Calumet, Inc

Good day and welcome to the Calumet Specialty Products Third Quarter 2023 Results Conference Call. All participants will be in a listen-only mode. Did you need assistance? Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Brad McMurray, Head of Investor Relations. Please go ahead.

Thank you, Betsy. Good morning. Thank you all for joining us today for our third quarter 2023 earnings call. With me on today's call are Todd Borgman, CEO, Vincent Argo, CFO, Bruce Fleming, EVP Montana Renewables and Corporate Development, and Scott Obermeyer, EVP Specialties. I'd also like to introduce David Lunen, who recently joined the company as our incoming CFO, which will be effective January 1st upon Vince's retirement from Calumet. You may now download the slides that accompany the remarks made on today's conference call, which can be accessed in the Investor Relations section of our website at .calumet.com. 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 SEC, for a list of factors that may affect our actual results and cause them to differ from our expectations. I'll now pass the call to Todd. Todd?

Thanks, Brad, and welcome to Calumet's third quarter 2023 earnings call. I'm sure many of you saw that Calumet issued two press releases this morning. One was our traditional earnings release, and the other was an announcement that after a thorough and productive negotiation, our general partner and conflicts committee reached agreement that Calumet will be transitioning to a C-Corp. I'm going to start with the quarterly report, and we'll transition to the conversion shortly thereafter. To do that, let's turn to slide three. During the quarter, Calumet generated $75.5 million of adjusted EBITDA, in what was in many ways a tail of two halves. The period started strong with a July that directionally represented what we expect out of Montana renewables, now that all units within the operation have been proven. However, the second half of the quarter was driven by two specific transient operational issues at our largest plants in Shreveport and Great Falls. Our Shreveport plant is fully repaired, and the Great Falls drum replacement is on track to be complete in the week, in the next week. Let me begin with more detail on the progress at Montana renewables. First, in July, we demonstrated a financially representative result consistent with guidance. That was an important milestone, as it marked the first full month that a majority of Montana renewables feed was untreated. Specifically, 70% of our July throughput was local, discounted, untreated feedstock. And MRL generated $14.2 million of adjusted EBITDA in the month. As mentioned, these results fell within our previous guidance of $1.25 to $1.45 per gallon on untreated feed, and demonstrated the location and feedstock advantage that underpins Montana renewables' lasting competitive positioning. Second, and unfortunately, as our August press release highlighted, we also found a crack in a steam drum that is a component of our renewable hydrogen plant. Our team developed a plan to repair the drum quickly on site. However, after removing 469 tubes and getting a closer look, we made a decision to replace the steam drum. This replacement is now installed and will be mechanically complete in the next few days. We've included in the appendix a few pictures of the steam drum repair that might help put the event in perspective. Third, we demonstrated the site's heightened redundancy, as we ran at reduced rates while the steam system was under repair. Given we were at reduced rates, we also took the opportunity to pull forward a catalyst change that was otherwise scheduled for April of next year. We're taking that catalyst change now. It's worth noting that our next generation catalyst has performed well, and the early change is simply an economic optimization. We'd rather take a few extra days to complete the turnaround when we're already cut back than taking a full multi-week shutdown this spring. This also sets us up to enter a strategically important first half of 2024 with a clean slate and no planned turnarounds. Turning to Shreveport, we also announced a few weeks ago that we had an operational issue that cost us roughly 300,000 barrels of specialty production during the quarter. The volume was limited primarily because of a plugged heater tube in our CDW unit. The plugging has been repaired, and our Shreveport plant has been operating well for about a month now. Because of the operational circumstances, the third quarter certainly resulted in lower capture of market opportunity. With Shreveport fully up, Montana completing its steam drum next week, and its catalyst change by the end of this month, I have full faith that we'll learn from this and reclaim the trajectory that we've come to expect. While the quarter was a setback, our strategy is robust and remains unchanged. I'll take a few minutes to remind listeners of the strategic path we're on as we're deep into the plan. Our strategic transformation began three years ago in the depths of COVID. At that time, we determined that three things would be required to put our company onto a different financial trajectory, transform the business, and ultimately unlock value for our shareholders. First, we needed to transform our core specialty business. Second, we needed to fund, construct, and operate Montana Renewables. And third, we would consider the structure of Calumet when the other two were behind us. In specialties, we made exceptional progress. It's highlighted by last year's record result, continual demonstration of commercial excellence, and despite a couple quarters of operational setbacks in Shreveport, marked improvement in the operations of this business. At Montana Renewables, in three years, we've turned an idea on a piece of paper into a leading business in renewable diesel and sustainable aviation fuel. MRL has been funded, constructed, fully demonstrated its operational and commercial leadership position, and has shown a glimpse of its economic potential. Over time, our thesis that Montana Renewables is at or near the top of the renewable fuels competitive stack is based on five key pillars, which we believe are largely proven. First is the geographic advantage and flexibility the business has in product marketing. From the beginning, our offering was oversubscribed, and through the first few months of operations, we've demonstrated the ability to partner with leading companies to flexibly find the best markets. Most recently, we've seen this with over 60% of our product finding its way to Canada, which is fitting with our location less than two hours south of the Canadian border by truck. As we see reports of backups in the Panama Canal extending supply chains in all industries, we're reminded how fortunate we are at Montana Renewables to be situated with direct rail access to critical markets. I think we're seeing while the steady margin theory applies to the industry as a whole, the volatility can be driven by length of supply chain. In a declining feedstock price environment, margins in our industry will be higher for those with short supply chains. Over time, the industry's volatility should balance out, and we simply would expect those with shorter supply chains to be more steady. Second is our feedstock advantage, which is underpinned by our geography and pretreatment capability. Montana Renewables is the nearest demand point for feedstock suppliers who collectively represent more than 10 times our capacity, and our ability to competitively for chiarotallo, distillers corn oil, canola, and even chamomile is well known. Our third competitive pillar is our SAF advantage. Sustainable aviation fuel is arguably the fastest growing area in energy, and Montana Renewables is the first mover here, is the largest SAF producer in North America. A great majority of the headlines we see of airlines buying SAF are originated in Great Falls, Montana. As most of you know by now, we believe that SAF represents our next transformational opportunity as we look ahead to our MAXAP expansion. Through these first three pillars, I characterize Montana Renewables as fully proven, and the last two aren't far behind. The fourth pillar is operational capability. We started renewable operations in Great Falls at about this time last year. The sequential commissioning of four major process operations over a six-month period was a success, starting with our renewable diesel unit last winter, and a catalyst that has proven to be robust. Then the renewable hydrogen plant in the first quarter, and last our SAF unit and our pretreater in the second quarter. We learned a lot over the first few months of operations, including some expected early teething pains, and we have proven that each of our units and the technology works as expected. The last proof point is routine EBITDA generation, which is ultimately an outcome of the previous four items. We saw a glimpse of this when Montana Renewables generated over $14 million of adjusted EBITDA in July on only 70% untreated feed, but the crack in our steam drum has set this back a few months. We fully expect to resume demonstrating this final proof point in December and into 2024. Turning to potential monetization, we expect that some duration of audited financials at steady state operating levels is an enabler to receive a proper evaluation for this business. We've said before that our goal is not to over-optimize and play for the last dollar, but the difference between marketing a 100% proven business and a 90% proven business is enough to warrant pushing the expected timeline for potential monetization back a quarter, and mid-year feels like a reasonable timeline for a potential next step. In parallel with taking this last step to complete the ultimate deleveraging of Calumet, we continue to be optimistic about the DOE process. We're in the final stage of the process, and while we can't say with certainty that we'll be successful or on what timeline, our optimism continues to increase as time progresses that Montana Renewables with its unique renewable hydrogen system and first mover advantage in SAF is right down the fairway for the type of project the Department of Energy is looking for. And last, we continue to progress engineering around our MAX-AFF project. We've narrowed the field to a short finalist list of technology providers and general contractors, and we expect to be in a position to fully launch this project as soon as we hear from the DOE that we're cleared for financing. All signs continue to point towards this project being one that can more than double the steady state ebony dot potential of Montana Renewables. We've discussed especially transformation and standing up Montana Renewables. I mentioned earlier that the third leg to deliver the shareholder value that we ultimately expect was to evaluate the structure of Calumet. This topic has received a lot of attention over the past few years, and we believed it was critical to address the fundamental business first. We all were reminded of the unintended consequences of being a very thinly traded MLP recently when a block sale of only one and a half percent of our units had an outsized impact on our shareholders. We don't believe that was a reflection on the fundamentals of the business. It was rather the reality that without a broad institutional investor base, most of whom can't invest in MLPs, we can have wild swings in our equity price. While this event served as a reminder, our general partner and conflicts committee were well into negotiations on the ultimate conversion of Calumet's MLP into a C-Corp when it occurred. Calumet's general partner comprised of our founders and their families has been an ardent supporter of Calumet since the beginning. If we back up a few years when Calumet was fighting for its survival, the general partner didn't waver. With this transaction, the general partner will absorb a meaningful tax bill. And as Amy mentioned in this morning's press release, they're willing to lean in as their believers in Calumet's growth vision and see the significant value available to all unit holders. There's no group more committed or financially aligned with the Calumet value unlock than our general partner. And on behalf of management and our unit holders, I thank the Heritage Group, Groobie family and our conflicts committee for negotiating a transaction that is exceptional for all parties. I truly believe this is a foundational launching pad for the future of our company. Let's flip to slide four for more details on a transaction. We're going to go over some detail here and we likely won't be getting into any more detail in Q&A as this approval is hot off the press. First, the corporate conversion will close within the next nine months. We'll begin to prepare the necessary document for the filing process soon. From there, we'll file a form S4, hold a unit holder vote and prepare for the ultimate closing. Upon closing, the general partner will exchange its existing IDRs and 2% general partner interest, which is approximately 1.6 million units, for five and a half million shares of common stock and two million warrants. These warrants will have a strike price of $20 a share and will expire three years from the date of issuance. This represents a dilution of .5% to our current shareholders, which is illustrated in the appendix on slide 14. This slide also highlights a few governance features, including a staggered board which will be made up of a majority of independent members. It's worth highlighting that upon conversion, there will be a single class of voting shares with economic interests fully aligned. As a management team, we look forward to getting out quickly to explain Calumet's growth strategy and immense value proposition to a new group of institutional investors that until now have not been able to invest in the company. With that, I'm going to turn the call over to Vince to review the quarter. Vince?

