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Good day, and welcome to the Calumet Specialty Products Partners, L.P. Fourth Quarter 2023 Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Brad McMurray, Investor Relations. Please go ahead.

Good morning. Thank you for joining us today for our fourth quarter and full-year 2023 earnings call. With me on today's call are Todd Borgmann, CEO; David Lunin, CFO; Bruce Fleming, EVP, Montana/Renewables and Corporate Development; and Scott Obermeier, EVP, Specialties. You may now download the slides that accompany the remarks made of today's conference call, which can be accessed in the Investor Relations section of our website at www.calumet.com. Also, a webcast replay of this call will be available on our site within a few hours. Turning to the presentation, on slides two and three, you can find our cautionary statements and tax disclosures. 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 our expectations. I will now pass the call to Todd. Todd?

Thank you, Brad, and welcome to Calumet's year-end 2023 earnings call. To start, I'll provide an update on our conversion process, we'll then recap 2023, Dave will take us deeper into the quarter and I'll wrap with a '24 outlook. Let's turn to slide four. In November, we announced that our general partner and conflicts committee had agreed to terms that would convert Calumet to a C-Corp from an MLP, and since then we've been at work putting that into effect. Over the past few years, Calumet has transformed itself into a new company, and it became clear that the typical institutional investors who would invest in a leading specialty products company in a top-tier renewable fuels business largely don't or even can't invest in MLPs. Further, almost no passive investment strategies, which make up nearly half of the capital being invested allocate to MLPs. Thus, to increase our investor base and ultimately provide our shareholders the best opportunity to realize fair value for Calumet, we embarked on this change. Two weeks ago we announced the signing of the official conversion agreement, which is a prerequisite to filing our S-4 with the SEC. After we receive comments back from the SEC, a final S-4 will be filed, a proxy vote held, and we hope to gain approval from our shareholders and complete this conversion midyear. Again, I thank everyone involved, especially our general partner and conflicts committee, for a fair and thorough negotiation, and we're looking forward to this vote and new opportunity. Turning to slide five, we see the fourth quarter. In the fourth quarter, Calumet generated $40 million of adjusted EBITDA, and for the year, we generated $261 million of adjusted EBITDA. Our 2023 financial results were driven by three things, all of which we've discussed previously. First, in Montana, a steam drum crack essentially set our strategic plan back half a year and culminated with a month-long outage in November, where we successfully replaced the unit. At that time, given we were down anyways, we pulled forward turnaround work and replaced the catalyst change that was previously scheduled for 2024. Second, the combination of a winter freeze and summer tornadoes in Shreveport underpinned roughly $70 million of lost opportunity in our specialties business. Third, and positively, we were able to offset some of the year's challenges with superb commercial execution throughout the business. Most notably, our Specialties team increased margins for the fifth consecutive year. Strategically, 2023 was a foundational year which positions us well to achieve our ultimate strategic objectives. Our Specialties business has solidified itself as a commercial leader in the space. Our unique integrated asset base, customer focus, and commercial and technical know-how are lasting advantages. Last year, we built on this by successfully integrating our Performance Brands and Specialty Products and Solutions segments into a single Specialties group. And we see additional opportunity here as we capture value from our agility, optionality and breadth of offering throughout the entire Specialty Products value chain. Further, in a few months, we'll be entering year three of our operational improvement plan in Shreveport. The events of 2023 highlighted some of our infrastructure weaknesses, both within and outside the plant. And while we'll never be immune to everything, the improvements made thus far have been meaningful and we're tackling reliability at Shreveport head on. Naturally, the most notable item of this past year was our Montana/Renewables business came to fruition. The first year wasn't without setbacks as often as the case for projects as ambitious as this one, and ultimately, we stood up and de-risked the key elements of the venture. We demonstrated our ability to source competitively advantaged feed. We de-risked our technology and we showed our commercial agility and ability to capitalize on our location as half of our product ended up in the rapidly growing Canadian market. Last, in May, we launched North America's largest sustainable aviation fuel business, establishing Montana/Renewables as a first mover in an area that is so promising that it has since become a strategic focal point of many in our space. The emergence of a rapidly growing SaaS market is extremely exciting for industry, and we're thrilled to be positioned at the tip of the spear along with our partners at Shell. We compare the sustainable aviation fuel transition today to the one we saw in renewable diesel nearly a decade ago. Like renewable diesel, SAF is the only drop in fuel that's available today. Other alternatives are interesting, but they require decades of research and development and huge investment to completely overhaul the airline industry's infrastructure, which we view as unlikely anytime soon. It's now common knowledge that our industry is producing less than 1% of the SAF that would be required in six years to meet the government's 3 billion gallon milestone in the grand SAF challenge. And this 2030 milestone is only 9% of the ultimate 35 billion gallon plan laid out by federal agencies. Naturally, more