Calumet Inc (CLMT) 2025 Q4 法說會逐字稿

Good day, everyone, and welcome to the Calumet Inc. fourth quarter and fiscal year 2025 earnings conference call. (Operator Instructions). At this time, I’d like to turn the conference call over to John Kompa, Investor Relations. Sir, please go ahead.

Thanks, Jamie. Good morning, everyone. Thank you for joining our call today. 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 Calumet’s fourth quarter 2025 earnings call. 2025 was a defining high impact year here at Calumet. We began the year with a credible plan and large potential amidst deep market uncertainty. Throughout the year, risk was aggressively managed and execution of our strategy turned Calumet’s potential to actualized results.

We opened the year with a mandate to demonstrate critical strategic objectives. First, we needed to demonstrate that our specialties business would consistently generate durable free cash flow amidst large market uncertainty. Second, Montana Renewables needed to prove standalone financial resilience and a structural advantage. Third, we needed to receive the transformative DOE loan at Montana Renewables, and last, accomplish material deleveraging of the balance sheet. As we reflect on 2025 today, I believe Calumet achieved each of these strategic milestones.

Over the course of the year, we reduced financial risk, expanded our structural earnings power, and repositioned Calumet for long-term value creation. Let me walk you through some of the highlights. We’ll start with the balance sheet. We ended 2024 with restricted group leverage standing above 8 times. We faced near-term maturities and elevated cash interest costs.

Montana Renewables was awaiting DLE funding. The broad equity markets were hesitant to engage with fundamental value plays like ours. Today, that picture is very different. For full year 2025, we delivered $293 million of adjusted EBITDA with tax attributes, nearly a 30% increase year-over-year. We reduced restricted debt by more than $220 million. Net recourse leverage improved from 8.2 times to 4.9 times.

We eliminated our 2026 and 2027 debt maturities. Montana Renewables successfully closed its DOE loan, removing roughly $80 million of annual cash debt service while also improving its leadership position in this industry. The outcome was a fundamental shift in financial durability. This outcome was driven by structural improvements. Across the system, we dramatically reduced costs and drove increased reliability.

Fixed costs were down over $40 million. Water treatment costs at Montana Renewables were down over $20 million, as were our crude transportation costs in the specialties business, while greatly enhancing feed flexibility and our ability to dial in specific specialty products for our customers. As a result of improved reliability and fewer repairs, capital spending was also reduced by roughly $20 million.

At the same time, our ops team increased production by roughly 1.3 million barrels on the year. Results like this come from an entire organization working towards a common goal. I thank our employees for accepting the challenge to responsibly attack costs, which includes our 900 plus teammates in the field, our ops excellence team, which is relatively small, but pound for pound exceptional, our finance team that made a step change in partnering with our sites and making information readily available, more broadly, everyone who leaned into owning and accomplishing this company-changing priority. Looking ahead, we believe there’s more opportunity on both costing and reliability.

Our company’s been operating the current asset base for a little over three years. During each of these, our team has delivered stronger production and lower operating costs. We expect for that to continue in 2026, despite what’s going to be a very heavy turnaround year. Let’s turn to slide four. The operational improvements we just discussed are more than just volume and cost.

Layering that capability on top of our leading commercial platform, which has been built out over decades, provides our sales team more volume and flexibility to support customers. We produced record levels of product in our Specialty Products and Solutions segment in 2025. Our commercial engine more than kept up as we sustained material margins above historic norms, despite softer macro conditions in the broader specialty chemicals industry.

Our team places material successfully to new homes consistently, as specialty sales volumes exceeded 20,000 barrels per day during every quarter of the year. The continued results in this business reflect years of investment, commercial excellence, culture and talent, integration of Performance Brands, targeted reliability and mixed improvement initiatives, and disciplined capital deployment.

