Calumet, Inc.: Form 10-Q for the period ended Sep 30, 2024

The historical unaudited condensed consolidated financial statements included in this Quarterly Report reflect all of the assets, liabilities and results of operations of Calumet, Inc. (“Calumet,” the “Company,” “we,” “our,” or “us”). The following discussion analyzes the financial condition and results of operations of the Company for the three and nine months ended September 30, 2024. Stockholders should read the following discussion and analysis of our financial condition and results of operations in conjunction with our 2023 Annual Report and our historical unaudited condensed consolidated financial statements and notes included elsewhere in this Quarterly Report.

Overview

We manufacture, formulate and market a diversified slate of specialty branded products and renewable fuels to customers across a broad range of consumer-facing and industrial markets. We are headquartered in Indianapolis, Indiana and operate twelve facilities throughout North America.

Our operations are managed using the following reportable segments: Specialty Products and Solutions; Performance Brands; Montana/Renewables; and Corporate. For additional information, see Note 12 — “Segments and Related Information” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements.” In our Specialty Products and Solutions segment, we manufacture and market a wide variety of solvents, waxes, customized lubricating oils, white oils, petrolatums, gels, esters, and other products. Our specialty products are sold to domestic and international customers who purchase them primarily as raw material components for consumer-facing and industrial products. In our Performance Brands segment, we blend, package and market high performance products through our Royal Purple, Bel-Ray, and TruFuel brands. Our Montana/Renewables segment is comprised of two facilities — renewable fuels and specialty asphalt. At our Great Falls renewable fuels facility, we process a variety of geographically advantaged renewable feedstocks into renewable diesel, sustainable aviation fuel, renewable hydrogen, renewable natural gas, renewable propane, and renewable naphtha that are distributed into renewable markets in the western half of North America. At our Montana specialty asphalt facility, we process Canadian crude oil into conventional gasoline, diesel, jet fuel and specialty grades of asphalt, with production sized to serve local markets. Our Corporate segment primarily consists of general and administrative expenses not allocated to the Specialty Products and Solutions, Performance Brands or Montana/Renewables segments.

Recent Developments

On July 10, 2024, the Company completed the previously announced conversion transaction contemplated by the Conversion Agreement, dated as of February 9, 2024 (as amended, the “Conversion Agreement”), by and among the Company, the General Partner, Calumet, Inc. (“New Calumet”), Calumet Merger Sub I LLC (“Merger Sub I”), Calumet Merger Sub II LLC (“Merger Sub II”) and the other parties thereto, including The Heritage Group (the “Sponsor Parties”). Pursuant to the Conversion Agreement, (a) Merger Sub II merged with and into the Company, with the Company continuing as the surviving entity and a wholly owned subsidiary of New Calumet, and all of the common units were exchanged into the right to receive an equal number of shares of common stock, par value $0.01 per share, of New Calumet (“Common Stock”) and (b) Merger Sub I merged with and into the General Partner, with the General Partner continuing as the surviving entity and a wholly owned subsidiary of New Calumet, and all outstanding equity interests of the General Partner (1,640,583 general partner units) were exchanged into the right to receive an aggregate of 5,500,000 shares of Common Stock and 2,000,000 warrants to purchase common stock at an exercise price of $20.00 per share (subject to adjustment).

Third Quarter 2024 Update

Outlook and Trends

During the third quarter of 2024, our business continued to benefit from strong production volumes. In the third quarter, we achieved multiple production milestones, including the highest production levels in over five years in our specialties business, while we also processed approximately 12,000 barrels per day of renewable feedstock and over 2,500 barrels per day of SAF in our Montana Renewables business. Our Montana Renewables business achieved a new SAF production record each month during the quarter, culminating with approximately 3,200 barrels per day of SAF production in September. Additionally, we continue to benefit from enhanced operational performance in all of our businesses as a result of the capital investments we have made over the past few years on projects designed to improve the reliability of our assets.

In our Specialties Products and Solutions and Performance Brands segments, we continue to benefit from an attractive specialty product margin environment, which has proved resilient despite the weakened commodity margin environment which has hampered results for our fuel based products. Demand for our products in these businesses remained strong in comparison to historical averages and we continue to leverage the benefits of our fully integrated specialty business in this market. As expected, margins continue to normalize relative to the record highs experienced in the second half of 2022 and early 2023. We expect the current margin environment for both specialty products and fuel based products to continue for the remainder of the year. Further, we believe low unemployment and stabilizing raw material and packaging costs point to a continuation of healthy demand for the majority of our products. While the risk of recession and inflation continue to be monitored, our plants and the industry are expected to operate at high rates to meet market demand.

In our Montana/Renewables segment, we continue to see strong demand for our renewable fuel products. We maintain our outlook of strong demand for renewable fuel products, including those we produce at our Montana Renewables facility. We believe demand for renewable fuel products will only continue to grow as a result of the rapid expansion of corporate decarbonization targets, broad sustainability initiatives, and governmental mandates and incentives that have been passed or announced by national, state, and provincial jurisdictions across the globe. In light of the global decarbonization initiatives, forecasts of future availability still fall short of the necessary emissions reductions that would be required to reach established net-zero goals, as adequate supply does not exist yet. For example, our Montana Renewables facility is one of the only facilities in Norh America capable of SAF production at scale in North America today. We believe that our position as a first-mover makes us the key producer for potential offtake partners to help them reach their announced targets. The Great Falls facility expects to conduct a planned turnaround in November to change catalyst. This timing allows completion prior to the winter season and was planned to coincide with a period of margin uncertainty as the blender tax credit is expected to change to the production tax credit.

Our Montana specialty asphalt facility continues to be impacted by WCS inflationary pressure, but remains strategically advantaged due to its local access to cost-advantaged Canadian conventional crude oil, while producing additional fuels and refined products for delivery into the regional market. Due to its strategic location and logistical capabilities, we believe that our Montana specialty asphalt facility is well-positioned to continue to serve long-standing customers in the regional market.

