Calumet, Inc

Good day, and welcome to the Calumet Specialty Products Partners second quarter 2023 results conference call. All participants will be in a listen-only mode, and should you need any 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 your telephone keypad. And to withdraw a question, please press star, then two. Please also note that this event is being recorded today. I would now like to turn the conference over to Brad McMurray and Investor Relations. Please go ahead, sir.

Thank you for joining us today for our second quarter call. With me on today's call are Todd Borgman, CEO, Instant Argo CFO, Bruce Fleming, EVP Montana Renewables and Corporate Development, Scott Obermeyer, EVP Specialties, and Mark Long, EVP Sustainable Products and Strategies. 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.cowumetspecialty.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'll 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 partnership's 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 expectations. I'll now pass the call to Todd.

Todd? Thanks, Brad. And welcome to Calumet's second quarter 2023 earnings call. This was a quarter of many strategic achievements. Most crucially, all elements of Montana Renewables, the RD unit, the renewable hydrogen plant, and the next generation pretreater met or outperformed expectations. Further, our sustainable aviation fuel project came online, catapulting us from nowhere to the largest SAF producer in North America. At the corporate level, we continued the process of improving our balance sheet by successfully issuing unsecured debt, which will eliminate our secured notes. Our specialties business continued with excellent commercial execution while asset operations overcame a series of tornadoes and extreme weather that limited production. Ultimately, we generated $67.7 million of adjusted EBITDA for the quarter, which is a decrease of $10 million from the prior period. Our Northwest Louisiana team spent much of the last quarter, the last half of the quarter, recovering from weather-driven power disruptions. While doing so, we elected to pull forward maintenance, and at this point, we have no meaningful planned downtime for the remainder of 2023, and we enter the third quarter running our assets at full rates. At the halfway point of our three-year plan to fortify operations, our assets continue to demonstrate an improved ability to recover quickly when challenges arise. And we're also adding redundancy to further prevent or lessen the impacts of external events on our business. Commercially, we're executing across all of Calumet with a focus on the customer. Montana Renewables has pointed half of our sales volume to Canada and seamlessly stepped into the SAF market. Our specialties team continues to capture value from a unique and integrated value chain, and our supply chain and planning teams spent the last half of the quarter ensuring customer needs were met as we navigated around the weather and maintenance. Further, it's nice to see a return to a more normal environment in performance brands as input costs have stabilized. This is a business that we can grow, and we're seeing strong signs of that in our industrial business. Our branded products are well-positioned to meet the industry's growing demand for high-performing and energy-efficient solutions, whether it be Bellray products servicing the global mining industry or our new biodegradable Biomax products being utilized in the global marine market. The second quarter also saw the completion and full startup of Montana Renewables, and the team settled into the new operation nicely. As we stepped into this new business, it was essential that we quickly proved out the core operating pillars – which were ensuring the RDU and hydrogen plant ran at planned rates, proving our new and leading pre-treater technology, demonstrating catalyst performance, and meeting staff specifications. We've demonstrated all of these core concepts. As expected, we encountered a few blips as the team quickly scaled the learning curve, and our commissioning experience feels like minor teething problems relative to the industry experience. MRL's operation is intricate, including a closed recycle in our net zero hydrogen production and serial number one of the next generation feedstock pre-treater technology. As our operators learned the intricacies of this new operation, they quickly got the plant running consistently at the planned 12,000 barrels a day by quarter end, with the subsequently commissioned pre-treater following the same upward trajectory. We took our board of directors to visit the plant earlier this week, and we were all once again impressed with the quality and knowledge of our local Montana team and leadership. Naturally, we're in a period of rapid learning as we dig deeper into the operation and understand the true ability of our units. One quarter in, we both developed some new understanding and confirmed a few of our core hypotheses. First and most importantly, we've proven our technology works and our team can operate this facility at expected levels. We were making on-spec product right out of the gate, and even some of our customers were surprised at how quickly we came online. We monitor our catalysts closely, and it's performing as planned, even as we introduced higher amounts of feed that we treated ourselves. Further, the capacity creep has already started. As you might remember, we don't know the maximum capacity of our RDU, as we never filled the unit in fossil service, so its true capacity has not yet been tested. Just a few months in, our team has already demonstrated the already-used ability to run over 13,000 barrels a day. Next, we're pleased with the decision we made to install the pre-trader with ARA technology. The amount of feedstock flexibility this unit opens is tremendous, and we're capturing the yield advantage that we expected. Over previous quarters, we spent a lot of time talking about the need for a pretreater in this business, and we're quickly seeing the field of renewable diesel producers naturally separated into those that have pretreatment ability and those that don't. Last quarter, I mentioned that the difference between treated and untreated feed costs was $0.80 a gallon. Right now, the pretreater advantage is roughly $1 a gallon. At these levels, the ability to process untreated feed is even more important than location for the time being. Fundamentally, the next-generation technology allows us to lose 4% less feed than a standard treater. At current feedstock prices, that's roughly a 20-cent-a-gallon advantage. With these data points, we expect the ARA technology will allow us to maintain a structural advantage even within the camp of competitors that do have pretreat. We also are learning how different feeds are handled. They run at various speeds, cause filter changes at different intervals, and differ in the amount of time it takes to unload a railcar. These are common items to work through, which will allow us to optimize as we continue to process more untreated material. We're optimizing the drawdown of our previous market purchases of treated feed, and we continue to ramp up the pre-shooter rates as we gain comfort with the new technology. Further, we've confirmed that location is as important as we thought. We've seen generic industry margins tightening recently, especially for the treated feeds in the Gulf. This temporary dynamic has occurred before when markets rebalanced from a short-term disruption. While we fully expect it to normalize quickly, our relative location advantage provides flexibility and allows us to pivot rapidly in a changing environment. This is true on both the feed and product side of our business. On the feed side, the location advantage is magnified by our next-generation pre-trader that we just discussed. In fact, we just placed our first order for Camelina, which will arrive in the next couple weeks. Camelina is in its very early stages, but given its indigenous to Montana, extremely low CI, and does not compete with food, this cover crop presents tremendous upside to Montana renewables. On the product side, 50% of our existing RD is now selling in Canada, as we see our early theory playing out that our product will migrate to the spot of optimal logistic advantage. As the largest single market, California is often the reference point for renewable fuels in our industry. But with Canada sharing a land border with Montana, we fully expect our products to all land in premium locations. Next up, the level of interest in SAF is even bigger than we expected, and industry seems to quickly be aligning that SAF is the best, fastest, and most practical path to airline decarbonization. With the SAF market currently being a fully voluntary market, it's been interesting to see the wide range of views that exist on how this material will price long-term. For us, Shell has been a great partner so far, and we're pleased with the value they're bringing to the table in these early days. As Montana Renewables looks forward to the MAC SAF expansion, we continue to be enthusiastic. We expect to be in a position to share some early numbers on expected costs in EBITDA cents. And we believe that with MaxSaf, we can more than double our current EBITDA run rate in 2025. The MaxSaf project leverages our early mover advantage, and we could sell all of the product we could make into California, Oregon, Washington, Canada, and even Illinois and Minnesota with the new state SAF credits. And finally, we're already exploring opportunities to further integrate Montana Renewables molecules into specialty applications. As we speak, our development team is experimenting with renewable naphtha and diesel fractions for uses in our solvents business. We've seen early successes with other sustainable product lines, and adding another example of unique and advantaged integration to our specialty platform is exciting as we continue to look for ways to leverage our newly found renewables expertise across our enterprise. With that, I'll turn the call over to Vince to take us through the quarterly results. Vince?