Our integrated asset network and ability to dynamically shift production into the highest value markets continues to be an advantage. Our extremely high customer experience scores are the result of a differentiated passion for customers, which is a core Calumet value. Turning to slide 5, we see that Montana Renewables also enters 2026 in a much different position than a year ago.

Throughout last year, we reached a new level of operational reliability and cost competitiveness, demonstrating a financial leadership position in one of the most compressed renewable diesel margin environments on record.

Operating costs averaged $0.41 per gallon in the second half of the year, a 60% improvement over 2 years ago. Further, we monetized more than $90 million of Production Tax Credits, which was essentially everything we made, and we are pleased to see the Section 45Z regulations progress in early 2026. On the strategic front, 2 quarters ago, we announced our streamlined Max SAF 150 expansion would be bringing 120-150 million gallons of annual SAF capacity online at a fraction of the originally contemplated cost. Last quarter, we mentioned that roughly 100 million gallons of new SAF contracts at $1-$2 per gallon premium over renewable diesel were in final review with the DOE. These contracts are now complete, with more in process that will lay in to support our volume ramp.

These contracts are all multi-year, and they include increased take-or-pay volumes from existing customers, new physical SPK offtakers, and blended SAF offtakes, combined with contracts for Scope One and Scope Three credits through book and claim, which opens up premium renewable markets globally that complement the strong local markets we serve in Illinois, Minnesota, the Rockies, Canada, the Pacific Northwest, and California.

Montana Renewables will begin its turnaround in Max SAF 150 project next week and remain down through late April, at which point we’ll rebuild inventories and begin ramping up SAF production and serving these new customers. The regulatory environment for biofuels also continues to improve. I mentioned the 45Z rules are now clarified and out for final comment. Further, and with plenty of press, the new renewable volume obligation is expected imminently.

We anticipate that a stronger RVO will improve industry utilization and margin improvement, as idle facilities are expected to be required to restart to meet increased mandates. Restarting production to meet demand volume is a very different and much improved market dynamic than one where companies are hanging on at variable costs while waiting for the rules to shift.

We’ve already seen improvement in the index margin on both the back of this expectation and the 2024 RIN carry forward overhang drifting into history. An increased base level of industry RD margins would be a welcome change for all, and at Montana Renewables, we’re excited to stack on top of that the added margin from increased SAF as we complete our project in the second quarter. With that, I’ll turn the call over to David.

Thanks, Todd. Turning to slide 6. Overall, our quarter and full year results were strong, both financially and strategically. We generated $69.3 million of adjusted EBITDA with tax attributes in the quarter and $293.3 million for the full year, 2025. Each segment contributed meaningfully to our financial results. We saw continued momentum and record production, both in our SPS segment and Montana Renewables, as well as continued outperformance and growth in our Performance Brands segment. Our strong earnings results during the quarter also allowed us to reduce restricted group indebtedness by nearly $80 million, in addition to the $220 million that was reduced for the full year, 2025.

Before I get into more details, I wanted to highlight our planned capital expenditures for 2026, as we are forecasting total CapEx of $115 million-$145 million for all of Calumet, of which $70 million-$90 million is in the restricted group. This is $30 million-$40 million higher than normal, primarily due to a heavy turnaround year, which is scheduled maintenance at Shreveport, Cotton Valley, Princeton, Karns City, and Great Falls. Despite this, we expect total company production to increase year-over-year on the reliability improvements implemented over the past few years.

Looking at our Specialty Products and Solutions segment on slide 7, both our quarterly and full year results reflected the continued benefits of our commercial excellence initiatives and totaled $88.5 million for the quarter and $291.8 million for the full year. The team continues to leverage the inherent optionality in our manufacturing network to place volumes where they can generate the most value while serving our diversified customer base.

More than 50% of our customers buy more than one product line from Calumet, and many are long-term customers because of our unique ability to meet their product specifications. Both our quarter and full year reflect a favorable product mix, even with certain specialty markets demonstrating some softness, our sales team has continued to place our products at over $60 a barrel margin.

