Executive Summary / Key Takeaways

• C-Corp Conversion Unlocks New Investor Base: Calumet's July 2024 conversion from an MLP to a Delaware corporation fundamentally broadened its ownership base and simplified its capital structure, setting the stage for institutional ownership and improved valuation multiples.

• DOE Loan as Transformative Deleveraging Catalyst: The $1.44 billion Department of Energy loan guarantee, with $781.8 million already disbursed, is reducing annual cash interest by approximately $80 million and enabling the MaxSAF expansion at a capital cost of only $20-30 million—dramatically derisking the balance sheet while funding growth.

• Operational Excellence Driving Record Margins: Company-wide operating costs have fallen $61 million year-to-date through Q3 2025, while the Specialty Products segment achieved record production with margins consistently above $60 per barrel, demonstrating management's ability to extract more value from existing assets.

• MaxSAF Expansion Positions CLMT as SAF Leader: The MaxSAF project will add 120-150 million gallons of sustainable aviation fuel capacity by Q2 2026, capturing a $1-2 per gallon premium over renewable diesel and positioning Montana Renewables as North America's most competitively advantaged SAF producer.

• Clear Path to 2026 Debt Maturity Resolution: Through asset sales, PTC monetization, and operational cash flow, Calumet has reduced its 2026 notes from $354 million to $124 million, with a credible path to eliminate the remaining balance and address 2027 maturities through organic means or strategic asset monetization.

Setting the Scene: From Indianapolis Refiner to Renewable Fuel Leader

Calumet, Inc., founded in Indianapolis, Indiana in 1919, has spent over a century evolving from a traditional specialty hydrocarbon manufacturer into a strategically integrated producer of high-margin branded products and renewable fuels. The company operates twelve facilities across North America through four segments: Specialty Products and Solutions (SPS), MontanaRenewables (MRL), Performance Brands, and Corporate. This integrated model—where stable specialty chemicals provide baseline earnings while renewables deliver variable upside—represents the core of Calumet's competitive strategy.

A pivotal structural shift occurred on July 10, 2024, when Calumet completed its conversion from a Master Limited Partnership to a C-Corporation. This wasn't merely a legal formality; it fundamentally transformed the company's access to capital markets. The MLP structure had constrained ownership to income-seeking investors and created complex tax reporting. As a C-Corp trading on Nasdaq under CLMT, the company can now attract institutional investors, broaden its shareholder base, and potentially command higher valuation multiples aligned with corporate peers rather than yield-focused MLPs.

The industry backdrop is equally transformative. The renewable fuel sector faces a critical inflection point as the EPA's Renewable Fuel Standard program undergoes long-awaited clarification. For years, Calumet battled the EPA in court over Small Refinery Exemptions (SREs) , with the agency illegally denying petitions from 2018-2023. In August 2025, the EPA finally granted full or partial relief on all petitions from 2019 through 2024, reducing Calumet's RINs obligation by over $320 million. This regulatory victory removes a massive balance sheet overhang and cash flow drag that had plagued the company for years.

Simultaneously, the sustainable aviation fuel market is approaching a supply deficit. Global mandates are accelerating, with European SAF prices rising approximately 60% over the past six months while feedstock prices remained flat. Airlines face fines up to $2,700 per ton for non-compliance, creating powerful demand pull. Calumet's Montana Renewables facility, already North America's largest SAF producer, sits at the epicenter of this structural shortage.

Technology, Products, and Strategic Differentiation

Calumet's competitive moat rests on three pillars: proprietary conversion technology, unmatched feedstock flexibility, and an integrated production model that maximizes margin capture across the value chain.

Montana Renewables' proprietary gasification and hydrotreating technology converts waste feedstocks into renewable diesel, SAF, hydrogen, and other co-products. This isn't standard transesterification; it's a more sophisticated process that yields higher carbon intensity reduction scores, translating into superior LCFS credits and RIN values. The technology enables the facility to process diverse feedstocks—from used cooking oil to animal fats to agricultural residues—while maintaining consistent product quality. This flexibility proved decisive during Q3 2025 when feedstock physical basis widened by $0.20 per gallon across the industry; Montana Renewables' short supply chains and dynamic optimization capabilities allowed it to switch feedstocks rapidly, protecting margins while competitors suffered.