As we have experienced in the past several years, our integrated business model and diversified product portfolio provides an advantaged response to changing market conditions. While we are not immune to the impacts of an economic downturn, we believe our specialty business is well positioned in periods of raw material volatility, which can negatively impact short-term margins, and a variety of economic conditions.

Contingencies

For a summary of litigation and other contingencies, please read Note 6 — “Commitments and Contingencies” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements.” Based on information available to us at the present time, we do not believe that any liabilities beyond the amounts already accrued, which may result from these contingencies, will have a material adverse effect on our liquidity, financial condition or results of operations.

Financial Results

We reported a net loss of $100.6 million in the third quarter 2024 versus net income of $99.8 million in the third quarter 2023. We reported Adjusted EBITDA (as defined in Note 12 — “Segments and Related Information” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements”) of $49.8 million in the third quarter 2024 versus $75.4 million in the third quarter 2023. We used cash from operating activities of $15.5 million in the third quarter 2024 versus generating cash from operating activities of $45.2 million in the third quarter of 2023.

Please read Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures” for a reconciliation of EBITDA and Adjusted EBITDA to Net income (loss), our most directly comparable financial performance measure calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”).

Specialty Products and Solutions segment Adjusted EBITDA was $42.6 million in the third quarter 2024 versus $38.6 million in the third quarter 2023. Compared to the third quarter of 2023, Specialty Products and Solutions third quarter 2024 segment Adjusted EBITDA was favorably impacted by higher throughput volumes as a result of improved operational performance and the absence of maintenance activities that were completed at our Shreveport facility during the prior year period. Current period production volumes increased in comparison to the prior year period, despite experiencing unplanned downtime in July as a result of Hurricane Beryl. Current period results in our fuels business were unfavorably impacted by the lower commodity margin environment that has impacted the broader industry.

Montana/Renewables segment Adjusted EBITDA was $12.7 million in the third quarter 2024 versus $38.2 million in the third quarter 2023. Our current quarter results were favorably impacted by strong operations at MRL throughout the quarter, where we processed approximately 12,000 barrels per day of renewable feedstock and over 2,500 barrels per day of SAF. Further, a new SAF production record was achieved each month during the current quarter, culminating with approximately 3,200 barrels per day of SAF produced in September. Results for the segment were unfavorably impacted by a decrease to margins from feedstock price lag when the industry saw these prices abruptly drop approximately $0.40 per gallon in late July. Our legacy specialty asphalt plant posted lower results as fuel spreads tightened, despite strong retail asphalt sales.

Performance Brands segment Adjusted EBITDA was $13.6 million in the third quarter 2024 versus $13.2 million in the third quarter 2023. Results in our Performance Brands segment were favorably impacted from the strong volume growth across high performance products, in particular our TruFuel product line and our integrated industrial business. This segment continues to benefit from strong unit margins, reflective of stabilized input costs in our branded and consumer markets and a focus on growing our presence in industrial markets.

Total Corporate costs represented a loss of $19.1 million of Adjusted EBITDA in the third quarter 2024 versus a loss of $14.6 million of Adjusted EBITDA in the third quarter 2023 due to higher labor and benefits related expenses.

Liquidity Update

As of September 30, 2024, we had total liquidity of $289.8 million comprised of $34.6 million of unrestricted cash and $255.2 million of availability under our credit facilities. As of September 30, 2024, our revolving credit facilities had a $508.4 million borrowing base, $27.3 million in outstanding standby letters of credit and $225.9 million of outstanding borrowings. We believe we will continue to have sufficient liquidity from cash on hand, projected cash flow from operations, borrowing capacity and other means by which to meet our financial commitments, debt service obligations, contingencies, and anticipated capital expenditures for at least the next 12 months. Please read Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for additional information.

Renewable Fuel Standard Update

Along with the broader refining industry, we remain subject to compliance costs under the RFS unless or until we receive a small refinery exemption from the EPA, which we have historically received. Administered by the EPA, the RFS provides annual requirements for the total volume of renewable transportation fuels that are mandated to be blended into finished transportation fuels. If a refiner does not meet its required annual Renewable Volume Obligation, the refiner can purchase blending credits in the open market, referred to as RINs.

During the third quarter 2024, we recorded an accrued expense of $42.8 million for RINs, as compared to a gain of $157.3 million for RINs in the third quarter 2023. Our gross RINs Obligation, which includes RINs that are required to be secured through either our own blending or through the purchase of RINs in the open market, is spread across four compliance categories (D3, D4, D5 and D6). The gross RINs obligations may be satisfied by our own renewables blending, RIN purchases, or receipt of small refinery exemptions.

Expenses related to RFS compliance have the potential to remain a significant expense for our two segments containing fuels products. If legal or regulatory changes occur that have the effect of increasing our RINs Obligation or eliminating or narrowing the availability of the small refinery exemption under the RFS program, we could be required to purchase additional RINs in the open market, which may materially increase our costs related to RFS compliance and could have a material adverse effect on our results of operations and liquidity.

See Note 2 — “Summary of Significant Accounting Policies” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” in this Quarterly Report for further information on the Company’s RINs obligation.

Unrestricted Subsidiaries

See Note 14 — “Unrestricted Subsidiaries” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” in this Quarterly Report for further information regarding certain financial information of our unrestricted subsidiaries.

Key Performance Measures

Our sales and results of operations are principally affected by demand for specialty products, fuel product demand, renewable fuel product demand, global fuel crack spreads, the price of natural gas used as fuel in our operations, our ability to operate our production facilities at high utilization, and our results from derivative instrument activities.