The benefits of our past reliability investments can also be seen in our strong operations, as we’ve had 5 consecutive quarters of specialty volume greater than 20,000 barrels per day. It was also the second consecutive quarter of record production. With our cost reduction initiatives and increased production, our fixed cost per barrel declined by over $1 per barrel versus the prior year period.

Finally, our steady production environment again enabled the capture of stronger crack environment as fuel margins increased significantly year-over-year, which we view as upside to our integrated model. As I mentioned last quarter, I gained access to a new crude oil supply chain earlier this year, including the ability to target specific segregated or blended crudes in Cushing and further north in the DJ Basin, and at the same time, reduce our pipeline tab.

In 2025, this improvement drove about a $19 million decrease in transportation costs and provides even further ability to dial in our assets and feed to a specific use. In our Performance Brands segment on slide 8, we also saw the benefit of our commercial excellence initiatives, strong and growing brands, and integration capabilities. Adjusted EBIT was $5.4 million for the quarter and $47.9 million for the full year of 2025.

Keep in mind that fiscal year 2024 includes a full year of Royal Purple Industrial results and that the Royal Purple Industrial business was sold at the end of Q1, 2025. Adjusting for the divestiture and insurance proceeds received, 2025 was the third consecutive year of growth in the segment as we offset the lost contribution from RPI through growth and cost reduction.

One of our standout product lines is once again our TruFuel business, which posted another record year. This ready-to-use fuel, engineered for outdoor power equipment, is available for four-cycle and two-cycle engines, and the product continues to resonate with both consumers and first responders, considering its proven ability to protect small engines from the corrosive nature of ethanol while ensuring peak performance of the equipment.

Moving to slide 9. Our Montana Renewables segment, fourth quarter 2025 adjusted EBIT with tax attributes was negative $5.4 million and positive $31.3 million for the full year of 2025. On the MRL side, the company worked through trough renewable fuel industry conditions for most of the year also, the quarter was burdened with disproportionate transaction costs related to the $65 million of PTCs that we sold during the quarter.

We expect to monetize our Production Tax Credits more ratably as the market is now normalized. On a full year 2025 basis, Adjusted EBIT with tax attributes for MRL was nearly breakeven, even as margins remained compressed by the low 2025 RVO, offset by our significant cost reduction efforts. Notably, the full year results do not reflect an additional $8.4 million of 2025 generated PTCs, which occurred after final regulations were posted after quarter end. Our MaxSAF 150 plans remain unchanged, and we are set to begin the project as we head into March and combine the required changes to our kit with a turnaround.

We expect to complete the expansion in the second quarter and then steadily ramp volumes moving into the third quarter to meet new customer contracts, including the notable agreement we announced recently with World Energy, previously announced contract with FEG, and an increase in offtake with Shell, amongst others. Finally, on the Montana Asphalt side, both the fourth quarter and fiscal year results improved on the strength of improved asphalt margins and cost reduction initiatives following years of site reconfiguration.

Further, we are seeing a widening of the WCS differential into 2026. With the site back at reasonable cost level and more normalized WCS, we expect the site to continue producing in the $30 million-$50 million of EBIT range we’ve discussed routinely. Let me now turn the call back to Todd for his concluding remarks.

Thanks, David. We’re entering 2026 with the same high level of energy and excitement of a year ago, but with a much improved underlying fundamental. In Specialties, we expect the cost discipline embedded over the past 2 years to be durable, along with our continued commercial leadership position. While 2025 was another step change in operational excellence, we believe further opportunity remains to expand earnings through incremental reliability gains and customer-focused growth. In addition to that, David mentioned a heavy turnaround year, and I’ll highlight that turnaround excellence is the next step in our evolution.

Our operations team has been planning these for some time, and during these events, we’re making critical improvements that will underpin the next step change in operational performance. At Montana Renewables, our objectives are clear. First, execute MaxSAF 150 safely, on time, and on budget in the second quarter.