Thanks, Todd. Before I comment on our business segment, I would like to turn your attention to the RIN slides in the appendix. Our net income included a non-cash gain of $173 million related to our RIN's -to-market adjustment. We do not view these -to-market gains or losses as meaningful with respect to our business performance, and our strategy regarding RINs remains unchanged. So let's turn back to slide six. Our SPS business generated $38.7 million of adjusted EBITDA during the quarter. As Todd mentioned, we had a temporary operational issue at Shreveport that resulted in a loss of roughly 3,000 barrels of specialty product production. We purchased some third-party material where we could to ensure our long-term customers were kept whole, while the operations team at the facility brought the affected units back to normal production levels, which has occurred. The other notable item that impacted the quarter was a $19 per barrel increase in crude prices. Our commercial team implemented price increases that largely took effect on October 1st, so we are seeing the benefit of the price increases this quarter as crude as stabilized. We continue to be constructive on the margin environment going forward, although we'd expect normal seasonality late in the year. On the fuel side, both volumes and margins improved quarter over quarter, and while the winter is typically weaker seasonally, especially for gasoline, we continue to see strong distillate margins. Not only do we produce more diesel than gasoline, but our specialty business tends to benefit from higher diesel prices, as it's an alternative for solvents and light loops. With product inventories at or below their historical averages, the fundamentals continue to point to healthy margins in the near to medium term. Moving to slide eight, our performance brands business had another solid quarter, generating $13.2 million of adjusted EVA DAU. This was up $1 million from the previous quarter. We typically see some seasonality in this business as big box retailers manage year-end inventory levels. Our performance brands team is focused on continuing to manage our costs, deliver high quality products to our customers, and optimize our product mix to find the highest net back channels across our branded products. And we're excited about the opportunities ahead to continue to improve this business as we have during the year. Industrial demand that we have mentioned before continues to be strong, especially in mining and marine applications, and we think these end uses will continue to be tailwinds for this business. Moving to our Montana business, you can see on slide 10 that we generated $38.2 million of adjusted EVA DAU in the quarter. Operations at our legacy asphalt plant were excellent, and we have seen heavy Canadian crew differentials widen near the end of the quarter and into the fourth quarter. We operated the plant at nearly 12,000 barrels per day of production. Which has been fairly consistent after the large turnaround last year that separated our renewables business and legacy specialty asphalt business. At Montana Renewables, Todd spent a lot of time on the previously disclosed steam system, and I will briefly touch on that again. We have four hydrogen plants at the Great Falls site that supply hydrogen to both of the legacy plant and a renewable diesel plant. Three of those were preexisting, and we constructed the fourth as part of the MRL construction and conversion. This redundancy has been important as we've been at least been able to run at reduced rates while the fourth plant has been down. With the steam drum replacement now mechanically complete, we expect to begin bringing that hydrogen plant back into service about one week from now. We're also on track to complete the turnaround that was pulled forward, and we're excited to pick up where we left off in July and fully demonstrating the uniqueness of Montana Renewables as we expect to run a full 12,000 barrels per day through December and going forward, with most of that being untreated feed. We'll start with the untreated feed that was on the books for the past couple months, and we expect to be back in the market in the new year, adding new regionally available supply. With that, I'll turn it back to Dodd for closing comments.

