Calumet, Inc

Good morning and welcome to the Calumet Inc. fourth quarter and full year 2024 results conference call. All participants will be in listen-only mode. Should 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. Please note this event is being recorded. I would now like to turn the conference over to John Compa, Investor Relations for Calumet. Please go ahead.

Thank you, Dave. Good morning, everyone. Thank you for joining our call today. With me on today's call are Todd Borgman, CEO, David Lunen, EVP and Chief Financial Officer, Bruce Fleming, EVP Montana Renewables and Corporate Development, and Scott Obermeyer, EVP Specialist. You may now download the slides of the company remarks made on today's conference call, which can be accessed in the IR section of our website at cabinet.gov. 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 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 three, I'll now pass the call to Tom.

Thanks, John, and thank you for joining the full-year 2024 earnings call. This past year has been the company's most active and strategically imperative time period, as we've executed our strategy by converting our company structure from a master limit partnership to a C-Corp, funding the DOE loan across two administrations, proving out and de-risking the operations of Montana Renewables, and widening our competitive moat in the specialty business. With the new company structure and our cash debt service reduced by roughly a third, We pivot forward to a new time in our company, with two fully operating, competitively advanced businesses focused on the fundamentals of deleveraging our balance sheet and growing our cash flow. The foundation that is now in store provides the ability to pursue these two objectives simultaneously, and from where we stand today, we see tremendous value in achieving these concurrent objectives. Turning to slide four, I'll note that this morning we announced the sale of our Royal Purple Industrial business for $110 million. And this accretive deal accomplishes the joint objectives we just laid out by reducing our debt and fortifying our specialty strategy. The industrial rural purple business is a great business with fabulous people. But as an ultra-premium synthetic niche, it isn't a business that is force-multiplied by Calumet's extensive specialties network, and thus is a logical step to monetize. With this new cash delever and $80 million of annual cash savings starting last week as our MRL financings were paid, We're excited about the start to 2025. Now let's flip to slide five, and I'll take a few moments to hit on some of the foundational milestones achieved over the past 12 months. Let's start today's look back with day-to-day business execution. Commodity markets will fluctuate. Volatility for event-based trading will revert to fundamentals. And with the DOE loan behind us, it's reducing our leverage and continued demonstration of earnings growth that will increase the value of our company. We continue to see immense value from advancing our commercial and operational excellence objectives, and execution in these areas, particularly in safety and reliability, improved noticeably. Commercial growth within our specialty business has been a meaningful competitive vote at Calumet for decades, and it has widened substantially over the past few years. In 2024, our commercial teams sold the most volume that we've seen through our existing portfolio. Our specialty products and solutions teams grew volume 7% year-over-year, or roughly 1.4 million barrels. You might remember that we integrated our performance brand segment and SPS segment into one specialty's business two years ago, as we believed there were synergies here, both in commercial optionality from integration and in leveraging our broader specialty's commercial approach. In 2024, performance brand volumes grew 22% and delivered $51 million of adjusted EBITDA after adjusting out insurance proceeds. Operations is an area that we haven't spent as much time on publicly as some others, but it receives an enormous amount of time here internally, and it's a core enabler of our high-touch commercial approach. Our operations are flexible and integrated, and we do a lot of things others won't to satisfy our customers. In 2024, Calumet's operations also got safer and more reliable, while simultaneously reducing our operational costs and capital expenses. Last year, our company saw its lowest number of safety recodables, with a TRIR of 0.47. Our number one priority every day here at Calumet is that everyone who shows up to work goes home safely, and last year's major improvement is a credit to the team's efforts. Good safety performance typically goes hand-in-hand with strong operations, and we saw that in 2024. Going back three years, we announced a capital program aimed at northwest Louisiana, which was matched with a full-court press on adding critical talent. We're seeing the benefits of that, as Shreveport ran exceptionally well in the second half of last year, setting specialty production records in both the third quarter and the fourth quarter. This story is not just a Shreveport one, though. For example, our Princeton facility operated exceptionally and could have sold even more as demand for transformer oil soared with global power demand. While volumes increased, our specialty operations team was able to drive fixed costs down, And for the 2024 full year, our out costs were more than a dollar a barrel less than prior year. On 60,000 barrels a day plus, that's substantial improvement. We're committed to continuing the progress, and we have taken the next level of cost reduction actions that will reduce combined fixed costs in our specialty business by another $20 million compared to 2024. Next, let's talk about Montana Renewables operations. The improvement there was both expected and dramatic. given the early stage nature of this business. And while it took a few more months than we originally planned, our Montana Renewables Ops team ended 2024 by achieving the targets laid out a year ago. We began the year operating with a cost structure of about $1.30 a gallon, which improved gradably as our team ran up the learning curve on renewable feeds, learned to optimize our pretreatment unit, and reduced our water output by over 70%. In December, we reached our target cost level of $0.70 per gallon. To be clear, this $0.70 a gallon is fully loaded with SG&A. Our insurance, commercial team, overhead, and all costs to run Montana renewables are in that $0.70. On a site op cost, we operate in the mid-40s of cents per gallon, and we expect that number will be reduced to $0.40 a gallon this year. As we scale up our facility, these unit costs will decrease further, and we'll compare with the larger plants and industry. Further on operations, Montana Renewables' reliability improved substantially throughout the year as we worked out the case. We met our 30 million gallon annual run rate for SAF in the third quarter and have demonstrated a capacity 60% higher than that. The combination of our competitive cost structure, unique logistical advantage, and our SAF early mover advantage positioned Montana Renewables with a lasting competitive edge. And as the plant and SAF capacity grow, we expect this advantage to grow alongside. Now I'll turn the call over to David, then I'll come back and close with some more color on our renewable diesel and SAF markets and our 2025 key objectives.