Second, continue improving our already strong cost levels. Third, continue to leverage our early mover advantage in SAF as we grow. We expect that accomplishing these will drive a step change financial improvement even in past strong market conditions, and will be increasingly exciting if the market’s growing assumptions surrounding an improved RVO play out as expected.

Last, on the back of these key items, we’ll continue to evaluate strategic pathways that unlock long-term value as the platform demonstrates sustained performance. Across Calumet, our capital allocation priorities remain disciplined and consistent. We expect to continue to drive durable free cash flow that underpins enhanced deleveraging. We plan to grow both our specialties, widening our competitive moat, and execute on our Max SAF 150 strategy at Montana Renewables. We plan to execute this strategy and continually develop it with an eye towards midterm shareholder value creation.

With that, thank you for your time today, and I’ll turn the call back to the operator and see if we have any questions. Operator?

Ladies and gentlemen, we will begin that question-and-answer session. (Operator Instructions).

Our first question today comes from Carly Davenport from Goldman Sachs. Please go ahead with your question.

Hey, good morning, team, and thank you for taking our question. We wanted to ask two parts, maybe. First, can you talk about the macro setup from here? There is still, you know, some regulatory uncertainties, but we got a bit of an update yesterday. Then from there, talk about what you’re doing at an operational level. What are the gaining items at Max SAF, and what should we expect from here?

Oh, hey, Alexa, it’s Bruce. Look, the regulatory uncertainty is, as a lot of us call it, is just a feature of the landscape. You know, the global energy transition is a regulated market, but it’s collective governments, many, many governments acting, you know, directionally. You know, we feel like that’s a very robust framework. We also feel like it adds the equivalent of a lot of margin volatility on top of kind of the base energy. With that said, you know, if you want to survive in that environment, be a low-cost provider, be well positioned, be able to shift gears quickly, and we think we are all three.

And Alexa, Todd, maybe I’ll pile on a little bit. One of the things that we think is so important and exciting about our Max SAF project at Montana Renewables is that it adds an element of, you know, just durability on top of the already margin volatility that Bruce mentioned. You can kind of think about it a lot like our specialties business relative to fuels, in the other half of Calumet. You know, we have contracted volumes with meaningful margin in them, that even if we kind of rewind the clock to last year, we’re generating pretty meaningful free cash flow at Montana Renewables with the addition of the SAF volume and the contracts that we have.

You know, like Bruce said, then you get to layer on the improvements that we’re expecting from the RVO, and it creates a really nice dynamic. There’s kind of the risk reward. I’d say both sides of that coin are really improved with the SAF project. Thanks for the question.

Thank you. That’s very helpful. Sounds like a good setup. I’ll turn it back.

Our next question comes from Conor Fitzpatrick from Bank of America. Please go ahead with your question.

Good morning, everybody. It looks like we’re in the phase of the RINs market and demand step-up progressing, where we should, you know, sometime soon, begin to see producers ramp utilization. I think one way to glean that is from moves in feed prices, and they’ve gone up, but a lot of that is raw soybean cost pass-through through the crush spread.

I was just wondering, you know, there’s not been a lot of press releases of idle plants coming back online. There’s not a ton of evidence of utilization coming back within the overall market. I was wondering if your views are similar or different as it relates to. It’s particularly important to, you know, our views of the cost of producing RINs at 2026 demand levels.

Hey, Conor, it’s Bruce. Thank you for the question. Let me answer with a concept of time scale. We think the industry is running at variable margin now. People are not covering fixed costs, and the half of the group that’s in the high cost structure end have been closing. We have been running full. You got to be tactical on where do you stand in the supply stack exactly.

That ghost capacity, which exists in biodiesel plants that can come back quickly and renewable diesel plants that are online and can speed up, that’s available, but it’s not going to be called into the market until we see the RVO come out. We’re all waiting for that.