capacity and additional technologies are going to be required. There are a few ways to make SAF, the most economic of which by far is the HEFA process which Montana/Renewables currently uses. That being said, the growth prospects for this industry are so large that all technologies are likely to be required, most of which are meaningfully more expensive than the HEFA process. Further, we're seeing demand for SAF change quickly. SAF mandates exist in the U.K., individual airlines have announced targets. We see airports setting SAF requirements, and just this week, Singapore announced the requirement for all departing planes to use SAF. This rapidly growing demand is exactly why some of the largest players in the industry are investing heavily in this space. And it's why Montana/Renewables made the change in our original project nearly two years ago to add SAF capability. Throughout 2023, we progressed plans to build on Montana/Renewables' first mover advantage via our MaxSAF project. We've progressed engineering, interviewed construction partners, and we eagerly await feedback from the DOE on final funding to move forward. The DOE process continues to move well, in fact, accelerate, and we're hopeful to receive confirmatory feedback in a not-too-distant future that will allow us to officially launch the next phase of MaxSAF, which we expect will make us one of the largest SAF facilities in the world. A growth in SAF demand also should be expected to change the landscape of renewable diesel. As we evaluate MaxSAF, we ask, if these margins exist and the addressable market is so large, why wouldn't every renewable diesel player convert? Naturally, our industry is full of sharp competitors who are considering just that. What we quickly find is despite all of the growth we've seen in renewable diesel, the entire US RD capacity just reached 3 billion gallons this year. In other words, it would take all of the RD to meet the 2030 Grand Theft Challenge. Of course, we're also seeing demand grow in renewable diesel, with Canada being early in their program and New Mexico reminding us that individual states will continue to implement new low-carbon fuel standards. Further, all the renewable diesel that's being produced today is needed to remain in compliance with existing low-carbon fuel requirements. And as RD is converted to SAF, the obligated RD volume demand will necessitate the need for market to incentivize the production of renewable diesel. As this dynamic plays out, we'll take our traditional approach at Montana/Renewables of building an optionality, remaining nimble commercially, and leveraging our relative location and cost advantage in any scenario. This includes the ability to produce either renewable diesel or SAF. It also includes utilizing our advantage logistics cost structure to weather any industry volatility. Recently, we've seen market renewable diesel margins hit a trough. While short-term volatility exists in any business, we believe the historic structure of the market will continue to hold in time. When the price of RINs, diesel and LCFS, all independent variables are reduced at the same time, the needed equal and opposite impact of feed price is dramatic. Suppliers try to mitigate a sharp decline by all means available to them, including reducing crush rates and building inventory, which can delay the reaction in feed prices. We would expect the impact of price lag on industry margins to be larger than normal in this scenario, and we're seeing that today. Of course, over time, biodiesel would have a difficult time competing at low industry margins, inventories in the supply chain should build, and one of the variables in the proxy equation has to react. And just in the past couple of weeks, we've seen the vegetable oil margin indicators start to turn. We've also seen tallow, a waste product adjust rapidly and strong tallow margins continue to exist. In a normal environment, we'd expect the relatively short length of Montana/Renewables supply chain to be a differentiated advantage in times like this. But during this current trough, we've been full of inventory that was originally contracted for the second half of 2023 before the facility was cut back. This impacts us as the feed is higher priced, but it also limits our flexibility to react to short-term changes in the relative feed dynamics, which otherwise would be a core advantage. We started processing our old feed when we restarted in December, and expect to be through it in the first quarter. To put the impact of these items in perspective, the difference between Q3 average CBOT price levels in December was over a $1.20 per gallon. Further, over the past couple of months, margins have remained over a dollar a gallon higher for tallow than vegetable oils. With normal inventory levels, we'd be switching to tallow and capturing this advantage, which would deliver margins reasonably in line with previously stated expectations. With full inventory, we are processing what we have. As the energy transition continues to evolve, we believe Calumet is positioned for success. As discussed today, we're well positioned in Montana for both renewable diesel and SAF growth, and our Specialties business can flex fuel production up or down as the market dictates. Further, our Specialties business is positioned to benefit from many of the megatrends that we see in today's market as we produce high-performing products going into mining, power transmission, food and pharma, and clean water, including a growing list of environmentally friendly materials such as our biodegradable lubricants servicing the global shipping industry. We believe this breadth and flexibility positions us well as our industry continues to evolve. Our core belief continues to be that the energy transition will continue to occur but will take longer than most think. It's complex, it requires investment, and it will ebb and flow as businesses and society experiment and adapt. And at Calumet, we'll continue to focus on positioning ourselves to remain competitively advantaged in all scenarios. With that, I'll hand the call to David to review our quarterly financials. David?