Our primary raw materials are crude oil, renewable feedstocks, and other specialty feedstocks, and our primary outputs are specialty consumer-facing and industrial products, specialty branded products, fuel products, and renewable fuel products. The prices of crude oil, specialty products, fuel products, and renewable fuel products are subject to fluctuations in response to changes in supply, demand, market uncertainties and a variety of factors beyond our control. We monitor these risks and from time-to-time enter into derivative instruments designed to help mitigate the impact of commodity price fluctuations on our business. The primary purpose of our commodity risk management activities is to economically hedge our cash flow exposure to commodity price risk. We also may hedge when market conditions exist that we believe to be out of the ordinary and particularly supportive of our financial goals. We enter into derivative contracts for future periods in quantities that do not exceed our projected purchases of crude oil and natural gas and sales of fuel and renewable fuel products. Please read Note 9 — “Derivatives” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” for additional information.

Our management uses several financial and operational measurements to analyze our performance. These measurements include the following:

• sales volumes;
• segment gross profit;
• segment Adjusted gross profit;
• segment Adjusted EBITDA; and
• selling, general and administrative expenses.

Sales volumes. We view the volumes of Specialty Products and Solutions products, Montana/Renewables products and Performance Brands products sold as an important measure of our ability to effectively utilize our operating assets.

Our ability to meet the demands of our customers is driven by the volumes of feedstocks that we run at our facilities. Higher volumes improve profitability both through the spreading of fixed costs over greater volumes and the additional gross profit achieved on the incremental volumes.

Segment gross profit. Specialty Products and Solutions, Montana/Renewables and Performance Brands products gross profit are important measures of profitability of our segments. We define gross profit as sales less the cost of crude oil and other feedstocks, LCM/LIFO adjustments, and other production-related expenses, the most significant portion of which includes labor, plant fuel, utilities, contract services, maintenance, transportation, RINs, depreciation and amortization and processing materials. We use gross profit as an indicator of our ability to manage margins in our business over the long-term. The increase or decrease in selling prices typically lags behind the rising or falling costs, respectively, of feedstocks throughout our business. Other than plant fuel, RINs mark-to-market adjustments, and LCM/LIFO adjustments, production related expenses generally remain stable across broad ranges but can fluctuate depending on maintenance activities performed during a specific period.

Segment Adjusted gross profit. Specialty Products and Solutions, Montana/Renewables and Performance Brands products segment Adjusted gross profit measures are useful as they exclude transactions not related to our core cash operating activities and provide metrics to analyze the profitability of the core cash operations of our segments. We define segment Adjusted gross profit as segment gross profit excluding the impact of (a) LCM inventory adjustments; (b) the impact of liquidation of inventory layers calculated using the LIFO method; (c) RINs mark-to-market adjustments; (d) depreciation and amortization; and (e) all extraordinary, unusual or non-recurring items of revenue or cost of sales.

Segment Adjusted EBITDA. We believe that Specialty Products and Solutions, Montana/Renewables and Performance Brands segment Adjusted EBITDA measures are useful as they exclude transactions not related to our core cash operating activities and provide metrics to analyze our ability to pay interest to our noteholders. Adjusted EBITDA allows us to meaningfully analyze the trends and performance of our core cash operations as well as to make decisions regarding the allocation of resources to segments. Corporate Adjusted EBITDA primarily reflects general and administrative costs.

Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

Production Volume. The following table sets forth information about our continuing operations. Facility production volume differs from sales volume due to changes in inventories and the sale of purchased blendstocks such as ethanol and specialty blendstocks, as well as the resale of crude oil.

(1) Total sales volume includes sales from the production at our facilities and certain third-party facilities pursuant to supply and/or processing agreements, sales of inventories and the resale of crude oil to third-party customers. Total sales volume includes the sale of purchased blendstocks.

(2) Total feedstock runs represent the barrels per day of crude oil and other feedstocks processed at our facilities and at certain third-party facilities pursuant to supply and/or processing agreements.

(3) The difference between total facility production and total feedstock runs is primarily a result of the time lag between the input of feedstocks and production of finished products and volume loss.

The following table reflects our unaudited condensed consolidated results of operations and includes the non-GAAP financial measures EBITDA and Adjusted EBITDA. For a reconciliation of EBITDA and Adjusted EBITDA to Net income (loss), our most directly comparable financial performance measure calculated and presented in accordance with GAAP, please read “— Non-GAAP Financial Measures.”

(In millions)

Non-GAAP Financial Measures

We include in this Quarterly Report the non-GAAP financial measures EBITDA and Adjusted EBITDA. We provide reconciliations of EBITDA and Adjusted to Net income (loss), our most directly comparable financial performance measure.

EBITDA and Adjusted EBITDA are used as supplemental financial measures by our management and by external users of our financial statements such as investors, commercial banks, research analysts and others, to assess:

• the financial performance of our assets without regard to financing methods, capital structure or historical cost basis;
• the ability of our assets to generate cash sufficient to pay interest costs and support our indebtedness;
• our operating performance and return on capital as compared to those of other companies in our industry, without regard to financing or capital structure; and
• the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.

Management believes that these non-GAAP measures are useful to analysts and investors as they exclude transactions not related to our core cash operating activities and provide metrics to analyze our ability to pay interest to our noteholders. However, the indentures governing our senior notes contain covenants that, among other things, restrict our ability to pay distributions. We believe that excluding these transactions allows investors to meaningfully analyze trends and performance of our core cash operations.

We define EBITDA for any period as net income (loss) plus interest expense (including amortization of debt issuance costs), income taxes and depreciation and amortization.

We define Adjusted EBITDA for any period as EBITDA adjusted for (a) impairment; (b) unrealized gains and losses from mark-to-market accounting for hedging activities; (c) realized gains and losses under derivative instruments excluded from the determination of net income (loss); (d) non-cash equity-based compensation expense and other non-cash items (excluding items such as accruals of cash expenses in a future period or amortization of a prepaid cash expense) that were deducted in computing net income (loss); (e) debt refinancing fees, extinguishment costs, premiums and penalties; (f) any net gain or loss realized in connection with an asset sale that was deducted in computing net income (loss); (g) amortization of turnaround costs; (h) LCM inventory adjustments; (i) the impact of liquidation of inventory layers calculated using the LIFO method; (j) RINs mark-to-market adjustments; and (k) all extraordinary, unusual or non-recurring items of gain or loss, or revenue or expense.