The MaxSAF 150 project exemplifies Calumet's capital efficiency. Rather than waiting for a new Gulf Coast reactor requiring $150-250 million in capital, management identified a "cheaper, quicker path" leveraging existing MRL assets. For only $20-30 million—funded 55% by the DOE loan and 45% by MRL operating cash flow—Calumet can enhance its existing reactor and other Montana assets to increase SAF yields from 2,000 barrels per day to 8,000-10,000 barrels per day by early 2026. This represents a capital cost of less than $0.25 per gallon of new SAF capacity, compared to industry norms of $1-2 per gallon. The project is on schedule, with approximately 100 million gallons of post-expansion volumes already placed through completed contracts or in final DOE review.

The integrated model provides crucial stability. While pure-play renewable fuel producers face margin volatility from RIN price swings and feedstock cost fluctuations, Calumet's Specialty Products segment generates consistent baseline earnings. In Q3 2025, SPS achieved record production with Adjusted EBITDA of $80.2 million, up 58% year-over-year. The segment sold over 20,000 barrels per day at margins exceeding $60 per barrel, demonstrating resilient demand even in a reported soft specialty chemicals environment. This specialties foundation allows Calumet to invest through renewable fuel cycles without external capital raises, a structural advantage over standalone biofuel producers.

Performance Brands, led by Royal Purple, Bel-Ray, and TruFuel, adds another layer of differentiation. TruFuel commands roughly 65% market share in its pre-mixed fuel niche and is on track for another record EBITDA year, having expanded into 4,000 new Walmart stores. The February 2025 divestiture of the Royal Purple industrial business for $110 million—at roughly a 10x EBITDA multiple—streamlined the segment while providing cash for debt reduction. Management expects to recapture most of the divested EBITDA through operational efficiencies within two years, effectively getting paid to simplify the business.

Financial Performance & Segment Dynamics: Evidence of Strategic Execution

Calumet's Q3 2025 results provide compelling evidence that the transformation strategy is working. The company generated $92.5 million in Adjusted EBITDA with Tax Attributes, which CEO Todd Borgmann called "the strongest quarter in a number of years." Net income reached $313.4 million, a dramatic swing from a $100.6 million loss in Q3 2024. More importantly, the quality of earnings improved materially.

The Specialty Products and Solutions segment delivered $80.2 million in Adjusted EBITDA, up from $50.7 million year-over-year, driven by record production and fuel margins. Gross profit surged to $276.3 million from just $2.3 million in Q3 2024—a 119-fold increase. This wasn't a one-time windfall; it reflected sustained operational improvements, including $10 million in fixed cost reductions in the first half of 2025 and an 8% production volume increase in Q1. The segment's ability to maintain margins above $60 per barrel despite broader specialty market softness validates the integrated model's resilience.

Montana Renewables posted $17.1 million in Adjusted EBITDA with Tax Attributes, up 17% year-over-year. The underlying renewables business posted slightly negative EBITDA of $3.5 million for Calumet's 87% share, but this masks significant progress. Operating costs, excluding SG&A, reached $0.40 per gallon—the eighth consecutive quarter of improvement. The Montana specialty asphalt facility contributed a $14 million year-over-year gain, its strongest quarter in recent memory. The segment's gross profit swung from a $20.1 million loss in Q3 2024 to a $78.9 million profit, primarily due to the $320 million RINs obligation reduction.

Performance Brands generated $13.2 million in Adjusted EBITDA, essentially flat year-over-year excluding the RPI divestiture. TruFuel's expansion and stabilized input costs offset the lost industrial business contribution. The segment's 65% market share in its niche and consistent cash generation provide reliable funding for corporate overhead and debt service.

Corporate costs remained controlled at $18 million in Q3 2025, down slightly from $19.1 million the prior year. More significantly, company-wide operating costs fell $24 million in the quarter and $61 million year-to-date, demonstrating management's operational discipline.