Thanks, Todd. I'll start with our announcement this morning that we entered into a note purchase agreement to issue $200 million aggregate principal amount of 9.25% Senior Secured First Lien Notes due 2029. The use of proceeds will be to call and retire our existing 2024 secured notes and we will also call, along with available will, cash $50 million of our 11% 2025 notes. This transaction allows us to remove a near-term maturity, reduce overall indebtedness and reduce our annual interest expense. Given the potential Montana/Renewables monetization was pushed back half a year due to last year's steam drum replacement and the need to demonstrate a few quarters of strong operations in order to capture proper value from a potential monetization, we want to ensure that we had ample flexibility and time to kind of access the market properly. This financing provides that flexibility by adding a small quantum of debt that wouldn't otherwise trade well is cheaper than a new unsecured issuance and will also be callable in a year, as well as leaving enough debt outstanding without call protection to provide an efficient path for further deleveraging later in the year. Before I review the segments, I'd also like to comment on the 8-K we released this morning and the associated restatement of 2022 and 2023 quarters. The restatement relates to our accounting for the preferred equity investment in MRL. We had been allocating net losses in the business in a proportion to the total ownership for the non-controlling interest. We've determined that these losses should not have been allocated to the preferred equity investment, thus, $6.7 million in 2022 and $18.5 million in 2023 of losses that were previously allocated to non-controlling interest will now be allocated to Calumet's limited partners. To be clear, this has no impact on the net income, adjusted EBITDA or cash flow of the business, and only it relates to the allocation of net losses. This restatement also has no impact on the timing of our conversion, and more details can be found in the 8-K. Turning to Slide 8. Our SPS business generated $75.6 million of adjusted EBITDA during the quarter and $251.2 million for the full year 2023. This was a very strong quarter for our SPS business. The plants operated well and we had one of the best quarters as our commercial team continued to execute our customer-focused strategy. We saw unit margins increase with specialties during the quarter while fuel and asphalt margins decreased seasonally. We continue to see an above-mid-cycle margin environment in this business. Moving to Slide 10. Our Performance Brands business generated $6.1 million of adjusted EBITDA, bringing our full-year adjusted EBITDA to $47.9 million for the Performance Brands segment. We typically see some seasonality in the business as some of our customers, especially the big box retailers, manage year-end inventory levels and that was no different this quarter. Industrial demand outpaced consumer demand which weakened and we expect that trend likely to continue early in 2024. Our team continues to do a nice job capturing value from the optionality and integration of our various business across SPS and the PB segment. As you can see turning to Slide 11, we have delivered five consecutive years of growth in our Specialties business. As a reminder, this is a combination of the Specialty Products within our SPS segment and our Performance Brands segment. The team has done a really good job these last several years, capitalizing on an improved margin environment while also making lasting step-change improvements within the business. You can see in the lower right-hand chart a steadily increasing volume of intermediates between our SPS and PB business as the team continues to drive an integrated business model which we believe provides a unique advantage across our platform. Moving to our Montana businesses, you can see on Slide 13 that we recorded a loss of $25.8 million of adjusted EBITDA in the quarter and generated $30.2 million of adjusted EBITDA for the full year. While operations performed well at our legacy asphalt plant during the quarter, the winter is always difficult in this business as roads aren't being paved and local gasoline demand dries up. For our conventional asphalt and niche fuels plant, its first year post-MRL was a good one. Going in we expected the 50% smaller footprint would deliver roughly 60% of the specialty asphalt operations post MRL, and then we executed on that in 2023. At Montana/Renewables, Todd spent time earlier on the previously disclosed closed steam drum outage and replacement, and I will briefly touch on that again as that was the story in Q4 and the second half of 2023. The repair work was completed during the fourth quarter along with the turnaround and catalyst change that we pulled forward into the period. The renewable diesel plant was completely shut down for the month of November and came back online at the beginning of December, and has been operating well since. You can see in our renewables productions volumes the impact of the reduced rates and shutdown had on MRL's production. Now that the facility is back up and operating at close to full capacity, we are drawing the rest of our excess inventory that was built during the unplanned outage and shutdown. We should be through that inventory in the next quarter, at which point we will resume our normal feedstock purchase program. We are glad to have the replacement work on the steam drum behind us. And while last year, while that had the impact of pushing back about six months, our strategy is unchanged as we continue to pursue the DOE loan, finalize our expansion for MaxSAF, and prepare for potential monetization opportunities. Lastly, before I turn it back to Todd to wrap up prepared remarks, I'll provide a few guidance items for this year. We expect the Corporate segment to incur approximately $80 million of adjusted EBITDA cost in 2024, which is in line with previous year's and our previously outlined annual expectations. And from a cash flow perspective, excluding MRL, we anticipate $100 million to $120 million of annual CapEx. On Montana/Renewables, we expect $15 million to $30 million of sustaining CapEx this year, which includes the planned purchase of a long lead time catalyst that will be later in the year or next year. I'll now hand it back to Todd for closing comments before we move to Q&A.

Thanks, David. Let's flip to the last slide and talk about the year ahead. 2024 is a pivotal year for the Company and its investors. This is the first year that both our specialties business and renewables business are fully operating together, and we're committed to unlocking value through a number of near-term catalysts. The first of these is demonstrating the top decile profitability potential of Montana/Renewables, which given the old feed and inventory overhang mentioned earlier, we expect to occur in the second quarter. Next is the DOE process, which we mentioned earlier. This goes hand in hand with the launch of MaxSAF, and we look forward to providing a more complete outlook on this project soon. Not only is MaxSAF a huge opportunity, but we also expect it to be another catalyst in a potential Montana/Renewables monetization, which continues to be an ultimate deleveraging step for the organization. And last, we're on track for a mid-year conversion to a C-Corp. Up to now, investors who are otherwise interested in Calumet have not been able to invest in our Company due to common constraints that come with MLPs. Our institutional and passive investor base is tiny in size which results in our units being very thinly traded, which also is a deterrent to new investors. Since the conversion announcement late last year, we've spoken to many potential new shareholders about the Calumet opportunity. We believe our story is an interesting one for investors, and we're excited to provide the ability for them to partake in a new Calumet, one which has been transformed over the past few years, which has two competitively advantaged businesses and significant near-term catalysts that we believe present a meaningful value proposition. Thank you. And with that, I'll turn the call back to the operator for questions. Operator?

We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Roger Read with Wells Fargo. Please go ahead.

Yes. Thanks. Good morning, everybody. Yes, it does look like it's going to be a pretty exciting and also challenging 2024 for you. Coming to the MRL side, I'd like to just ask you, Todd. You mentioned product going into Canada, some of the other places. We recognize the issues with start-up of these facilities and feedstock costs. But if you look at the distribution side, give us kind of an inkling of how that's turned out and maybe how those realizations are working, so that as you fix the feedstock and the operational issues, we can get confidence on where margins ought to go.

Yes, you bet. And hi, Roger. Thanks for calling in. And I'll turn it over to Bruce here in a second. I'm sure he has more to add. But in general, I'd say our product distribution has been exceptional. We have a super flexible group of partners. They're contracted long-term. Remember, we sell everything FOB, so we have insight into where the product is going, and we benefit when products are upgraded to Canada, for example. But ultimately, our sales are contracted formulaically, they align with the steady margin formula that we've talked about historically, and I'd say those are working very well exactly as expected. I don't know, Bruce, what would you add?

Thanks, Roger. The fact that we have our pathways registered into all of the LCFS geographies, as well as having the CORSIA certification for our SAF, means that our off-takers have a lot of flexibility to shift any of these materials to where they think is the best for their system operations. So we've had as much as 50% of physical production going to Canada on a monthly basis. And this is one of the hidden attributes of our geographic location. I mean, we share a land border with British Columbia. A lot of people are trying to get there the hard way by the water, and we literally drive a truck over. So there's a lot going on in the distribution optimization space.

All right. Get a geographic explanation as well as everything else, right? Shifting gears to the other two businesses, just asking really for sort of a macro outlook. We've seen the chemical industry have a lot of challenges. I know you all are not pure chemicals, but you kind of get put into that box. So I'm just curious as you look at beyond the weather issues at Shreveport, but what's the underlying kind of demand and pricing setup as we look at both Specialty and Performance?

Hey, Roger, this is Scott. Thanks for the question. So as we sort of walkthrough, I'll call it the timeline, Roger. In Q4, I think the real headline theme was seasonality, right? So we saw the fuel cracks take a major step down on that side of the business. Within the Specialties, both SPS and Performance Brands. I would say we saw the typical seasonal slower demand at year-end. We also saw some customers looking to destock a little bit further and de-risk their business where possible. Looking now into the early part of 2024, I would say it's a little bit mixed, Roger. Going back to the fuel side of the business, we have a constructive outlook. Within fuels, we've seen crack margins improve from three-year lows that we hit in mid-December. We've seen that improve back above mid-cycle, although remains highly volatile. On the Specialty side. Roger, overall, we say demand is slowed. As you alluded to, we've seen the demand slow. But with that said, and Todd and David touched on this during the script, you know, we've delivered five years in a row of record results within that Specialty side of the business. You know we've implemented commercial best-in-class programs that have allowed us to perform and deliver results, really, in any type of environment that we've encountered the past three, four, five years. So we remain confident in the business, but without question, there has been some market pullback from the customer demand.

Maybe I'd add a little bit, Roger and Scott to see what you think of this. The -- if I look at the normal slide that we present in SPS, we show the margin per barrel on Specialties. And we saw that bounced back to a little bit above $70 a barrel in Q4, which I think we alluded to on the last earnings call. I think we'll continue to see margins kind of in between that Q4 and Q3 number so $60, $70 type range as we look into 2024 and continue to expect that we'll be able to sell everything we make. So it's undoubtedly a little bit slower on kind of -- particularly on the retail front, but more broadly continues to be well above mid-cycle and just very comfortable and confident in the sales team that Scott has built. They're doing an exceptional job and really able to go out and have a lot of confidence to perform in any market.

Great. I appreciate that. I'll turn it back. Thanks.

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

Yes. Good morning, Todd and team. Thanks for the time today. The first question I had was…

Good morning.

Good morning. I was really on Montana in trying to get a sense of what the lost profit opportunity was because it was a tougher quarter, but you had a turnaround and you had a period where you're working through some high-priced inventory. Now, is there a way to strip back out and try to get a sense of what the profitability would have looked like? And in that any comments on when you -- we can really see the run rate levels of profitability for that business?

Hey, Neil, it's Todd. I'll kick again and then, like I said, Bruce will have plenty to add, I'm sure. I'd say lost profit opportunity in the second half was between $80 million and $100 million. So the steam drum crack undoubtedly pushed us back. If we look forward to what we're doing now, and I alluded to this a little bit in this script. I think if we look forward, we look at what margins have done right now, industry margins have softened a little bit and we know we have some impact of old feed. But remember, Montana/Renewables' core advantage is our ability to switch feedstocks and take advantage of whatever market is strong. And what we've really seen is tallow has remained super profitable. Unfortunately, right now we're not able to take advantage of it largely because our inventory is full. So LPO is kind of hard to pull back too much because there's so many elements. But I'd say right now, if we were running in an normal steady-state environment, looking at industry tallow margins of $1.70-ish a gallon or so, we'd be generating somewhere probably between $0.80 and $1 a gallon. So it's a little bit softer out there, but undoubtedly this is a top decile plant. The impact of Q4 was solely on operations and a turnaround and not being able to spread fixed costs and capture those economies of scale. So I don't know, Bruce, what would you add?

I think that's a good capture. And Neil, in addition, I would flag with tallow margins at $2, if you waive the magic wand, we should be running 100% tallow. And we have done that. We commissioned the unit on 100% tallow so it's within our reach. The issue we ran into was with the downtimes due to the steam drum, we underran production. All of our tanks are full, our supply chain is full, and our ability to shift gears and optimize feed classes is going to be delayed till we clear that inbound.

Thanks, Bruce. And then team, when do you see that happening? When do you get that inflection? Where we can see the run rate profitability of the renewables business? Is that the middle of this year?

Probably sooner, Neil. We're actually already climbing out of the hole when we look at our internal short-time frame metrics. The quarterly reporting will begin to show that at the end of this current quarter and it's going to continue to improve as we resume normal feed optimization activity.

And I think if I'd add anything is, expect Q2 for the first full kind of run rate quarter, right? So Bruce is highlighting that. We're getting through the end of our inventory challenges here. I think that we'll have that fully cleared in March, and Q2 is what we're looking at for kind of the first normal, I'll call it, where we're buying feed in month and selling product in the same month at full rate.

Thanks, Todd. Thanks, Bruce.

Thank you.

Thank you.

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

Guys, I just have a quick macro question. You provided very detailed opening comments and one of the read-throughs for me was that you were indicating that your advantage -- you have advantage feedstock, you're making renewable diesel with the lower feedstock prices eventually. But one side of the industry which you kind of hinted was at a disadvantage was biodiesel producers using vegetable oil. And it looks like some of those guys could shut down and eventually that would help bring the whole industry more into balance, better D4 outlook, better LCFS outlook, and also reduce the oversupply of BDRD. Is that what you are thinking that the advantage projects like yours will run while weaker biodiesel projects using vegetable oil could have to eventually shut down?

Manav, it's Bruce. Directionally, that's absolutely correct. The Siri autumn, you know, the ordinal ranking of cash margin is absolutely going to favor the HEFA producers over the biodiesel logistics, will also sort out individual competitors, and ours are going to be the best because we're the closest to all of the markets. The question on the table is actually how fast does the EPA correct its error. They underrepresented the supply side and that has the effect when they set their targets. Sorry, they set the targets too low, to be clear. That's putting a lot of pressure on the farmers and on the ag sector. I'm not sure that's politically sustainable.

Perfect guys. And a quick follow-up. Looks like New Mexico is also moving ahead. And from what we are hearing is that this delay in carb is actually a little more positive. They are looking at the current mechanism and saying maybe we need to be more strict about it to get the carbon price bank in a better balance. Anything you have heard either on New Mexico or the proposed carb ruling if you could help us out.

Well, we know what you know from the public reports. But our thesis all along has been that the low carbon fuel standard is going to continue to spread geographically. So if you just look at recent history, you have all of federal Canada opting in. And they were careful with the rule. They took their time to get that right, and it came on stream July 1st of this past year. That doubles the addressable diesel volume subject to an LCFS standard, just like that. New Mexico is smaller, I believe 100,000 barrels a day. Diesel is the volume I have in my head. But they're not going to be last. They're just next. A lot of state legislatures are considering this. Sometimes it's for farm support because it does pull crop-based material through into the transportation fuel pool. Sometimes it's for air quality. Everybody has got a different motivation, but that's going to continue. And that's just the US or North American picture. You know, these rules are continuing to come in around the world. As Todd indicated there's been a lot of activity in SAF, most recently with Singapore requirement. And I want to re-emphasize that renewable diesel plus SAF is the call on the HEFA hardware. Every gallon of SAF the industry makes has been taken away from diesel and that's got to be part of the balances for anybody doing any forecasting.

Thank you so much for detailed responses, guys.

Thanks, Manav.

The next question comes from Sameer Joshi with H.C. Wainwright. Please go ahead.

Hey, guys, thanks for taking my questions. Just a clarification on the C-Corp conversion and sort of the monetization of MRL. Is it possible for you to continue to sort of proceed on the divestiture while this C-Corp process is going on, or will it have to be only started after the C-Corp done?