We define Adjusted EBITDA Margin as Adjusted EBITDA divided by sales.

The definition of Adjusted EBITDA presented in this Quarterly Report is similar to the calculation of “Consolidated Cash Flow” contained in the indentures governing our Senior Notes (as defined in this Quarterly Report) and the calculation of “Consolidated EBITDA” contained in the Credit Agreement. We are required to report Consolidated Cash Flow to the holders of our Senior Notes and Consolidated EBITDA to the lenders under our revolving credit facility, and these measures are used by them to determine our compliance with certain covenants governing those debt instruments. Please read Note 8 — “Long-Term Debt” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” in this Quarterly Report for additional details regarding the covenants governing our debt instruments.

EBITDA and Adjusted EBITDA should not be considered alternatives to Net income (loss) or Operating income (loss) or any other measure of financial performance presented in accordance with GAAP. In evaluating our performance as measured by EBITDA and Adjusted EBITDA, management recognizes and considers the limitations of these measurements. EBITDA and Adjusted EBITDA do not reflect our liabilities for the payment of income taxes, interest expense or other obligations such as capital expenditures. Accordingly, EBITDA and Adjusted EBITDA are only two of several measurements that management utilizes. Moreover, our EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of another company because all companies may not calculate EBITDA and Adjusted EBITDA in the same manner.

The following tables present a reconciliation of Net income (loss), our most directly comparable GAAP financial performance measure to EBITDA and Adjusted EBITDA for each of the periods indicated.

(In millions)

(1) For the nine months ended September 30, 2024, other non-recurring expenses included a $56.2 million realized loss on derivatives related to the embedded derivatives for our inventory financing arrangements. For the nine months ended September 30, 2023, other non-recurring expenses included a $28.4 million charge to cost of sales for losses under firm purchase commitments.

Changes in Results of Operations for the Three Months Ended September 30, 2024 and 2023

Sales. Sales decreased $49.0 million, or 4.3%, to $1,100.4 million in the three months ended September 30, 2024, from $1,149.4 million in the same period in 2023. Sales for each of our principal product categories in these periods were as follows:

(In millions, except barrel and per barrel data)

(1) Represents (a) by-products, including fuels and asphalt, produced in connection with the production of specialty products at the Princeton and Cotton Valley facilities and Dickinson and Karns City facilities, (b) polyolester synthetic lubricants produced at the Missouri facility, and (c) fuels products produced at the Shreveport facility.

(2) Represents asphalt, heavy fuel oils and other products produced in connection with the production of fuels at the Great Falls specialty asphalt facility.

(3) Represents packaged and synthetic specialty products at the Royal Purple, Bel-Ray and Calumet Packaging facilities.

The components of the $31.7 million decrease in Specialty Products and Solutions segment sales for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, were as follows:

(In millions)

Specialty Products and Solutions segment sales decreased period over period, primarily due to lower prices as a result of product mix. This impact was partially offset by an increase in volumes as a result of strong market demand.

The components of the $22.4 million decrease in Montana/Renewables segment sales for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, were as follows:

(In millions)

Montana/Renewables segment sales decreased primarily due to the weaker price environment in both our Montana Renewables and specialty asphalt businesses during the current year in comparison to the prior year period. This impact was partially offset by an increase in volumes as a result of improved production volumes at our Montana Renewables facility during the quarter compared to lower volumes in the prior year comparative period.

The components of the $5.1 million increase in Performance Brands segment sales for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, were as follows:

(In millions)

Performance Brands segment sales increased primarily due to increases in sales volumes as a result of strong market demand and a continued focus on growing our presence in certain industrial markets, partially offset by the decrease in sales price.

Gross Profit. Gross profit decreased $256.6 million, or 98.1%, to $4.9 million in the three months ended September 30, 2024, from $261.5 million in the same period in 2023. Gross profit for our business segments were as follows:

(Dollars in millions, except per barrel data)

The components of the $156.6 million decrease in Specialty Products and Solutions segment gross profit for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, were as follows:

(In millions)

The decrease in Specialty Products and Solutions segment gross profit for the three months ended September 30, 2024 as compared to the same period in 2023, was primarily due to the impact of RINs prices. While RINs prices decreased in the current period in comparison to the prior year period, the mark-to-market impact of RINs prices resulted in a RINs expense of $30.8 million in the current period, as compared to a benefit of $95.8 million in the prior year period. The unfavorable impact associated with margins was reflective of product mix. The unfavorable impact resulting from the weakened commodity margin environment for fuels products was partially offset by higher margins for specialty products. These impacts were partially offset by the favorable volumes impact as a result of strong market demand. Refer to Note 2 — “Summary of Significant Accounting Policies” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” for additional information related to our accounting for RINs.

The components of the $101.7 million decrease in Montana/Renewables segment gross profit for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, were as follows:

(In millions)

The decrease in Montana/Renewables segment gross profit for the three months ended September 30, 2024, as compared to the same period in 2023, was primarily due to the impact of RINs prices. While RINs prices decreased in the current period in comparison to the prior year period, the mark-to-market impact of RINs prices resulted in a RINs expense of $12.0 million in the current period, as compared to a benefit of $52.9 million in the prior year period. The unfavorable impact associated with margins was the result of feedstock price lag in Montana Renewables due to an abrupt drop in feedstock industry prices, as well as lower index margins during the current period. These impacts were partially offset by higher volumes as a result of improved operational performance at our Montana Renewables facility, which essentially operated at nameplate capacity in the current year period. Refer to Note 2 — “Summary of Significant Accounting Policies” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” for additional information related to our accounting for RINs.