The balance sheet transformation is equally impressive. Total liquidity stands at $384.4 million, including $94.6 million in unrestricted cash and $209.8 million in credit facility availability. Restricted group debt fell over $40 million in Q3, with the 2026 notes reduced from $354 million to $124 million through partial redemptions and the Shreveport terminal sale-leaseback. The latter transaction generated $80 million in net proceeds at a 10.75% cost of capital—higher than the DOE loan's 4.88% but still accretive given the 2026 notes' higher coupon.

The DOE loan's impact cannot be overstated. By replacing project financing costing roughly 13% with a 4.88% government-backed facility, Calumet reduced annual cash interest by approximately $80 million. The first tranche repaid $188 million of intercompany debt, leaving $350 million remaining from MRL to Calumet. MRL now pays only $27 million annually in cash interest on this intercompany debt, freeing substantial cash flow for the parent company.

Outlook, Management Guidance, and Execution Risk

Management's guidance points to continued momentum through 2026, underpinned by three catalysts: regulatory clarity, operational excellence, and SAF expansion.

The EPA's August 2025 SRE decisions removed a major overhang, but the 2025 petitions remain pending. Management expects the final 2026 Renewable Volume Obligation to equate to roughly 4.5 billion gallons of biomass-based diesel—a 30% increase from the current 3.5 billion gallon mandate. This includes approximately 1 billion gallons needed to address D6 RIN shortages. With North America capable of producing roughly 7 billion gallons of feedstocks, the industry should tighten considerably, lifting margins across the board. The One Big Beautiful Bill Act's extension of the 45Z Production Tax Credit through 2029, combined with restrictions on imported fuels qualifying for credits, further supports domestic producers.

Montana Renewables' MaxSAF expansion remains on schedule for first-half 2026 completion. The test run that temporarily slowed the plant confirmed the ability to reach 120-150 million gallons of annual SAF production. Approximately 75% of expansion volumes are either contracted or in final DOE review, with SAF premiums holding in the $1-2 per gallon range. The company monetized $25 million in PTCs during Q3 and another $15 million in October, trending toward a 95% capture rate—materially better than the initial 90% achieved earlier in the year.

Operational excellence initiatives are outperforming expectations. Year-to-date production is up nearly 600,000 barrels versus 2024, with further cost reduction opportunities identified for the next two years. Management expects the current margin environment to continue into Q4, offset by normal seasonal weakness, and anticipates maintaining specialty margins above $60 per barrel even in tougher conditions.

The deleveraging path is clear and achievable. The remaining $124 million of 2026 notes can be addressed through a combination of operational cash flow, PTC monetization, and potential additional asset sales. For the $522 million of 2027 maturities, management has multiple options: continued organic cash generation, strategic asset monetization, or a partial sale of Montana Renewables. The latter option becomes particularly attractive post-MaxSAF completion and RVO finalization, potentially making 2026 a "likely and hopeful transaction time" according to Borgmann. Critically, management emphasizes they are not compelled to sell MRL in a downturn, having sufficient options for near-term maturities.

Risks and Asymmetries: What Could Break the Thesis

While the outlook is constructive, three material risks could derail the transformation.

First, RINs compliance remains a structural risk despite recent victories. Legal or regulatory changes could increase the RINs obligation, raise RIN prices, or narrow SRE availability, materially increasing compliance costs. The EPA's 2025 petitions remain undecided, and any adverse ruling could reverse a portion of the $320 million benefit. However, the Fifth Circuit and D.C. Circuit rulings that forced EPA's reversal provide strong legal precedent, and management's success in court suggests the risk is mitigated but not eliminated.

Second, renewable diesel margin volatility persists. Q3 2025 saw industry margins compress as feedstock basis widened $0.20 per gallon above the CBOT marker. While this has since normalized, the industry continues operating at roughly 60% utilization with production around 350 million gallons per month. If the RVO increase disappoints or imported fuels circumvent new restrictions, margin recovery could stall. Calumet's feedstock flexibility provides some protection, but not complete immunity.