Thanks, Vince. Earlier this quarter, we announced that after a thorough search, Vince and I found his successor, CFO, and I'll introduce David momentarily. But before that, I want to thank Vince for everything that he's done over the past few years at Calumet. And by the time of our next call, David will be in the seat. Vince joined Calumet in August of 2020. Our stock was around $2.50. We had a material weakness in our financial reporting, and we were only shortly removed from a troubling SAP implementation. Vince's courage, tenacity, and leadership were paramount in fixing all of the above. And he also led us through a resegmentation, which brought transparency to Calumet by aligning the way we report the business with the way we run it. Vince and I co-developed a succession plan, and Vince is going to be with us through April as David takes the reins. David Lunen, who joined in September, has been working closely with Vince since day one. He brings 20 years of experience advising companies on corporate financial matters, including M&A and capital market transactions, and relevant industries. David was most recently with Goldman Sachs, and he has hit the ground running as he leads the exploration of potential MRL monetization, and probably prepares to step in fully as CFO on January 1st. Vince, congratulations and thank you. And David, welcome to Calumet. With today's news and game-changing opportunities ahead of us, it's an incredibly exciting time to be joining this company. With that, I'll hand the call back to the operator for questions. Operator?

Thank you. We will now begin the question and answer session. To ask your question, you may press stars and 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Roger Reed with Wells Fargo. Vince, go ahead.

Yeah, thank you. Good morning. Congratulations on the announcement of the conversion to the C-Corp. I think that'll be something that's been looked for, hoped for and will be warmly received. On the operational side, the specialty margins, you discussed them in the presentation. And if you look at the chart, are we essentially seeing specialty margins normalize here? Is that the right way to think about it? Plus or minus $60 or should we read into further strength based on the crude price moves and the comment about October price increases?

Hey, Roger, this is Scott. I would answer with two parts. You know, I think overarching, you know, we've seen some tapering and normalization of specialty margins that have come off all-time records right over the past year. So there is some tapering down of specialty margins. I think what occurred though in Q3 was a little bit magnified on some margin compression as crude spiked up and a lot of our operational issues created some additional headwind. So as we think about this quarter here in Q4, we've got a lot of our increases through, you know, depending on how crude shakes out. But we should see some improvement in fourth quarter to more normalized margins above Q3 results.

Okay, thanks on that. And then on the MRL, the, you know, kind of what happened in the third quarter, the drum issue and all, I was wondering if we could get a little more clarity on the period at which you did achieve the dollar and a quarter to dollar 45 margin. Sort of like what did you see in there? How well did the unit run? And is there upside from there if you're running really well, you know, find the right markets as you mentioned, you know, whether it's Canada or somewhere else. Just try to help understand like the real performance of the business when it, you know, isn't dealing with startup issues.

Hey, Roger, it's Bruce. I think the July performance was representative in terms of most of the things we looked for and we ran well. We didn't run all the way full in July. So actually, as we get sped up again, you're going to see that margin improve because we're going to spread the fixed costs. You know, on a unit basis, you'll see the margin improved. And then in terms of the implied optimization, the way we've got our product supply agreements set, we've got a distribution optimization that the customers benefit from. In return, we've got a very fully priced product. So that's kind of a synergistic partnership with them.

Okay, appreciate it. I'll turn it back.

Thanks. The next question comes from Neil Mettock with Goldman Sachs. Please go ahead.

Yeah, good morning and Vince, congratulations. David, welcome and congrats on the news about the conversion. I think liquidity has been a long been a focus area for investors around the stock. The first question is just building on the lost opportunity profit in the quarter. As you think about the downtime and if you were to build back some of these issues, do you have a sense of how much EBITDA would have been higher in the absence of those issues?

Yeah, we said about a little more than $50 million is what we think we lost in the third quarter, Neil. This is Todd, by the way. Thanks for the question. The two events, you know, 300,000 barrels in specialty, if you look at our margins, routine margins and specialty, that's probably a little over $20 million of lost opportunity. And then the same thing for MRL, right, two months of cutbacks. So if we look at July and say that we should have had July going forward at a minimum, you know, that's where we get the other 30 plus. So in total, $50 million of lost opportunity for the quarter, which, you know, is disappointing but also reminds us of the potential that we have ahead of us.

Thank you. And I know it's tricky to talk about the transactions. I've had to pass on this one, but we're just curious on tax implications to the extent, you are a Calumet holder and you own the MLP. It sounds like the way this is designed, there won't be a meaningful tax impact, but can you confirm that? And then as we think about you as a cash taxpayer, I would imagine the NOL will carry with this transaction and therefore I wouldn't imagine you'd be paying cash taxes for a while, but any thoughts on the tax side would be great. Yeah. And you can't,

understood. No, I'll comment on it a little bit. I'll be careful. Like normal, you're all over the topic and I think you hit on a couple of the big ones. So, you know, Nicole, I mentioned the GP will make a meaningful tax cash payment. That depreciable basis step up actually gets shared across all shareholders. There's some tax arbitrage as things like passive loss carry forwards, like you mentioned, will flow into investor basis at conversion and be taxed at capital gains rates rather than ordinary income. The other tax impact that it's hard to quantify, but could be meaningful, is the increase in price between now and conversion as new investors enter will also result in a step up in depreciable tax basis. It'll be helpful to all investors. So I'll probably stop there, but I think you're right as a whole to say for most this should not be a negative tax event. In fact, it should be very, very positive tax event for the great majority of our unit holders. Okay, that's great. Thanks, guys. Eva, thank you.

The next question comes from Manav Gupta with UBS. Please go ahead.

Good afternoon. Good morning, guys. Help us understand a little bit about the restart process here. Looks like you're firmly on course to get the operations fixed at Montana. Should we assume that one Q24 you run all out and that kind of gives us that $1.30 or $1.40 EBITDA per gallon margin? Should we be watching that as the quarter where everything comes together for you in terms of R.D.?

Hey, Manav, first, we're going to plan to be running full from, let's just say, December 1st so that you get a solid month, another proof point, and then we'll stay full. What we've got to do though, the steam system repair work was an unplanned slowdown. So we've got a certain quantity of clean feed still backed up in inventory that we're going to have to pull through. So the $1.25 to $1.45 guidance is for dirty feed. And, you know, we've got a blend situation for a little while.

Perfect. Please follow up. Yeah, please go on.

Well, I was going to say, so if you look at July, we had about 70% dirty, 30% clean. The actual performance, if I recall correctly, was $1.23 on a blended basis. So right at the, you know, kind of low end of the range. What you should look for is, you know, the spread between perhaps RBD veg oil and crude veg oil in market as a proxy for what happens when we blend.

Perfect. A quick follow up is you already have a SAF transition strategy in place and expansion. I understand you're waiting for the full confirmation of the DOE loan, but help us walk through this SAF transition strategy. And when it's all over, how much SAF could you be looking to produce in your system? Thank you.

We're advertising, and we have been for a couple of years, 230 million gallons a year, SAF. At the moment, based upon the engineering progress, that's looking conservative. There's a high case at 300 million gallons that we think is probably reasonably achievable. This is something that we'll be reporting back to you on as we go forward.

Thanks, guys. Thanks, Love.

Next question comes from Amit Dale with HC Wainwright. Please go ahead.

Good morning. Thank you. Another question that's been asked, just on the timeline for the monetization, you know, with respect to this Convent to C-Corp, you know, how does that affect, you know, you're saying 2Q24 for the monetization within nine months to complete the C-Corp transition. So do these have a bearing on each other in terms of how we can move forward on the monetization?

Hey, Amit, it's a good question. They could. I think a lot of that's driven by what type of market we're seeing at that point in time, right? The nine months on conversions and outside date, it can be faster than that. If you think about what needs to get done, you know, I guess starting now or very shortly, we start doing the documentation, we're getting ready, we're signing the official document that then transitions us into filing the proxy, the S-4 and receiving a shareholder vote. So it could be faster than nine months. Nine months is the outside date. I think the committee and the GP agreed to have a firm date so that there was certainty that a conversion would happen by a certain point in time, but it certainly could be pulled out. So I think we'll get a better view of that process once we're in it and that timing. Obviously Q1 is going to tell us a lot at Montana Renewables too, and we're pretty confident about that, excited about that quarter. And then we're going to assess how the market looks. And I think it would be a combination of those three things that really drives ultimate timing. But at this point, we don't see any reason to change anything. We think these are all additive. We think that adding more investors that potentially would have had to hold out for an MRL spin-off can now invest in CountyMAT and start to get inside the company and learn more about us. I know there's a lot of people out there who are very interested and excited in MRL itself. There's been a lot of interest in that as a standalone public company. So I think as we look forward, that continues to be the planning base, and hopefully we'll get some of those investors to come in and take a look at it sooner than they otherwise would have.

John O'Brien Thank you for that. And just in relation to that, are there any unknowns in this transition process that could maybe delay the process or cause any challenges I guess?

Michael O'Brien I don't think so. I say that with a little hesitancy just because we haven't done it before. But we've got a lot of advisors and legal counsel that has, and I think there's a pretty clear path for these types of things. So as I look at the plan, it appears pretty straightforward. There's a lot to do, certainly. But I don't see a specific event or turning point or anything like that that would leave us questioning the ultimate outcome.

Jason Gabelman I appreciate that. That's all I have, guys. I'll take my other questions offline. Thank you.

John O'Brien All

right. Thank you.

Coordinator As a reminder, if you have a question, please press star then 1 to be joined into the question queue. The next question comes from Jason Gabelman with TD Town. Please go ahead.