The components of the $1.7 million increase in Performance Brands segment gross profit for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, were as follows:

(In millions)

The increase in Performance Brands segment gross profit for the three months ended September 30, 2024, as compared to the same period in 2023, was primarily due to an increase in industrial volumes. This segment continues to benefit from strong unit margins, reflective of stabilized input costs in our branded and consumer markets.

Gain (loss) on derivative instruments. There was a $15.2 million gain on derivative instruments in the three months ended September 30, 2024, compared to a $54.3 million loss in the same period in 2023. The $1.6 million realized gain on derivative instruments in the current year period was primarily due to the gain recognized at the settlement of crack spread swaps positions during the period. The $13.6 million unrealized gain on derivative instruments in the current year period was primarily due to the inventory financing embedded derivative. There was a $18.0 million realized loss in the prior year period, primarily as a result of the settlement of crack spread swaps positions during the period. There was a $36.3 million unrealized loss in the prior year period as the result of a $24.6 million unrealized loss associated with the inventory financing embedded derivative and a $11.7 million unrealized loss on crack spread swaps positions.

Changes in Results of Operations for the Nine Months Ended September 30, 2024 and 2023

Sales. Sales increased $35.4 million, or 1.1%, to $3,239.9 million in the nine months ended September 30, 2024, from $3,204.5 million in the same period in 2023. Sales for each of our principal product categories in these periods were as follows:

(In millions, except barrel and per barrel data)

(1) Represents (a) by-products, including fuels and asphalt, produced in connection with the production of specialty products at the Princeton and Cotton Valley facilities and Dickinson and Karns City facilities, (b) polyolester synthetic lubricants produced at the Missouri facility, and (c) fuels products produced at the Shreveport facility.

(2) Represents asphalt, heavy fuel oils and other products produced in connection with the production of fuels at the Great Falls specialty asphalt facility.

(3) Represents packaged and synthetic specialty products at the Royal Purple, Bel-Ray and Calumet Packaging facilities.

The components of the $26.7 million decrease in Specialty Products and Solutions segment sales for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, were as follows:

(In millions)

Specialty Products and Solutions segment sales decreased period over period due to the lower commodity price environment in the current year period. This impact was partially offset by an increase in sales volumes as a result of strong market demand.

The components of the $45.5 million increase in Montana/Renewables segment sales for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, were as follows:

(In millions)

Montana/Renewables segment sales increased primarily due to stabilized production volumes at our Montana Renewables facility during the current year period in comparison to lower volumes in the prior year comparative period as a result of the start-up of the facility. This impact was partially offset by the weaker price environment in both our Montana Renewables and specialty asphalt businesses during the current year in comparison to the prior year period.

The components of the $16.6 million increase in Performance Brands segment sales for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, were as follows:

(In millions)

Performance Brands segment sales increased primarily due to increases in sales volumes as a result of strong market demand and a continued focus on growing our presence in certain industrial markets.

Gross Profit. Gross profit decreased $282.4 million, or 65.7%, to $147.2 million in the nine months ended September 30, 2024, from $429.6 million in the same period in 2023. Gross profit for our business segments were as follows:

(Dollars in millions, except per barrel data)

The components of the $187.4 million decrease in Specialty Products and Solutions segment gross profit for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, were as follows:

(In millions)

The decrease in Specialty Products and Solutions segment gross profit for the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily due to the impact of RINs prices. While RINs prices decreased in the current year period in comparison to the prior year period, the mark-to-market impact of RINs prices resulted in a RINs expense of $3.6 million in the current year period, as compared to a benefit of $95.7 million in the prior year period. The unfavorable impact associated with margins was the result of a weakened commodity margin environment for fuels products, coupled with the impact of lower margins for specialty products. The favorable volumes impact was the result of strong market demand. The favorable impact for operating costs in the current year period was due to the absence of expenses associated with turnarounds completed at our Shreveport, Cotton Valley, and Princeton facilities and unplanned outages as a result of the severe weather experienced in Northwest Louisiana during the prior year comparative period. Refer to Note 2 — “Summary of Significant Accounting Policies” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” for additional information related to our accounting for RINs.

The components of the $99.1 million decrease in Montana/Renewables segment gross profit for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, were as follows:

(In millions)

The decrease in Montana/Renewables segment gross profit for the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily due to the impact of RINs prices. While RINs prices decreased in the current year period in comparison to the prior year period, the mark-to-market impact of RINs prices resulted in a RINs benefit of $5.1 million in the current year period, as compared to a benefit of $61.3 million in the prior year period. This was coupled with the unfavorable impact resulting from a softer commodity margin environment in the current year period in comparison to the prior year. Operating expenses were unfavorable period over period as a result of operating the feedstock pre-treatment unit for the duration of the current year. The favorable volumes impact was the result of stabilized production at our Montana Renewables facility during the current year period. Refer to Note 2 — “Summary of Significant Accounting Policies” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” for additional information related to our accounting for RINs.

The components of the $4.1 million increase in Performance Brands segment gross profit for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, were as follows:

(In millions)

The increase in Performance Brands segment gross profit for the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily due to an increase in industrial volumes. The unfavorable impact for operating costs was due to the partial receipt of proceeds from the Company’s business interruption insurance policy included in the prior year period results. This segment continues to benefit from strong unit margins, reflective of stabilized input costs in our branded and consumer markets.

Interest expense. Interest expense increased $11.6 million, or 7.1%, to $175.3 million in the nine months ended September 30, 2024, from $163.7 million in the same period in 2023. The increase was primarily due to higher borrowings on our revolving credit facility during the current year period in comparison to the prior year.

