that we just talked about, and that's max shareholder value creation. We're not going to take our eye off the ball on finishing the deleveraging. So I think that's the first message is, just because we've had a couple great quarters here, we still want to continue to pay down debt, and that's our #1 priority and carries a huge rate of return. But at the same time, we're generating a xxxx of a lot of cash, and we're going to compare all of our growth opportunities against one another, whether that's MRL growth, organic growth, CapEx, or inorganic M&A. We'll evaluate everything to drive shareholder value. I'd just say we don't want to get ahead of ourselves. And first and foremost is completing that deleveraging.

And at the same time, we're looking forward and we'll keep building that war chest. And when the time is right to strike on something that's hugely synergistic, we'll take advantage of that.

Gregg Brody

Thank you. Thanks for your time, guys.

Operator

Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to John Kompa, Investor Relations for Calumet, for any closing comments.

John Kompa

Thank you, Keith. On behalf of Todd and the entire management team, I'd like to thank everyone again for their interest in Calumet. Have a great rest of the day.

Operator

Thank you. This concludes today's conference. Thank you for participating. You may now disconnect.

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