Calumet, Inc

Good morning and welcome to the CalUMet Specialty Products Partners LP fourth quarter and full year 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Brad McMurray, Director of Investor Relations at Calumet. Please go ahead.

Good morning. Thank you for joining us today. With me on today's call are Todd Boardman, CEO, Vince DiNargo, CFO, Bruce Fleming, EVP Montana Renewables and Corporate Development, Scott Obermeyer, EVP of Specialties, and Mark Long, EVP of Sustainable Products and Strategy. 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 www.calumetspecialty.com. 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. I'd like to remind everyone that during this call we may provide various forward looking statements. Please refer to the partnerships press release that was issued this morning as well as our latest filings with the Securities and Exchange Commission for a list of factors that may affect our actual results and cause them to differ from our expectations. Also, please note that last week we launched a municipal bond offering for Montana renewables. That process is ongoing and as such we may be limited in regard to questions, about the bond offering on this call.

I'll now pass the call to Todd. Thanks, Brett, and welcome to Calumet's year-end 2022 earnings call. 2022 was a breakthrough year for Calumet as Montana Renewables launched operations and our specialty business led the company to a record-setting full-year adjusted EBITDA of $390 million, a new high for Calumet. The successful start-up of Montana Renewables was our most recent strategic milestone, as targeted production levels were quickly reached and we've operated well ever since. Strategically, our vision has become reality. We now have demonstrated the power of our industry-leading specialty business and have turned a great project into a top-tier renewable diesel business. From this platform, we believe further substantial unit holder value can be delivered. Talking about strategic progress, let's turn to slide three. Calumet is a company in the final stages of a strategic transformation. And before we get into the financial details, let's pause and take stock of where we are and why we believe Calumet is particularly well positioned. Two years ago, we announced how a small, highly leveraged company could use the energy transition to transform itself by converting part of our assets to renewable service. We developed some views that were, at least at the time, contrary to prevailing wisdom. It's worth a few moments, to revisit the most consequential of those core axioms as it lays the foundation for what we are today. First, let's talk about decarbonization and the global energy transition. It's always been our thinking that two fundamental but conflicting truths exist. One, the transition is important and it will happen. Two, it will be much more lengthy, complicated, and expensive than popular consensus. The best we have made are consistent with that strategic view, and the conventional wisdom seems to be coming into line with our thinking. Our view was fundamental to forming our initial design framework. It was when we confirmed that we could retain significant conventional processing capacity, and thus 60% of our Great Falls EBITDA, all while standing up a leading renewables venture, that Montana Renewables became a lock. With the consensus expectation that the industry norm going forward will include underinvestment and conventional processing, our legacy Great Falls site should continue to generate strong cash flows. At the same time, we're accelerating the development of sustainable products in our specialties business. Over the past year, we've seen rapid growth in our BioMax brand, which is a biodegradable brand that doesn't compromise on the first-rate performance attributes of Royal Purple. We also launched a zero-carbon wax solution called Titan Zero, and inbound inquiries are accelerating across our specialty offerings as our customers look for sustainable solutions. During today's opening remarks, you heard a new title from Mark Long. As Executive Vice President of Sustainable Strategy and Products, Mark will dedicate his energy to accelerating our sustainable offering across our specialty business through partnering and innovating with our unique customer base. Technical customer collaboration is a sweet spot for Calumet, and Mark will bring a dedicated executive focus to leveraging Calumet's legacy core capabilities and the renewable product experience we've gained through Montana Renewables to innovate in this fertile area. The second core differentiator to our Montana Renewables strategy was how we thought about the renewable diesel market and margin formation. Our once contentious, strong, and stable margin theory has now gone mainstream. as it has subsequently appeared in competitors' marketing decks from here to Italy. From our view on industry margin formation, the concept of CI parity and the importance of our unique geography was born. At one point, feedstock supply was the most popular pushback we received, and it now feels our competitive advantage to preferentially source feed in Montana is widely accepted. The other frequent challenge we would receive in the early days was concerns of RD overbuild. When we started down this track, it felt like there was an announcement a week, and I don't believe we've seen a new announcement in the U.S. in over a year. It's actually contrary, as we've seen projects canceled