Gain (loss) on derivative instruments. There was a $9.6 million gain on derivative instruments in the nine months ended September 30, 2024, compared to a $14.5 million loss in the same period in 2023. The $52.3 million unrealized gain on derivative instruments in the current year period was primarily related to the unrealized gain on the inventory financing embedded derivative. The $42.7 million realized loss on derivative instruments in the current year period was primarily due to the realized loss on the embedded derivative recognized at the termination of the Shreveport inventory financing arrangement with Macquarie. The $33.3 million realized loss on derivative instruments in the prior year period was due to the settlement of crack spread swaps positions during the period. The $18.8 million unrealized gain on derivative instruments in the prior year period was primarily the result of a $39.7 million unrealized gain on crack spread swaps positions, partially offset by the unrealized loss on the inventory financing embedded derivative of $20.9 million during the period.

Liquidity and Capital Resources

General

The following should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” included under Part II, Item 7 in our 2023 Annual Report. There have been no material changes in that information other than as discussed below. Also, see Note 7 — “Inventory Financing Agreements” and Note 8 — “Long-Term Debt” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” in this Quarterly Report for additional discussions related to our Supply and Offtake Agreements and our long-term debt.

Cash Flows from Operating, Investing and Financing Activities

We believe that we have sufficient liquid assets, cash flow from operations, borrowing capacity and adequate access to capital markets to meet our financial commitments, debt service obligations and anticipated capital expenditures for at least the next 12 months. We continue to seek to lower our operating costs, selling expenses and general and administrative expenses as a means to further improve our cash flow from operations with the objective of having our cash flow from operations support all of our capital expenditures and interest payments. However, we are subject to business and operational risks that could materially adversely affect our cash flows. A material decrease in our cash flow from operations including a significant, sudden decrease in crude oil prices would likely produce a corollary effect on our borrowing capacity under our revolving credit facility and potentially our ability to comply with the covenants under our revolving credit facility. A significant, sudden increase in crude oil prices, if sustained, would likely result in increased working capital requirements which would be funded by borrowings under our revolving credit facility. In addition, our cash flow from operations may be impacted by the timing of settlement of our derivative activities. Gains and losses from derivative instruments that do not qualify as cash flow hedges are recorded in unrealized gain (loss) on derivative instruments until settlement and will impact operating cash flow in the period settled.

The following table summarizes our primary sources and uses of cash in each of the periods presented:

(In millions)

Operating Activities. Operating activities used cash of $43.0 million during the nine months ended September 30, 2024 compared to using cash of $7.4 million during the same period in 2023. The change was primarily driven by a decrease in unit margins as a result of the weaker margin environment experienced during the current year period. This impact was partially offset by a decrease in the cash required for working capital during the current year period.

Investing Activities. Investing activities used cash of $51.7 million during the nine months ended September 30, 2024 compared to a use of cash of $240.3 million during the same period in 2023. The change is related to a decrease in cash expenditures for additions to property, plant and equipment in the current year period in comparison to the prior year. The cash expenditures for additions to property, plant and equipment in the prior year period were primarily related to our Montana Renewables project.

Financing Activities. Financing activities provided cash of $122.3 million in the nine months ended September 30, 2024 compared to providing cash of $232.9 million during the same period in 2023. The change is primarily due to the borrowings we received in the prior year period from the issuance of the 2028 Notes and the MRL Term Loan Credit Agreement. This was partially offset by the proceeds we received in the current year from the issuance of the 2029 Notes, borrowings from the Montana terminal asset financing arrangement and the Montana refinery asset financing arrangement, and the increase in net borrowings on our revolving credit facility in the current year period compared to the same period in 2023.

Capital Expenditures

Our property, plant and equipment capital expenditure requirements consist of capital improvement expenditures, replacement capital expenditures, environmental capital expenditures and turnaround capital expenditures. Capital improvement expenditures include the acquisition of assets to grow our business, facility expansions, or capital initiatives that reduce operating costs. Replacement capital expenditures replace worn out or obsolete equipment or parts. Environmental capital expenditures include asset additions to meet or exceed environmental and operating regulations. Turnaround capital expenditures represent capitalized costs associated with our periodic major maintenance and repairs.

The following table sets forth our capital improvement expenditures, replacement capital expenditures, environmental capital expenditures and turnaround capital expenditures in each of the periods shown (including capitalized interest):

(In millions)

2024 Capital Spending Forecast

We are forecasting total capital expenditures of approximately $110 million to $140 million in 2024. Our forecasted capital expenditures are primarily related to growth and sustainability projects. We anticipate that capital expenditure requirements will be provided primarily through cash flow from operations, cash on hand, available borrowings under our revolving credit facilities and by accessing capital markets as necessary. Further, we continue to anticipate that capital improvement expenditure requirements will be funded from borrowings under our revolving credit facilities or by funding accessed through capital markets. If future capital expenditures require expenditures in excess of our then-current cash flow from operations and borrowing availability under our revolving credit facilities, we may be required to issue debt or equity securities in public or private offerings or incur additional borrowings under bank credit facilities to meet those costs.

Debt and Credit Facilities

As of September 30, 2024, our primary debt and credit instruments consisted of the following:

• $650.0 million senior secured revolving credit facility maturing in January 2027 (after giving effect to the amendments to our revolving credit facility (the “Credit Facility Amendments”)), subject to borrowing base limitations, with a maximum letter of credit sub-limit equal to $255.0 million, which amount may be increased to 90% of revolver commitments in effect with the consent of the Agent (as defined in the Credit Agreement) (“revolving credit facility”);
• $90.0 million senior secured revolving credit facility, with the option to request additional commitments of up to $15.0 million, maturing in November 2027 (the “MRL Revolving Credit Agreement”);
• $363.5 million of 11.00% Senior Notes due 2025 (“2025 Notes”);
• $325.0 million of 8.125% Senior Notes due 2027 (“2027 Notes”);
• $325.0 million of 9.75% Senior Notes due 2028 (“2028 Notes”);
• $200.0 million of 9.25% Senior Secured First Lien Notes due 2029 (“2029 Secured Notes”);
• $73.9 million of borrowings under our MRL Term Loan Credit Agreement;
• $44.9 million of financing through our Shreveport terminal asset financing arrangement;
• $372.5 million of financing through our MRL asset financing arrangements;
• $34.7 million of financing through our Montana terminal asset financing arrangement; and
• $110.0 million of financing through our Montana refinery asset financing arrangement.

