2023
ANNUAL
REPORT
A Foundation for Growth
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-51734
Calumet Specialty Products Partners, L.P.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
2780 Waterfront Parkway East Drive, Suite 200
Indianapolis, IN
(Address of Principal Executive Offices)
35-1811116
(I.R.S. Employer
Identification Number)
46214
(Zip Code)
(317) 328-5660
(Registrant’s Telephone Number, Including Area Code)
None
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class
Trading symbol(s)
Name of Each Exchange on Which Registered
Common units representing limited partner interests
CLMT
The Nasdaq Stock Market LLC
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller Reporting Company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☒
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
The aggregate market value of the common units held by non-affiliates of the registrant was approximately $1.0 billion on June 30, 2023, based on
$15.86 per unit, the closing price of the common units as reported on the Nasdaq Global Select Market on such date.
On February 28, 2024, there were 80,223,093 common units outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
NONE.
Table of Contents
EXPLANATORY NOTE
Restatement Background
On February 22, 2024, management of Calumet Specialty Products Partners, L.P. (the “Partnership”) and the Audit and
Finance Committee (the “Audit and Finance Committee”) of the Board of Directors of Calumet GP, LLC, the general
partner of the Partnership, concluded that the Partnership’s consolidated audited financial statements for the fiscal year
ended December 31, 2022 (the “Annual Non-Reliance Period”) included in the Partnership’s Annual Report on Form 10-K
for the Annual Non-Reliance Period and the unaudited interim consolidated financial statements for the periods ended
March 31, 2023, June 30, 2023, and September 30, 2023 (collectively, the “Interim Non-Reliance Periods” and, together
with the Annual Non-Reliance Period, the “Non-Reliance Periods”) included in the Partnership’s Quarterly Reports on
Form 10-Q for each of the Interim Non-Reliance Periods, in each case, require restatements and should no longer be relied
upon.
As described in the Partnership’s Current Report on Form 8-K filed with the SEC on February 23, 2024, during the
preparation of the Partnership’s consolidated financial statements as of and for the year ended December 31, 2023, the
Partnership identified an error in the presentation of net income (loss) to partners arising from the misallocation of net loss
from Montana Renewables Holdings LLC, a subsidiary of the Partnership (“MRHL”), to noncontrolling interest. The
Partnership previously reported its net loss attributable to noncontrolling interest based on the relative ownership interest of
the equity holders in MRHL, which was approximately 14% for the noncontrolling interest. The Partnership has
subsequently determined that, under applicable accounting standards, no portion of the net loss from MRHL should have
been allocated to noncontrolling interest.
Restatement of Previously Issued Consolidated Financial Statements
This Annual Report on Form 10-K for the year ended December 31, 2023 (this “Form 10-K”) includes restated
consolidated financial statements as of and for the year ended December 31, 2022 and unaudited interim financial
information for the Interim Non-Reliance Periods. In addition to the restatement error described above, the Partnership has
corrected certain items that were concluded as immaterial, individually and in the aggregate, to the financial statements for
the Non-Reliance Periods.
Control Considerations
See Item 9A, Controls and Procedures, for information related to the material weakness in internal control over
financial reporting and the related remedial measures.
1
Table of Contents
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
FORM 10-K — 2023 ANNUAL REPORT
Table of Contents
PART I
Items 1 and 2. Business and Properties
Item 1A.
Risk Factors
Item 1B.
Item 1C.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Unresolved Staff Comments
Cybersecurity
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant’s Common Equity, Related Unitholder Matters and Issuer Purchases of
Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Directors, Executive Officers of Our General Partner and Corporate Governance
Executive and Director Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Unitholder
Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accounting Fees and Services
Item 15.
Item 16.
Exhibits
Form 10-K Summary
PART IV
2
Page
6
30
58
58
59
59
60
61
62
85
88
151
151
155
155
156
162
178
181
184
185
191
Table of Contents
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Annual Report”) includes certain “forward-looking statements.” These
statements can be identified by the use of forward-looking terminology including “will,” “may,” “intend,” “believe,”
“expect,” “outlook,” “anticipate,” “estimate,” “continue,” “plan,” “should,” “could,” “would,” or other similar words. The
statements regarding (i) demand for finished products in markets we serve; (ii) estimated capital expenditures as a result of
required audits or required operational changes or other environmental and regulatory liabilities; (iii) our anticipated levels
of, use and effectiveness of derivatives to mitigate our exposure to crude oil price changes, natural gas price changes and
fuel products price changes; (iv) estimated costs of complying with the U.S. Environmental Protection Agency’s (“EPA”)
Renewable Fuel Standard (“RFS”), including the prices paid for Renewable Identification Numbers (“RINs”) and the
amount of RINs we may be required to purchase in any given compliance year, and the outcome of any litigation
concerning our existing small refinery exemption (“SRE”) petitions; (v) our ability to meet our financial commitments,
debt service obligations, debt instrument covenants, contingencies and anticipated capital expenditures; (vi) our access to
capital to fund capital expenditures and our working capital needs and our ability to obtain debt or equity financing on
satisfactory terms; (vii) our access to inventory financing under our supply and offtake agreements; (viii) the effect, impact,
potential duration or other implications of supply chain disruptions and global energy shortages on our business and
operations; (ix) general economic and political conditions, including inflationary pressures, instability in financial
institutions, the prospect of a shutdown of the U.S. federal government, general economic slowdown or a recession,
political tensions, conflicts and war (such as the ongoing conflicts in Ukraine and the Middle East and their regional and
global ramifications); (x) the future effectiveness of our enterprise resource planning system to further enhance operating
efficiencies and provide more effective management of our business operations; (xi) our expectation regarding our business
outlook with respect to the Montana Renewables business; (xii) an inability to remediate the material weakness in our
internal control over financial reporting or additional material weaknesses or other deficiencies in the future or the failure
to maintain an effective system of internal controls; (xiii) the expected benefits of the Corporate Conversion (as defined
herein) to us and our unitholders; and (xiv) the anticipated completion of the Corporate Conversion and the timing thereof,
as well as other matters discussed in this Annual Report that are not purely historical data, are forward-looking statements.
These forward-looking statements are based on our expectations and beliefs as of the date hereof concerning future
developments and their potential effect on us. While management believes that these forward-looking statements are
reasonable as and when made, there can be no assurance that future developments affecting us will be those that we
anticipate. All comments concerning our current expectations for future sales and operating results are based on our
forecasts for our existing operations and do not include the potential impact of any future acquisition or disposition
transactions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our
control) and assumptions that could cause actual results to differ materially from our historical experience and our present
expectations or projections. Known material factors that could cause our actual results to differ from those in the forward-
looking statements are those described in Part I, Item 1A “Risk Factors” of this Annual Report. Readers are cautioned not
to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation
to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new
information, future events or otherwise.
References in this Annual Report to “Calumet Specialty Products Partners, L.P.,” “Calumet,” “the Company,” “we,”
“our,” “us” or like terms refer to Calumet Specialty Products Partners, L.P. and its subsidiaries. References in this Annual
Report to “our general partner” refer to Calumet GP, LLC, the general partner of Calumet Specialty Products Partners, L.P.
3
Table of Contents
SUMMARY OF RISK FACTORS
An investment in our common units involves a significant degree of risk. Below is a summary of certain risk factors
that you should consider in evaluating us and our common units. However, this list is not exhaustive. Before you invest in
our common units, you should carefully consider the risk factors discussed or referenced below and under Item 1A. “Risk
Factors” in this Annual Report on Form 10-K. If any of the risks discussed below and under Item 1A. “Risk Factors” were
actually to occur, our business, financial position or results of operations could be materially adversely affected.
Risks Related to Our Business
● Our business depends on supply and demand fundamentals, which can be adversely affected by numerous
macroeconomic factors outside of our control.
● Our business has exposure to some commodities which are volatile, and a reduction in our margins will adversely
affect the amount of cash we will have available to operate our business and for payments of our debt obligations.
● Our hedging activities may not be effective in reducing our exposure to commodity price risk and may reduce our
earnings, profitability and cash flows.
● Decreases in the price of inventory and products may lead to a reduction in the borrowing base under our
revolving credit facility and our ability to issue letters of credit or the requirement that we post substantial
amounts of cash collateral for derivative instruments.
● We depend on certain third-party pipelines for transportation of feedstocks and products, and if these pipelines
become unavailable to us, our revenues and cash available for payment of our debt obligations could decline.
● The price volatility of utility services may result in decreases in our earnings, profitability and cash flows.
● Our facilities incur operating hazards, and the potential limits on insurance coverage could expose us to
potentially significant liability costs.
● An impairment of our long-lived assets or goodwill could reduce our earnings or negatively impact our financial
condition and results of operations.
● Competition in our industry is intense, and an increase in competition in the markets in which we sell our
products could adversely affect our earnings and profitability.
● We depend on unionized labor for the operation of many of our facilities. Any work stoppages or labor
disturbances at these facilities could disrupt our business and negatively impact our financial condition and results
of operations.
● Our method of valuing inventory may result in decreases in net income.
● Our arrangements with J. Aron (as defined herein) and Wells Fargo (as defined herein) expose us to J. Aron
and/or Wells Fargo-related credit and performance risk as well as potential refinancing risks.
● We have a substantial amount of indebtedness, which may adversely affect our cash flow and our ability to
operate our business.
● Our financing arrangements contain operating and financial provisions that restrict our business and financing
activities.
● A change of control could result in us facing substantial repayment obligations under our revolving credit facility,
our senior notes, our secured hedge agreements, our Supply and Offtake Agreements (as defined below), the
MRL revolving credit agreement (as defined below), the Montana Renewables, LLC (“MRL”) financing
arrangements with Stonebriar (as defined below), and the MRL term loan credit agreement with I Squared.
● We must make substantial capital expenditures for our facilities to maintain their reliability and efficiency.
● We may incur significant environmental costs and liabilities in the operation of our refineries, facilities, terminals
and related facilities.
4
Table of Contents
● We are subject to compliance with stringent environmental and occupational health and safety laws and
regulations.
● The availability and cost of renewable identification numbers and results of litigation related to our SRE petitions
could have a material adverse effect on our results of operations and financial condition and our ability to make
payments on our debt obligations.
● Our and our customers’ operations are subject to risks arising out of the threat of climate change, including
regulatory, political, litigation and financial risks, which could result in increased operating and capital costs for
our customers and reduced demand for the products and services we provide.
● We could incur substantial costs or disruptions in our business if we cannot obtain or maintain necessary permits
and authorizations or otherwise comply with occupational, environmental and other laws and regulations.
Risks Related to the Corporate Conversion
● The Corporate Conversion is subject to conditions, including some conditions that may not be satisfied on a
timely basis, if at all. Failure to complete the Corporate Conversion, or significant delays in completing the
Corporate Conversion, could negatively affect our business and financial results and the price of our common
units or, following the consummation of the Corporate Conversion, future business and financial results and the
price of the common stock.
Risks Related to Our Partnership Structure
● We may not have sufficient cash from operations, following the establishment of cash reserves and payment of
fees and expenses, including cost reimbursements to our general partner, to enable us to resume paying
distributions to our unitholders or restore distributions to previous levels.
● The amount of cash we have available for distribution to unitholders depends primarily on our cash flow and not
solely on profitability.
● Our general partner and its affiliates have conflicts of interest and limited fiduciary duties, which may permit
them to favor their own interests to other unitholders’ detriment.
● The Heritage Group and certain of its affiliates may engage in limited competition with us.
● Our partnership agreement contains provisions that reduce the standards to which our general partner would
otherwise be held by state fiduciary duty law.
● Unitholders have limited voting rights and are not entitled to elect our general partner or its directors.
Tax Risks to Common Unitholders
● Our tax treatment depends on our status as a partnership for federal income tax purposes. Our cash available for
distribution to unitholders may be substantially reduced if we become subject to entity-level taxation as a result of
the Internal Revenue Service (“IRS”) (i) treating us a corporation or (ii) assessing and collecting tax directly from
the partnership resulting from or any audit adjustments.
● Our tax treatment or the tax treatment of our unitholders could be subject to potential legislative, judicial, or
administrative changes and differing interpretations, possibly applied on a retroactive basis.
● Our unitholders may be required to pay taxes on their share of our income even if they do not receive any
distribution from us. A unitholder’s share of our taxable income may be increased as a result of the IRS
successfully contesting any of the federal income tax positions we take. Tax gain or loss on the disposition of our
common units could be more or less than expected. Unitholders may be subject to limitation on their ability to
deduct interest expense incurred by us.
● Tax-exempt entities and foreign persons face unique tax issues from owning our common units that may result in
adverse tax consequences to them.
5
Table of Contents
Items 1 and 2. Business and Properties
Overview
PART I
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 business is organized into the following reportable segments:
Specialty Products and Solutions; Montana/Renewables; Performance Brands; and Corporate. 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 Montana Renewables facility, we process a variety of geographically advantaged renewable feedstocks into
renewable diesel, sustainable aviation fuel (“SAF”), renewable hydrogen, renewable natural gas, renewable propane, and
renewable naphtha that are distributed into renewables 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
the Specialty Products and Solutions, Performance Brands or
Montana/Renewables segments.
to
6
Table of Contents
Our Assets
Our primary operating assets consist of:
Facility
Calumet Packaging
Location
Louisiana
Year Acquired
2012
Sales Volume for the
Year Ended December 31,
2023 in Barrels per
Day (“bpd”)
1,068
Royal Purple
Texas
2012
335
Missouri
Missouri
2012
Karns City
Pennsylvania
2008
212
1,486
Dickinson
Texas
2008
562
Cotton Valley
Louisiana
1995
4,743
Princeton
Louisiana
1990
4,896
Shreveport
Louisiana
Montana Refining
Montana
Montana Renewables Montana
2001
2012
2021
42,400
13,399
6,188
Products
Specialty products including premium
industrial and consumer synthetic
lubricants, fuels and solvents
Specialty products including premium
industrial and consumer synthetic
lubricants
Specialty products including polyol ester-
based synthetic lubricants
Specialty white mineral oils, solvents,
petrolatums, gelled hydrocarbons, cable
fillers and natural petroleum sulfonates
Specialty white mineral oils, compressor
lubricants and natural petroleum
sulfonates
Specialty solvents used principally in the
manufacture of paints, cleaners,
automotive products and drilling fluids
Specialty lubricating oils, including
process oils, base oils, transformer oils,
refrigeration oils, and asphalt
Specialty lubricating oils and waxes,
gasoline, diesel, jet fuel and asphalt
Specialty asphalt, gasoline, diesel, and jet
fuel
Renewable diesel, sustainable aviation
fuel, renewable hydrogen, renewable
natural gas, renewable propane, and
renewable naphtha
Storage, Distribution and Logistics Assets. We own and operate a product terminal in Burnham, Illinois with aggregate
storage capacities of approximately 150,000 barrels. The Burnham terminal, as well as additional owned and leased
facilities throughout the U.S., facilitate the distribution of products in the Upper Midwest, West Coast and Mid-Continent
regions of the U.S. and Canada.
We also use approximately 2,050 leased railcars primarily to receive and ship crude oil and distribute our specialty and
fuel products throughout the U.S. and Canada. In addition, we use approximately 450 leased railcars to source renewable
feedstocks and distribute renewable fuels products into the western half of North America. In total, we have approximately
7.0 million barrels of aggregate storage capacity at our facilities and leased storage locations.
Montana Renewables. At our Montana Renewables 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. These renewable fuels are distributed into renewable markets in the western
half of North America.
7
Table of Contents
Business Strategies
Our management team is dedicated to improving our operations by executing the following strategies:
● Enhance Profitability of Our Existing Assets. We focus on identifying opportunities to improve our asset base,
deepening our competitive advantages, and increasing our throughput, profitability, and cash flows. Our highest
current priority is streamlining the operations at our Montana Renewables facility and planning for expansion
projects at the facility. As part of this project design, we converted the historical Great Falls refinery into two
independent facilities: a 15,000 bpd specialty asphalt plant and a 15,000 bpd renewable fuels production facility.
At our Montana Renewables facility, we successfully commissioned a renewable hydrogen plant, a feedstock pre-
treatment unit, and a sustainable aviation fuel unit in 2023. The feedstock pre-treatment unit is expected to unlock
the advantaged price and feedstock optionality we have in Montana and the commissioning of the sustainable
aviation fuel unit made Montana Renewables the largest SAF producer in the western hemisphere. Other
examples include investments in a polymerized modified asphalt unit at our Great Falls Specialty Asphalt facility
in 2022, additional wax blending assets at our Calumet Paralogics, LLC (“Paralogics”) facility in 2021, and the
addition of storage capacity to increase sales of our most profitable solvents at our Cotton Valley facility in 2021.
In addition, we have undertaken various small expansion and optimization projects in our Performance Brands
segment over the past four years, including a new packaging line for 1.0 gallon cans of TruFuel to support
growth, a new 2.1 gallon pail TruFuel line to meet the market demand for larger package sizes, and a new quart
line in Porter, Texas to recognize efficiencies in packaging Bel-Ray products. We intend to continue increasing
the profitability of our existing asset base through various low capital requirement measures which may include
investments targeting more efficient logistics, improving the product mix of our processing units, and reducing
costs through operational modernizations.
● Maintain Sufficient Levels of Liquidity. We are actively focused on maintaining sufficient liquidity to fund our
operations and business strategies. As part of a broader effort to maintain an adequate level of liquidity, the board
of directors of our general partner unanimously voted to suspend cash distributions, effective beginning the
quarter ended March 31, 2016.
● Concentrate on Positive and Growing Cash Flows. We intend to continue to focus on operating assets and
businesses that generate positive and growing cash flows. Approximately 89.0% of our continuing operations
gross profit in 2023 was generated by our Specialty Products and Solutions segment, which is characterized by
stable customer relationships due to our customers’ requirements for the specialized products we provide. In
addition, we manage our exposure to crude oil price fluctuations in this segment by passing on incremental
feedstock costs to our specialty products customers. In our Performance Brands segment, which accounted for
approximately 18.2% of our continuing operations gross profit in 2023, we blend, package and market high
performance products through our Royal Purple, Bel-Ray, and TruFuel brands. Our fast-growing portfolio of
high-performance brands are characterized by strong customer loyalty and stable cash flows. In our
Montana/Renewables segment, which accounted for approximately (7.2)% of our continuing operations gross
profit in 2023, we expect growth in cash flows as a result of the commissioning of production units at our
Montana Renewables facility. Historically, renewable diesel margins have been both significantly higher and
more stable than fuel margins. Further, the remaining Great Falls specialty asphalt facility is expected to produce
a larger percentage of its products for local retail markets at lower net freight costs.
● Develop and Expand Our Customer Relationships. Due to the specialized nature of certain of our products, the
high cost of replacement and the long lead-time associated with the development and production of many of our
specialty products, our customers are incentivized to continue their relationships with us. We believe that we offer
a more diversified product slate to our customers than competitors do, and we also offer more technical support
and bespoke services. In fiscal year 2023, we sold a range of over 1,900 specialty and fuels products to
approximately 2,400 customers. We intend to continue to assist our existing customers in their efforts to expand
their product offerings, as well as marketing specialty product formulations and services to new customers. By
continuing to service our long-term relationships with our broad base of existing customers and by constantly
targeting solutions for new customers, we seek to limit our dependence on any one portion of our customer base.
8
Table of Contents
● Disciplined Approach to Strategic and Complementary Acquisitions. We do not expect to focus on large
acquisitions in the near term. However, should the right opportunity develop, our senior management team is
prepared to consider acquiring low-risk assets where we can enhance operations and improve profitability and
product lines that will complement and expand our specialty product offerings. For example, in March 2020, we
acquired Paralogics, a producer of candle and industrial wax blends, which expanded our presence in the
specialty wax blending and packaging market while adding new capabilities into our existing wax value chain. In
the future, we intend to continue pursuing prudent, accretive acquisitions that will deepen our long-term
competitive advantages. We intend to reduce our leverage over time and maintain a capital structure that
facilitates competitive access to the capital markets.
Competitive Strengths
We believe that we are well positioned to execute our business strategies successfully based on the following
competitive strengths:
● We Have Strong Relationships with a Premier Customer Base. We have long-term relationships with many of our
customers and we believe that we will continue to benefit from these relationships. Many of these relationships
involve lengthy approval processes or certifications that may make switching to a different supplier difficult. In
fiscal year 2023, we sold our products to approximately 2,400 customers, and we are continually seeking to
deepen those relationships across our broad and diversified customer base. No single customer accounted for
more than 10% of our consolidated sales for any of the three years ended December 31, 2023, 2022 and 2021.
● We Offer Our Customers a Diverse Range of Specialty Products. We offer a wide range of over 1,900 specialty
products. We believe that our ability to provide our customers with a more diverse selection of products than most
of our competitors gives us an advantage in meeting the needs of large, strategic customers and allows us to
compete in profitable niches. We believe that we are the only specialty products manufacturer in North America
that produces all six of the following products: naphthenic lubricating oils, paraffinic lubricating oils, waxes,
solvents, white oils and petrolatums. Our ability to produce numerous specialty products allows us to ship
products between our facilities for product upgrading in order to meet customer specifications.
● We are a Leader in North America’s Energy Transition. Our MRL facility is permitted to pretreat and convert
15,000 barrels per stream day of renewable feedstocks into low-emission sustainable alternatives that directly
replace fossil fuel products. MRL is a leader in North America’s energy transition and the largest Sustainable
Aviation Fuel producer in the western hemisphere. The renewable fuel products produced by MRL are distributed
into renewable markets in the western half of North America.
● Our Facilities Have a Unique Combination of Flexibility and Scale. Our facilities are equipped with advanced,
flexible technology that allows us to produce high-grade specialty products. For example, our integrated specialty
products complex in Northwest Louisiana consists of 27 processing units and 195 million gallons of storage
capacity across 400 tanks and has a wide variety of specialized hydroprocessing, dewaxing, emulsifying and
distillation capabilities that allow us to meet complex, bespoke customer needs at scale providing an advantaged
cost. Our acquisition of Paralogics also added new capabilities into our existing wax business value chain, adding
approximately 20 million pounds of annual blending and formulating capabilities. Our facilities also enjoy the
value and optionality of integration as many products can be further processed and upgraded at our own facilities.
● We Have Leading, High-Growth Brands. Our Performance Brands segment benefits from well-known high-
performance premium brands in consumer, retail and industrial markets. These brands garner a premium and are
well positioned for growth. Further, the majority of products in our Specialty Products and Solutions segment are
marketed under well-known industrial and consumer-facing brands that are of high value in the market and in
many cases were established several decades ago.
9
Table of Contents
● We Have an Experienced Management Team. Our team’s extensive experience within the specialty products,
commodities and renewable energy industries provides a strong foundation to build and optimize a diversified,
competitively advantaged business that can succeed in various business cycles and environments.
Potential Acquisition and Divestiture Activities
While we evaluate potential acquisitions of strategic and complementary assets that would deepen our competitive
advantage, our focus has been and continues to be to de-lever our balance sheet. We evaluate our portfolio on an ongoing
basis to allow an objective assessment of potential divestiture candidates that are non-core to our business and/or worth
more to a buyer than to us. The combination of acquisition and divestment activities is intended to maximize our return on
invested capital by creating and maintaining a portfolio of core assets that optimize our blend of feedstocks, improve our
operating efficiency and cash flows, and leverage our competitive strengths. We also intend to monetize all or a portion of
our equity in MRL over time.
As we optimize our asset portfolio, which may include the divestiture of certain non-core assets or all or a portion of
our equity in MRL, we intend to redeploy capital into projects to develop assets that are better suited to our core specialty
products business strategy and de-leverage our balance sheet.
Going forward, we intend to tailor our approach toward owning businesses with stable cash flows and growing end
markets. As a result, we may pursue potential arrangements with third parties to divest certain assets to enable us to further
reduce the amount of our required capital commitments and potential capital expenditures. We expect that any potential
divestitures of assets will also provide us with cash to reinvest in our business and repay debt.
Partnership Structure and Management
Calumet Specialty Products Partners, L.P. is a Delaware limited partnership formed on September 27, 2005. Our
general partner is Calumet GP, LLC, a Delaware limited liability company. As of February 28, 2024, we have 80,223,093
common units and 1,637,206 general partner units outstanding. