Calumet, Inc. /DE(CLMT)Q2 2026 法說會逐字稿

Good day, and welcome to the Calumet Inc. Second Quarter 2026 Conference Call. The operator provided instructions for participating in the question-and-answer session. Please note, this event is being recorded. I would now like to turn the conference over to John Kompa, Investor Relations. Please go ahead.

Thanks, David. Good morning. Thank you for joining our second quarter 2026 earnings call. With me on today's call are Todd Borgmann, CEO; David Lunin, EVP and Chief Financial Officer; Bruce Fleming, EVP, Montana Renewables and Corporate Development; and Scott Obermeier, President, Specialties. 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 2, 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 3, I'll now pass the call to Todd.

Thanks, John. Good morning, and welcome to today's call. The last time we were together, we expressed that this year was setting up a lot like 2022, and the second quarter delivered on that with $175 million of adjusted EBITDA with tax attributes despite starting the period with three planned turnarounds in Princeton, Cotton Valley and Montana Renewables. Just as important as the quarterly earnings is what they mean for Calumet's strategic positioning. Our restricted group leverage ratio is now below 4x. And with the first phase of our MaxSAF-150 expansion behind us and strong cash flows in all businesses, we're expecting to surpass 3x next quarter. About a month ago, we called $100 million of notes. And last week, we terminated the sale leaseback of our CMR truck rack with a $115 million repurchase, eliminating that high interest debt. The outlook is for continued and accelerated deleveraging from here. So the conversation today is increasingly about what our self-funding and growing platform does next. Let's turn to Slide 4, and we'll start with our Specialties business. We've long talked about our integrated specialty strategy. And this quarter, we saw it in spades. Our routinely high-margin specialty products are exposed to an extremely favorable market dynamic; we'll hit on that momentarily. As we've discussed previously, our specialty products are sourced from crude oil, which is a competitive advantage as relying on sourcing intermediates in the current market is a challenging position given the value of those intermediates to fuels processors and the scarcity of them in general. Further, processing crude to generate specialties means we're exposed to the fuels and asphalt coproducts that are generated during production as well. I'll take this a little deeper into the underlying drivers of the current specialty markets. Last quarter, we talked about the disruptions in the global energy market and their expected impact on diesel, which drives solvents pricing at Cotton Valley, and lubes, which we make in varying forms at Shreveport and Princeton and then upgrade further at other sites. We've now seen this impact of global disruptions on the market in real time. Historically, our industry produces a little over 700,000 barrels per day of paraffinic base oil globally. And at the highest level, it's been well balanced with demand. Today, over 10% of that capacity is offline, leaving the market structurally imbalanced. Historically, the Middle East and United States were the two large export hubs, each of which was supplying about half of the base oils imported elsewhere throughout the world. With one-third of Middle Eastern capacity fully or partially offline from the Iranian war, that export capability has turned upside down. A disproportionate share of that is Group III, which is in even worse shape than the broader lube oil market, although the shortfall of Group II has meant changes in formulations, increasing Group II demand in the motor oil segment. About half of Calumet's paraffinic base oils are Group II. Further, Europe has lost roughly one-third of its Group I base oil production during the Russia-Ukraine war, creating a shortage of that grade as well. Group I is typically tailored to industrial applications and represents the other half of Calumet's paraffinic base oil production. Pre-war, Europe was essentially balanced in supply and demand, but has now joined Asia as an extremely short market. In short, there's simply not enough base oil to go around. Further, logistics costs to ship oil around the globe have ballooned given the shortage of vessels and skyrocketing insurance costs. Combine these elements with the refining industry already running at record utilization with no room to process more, and you have a setup that is unlikely to be resolved quickly. A prime example is we're fortunate to land on the right side of each of these global dynamics. Our crude supply is largely domestic, nearby and readily available. Our customers are often major global companies that, as a whole, are typically domestic buyers, and we're a fully integrated producer, so we capture the intermediate value that nonintegrated suppliers have to pay for. Given this strong backdrop, accelerated deleveraging in action and a constructive outlook, we're also closely examining a pipeline of low-risk, high-return growth projects that we've been accumulating over the years as the majority of our discretionary capital was pointed towards building Montana Renewables and deleveraging. While we won't take our eye off completing the deleveraging, that's occurring more quickly than previously anticipated. So we're progressing this growth pipeline in a parallel and disciplined fashion. We're expecting a good chunk of this pipeline to clear the FEL process and be deployed in 2027 and 2028. I thank our Specialties team for the execution today. It's great to be talking about high return growth CapEx again in this business and having a team that's rebuilt our operational and commercial foundation so successfully, albeit with little capital, adds to our conviction. Turning to Slide 5. We see a similarly strong market at Montana Renewables as the RVO is working out exactly as expected. The index margin has moved sharply higher as it has to because the mandate requires biodiesel capacity to come back online. And as we said on prior calls, biodiesel producers have long memories and won't restart until they're confident. That's precisely what we're seeing: a measured, rational restart that supports margin, which is what the administration intended to do when it set the RVO. Step back and the pattern is clear. There have been two decades of RVO targets since 2006. And every single one of them, except the 2024 CET1 rule, the EPA set the target at existing capacity plus growth and let American ingenuity fill the gap. Plenty of opponents called the SEP 2 policy too big and unreachable. What we've actually seen with the SEP 2 rule is a 70% increase in biomass-based diesel production this year as the industry reignites. Also, the agriculture community is crushing more crop than ever. Soybean and canola crush are both at record levels, and we're seeing about 5% more crush capacity being added this year. Throughout the value chain, we're seeing a lot more American jobs making American energy. You can see it on the RINs data on this slide, and this dynamic is why this critical lag in energy policy has been a long-standing and bipartisan issue. And last, let's turn to Slide 6 and talk Montana Renewables growth. David will walk through the financials in the segment review, but the gist at MRL is we made $17 million of adjusted EBITDA with tax attributes in Q2 despite over $40 million of foregone margin while we were offline completing the first stage of the MaxSAF-150 expansion. And with July as an indication, we're on track to pace well ahead of the second quarter even after normalizing for the downtime. Also since we last talked, we completed our performance test of the newly installed MaxSAF catalyst, and it met or exceeded expectations across the board. With the first step of MaxSAF-150 behind us, we'll turn our efforts to the next steps of the expansion. First, I'll remind everyone that as we improve our project, we're also working with the DOE to ensure the supporting documents are updated. This is progressing well, and we'll disclose more details when that process concludes, which we expect will occur before our next call. Until then, I'll give a little more insight into how we're envisioning expansion in Montana, and we'll limit our comments on further details until the full package is announced. Importantly, rather than a massive mega project, which included transporting a second reactor from the Gulf Coast, we've identified a novel expansion. It's much cheaper, faster, lower risk and carries a much higher IRR. We plan to reconfigure some assets that CMR is already operating in Great Falls with the anchor asset being a second reactor. Lining up the second reactor in SAF production will provide best-in-class SAF yields. The current industry standard practice for SAF production involves fractionating and isomerizing renewable diesel, which creates SAF, but also creates less valuable byproducts like naphtha and fuel gas. In times of strong renewable diesel margins, the net act of converting renewable diesel to SAF plus byproducts balances at an economic optimum of lower SAF output. In fact, that's why you may hear industry participants at times saying the economics favor making RD even though there's a SAF premium. This second phase of our MaxSAF-150 project differentiates us by deploying the second reactor in a patent-pending polishing service instead of more severe cracking, which means minimal byproducts and, in turn, an economic optimization that occurs at a much higher SAF output. Furthermore, because the second reactor is repurposed from the crude refinery, we plan to have it running this winter. This reactor ultimately provides the capability to produce roughly 200 million gallons of SAF when we expand total fresh feed rate to 17,000 barrels a day over the next two years for a fraction of the capital originally expected. More imminently, it will pair with our existing reactor ramping up late this year and then producing 120 million to 150 million gallons of SAF next spring at an industry-leading yield and cost structure. And long term, we still have our Gulf Coast reactor, which will now be known as the third reactor available to us after we step through the series of project nodes that we'll discuss in more detail soon. Swapping the reactor from fossil to renewable service requires about two weeks of downtime on the fossil side, and we're going to take that early this winter. In fact, we originally planned to do this tie-in midyear. But in the current market environment, we're expecting to earn over $50 million of EBITDA at CMR between now and the reconfiguration, which is a major upgrade to the original plan. So we'll capture that and run at a 60 million gallon SAF run rate for a few months as we finish out the retail asphalt season. While the Great Falls site reconfiguration will repurpose some CMR equipment for a step change increase in profitability, we'll continue to operate at CMR, keeping the jobs in the community, providing the shared services for MRL and producing world-class asphalt. In summary, this capital-efficient project saves hundreds of millions of capital dollars, accelerates both increased SAF and throughput by years, de-risks the construction and doing the site reconfiguration this winter allows us to capture an extra $50 million of unexpected CMR upside. We expect to make an economically optimum 60 million gallon run rate of SAF until we reconfigure later this year. Coming out of that, we expect to quickly ramp up to an 80 million to 100 million gallon run rate by year-end, and we'll be running over a 120 million gallon run rate by spring of 2027. And most importantly, we're gaining another lasting competitive advantage at Montana Renewables, adding best-in-class SAF production yields to our top-tier position in location, feedstock flexibility, operating costs and our first-mover SAF marketing advantage. We look forward to sharing the full details of our expansion, the cost details and more on the multistep reconfiguration soon. And with that, I'll turn the call over to David. David?

Thanks, Todd, and good morning, everyone. I'll start with the headline. We delivered $175 million of adjusted EBITDA with tax attributes this quarter, and we're very proud of that result. Both of our businesses, Specialties and Montana Renewables, performed well, and we continue to operate in an incredibly attractive part of the market. Every segment participated, led by Specialty Products & Solutions. In STS, we executed across the board, both on the commercial and operational side despite a heavy turnaround period. That performance shows up not just in earnings but in cash generation, and we drove over $90 million of cash flow from operations during the quarter, which speaks to the underlying strength of the portfolio. And this is while we built $70 million of working capital as the value of our receivables increased substantially, which will naturally unwind itself. I do want to talk through a few tactical items that affected the quarter because they were deliberate choices rather than surprises. First, we saw an offset from fuel hedges of around $20 million. As I mentioned last quarter, we put these hedges in place, roughly 20% of our fuel production intentionally to protect our cash flow and support our debt paydown commitments at historically attractive spreads, essentially trading some upside for certainty as we work through our deleveraging plan. We have 10,000 barrels a day of hedges on through early 2028 with 2027 levels at approximately $28 per barrel on a CBOB basis. This, combined with the near-term margin environment, provides ample confidence that our ultimate deleveraging success is in plain sight. In fact, this quarter, we saw restricted group leverage fall below 4x, and that's before we retired $115 million more debt and expect to accelerate that through the second half of this year. Second, we had a working capital draw, and it's worth breaking that into its components because they tell very different stories. About $30 million is from intentionally holding higher levels of crude inventory than normal. That was a deliberate decision to de-risk our operations in an incredibly dynamic and evolving market for global oil. We expect that build to unwind naturally over time. Another $30 million came from an increase in accounts receivable, which was simply a function of higher prices across all of our SPS businesses. In other words, a good problem to have and not a sign of collection or credit issues. We've captured attractive margins across base oils, solvents, Penico and fuels. We also saw roughly $20 million of build at MRL as the business ramped up and built inventory and accounts receivable following the completion of our expansion project. With Montana Renewables now back operating consistently at higher rates, that build should come down. All of these actions are concrete steps towards deleveraging. In July, we called $100 million of our 2028 MIRA notes and also retired our sale leaseback at the truck rack at CMR. Given our strong business performance and outlook for the rest of the year, we expect to continue at this accelerated pace. Taken together, we see this quarter as a continuation of the operational momentum we've built with a few timing-related working capital items that we expect to normalize and a continued unwavering focus on completing our debt reduction. With that, let me walk through the performance by segment. Turning to Specialty Products & Solutions. Adjusted EBITDA of $161.7 million — more than double that of the prior year. The strong results came from both sides of the integrated model. The more than 20 specialty price increases our commercial team pushed through during the first quarter's spike reached full realization with Shreveport running clean all quarter. Further, we started the quarter with turnarounds at Princeton and Cotton Valley, both of which were completed on time and on budget. We have no turnaround scheduled for the third quarter, and Shreveport will do its turnaround in the fourth quarter. This quarter also marked our seventh consecutive quarter of specialty sales volume above 20,000 barrels per day and, more importantly, a record specialty production quarter. Year-to-date in 2026, our specialties volume has increased over 5% from the high milestone achieved last year in 2025. As we've highlighted in the past, our integrated business allows us to produce fuels and take advantage of the attractive high-margin fuel environment. The price increases that we've already implemented plus the elevated fuel margin environment continue to position us well for what we believe will be a strong second half of 2026. Turning to Performance Brands. Adjusted EBITDA was $6.3 million, down about $6.2 million versus the prior year. This is timing, not demand. Volumes were up 18% in the quarter. Input costs spiked before our pricing actions caught up. And as we discussed last quarter, our retail-oriented customer base carries a typical 60- to 90-day lag before price increases flow through to margin. It's also worth remembering that all of our businesses are in LIFO accounting. So the rapid cost inflation flowed straight into the quarter's cost of goods rather than being smoothed the way a typical FIFO finished products business would report it. That was a $7 million headwind for PV during the quarter. As pricing action catches up and the inventory effect reverses, we expect the segment to recover. And frankly, this quarter is evidence that the same input cost move squeezing Performance Brands is what's benefiting the rest of Calumet. With STS production 35x greater than Performance Brands, it's a condition we'll gladly accept. Looking ahead to the third quarter, we continue to remain vigilant on the pricing front with select actions going forward. In our Montana/Renewables segment, Todd covered Montana Renewables performance with $17 million of adjusted EBITDA with tax attributes despite the site being down all of April and half of May, with roughly $40 million of lost opportunity between the MaxSAF expansion and turnaround as well as the Powderad outage. Index margins are strong, approximately $2.60 per gallon and rising today. So we are excited as we've ever been to have MRL meaningfully contributing, and we expect the third quarter to be meaningfully higher as we show a full quarter of production and earnings. Strategically, we are pleased to complete the first step of our MaxSAF-150 expansion on time and stepping into the market that is extremely positive for both renewable diesel and SAF. Our industry-leading low-cost structure and geographic advantage continues to underpin Montana Renewables' competitive advantage in the industry. On the refining side, CMR generated $12.2 million of adjusted EBITDA, up about $10.9 million sequentially as the margin environment is well known. Asphalt margins lagged early in the quarter as rapid crude escalation squeezed asphalt margins. Pricing is caught up and the third quarter is peak asphalt season. So as Todd noted, CMR is set up for an outsized run between now and the November downtime. In closing, let me reiterate, we entered the second half of 2026 with real momentum. The specialties environment is carrying forward. The third quarter is turnaround-free and Montana Renewables is ramping its strong index margins with the share of our slate growing. Our priorities are simple: run safely, reliably and full to capture this market, finish the DOE modification and lay out the complete expansion, funding and site reconfigure details, which we expect to do well before our next earnings call and continue deleveraging ahead of schedule while beginning to deploy capital into high-return growth with discipline. Thank you for your time today. And with that, I'll turn the call back to the operator for questions.

The operator provided instructions for the question-and-answer session. Our first question comes from Conor Fitzpatrick with Bank of America.

Across the energy sector, there's been pretty divergent outcomes as a result of the Iran war. Refined product crack spreads are around record levels and the strip declines only gradually into the future as capacity would struggle to rebuild inventories. Petrochemicals margins have normalized more rapidly, mostly as a result of crude and feedstock prices and availability normalizing as well. Base oil cracks are extremely high and have remained high. But I wanted to get your perspective on how durable high base oil cracks will be. Damage tends to interrupt operations only for a couple of months at a time at the fuel refinery level, but undercapacity slows inventory rebuild. Is there kind of a similar story playing out for specialties and base oils? And how much of global margin gains in base oils are just the pass-through of feed costs like VGO?

Yes. This is Scott. Let me start by saying I think right now across the whole portfolio — and I'll get into base oils here in a second — production has been great and execution has been great. And we think about the fuel crack market being historic; specialties, again, across our whole portfolio are doing really well. So we feel good about that. We think in this current environment, it's not just a short-term situation. There's been a lot of structural impacts that will take months to sort out. So we don't view the overall market as just a short-term situation. Our outlook in the coming months is that I think results will be similar to how they were here recently. To touch a little further on base oils — as Todd mentioned in the script, Calumet produces Group I and Group II base oils. A lot of the early headlines with the Iran war were on Group II Middle East capacity and refineries being taken offline, and that has had some impact on both Group I and Group II as customers and companies look to reformulate into Group I and Group II. So the demand has been really strong to try to replace some of the gap in Group II. In addition, some of the larger global commodity refineries that make base oils have been diverting to distillate due to the historic crack spread. And the third piece on base oils that we see going on — there were reports this week of Russian refineries impacted by drone strikes from Ukraine. So there's a significant amount of capacity that in the past couple months has been taken offline. Long story short, overall and specifically for base oils, we view the market as being tight, and we expect that to continue certainly in the coming months through 2026.

And I guess the follow-up is capital structure has improved by over $100 million and MRL run-rate operations should accelerate that further going forward, at least in the near term, along with specialties margins and surplus. So in the event that your deleveraging targets are achieved organically soon, does that change your approach to MRL regarding monetization or other options?

It's Todd. It's a good question. I think the answer is no, not long term. We still expect that separating and monetizing Montana Renewables is the right long-term path for this business. I'd say what has changed, and you pointed this out in your question, is we no longer have to do it as a prerequisite to grow our Specialties business, which I think is critical. Our business cash flow allows us to pay down debt much more quickly than we ever planned. So we're looking at MRL monetization purely through the lens of shareholder value optimization, which is exactly where you want to be when approaching a potential transaction of that size with the value creation potential that it has.

The next question comes from Amit Dayal with H.C. Wainwright.

Amazing results. Congratulations on the execution. For 3Q '26, what is your confidence level to see sort of the full benefits of MRL come through? I know it's been start and stop over the last two years roughly. But for 3Q '26 and maybe for the second half of this year, can we expect the full contribution from MRL to come through?

It's Todd again. I'll start off and then see if Bruce wants to jump in. I think the answer is absolutely yes. In July, we saw earnings continue to ramp positively. Obviously, we were down in April and the first half of May for the MaxSAF turnaround, which doesn't shed the fixed costs in that environment. Earlier, we talked about a normalized run rate for Q2 being in the $60 million range; you would have thought of that as $17 million we reported plus a little over $40 million of foregone margin while we were down. So I think you extend that to what we're seeing into Q3. We certainly expect to continue picking up on that pace in a meaningful way. We've already demonstrated really strong margins return. It's great to see that. We've been talking about it for a while. We saw the RVO change. The market is reacting as we expected. We're seeing the increased supply-side restart and the impact of that. Going forward, we expect to continue that improvement.

And then just sort of a follow-up to that. The Gulf Coast reactor, just to clarify, could that allow you to go beyond the 200 million gallons?

Yes, it could. There's no reason it couldn't do what it was originally scheduled to do when we talked about this project. I don't want to miscommunicate that the numbers we talked about today are the end of the road. What we're saying is the next step in the growth process here. I'm really looking forward to sharing more details on this, particularly costs, because it's just so much more capital efficient than we originally discussed. But we're going to have the ability to increase to 17,000 barrels a day of total throughput and up to 200 million gallons of SAF — much more quickly and much more economically than previously planned. From there, sure, we have the ability to add the third reactor if we want, and we'll make that decision as time gets closer.

The next question comes from Josiah Knight with Goldman Sachs.

Maybe just on the outlook for SAF more broadly. I know you just press released the Minneapolis Airport contract. Can you talk about the demand you're seeing from customers, whether domestically or abroad, a little deeper?

Josiah, yes, happy to do that. The North American voluntary market and the European mandatory market are introducing some possible trade flows. We've seen cargoes move on the water. So there will be industry dynamics associated with that. But at the moment, and to our best understanding from all of our customer conversations, those markets are going to remain separate and behave separately. We've not found the bottom of the voluntary demand. We expect to continue to ramp sales up. We've prepositioned our production capability by the project we just installed and by the pivot of some fossil refinery assets that Todd covered. So we're maintaining an attitude of thinking flexibly and being really good at managing the risks in a climate of external volatility.

Got it. That's helpful. And then a follow-up, just on mid-cycle. I know right now there's a lot going on. Has your view of mid-cycle renewable diesel margins changed at all? Or has that been the same?

It has not. I would draw everybody's attention to what we call the supply stack on Slide 5 of the handout. If you want to bring capacity back into the market, which is a bipartisan effort — everybody on both sides of the aisle is in favor of domestic production — you're going to need cash margins to cover fully loaded costs. That's where the market is or above. The market may be a little above at the moment, and that's consistent with the 20 years of history we show. So yes, we think last year was an aberration and an error in the CET1 rule. Going forward, we expect typical behavior. On that basis, this remains a strong business for a domestic producer.

The next question comes from Jason Gabelman with TD Cowen.

I want to ask about the reactor that you're taking from the Montana plant and putting into MRL. Can you share anything around the cost of that project and then the yield that you'll lose at the conventional Montana plant?

Jason, it's Todd. Let's defer talking about extra details for just a little bit here. As I said earlier, we expect to be out with more on that soon. But it is safe to say a good chunk of the EBITDA CMR made historically will be traded for a much larger number at MRL and the massive cost savings of the project. It's also not like CMR is underwater — it's somewhere in between. It's important to our community. It's important to our employees. And quite frankly, it's important to Montana Renewables to continue to provide the shared benefits that MRL receives from sharing the underlying fixed costs and workforce. So CMR is going to be a continuing piece of the portfolio, but we are reconfiguring a decent chunk of it for a high multiple of return at MRL.

I would add to that because you asked about the mix. On the fossil side, we're going to keep the asphalt rack open. We're going to keep the gasoline rack open. We're going to keep the crude run going. We're going to keep the employment. We are going to have some rearrangement in the black oils, the CAF area. We'll be able to get into that post some DOE activity and imminent conversations around the details.

Okay. My follow-up is kind of related to that. It's a bit surprising that you're not running at MaxSAF until the reactor comes online. I think when you laid out the project, you only expected about 1,000 barrels a day of renewable naphtha. So has the yield that you've seen on the current MaxSAF configuration differed from what your expectations were and that's why you're deciding to run at higher renewable diesel until you have this other reactor? Does it have to do with when SAF contracts kick in? Any more color would be helpful.

Yes, you bet. I don't want to say that the yields on renewable naphtha are higher than originally expected at all. I'd say as you crank up severity on the cracking without the polishing service, more and more RV goes to naphtha. If we rewind a few months, when RD was less valuable, losing some of that in the cracking process wasn't too painful. When CMR margins were lower, converting that second reactor sooner wasn't much of a lost opportunity either. And the reality now — and we're fortunate for this — is the economics are different. So we're not incentivized to lose RD until we add the polishing reactor. At that point, our yields are going to go from normal industry marginal yields to best-in-class. We're happy to push that back a few months to capture the big $50 million prize sitting in front of us at CMR. Combine all of this to figure out the step that we're taking here. As far as SAF contracts, there's nothing timing-related that prevents ramping. Both these things have flexibility. We have the ability to ramp up and ramp down. So we'll service the contracts in a way now that allows us to run at about a 60 million gallon run rate until we make that switch, get the better yields, crank up the staff and then exercise the flexibility we have in them to continue to grow and add more as well.

Got it. That's good color. If I could just squeeze in one more: the debt paydown subsequent to quarter end, was that funded by cash on hand? Did you have to draw on the ABL?

Jason, it's David. It's predominantly cash generated just from the earnings of the quarter.