We feel good about what we’re hearing, and, you know, let’s see what the facts are shortly, we hope.

Yeah, I’d add, Conor, it’s, you know, the likelihood that people turn back on when they’re covering fixed costs by $0.01 after some of the decisions made more broadly in industry over the past 2 years, we think is very favorable to the market. I talked about this kind of the last 2 quarters in the prepared comments, like Bruce said, as we float on variable margin, you know, you don’t incur. Our normal kind of supply stack doesn’t govern today because people aren’t making long-term rational economic decisions.

They’re hanging on based on expectations that they’re going to recover the investments and the fixed cost losses in the near term. As we see, people have to restart and make that decision to restart and to cover increased demand.

We don’t think that they’re going to do that for a penny. We think that people are going to be very thoughtful and cautious, and, you know, it creates quite a constructive outlook if you believe that. You know, we’ll see what the final RVO is. I know there’s a lot of rumors going around out there, when we do, we don’t think that the industry just kind of ramps up overnight. We think it’s going to be kind of a very thoughtful, volume ramp up over time that will be beneficial to those who are in it operating every day.

Thanks. That’s good color. For what it’s worth, you know, if you look historically at the changing marginal producer, back in time, that producer tends to earn, like, $0.20-$0.30 per gallon, just, if you do some rough math on it. I guess my follow-up question was just moving parts for fourth quarter Montana Renewables margin. There were some, you know, market margins were pretty fluctuant, and they were up for some weeks and down for other weeks. I was wondering just, you know, how that translated into margin capture for the business and operations.

Conor, it’s Bruce again. We’re pretty good at shifting gears there. Our inbound and outbound supply chains are pretty short in terms of days of shipping. You know, we do track capture. We don’t publish it, but I’ll tell you that we capture more than 100% of the renewable diesel index margin. Yeah, that’s because of our ability to shift gears quickly.

Now, it’s worth noting the fourth quarter managed to hit the lowest renewable diesel index margin ever recorded in the history of the world, and we’re very much looking forward to the current administration restoring, you know, reasonable industry structure through their proposed RVO. We’re bullish on that, and I think that’s gonna bring things back to historical.

Remember that these margins were $2-$3 a gallon on an index basis as recently as three years ago, you know? We just need to resume that kind of environment, and we’re gonna have an entirely different view of, you know, our success here.

Thanks. That’s all I have.

Our next question comes from Amit Dayal from H.C. Wainwright & Co. Please go ahead with your question.

Hey, good morning. Thanks for taking my questions. This capacity expansion that I think Todd said will start next week and is likely to complete by late April. When should we see capacity ramp up at full scale? Does this bring along with it, of course, capacity expansion, but also operational savings? Like, would you be lower than 41 gallons, sorry, $0.41 per gallon?

Hey, Sameer, it’s Todd. The good questions. I think we are on. I’ll start at the end. On the cost curve, we’re obviously heading in the right direction and just continue to, almost every quarter, see improvement over the one previous. We expect to just continue the incremental improvement there. We’re gonna keep getting more efficient over time.

Yes, as we increase our volume, then, you know, we’ll see more unit efficiencies drop to the bottom line as we progress. I don’t think there’s anything in this specific Max SAF project that would say, "Hey, there’s a major cost out," but we’re certainly going to be making more margins. We continue to improve our costs in any, you know, regardless of the project, just in a steady state.

To the extent that we’re ramping up volume, like I said, it helps and at the unit level on the bottom line. So that’s, you know, probably one side of your question. I guess the other on the ramp up, look, we’ve previously guided to 120-150 million gallons annually, and that’s where we expect to stay.

You know, we’re not naive enough to say that everything goes perfect and we come out of this thing in May, and the very first day we’re producing 150 million gallons. We also don’t have too technically challenging of a turnaround.

This is pretty well controlled, it’s pretty well designed, and it’s implementing expanding equipment that we know a lot about and isn’t a major kind of risk, I’d say, like the last major project that we have going on. I think what you’ll see is coming online, we’ll have a really nice, strong volume.

We’ll ramp up accordingly. Exactly how long it takes us to get to the, you know, 120-150 million gallons run rate, we don’t think it’s gonna be too long. We’ll come up in May and keep everybody up to speed on where we’re doing, and think in the second half of the year that we’re gonna be at that level.

Got it. Thanks for that color. I think you mentioned 100 million gallons of contracted multiyear contracts, and they are indexed at $1-$2 premium RD premium. Will you help us or remind us how does the feedstock pricing play into this, and how is that likely to impact pricing? I mean, profitability.

Hey, Samir, it’s Bruce. It’s worth noting that we’re performing now under the staff contracts, but until we deconstrain the unit during this upcoming turnaround, we can’t get our rate up to where we want it, we’re gonna have the acceleration Todd mentioned. As we lean into that, you know, the book of business that our marketing guys have created is very interesting.

We’ve intentionally executed contracts one by one, which are different than the other contracts. In other words, we’re trying to have a portfolio that is robust to some of the robust to some of the dynamics we talked about with Alexa a minute ago. With that in mind, I think the expectation should be that, you know, all of that.

feathers in, if we can hit the high end of the engineering ranges, you know, then we’ll get them towards the 150, and if we hit the lower end, it’ll be towards the 120. The contract volume, the differential that you asked about, that’s in, and we’ve had those folks lifting already.

And I’d add a little bit more, Sameer, on the feedstocks you asked about. We’ve been pretty successful linking those to the contract. Again, we’re in a location in Great Falls where we have access to a broad range of feedstocks, including all of the low CI ones that the SAF market typically wants.

We’ve been pretty successful landing those on long-term contracts as well, and feel quite confident in our ability to both continually add offtake and volume as we ramp up. But to match that with contracts on the feed side, just given kind of the robustness around the number of options that we have in the region.

Sounds good. Thanks for that color. Congrats on the progress operationally and as well as leveraging. Thank you.

(Operator Instructions). Our next question comes from Jason Gabelman from TD Cowen. Please go ahead with your question.

Yeah. Hey, morning. Thanks for taking my questions. Maybe shifting over to the base business. The Specialty margin was strong once again, above $60 a barrel. What’s going on in the business that’s enabling you to sustain those higher levels? Do you see that to continue to move higher over time? Conversely, if you could just comment on the Performance Brands’ weakness in the quarter.

Hey, Jason, Scott here. A few answers. You know, in terms of the strength of the specialty piece within SPF, you know, this hasn’t just been like a one quarter or one-year high performance. I think you’ve covered us for a while. You’ve seen the progression over the past, you know, five years and frankly, the transformation of the business. Todd talked about it in the prepared remarks.

You know, really, at the end of the day, our commercial excellence focus and the initiatives and that we’ve done over the years, and couple that with our integration and optionality, has proven to be highly successful, highly durable, through really almost any type of market. Then the improving production reliability as well, have added the volumes to it.

We remain, you know, really positive and constructive overall within that piece of the business. As we look heading into the early part of this year, you know, we expect our high performance to continue. Certainly, we’ve got some headwind early on in 2026 with the crude oil runoff, some short-term headwind, but overall, we feel really good about the business and the work that’s been done in that business, that it’s going to continue to outperform the market. I think on the Performance Brands, we’re really pleased with the year. You know, we think we’re essentially at a place now, Jason, where we’ve essentially offset even, as we said that we would do, offset the Royal Purple industrial sale and the margin that went away with that.

Feel really good about the year overall. We did see in the fourth quarter, though, as you pointed out, a lot of the customer base, retail in particular, that really destocked late in the year. So some challenges there, but we’re feeling good about the start of this year and the orders that we’re seeing. We’re optimistic about the 2026 results.