We were in compliance with all covenants under the debt instruments in place as of September 30, 2024 and believe we have adequate liquidity to conduct our business.

On January 17, 2024, the Company entered into the Fourth Amendment to its revolving credit facility (the “Credit Agreement”) governing its senior secured revolving credit facility maturing in January 2027, which provides maximum availability of credit under the revolving credit facility of $650.0 million, including a FILO tranche, subject to borrowing base limitations, and includes a $500.0 million incremental uncommitted expansion feature. Lenders under the revolving credit facility have a first priority lien on, among other things, the Company’s accounts receivable and inventory and substantially all of its cash (collectively, the “Credit Agreement Collateral”). Please refer to Note 8 — “Long-Term Debt” in Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” for additional information.

On March 7, 2024, the Company issued and sold $200.0 million in aggregate principal amount of 2029 Secured Notes in a private placement transaction in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The 2029 Secured Notes were issued at par for net proceeds of $199.0 million, after deducting transaction expenses. The Company used the net proceeds from the private placement of the 2029 Secured Notes, together with cash on hand, to redeem all of its outstanding 9.25% Senior Secured First Lien Notes due 2024 (the “2024 Secured Notes”) and $50.0 million aggregate principal amount of its outstanding 11.00% Senior Notes due 2025 (the “2025 Notes”). Please refer to Note 8 — “Long-Term Debt” in Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” for additional information.

On September 30, 2024, Calumet Montana Refining, LLC (“Calumet Montana”), a subsidiary of the Company, entered into the Montana Refinery Asset Financing Arrangement with Stonebriar related to a sale and leaseback transaction. Pursuant to the Montana Refinery Asset Financing Arrangement, Calumet Montana sold to and leased back from Stonebriar the Refinery Assets, for a total purchase price of up to $150.0 million. Calumet Montana received $110.0 million of the total purchase price on September 30, 2024 and the remaining purchase price of up to $40.0 million will be disbursed to the Company at the closing of a financing contemplated by MRL, an unrestricted, non-guarantor subsidiary of the Company. Please refer to Note 8 — “Long-Term Debt” in Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” for additional information.

The borrowing base on our credit facilities increased from approximately $453.7 million as of September 30, 2023, to approximately $508.4 million at September 30, 2024. Our borrowing availability decreased from approximately $363.9 million at September 30, 2023, to approximately $255.2 million at September 30, 2024. Total liquidity, consisting of unrestricted cash and available funds under our credit facilities, decreased from $377.6 million at September 30, 2023 to $289.8 million at September 30, 2024.

Inventory Financing

On January 17, 2024 (the “Effective Date”), the Company and J. Aron entered into a Monetization Master Agreement (the “Master Agreement”), a related Financing Agreement (the “Financing Agreement”) and Supply and Offtake Agreement (together with the Master Agreement and the Financing Agreement, the “Shreveport Supply and Offtake Agreement”). Pursuant to the Shreveport Supply and Offtake Agreement, J. Aron agreed to, among other things, purchase from the Company, or extend to the Company, financial accommodations secured by crude oil and finished products located at the Company’s Shreveport facility on the Effective Date and from time to time, up to maximum volumes specified for crude oil and categories of finished products, subject to the Company’s repurchase obligations with respect thereto. The Shreveport Supply and Offtake Agreement replaced the Company’s previous inventory financing agreement with Macquarie, which terminated on January 17, 2024. Please refer to Note 7 — “Inventory Financing Agreements” in Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” for additional information regarding our Supply and Offtake Agreements.

Short-Term Liquidity

As of September 30, 2024, our principal sources of short-term liquidity were (i) $255.2 million of availability under our credit facilities, (ii) inventory financing agreements related to our Shreveport facility and Montana Renewables facility and (iii) $34.6 million of unrestricted cash on hand. Borrowings under our revolving credit facilities can be used for, among other things, working capital, capital expenditures and other lawful partnership purposes including acquisitions. For additional information regarding our revolving credit facilities, see Note 8 — “Long-Term Debt” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” in this Quarterly Report.

Long-Term Financing

In addition to our principal sources of short-term liquidity listed above, subject to market conditions, we may meet our cash requirements through the issuance of long-term notes or additional common shares.

From time to time, we issue long-term debt securities referred to as our senior notes. Our outstanding senior notes are unsecured obligations that rank equally with all of our other senior debt obligations to the extent they are unsecured. As of September 30, 2024, we had $363.5 million in 2025 Notes, $325.0 million in 2027 Notes, $325.0 million in 2028 Notes, and $200.0 million in 2029 Secured Notes outstanding. In addition, as of September 30, 2024, we had $372.5 million of debt outstanding for our MRL asset financing arrangements, $73.9 million of debt outstanding for our MRL Term Loan Credit Agreement, $44.9 million of other debt outstanding for the Shreveport terminal asset financing arrangement, $34.7 million of other debt outstanding for the Montana terminal asset financing arrangement, and $110.0 million of other debt outstanding for the Montana refinery asset financing arrangement. Borrowings under the MRL asset financing arrangements and MRL Term Loan Credit Agreement are obligations of our unrestricted subsidiaries MRL and MRHL solely, and are non-recourse to the Company and its restricted subsidiaries.

To date, our debt balances have not adversely affected our operations, our ability to repay or refinance our indebtedness. Based on our historical record, we believe that our capital structure will continue to allow us to achieve our business objectives.

For additional information regarding our senior notes, please read Note 8 — “Long-Term Debt” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” in this Quarterly Report and Note 9 — “Long-Term Debt” in Part II, Item 8 “Financial Statements and Supplementary Data” of our 2023 Annual Report.

Master Derivative Contracts and Collateral Trust Agreement

For additional discussion regarding our master derivative contracts and collateral trust agreement, see “Master Derivative Contracts and Collateral Trust Agreement” under Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Annual Report.

Critical Accounting Estimates

For additional discussion regarding our critical accounting estimates, see “Critical Accounting Estimates” under Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Annual Report.

We are exposed to market risks from adverse changes in commodity prices, the price of credits needed to comply with governmental programs, interest rates and foreign currency exchange rates. Information relating to quantitative and qualitative disclosures about material market risk is set forth below.

Commodity Price Risk

Derivative Instruments

We are exposed to price risks due to fluctuations in the price of crude oil, refined products, natural gas and precious metals. We use various strategies to reduce our exposure to commodity price risk. We do not attempt to eliminate all of our risk as the costs of such actions are believed to be too high in relation to the risk posed to our future cash flows, earnings and liquidity. The strategies we use to reduce our risk utilize both physical forward contracts and financially settled derivative instruments, such as swaps, collars, options and futures, to attempt to reduce our exposure with respect to:

• crude oil purchases and sales;
• refined product sales and purchases;
• natural gas purchases;
• precious metals; and
• fluctuations in the value of crude oil between geographic regions and between the different types of crude oil such as NYMEX WTI, Light Louisiana Sweet, WCS, WTI Midland, Mixed Sweet Blend, Magellan East Houston and ICE Brent.

We manage our exposure to commodity markets, credit, volumetric and liquidity risks to manage our costs and volatility of cash flows as conditions warrant or opportunities become available. These risks may be managed in a variety of ways that may include the use of derivative instruments. Derivative instruments may be used for the purpose of mitigating risks associated with an asset, liability and anticipated future transactions and the changes in fair value of our derivative instruments will affect our earnings and cash flows; however, such changes should be offset by price or rate changes related to the underlying commodity or financial transaction that is part of the risk management strategy. We do not speculate with derivative instruments or other contractual arrangements that are not associated with our business objectives. Speculation is defined as increasing our natural position above the maximum position of our physical assets or trading in commodities, currencies or other risk bearing assets that are not associated with our business activities and objectives. Our positions are monitored routinely by a risk management committee and discussed with the board of directors of the Company quarterly to ensure compliance with our stated risk management policy and documented risk management strategies. All strategies are reviewed on an ongoing basis by our risk management committee, which will add, remove or revise strategies in anticipation of changes in market conditions and/or in risk profiles. These changes in strategies are to position us in relation to our risk exposures in an attempt to capture market opportunities as they arise.

Please read Note 9 — “Derivatives” in the notes to our unaudited condensed consolidated financial statements under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” for a discussion of the accounting treatment for the various types of derivative instruments, for a further discussion of our hedging policies and for more information relating to our implied crack spreads of crude oil, diesel, and gasoline derivative instruments.

Our derivative instruments and overall hedging positions are monitored regularly by our risk management committee, which includes executive officers. The risk management committee reviews market information and our hedging positions regularly to determine if additional derivatives activity is advised. A summary of derivative positions and a summary of hedging strategy are presented to our Board of Directors quarterly.

Compliance Price Risk

Renewable Identification Numbers

We are exposed to market risks related to the volatility in the price of credits needed to comply with governmental programs. The EPA sets annual volume obligations for the percentage of renewable fuels that must be blended into transportation fuels consumed in the U.S., and as a producer of transportation fuels from petroleum, we are subject to those obligations. To the extent we are unable to physically blend renewable fuels to satisfy the EPA requirement, we may purchase RINs in the open market to satisfy the annual obligations. We have not entered into any derivative instruments to manage this risk.

Holding other variables related to RINs obligations constant, a $1.00 increase in the price of RINs would be expected to have a negative impact on Net income (loss) of approximately $65.0 million per year.

Interest Rate Risk

Our exposure to interest rate changes on fixed and variable rate debt is limited to the fair value of the debt issued, which would not have a material impact on our earnings or cash flows. The following table provides information about the fair value of our fixed and variable rate debt obligations as of September 30, 2024 and December 31, 2023, which we disclose in Note 8 — “Long-Term Debt” and Note 10 — “Fair Value Measurements” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements.”

(In millions)

For our variable rate debt, if any, changes in interest rates generally do not impact the fair value of the debt instrument but may impact our future earnings and cash flows. We had a $650.0 million revolving credit facility and a $90.0 million revolving credit facility as of September 30, 2024, with borrowings for each revolving credit facility bearing interest at the prime rate or SOFR, at our option, plus the applicable margin. In addition, we had $73.9 million of borrowings outstanding under our MRL Term Loan Credit Agreement as of September 30, 2024, with borrowings bearing interest at SOFR plus 6.0% to 7.3% per annum. We had $225.9 million of outstanding variable rate debt as of September 30, 2024 and $149.7 million of outstanding variable rate debt as of December 31, 2023. Holding other variables constant (such as debt levels), a 100 basis point change in interest rates on our variable rate debt as of September 30, 2024, would be expected to have an impact on Net income (loss) of approximately $2.3 million per year.

Foreign Currency Risk

We have minimal exposure to foreign currency risk and as such the cost of hedging this risk is viewed to be in excess of the benefit of further reductions in our exposure to foreign currency exchange rate fluctuations.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of September 30, 2024.

Changes in Internal Control over Financial Reporting

No changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended September 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risks discussed in Part I, Item 1A “Risk Factors — Risks Related to our Business” and “— Risks Related to Montana Renewables” in our 2023 Annual Report and Part II, Item 1A “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. Aside from the risks discussed in Part II, Item 1A “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, there have been no material changes in the risk factors discussed in Part I, Item 1A “Risk Factors” in our 2023 Annual Report. As a result of the completion of the Conversion, the risk factors discussed in Part I, Item 1A “Risk Factors — Risks Related to the Corporate Conversion,” “— Risks Related to Our Partnership Structure” and “— Tax Risks to Common Unitholders” in our 2023 Annual Report are no longer applicable.