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

Just to stay on the question that Jason asked, can you tell us how we should think about the product yields from the MaxSAF-150 right now, how it's running beyond the SAF production?

Yes. As far as SAF, we'll lay out all of the yields and the volumes in more detail as we step through the project in the not-too-distant future. For now, we're running at about a 60 million gallon run rate, which I expect to be the optimum. Obviously, if margin dynamics change, we'll be flexible. Expect that run rate through the time when we do the reconfiguration. From there, we'll quickly ramp up by the end of the year to an 80 million to 100 million gallon SAF run rate. By spring, we'll be in the 120 million to 150 million gallon range. Then we'll step through additional steps that we'll talk about later, ultimately getting to 200 million gallons of SAF by 2028. It's not just more SAF; it's more throughput, increasing from around 12,000 barrels a day previously to just around 13,000 barrels a day today and moving to 17,000 barrels a day of total throughput. There are a number of positives here as we step up in a much more capital-efficient way than we originally discussed.

My question was on today's roughly 60-plus million gallons of SAF that I'm looking at: what's the yield on the other parts? Is it mostly RD? Or is there greater naphtha?

No, it's mostly RD. Nothing's changed there from normal.

Bruce, you were about to say something I cut you off.

Yes. Chronologically, today we've shifted some RD to SAF and we'll continue to run that journey as we have for a couple years. We started at 30 million gallons with Shell earlier and have been walking that up. Todd gave additional tactical detail verbally and on the slides; at the bottom of Slide 3 there's a note providing additional color about the $150 million and breaking that into tactical steps we're taking this year through the winter to maximize the site's cash contribution. We're accelerating the whole program that was originally designed with the DOE, getting more and getting faster, and we'll provide more step granularity in the near future.

Got it. Maybe just shifting gears. The $50 million of capital that you're talking about for Specialties — when should we expect that to start to trickle through? Is that this year? Or is that over time? Is it over this year and next? Help me understand how much CapEx is going up at the restricted group.

I'd say the majority of that comes through next year. Right now we have a pipeline of projects we're reviewing. These are smaller projects in nature — think of portfolio optimization items, debottlenecking, small expansions that have been stacking up. There are five or six items that make up that portfolio and they're at the end of the FEL process. We're expecting to clear those and approve most of them in the not-too-distant future. From there, we'd expect the majority of that $50 million to become part of the 2027 and 2028 capital budget that we'll announce. We're not expecting additional growth CapEx out the door this year. Not all of that gets spent on day one of 2027; it will be staged. Some of the work ties into turnarounds scheduled at the end of 2027, etc. So from a cash flow perspective, expect two-thirds plus in 2027 and the remainder in 2028.

So we won't see that show up in results until '28 most likely?

That's right. Maybe a little bit will trickle in in the second part of 2027, but as a whole you'd see the impacts in 2028.

Got it. And then just turning to MRL. Obviously, you're set up to generate a lot of cash. Should we expect a fair amount of that to go back to intercompany payables to start to work down?

We'll talk more about the cash and the loan and all of that soon, so I don't want to get ahead of that. I'd expect the cash, first and foremost, to go toward the next steps of the project, which — as we've said — are pretty capital-efficient. We'll go there first and then the rest will accumulate. But let's go into more details when we can talk with the full deal in front of us.

Got it. And just one last one: with the higher stock price and cash flow, M&A is a greater possibility than it was in the past. What's your assessment of the opportunity set out there? Is that something we should expect more of?

Yes. It's certainly something we're paying attention to. We're not going to take our eye off finishing the deleveraging. We've also got some nice organic growth CapEx that is low risk and that we have a lot of confidence in. But absolutely, we'll be watching the market and opportunities. If there's an opportunity to create shareholder value, we'll be all over it. We'll look for things that carry synergy with our broader Specialties network, and the same applies for Montana Renewables. We're in a place to start to look at what growth looks like in this company. We're excited to be stepping into that, but we'll remain disciplined and complete the deleveraging while doing these things in parallel.

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

Okay. Thank you, David. On behalf of Todd and the entire management team, I'd just like to thank everyone again for their interest in Calumet, and have a great rest of the day. Thank you.

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