Jason Gabelman Yeah. Hey, morning. Thanks for taking my questions. I wanted to first ask on the MACSAAF expansion project. I think previously you had discussed that the growth capex was not tied to the DOE loan. It sounds now like they are kind of tied. So if that's changed, can you discuss why that's changed? And then additionally, as you've been going out to customers to contract the SAF available in the expansion case, are you confident or do you have enough confidence to provide some sort of earnings outlook on that project?

Thanks. John O'Brien Let me start out, Jason. It's Todd. And then I'm sure Bruce will have plenty to add on. On the DOE question, what we've said consistently is we don't want to take on additional debt to do MACSAAF. And that continues to be the case. When I made the comment in the earnings call around you know, we'll be ready to go when DOE approves financing. What we're doing there is we're assuming that that's going to be, you know, the next opportunity for financing. There's certainly other opportunities for financing. I think you're probably referencing in the past where we've said, hey, you know, as part of a monetization proceeds could be used for MACSAAF expansion, those types of things. So all we're doing here is simply suggesting that DOE, you know, we would predict that DOE is, you know, sooner on the timeline, although obviously we can't guarantee that, don't know that. But, you know, sooner on the timeline than ultimate monetization. I think the bigger point is we don't want to take on additional debt to do MACSAAF. We made that commitment when we went and did the 28th and we're going to hold to that.

Got it. And I don't know if Bruce wants to- Yeah,

the second part of your question revolved around product placement. I'll give you three thoughts. And first, you know, we read this sort of steady stream of announcements of people signing up for billions and billions of gallons of SAF, which may or may not ever be available in the market. That's a backdrop. The situation for us is, you know, we're the largest of the only two producers on this side of the world. And we could sell all of the SAF to 12 different people tomorrow at the drop of a hat. So, you know, you're in the very early stages of what's going to be practically a vertical evolution for this new industry. So the third thought is we're the low cost provider. No matter what happens, we're going to stand at the top of the competitive rankings on this. We had the lucky accident of having the hardware to recover the SAF at a relatively low capital cost. Everybody else is going to have to build that. So we're there already. We're not first. World Energy was first. We're second. We're advantaged. We're planning to stay advantaged.

Got it. And maybe two quick clarifications on those comments. First, timing around the DOE loan. I know it continues to shift out, and it's always tough to guess when the government's going to move forward on something. And then on the SAF economics, where you're seeing those price premiums come in relative to renewable diesel. And I'll leave it there. Thanks.

The industry watchers seem to be centering on about a dollar to dollar fifty gallon premium to RD. And that's substantially a European circumstance right now. But I think we could broadly suggest that it's going to be similar in North America. Anybody with an RD platform should be able to fish out about 15 or 20 percent of it as SAF. So those in our mind are together. They're going to have to arm together through the nest of regulatory support mechanisms, including the new SAF Blender's tax credit. And we think that's an appropriate spread, which is going to reflect an industry average player. I'm going to emphasize that we're doing better than that. The way the trade flow is set up is also probably going to contribute because there are feedstock yield differences. There are catalyst yield differences. There's operational severity. And so if you think about refinery complexity and LP, multivariable decision making, you'll be thinking the right way about SAF made from hydro processing like us. I'll contrast that with something that's very, very linear. If your model is you buy ethanol, you convert almost all of it into SAF, you don't have all of that optimization flexibility. So our dependence on any premium in the market is different to a new entrance that lacks flexibility.

Got it. And then on the DOE loan timing.

That's up to the DOE. We're very pleased with the relationship that we've established over the last year and a half. It is actively engaged. We are in underwriting, but I'm not going to forecast their eventual decision or their timing.

All right. Great. Thanks for the call. Thanks, Jason.

This concludes our question and answer session. I would like to turn the conference back over to Brad McMurray for any closing remarks.

Thanks. On behalf of the management team here in the room, and really on behalf of all of Calumet, we'd like to thank you for your time and your interest this morning. Have a great end of the week. And this concludes the call. Thanks.

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