Got it. Just on the 26 outlook, you mentioned the turnarounds, you know, you should have higher volumes despite that. Is there any impact to the margin outlook given those turnarounds perhaps having to produce a different slate of products than you typically do?

Yeah, I would say the simple answer is no. There shouldn’t be much of an impact, despite turnarounds and some of the volatility going on, no.

Got it. Thanks. My follow-up is just going back to the SAF contracts, because, you know, I think one of the items we struggle with is just the confidence around that $1-$2 a gallon premium that you’ve cited. I was hoping you could just clarify kind of how the contracts are structured. When you talk about a premium over renewable diesel, are you indexing the contract to the renewable diesel margin, including, you know, the RIN, the LCFS credit, the PTC, or is it more nuanced than that?

Hey, Jason Bruce. I’ll give you a framework for that. Great question. Looking backwards, it was fully indexed. I mentioned earlier, we were intentionally diversifying the contract structures collectively. We want them to be different. For example, FEG is a Scope One and Three emissions certificate that we pull off. That means we take that SAF, we sell it, we get all of the credits, you know, RIN, LCFS, et cetera, producer’s tax credit, and on top of that, we get the certificate. That’s, that stacks up a little differently. And, you know, I could go around the table, and as I said, each one’s intentionally designed.

To act differently in different market conditions. We think the portfolio will be more robust and more stable to, you know, prospective regulatory changes and evolution. With that said, you know, the guidance, we really don’t want to start identifying specifics here, but the guidance has held for a long time, and one of the reasons for that is real simple.

SAF is an excellent renewable diesel blend component, super high-quality properties, and it cannot go into the market below RD. It can’t. Every once in a while, I pick up some publication where somebody calculated, you know, we used to call this dry lab back in the chemistry class.

Somebody calculated that SAF is lower than diesel, that’s crazy because the operator is going to take the SAF tank, pump it into the diesel tank, and capture that RIN this afternoon on the day shift, right? It’s always more, and we’re just arguing how much.

I think if I could add just a little bit, the, you know, the largest customer, on your question around, can just a fixed dip are the underlying components similar? Like Bruce said, we’re intentionally diversifying. At the same time, we’re quite confident in the $1-$2 gallon range just because of how these contracts come together.

A little more color on that. You know, our largest customers are very similar to, kind of what you just said. They’re if you looked at their contracts underlying the premium, it looks a lot like RD contracts, plus the fixed premium on top of that. In those, in that group, we’re quite excited to have the exposure to the upside on the RD, plus the fixed premium, which you’re kind of alluding to earlier.

That fixed premium plays out even in scenarios if we rewound back to last year and looked at, you know, kind of trough index margin environments. The other thing I’d say is, Bruce highlighted on the Scope One and Scope Three credit sales, there’s a naturally quite a correlation.

We want diversification, we want exposure to those markets, and I think I’ve said in the past, we see it a lot like our specialties business, where we can do some things that others probably don’t want to when we’re transacting in truckload volumes and controlling quality and, you know, transloading and doing those types of things that require a little bit more hands-on service, so it fits us really well.

That being said, there’s obviously a high correlation between the value of those credits and the fixed premium that other customers are willing to pay. It’s no coincidence that as we look at both of those, they lie comfortably in the $1 to $2 gallon range that we’ve talked about. I’ll highlight, these are fixed contracts, right? I think that was probably part of your question, but, you know, this isn’t a spot gasoline rack. These are contracts. They’re multiyear contracts. They have commitments to perform on both sides, and, you know, we’re quite confident in the ability to capture that margin.

Great, thanks. I appreciate all the call.

Thank you.

With that, we’ll be concluding today’s question and answer session. I’d like to turn the floor back over to John Kompa for closing remarks.

Thank you, Jamie. On behalf of Todd and the entire management team, I'd like to thank everyone for their interest today in Calumet. Have a great rest of the day. Thanks.

The conference has now concluded. We do thank you for attending today's presentation. You may now disconnect your lines.