Hey, Sameer, it's Scott. I think in general, our plan remains unchanged around both monetization and C-Corp conversion. I see them as separate, but there certainly are connection points. Obviously, our core theory with all of this is as Montana/Renewables comes online and just general investor sentiment towards MLPs, there is just -- it's just a completely different investor base. So to get the right type of interest, to get our trading volume up to where it needs to be and to be able to outreach institutional and passive investors, it's just critical that we had a more investable corporate structure. So I think that's separate from a potential monetization of Montana/Renewables. I also think it's generally helpful, right? So as we look at the Montana/Renewables potential monetization, I don't think much has changed there. We said all along that we need probably two quarters of strong steady operations which we started in December. We need at least one quarter, if not two of steady-state financials, which we said today we expect in Q2. So if we kind of tie all of that together, we would be pointing towards second half of the year for potential monetization. Obviously, we don't have to monetize. We are focused on creating Max shareholder value in this whole deal. But we're certainly interested in it and have been talking about it for a while. And I'd say our plan as that is a base case remains unchanged. The conversion or the change to a C-Corp would happen before that. So we expect the conversion to be complete in Q2, which would be before a sale of Montana/Renewables. Does that help?

Understood. Yes, yes. No. Thanks for that color. I understand. On the -- stepping back and looking at your overall financials, how has the RIN pricing environment helped, or impacted overall profitability? Because you do have to buy the RINs for your non-renewable business. And how is the RINs on balance sheet? How are you playing that -- pricing that out? Just wanted to understand how you're managing profitability and impact of these elements.

Hi, Sameer. It's Bruce. I'll take a start at that. So we basically have an inventory accounting style treatment of RINs on our balance sheet. So we accumulate any length or shortage, treat that as an inventory and reprice it at the end of each quarter. And as we've communicated before, we're not sure that's really a very good estimate of a financial liability for two reasons. One, there's a lot of volatility in the RIN price itself, which you just noted, and a rifle shot of four days out of the whole year is the first question. Secondly, you can't settle that liability with money. That's not how that program works. So with that disclaimer, I think I would also tell you that we're involved in a number of federal circuit court litigations, and I don't want to go too far into any forward-looking statements other than to note that the status of each of those cases is a matter of public record. And for example, the Fifth Circuit sided with us, and we'll see how that plays out as we continue to talk to the EPA.

Understood. And then one, just last one. Of the actual production of renewables, what proportion was -- I think it was 5.4 barrels per day on average. What proportion was RD and what proportion was SAF?

Our guidance is a 12,000 barrel per calendar day feedstock run. And if you convert that to gallons, you're going to get about 175 million gallons a year. We've contracted 30 million gallons of SAF.

Okay, got it. Helpful. Thanks a lot.

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

Good morning, guys. And Bruce, are you a little bit surprised that I didn't get to ask the RIN question? Just the thing -- I'm trying to understand how to think about funding the Max expansion project. And I realize the DOE funding is part of that, but can you talk a little bit of the sequencing of MaxSAF? Will you -- do you basically need the DOE funding to come in to start doing that, and then maybe you can try to tie that to ultimately the deleveraging of legacy Calumet?

Hey, Greg, it's Todd. We've said before that, that we're not going to take on meaningful extra -- just senior notes to go fund MaxSAF. And that continues to be the plan, at least until we're completely de-levered. So I wouldn't expect that to change. So what that means is it's directly linked to DOE. We've been progressing the engineering. We can do that internally. We can do that through very minor spend to an extent. We're getting to the point now where we have a pretty strong feel of what we have and we're very excited about it. We'll provide more details, actually, probably on the upcoming earnings call of what we actually expect MaxSAF to be. But we don't expect to go forward and spend meaningful dollars until we get DOE approval. So we're quickly coming onto a plateau and just how productive we can be. It's kind of like with the DOE comes the launch of MaxSAF. It's that simple. We've progressed through the pre-planning phases over the past few months and really excited about what we have. So the -- I guess to oversimplify, don't expect a whole bunch of excess new capital to come in to fund MaxSAF. It's strictly tied to DOE. No change in our long-term deleveraging plan. We've said that we want to reduce $300 million to $400 million of outstanding debt. That continues to be the plan, continued path and continues to be a minority sale of Montana/Renewables and free cash flow.

And would you expect any free cash flow from Montana/Renewable to come out this year, or is it all going to be reinvested?

No, I would expect it to stay in Montana/Renewables this year.

And then just on the DOE, you made it sound like you're optimistic you'll hear something soon. Can you talk a little bit about what you're hearing that gives you confidence in that? And just helps us understand what you're thinking when you made that statement.

Gregg, it's Bruce. I'll take that one. We are actively engaged with the DOE multiple times per week. It's a priority on both sides. And we will expect to have a go, no go in the foreseeable future. This is not a case where we've got some PowerPoint idea and we're running around looking for financing. We're launching the expansion off of a real platform and the economics are compelling.

All right, guys. I think that's it for me. Thanks for the time.

Thanks, Gregg.

Thank you.

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

Good morning. I wanted to ask about the political, or I should say government support as it relates to your SAF project. Given that it's an election year, one, how important is it that you get the loan from the DOE prior to the election? Do you see a potential for risk if you don't get it by then? And then two, how comfortable are you with the SAF economics excluding support from the IRA given there could be some risk to the producer tax credit if there's a republican wave?

Jason, I'll start. It's difficult to speculate on an election result. And as far as the second part of your question, we are able to participate in the current legislated markets which are not only federal. Remember that LCFS matters. Remember that there's a lot of global pressure to pull SAF into physical commerce. The commercial premiums in Europe are in the $3 a gallon range. Volumes are being mandated. State of Illinois has passed a $1.50 per gallon tax credit. So it's a much, much broader tapestry of support than just is the future administration going to reverse the existing federal law. And I don't think we perceive that as a large risk because if there's not a premium for SAF, we're going to leave it in the diesel. No premium, no SAF, and that's globally true.

Okay. Thanks. And then just on the DOE loan process, has there been something that's been holding this up longer than expected? I don't know if there's something specific or if it's just typical kind of government delays that you run into. But I think when you first started talking about the DOE loan, you expected it to get it as early as Labor Day 2023.

It's Bruce again. Your memory is correct. We actually began talking to the DOE two years ago. We didn't talk publicly about that earlier, but as it became a real prospect on both sides, we did have a step change improvement in that conversation after the IRA legislation came through. That changed a number of things. And so we're in actually a much better situation and assuming success, you're going to like it when it comes out. But it did require some re-architecture based upon the change in legislative support.

Okay. And then the final one just on Canada, which you mentioned is an important market for your renewable diesel sales. Can you discuss -- it's a bit less transparent than kind of the U.S. LCFS programs just given the federal program starting to ramp up. Can you discuss the outlook for that market? Do you expect that to become a major pull on U.S. renewable diesel production over the next couple of years as their clean fuel standard program ramps up?

Yes. And to give a little more color, if you make a loose analogy, the Canadian industry structure is similar to the U.S. side. There's a leader on the West Coast, that's British Columbia. They've got their own model and rules that are tighter than the national averages. Same as the analogy to California or CARP, and the U.S. federal. There is a proliferation of provincial-level requirements, some of which are direct volume mandates, not LCFS style, and then you've got the federal overlay of an LCFS program running off of a different model platform than the BC one. So the parallels are very, very reasonable. And if you take that and project it, the tightening program just calls in more and more volume. You know, it's supplied by import now, and the forecast is that'll continue. We're in a great position to be the shipper. Now, I want to give you a different thought. The model differences in Canada are not only on the product side. They treat carbon intensity calculations differently, and particularly British Columbia does. And so there's a real incentive to take Canadian canola and round trip it through our plant back to Canadian placed product. We've got one of our off-takers specifically requesting that we assign them product made from canola. So there is a lot going on under the surface. The forecast is that the global energy transition drive continues. Different local political -- local regional political players will find a way to properly tune that to their ag sector, their ranch sector, in the case of tallow, and there's no reason not to remain optimistic about the underlying industry structure.

Great. Got it. Thanks for the answers.

Thank you.

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

Thanks, Betsy. On behalf of the management team here in the room and really all of us here at Calumet, we appreciate your time and interest this morning. Thank you for joining us on today's earnings call. Have a great weekend, everybody.