or stalled due to cost pressures, financing, legal, and permitting challenges. We're seeing that location and feedstock flexibility are lasting advantage in this business, and new builds are extremely challenging. The obvious locations have already been announced or already converted. Further, With consensus being that traditional fuels refining will be more profitable for longer, the pressure for less-advantaged sites to convert has waned. Of course, if the consensus holds, our specialty business is well-positioned to benefit from traditional margins being better for longer as well. The third axiom for Montana renewables is SAF. As we've discussed in prior calls, we made a decision to invest in SAF prior to the Inflation Reduction Act. At the time, it looked like a niche, largely private market, but similar to the overwhelming positive response we received early in the RD marketing stage, SAF was highly sought after, and we could sell every drop we could make at margins substantially higher than RD. From there, the IRA was a pleasant surprise, and it changed our SAF outlook. The Montana Renewable Strategy shifted from serving a niche, specialty-like opportunity to becoming a first mover in a global megatrend. The U.S. is positioning itself as a SAF leader and it's fair to say that decarbonization of the rapidly growing aviation market will be a real challenge. It's also the case that SAF is the leader in the aviation decarbonization clubhouse and Montana Renewables is poised to be the largest SAF producer in North America next quarter. With these early views playing out, we retain our strong expectations around Montana Renewable's run rate profitability once the feedstock pre-treater is in place next month. We see immediate upside with the scope addition of SAF, and we are increasingly optimistic about the opportunity to potentially double Montana Renewable's EBITDA through our max SAF expansion, which we'll talk more about later. Turning to slide four, we shift the lens from strategic to execution. 2022 was the year in which strong execution and a favorable market environment met, generating exceptional results. With all the energy we see around Montana renewables, it's easy to lose track of the transformation that has occurred within our specialties business. 2022 was a record year. and strategically could not have happened at a better time, as the cash performance of this business allowed us to hold on to max equity in Montana Renewables through a time of immense value escalation. The results were fueled by record operations nearly across the board, exceptional commercial execution, and favorable market forces that looked to remain strong in 2023. Our entire organization was nimble through the supply chain disruptions in a highly inflationary environment. In three short years, Calumet's integrated platform has displayed what we mean by advantaged optionality. In COVID, we lowered rates, focused on specialties, and generated positive cash flow. In 22, we ran max rates, sometimes even intentionally maximizing fuel yields, and we set an EBITDA record. Over the same time period, our operations teams have also demonstrated their ability. In 2021, we lost the majority of the year to winter storm Yuri. In December of 22, we encountered a similar challenge, the week of Christmas, nonetheless, but with lessons learned from the year prior and well-placed capital early in the year, the result was different. That storm cost us the last week of the year, which essentially negated all of December's EBITDA, but we still delivered a record fourth quarter, and all of our sites are back and fully operating. What a difference a year makes, and I can't thank our teams out of the sites enough for their commitment, skill, and agility over the past few years. At Montana Renewables, an entire business was built and launched in roughly two years. Let's turn to slide five for the current status. As expected, our renewable diesel unit came up in the fourth quarter and has ran exceptionally well. Catalyst performance and throughput rates have been as planned as we run up to our hydrogen limit. We took the entire site down in the third quarter and separated it into a niche cash flow generating specialty asphalt refinery plus a world-class renewable diesel and sap facility. While these businesses are independent and unique, we operate them as one site with one mission. Delivering this project largely on schedule amidst supply chain challenges and a few shots of intense cold weather has been a gargantuan effort, and the team remains on track to deliver the sequential commissioning. Since startup, we've been successfully selling to customers and have fully de-risked our supply chain, which is incredibly important to suppliers in this industry. Our renewable hydrogen plant commenced startup on March 4th, and we're ramping up to 12,000 barrels a day. Our free-treater will be mechanically complete in March and running in April. Last, the sap scope that we added midway through the project will complete startup in April as well and will be the largest sap producer in North America next quarter. This takes the commitment of our project teams and operational teams working together, and we're really proud of the track the team is on. During the second quarter, we expect to achieve our run rate EBITDA, which we have previously guided to be in the mid-250s, with growth from there. With that, I'll turn it over to Vince to take you further into segment-level results. Vince?