Third, execution risk on MaxSAF remains. The project requires enhancing existing assets while maintaining current operations. Any construction delays, technology issues, or failure to secure remaining offtake agreements could reduce the expansion's value. The $20-30 million capital estimate is preliminary, and cost overruns would pressure already tight liquidity. However, the successful test run and advanced contracting mitigate this risk.

A fourth concern involves the material weakness in internal controls over cash flow reporting, which led to Q1/Q2 2025 restatements. While management is remediating the issue and the correction had no impact on EBITDA or net income, it raises questions about financial reporting sophistication during a critical transformation period.

Valuation Context: Positioning Among Peers

At $19.34 per share, Calumet trades at an enterprise value of $3.89 billion, representing 0.96x trailing twelve-month revenue and 11.12x EBITDA. These multiples sit at a discount to larger refining peers despite superior growth prospects.

HF Sinclair (DINO) trades at 0.42x revenue and 8.39x EBITDA, but generates lower gross margins (7.66% vs. Calumet's 9.65%) and slower growth. Marathon Petroleum (MPC) trades at 0.67x revenue and 10.79x EBITDA with gross margins of 9.31%, but its renewables exposure is limited and its growth profile is mature. Phillips 66 (PSX) trades at 0.58x revenue and 14.47x EBITDA with 10.79% gross margins, but faces higher capital intensity and slower execution in renewables. Valero (VLO) trades at 0.49x revenue and 9.58x EBITDA, but its renewables capacity is tied to joint ventures with less feedstock flexibility.

Calumet's negative book value (-$8.02 per share) and negative profit margin (-0.92% TTM) reflect historical losses and MLP legacy issues, but the quarterly trajectory has turned decisively positive with Q3 net income of $313.4 million. The company's 1.13x current ratio and 0.48x quick ratio indicate adequate liquidity, while the 4.55% return on assets demonstrates improving capital efficiency.

The valuation disconnect appears most stark in the renewables segment. Montana Renewables' 270% year-to-date growth in Adjusted EBITDA with Tax Attributes and the $1.44 billion DOE loan support suggest the market is undervaluing the SAF optionality. If MaxSAF delivers 120-150 million gallons at $1-2 per gallon premiums, incremental EBITDA could approach $120-300 million annually—material for a company that generated $92.5 million in total Q3 EBITDA.

Conclusion: A Transformation Story Entering Its Final Chapter

Calumet, Inc. has executed a remarkable transformation from a debt-laden MLP to a focused specialty refiner with a first-mover advantage in sustainable aviation fuel. The confluence of three catalysts—regulatory clarity from EPA's SRE decisions, operational excellence driving record specialty margins, and the DOE-funded MaxSAF expansion—creates a compelling risk/reward profile for investors willing to look beyond historical baggage.

The investment thesis hinges on execution. Can management deliver the MaxSAF expansion on time and budget? Will the 2026 RVO increase materialize as expected, lifting industry margins? Can the company maintain operational momentum while addressing remaining debt maturities? The evidence from Q3 2025 suggests yes: record production, $61 million in cost reductions, $320 million in RINs relief, and a clear deleveraging path.

For investors, the critical variables are Montana Renewables' EBITDA ramp and PTC monetization efficiency. If the segment can consistently generate $40-50 million in quarterly EBITDA with tax attributes while monetizing credits at 95% capture rates, the company will generate sufficient cash to eliminate 2026-2027 debt without dilutive equity issuance. The specialty segment's ability to maintain $60+ per barrel margins provides a stable foundation, while Performance Brands' market-leading positions offer additional upside.

Trading at a discount to peers despite superior growth and a transformative balance sheet improvement, Calumet offers asymmetric upside. The market has yet to fully credit the $1.44 billion DOE loan's impact on cost of capital, the $320 million RINs relief's permanence, or the MaxSAF expansion's earnings potential. As these catalysts crystallize over the next 12-18 months, the gap between perception and reality should close, rewarding patient investors who recognize that this century-old refiner has become a renewable fuel leader at precisely the right moment.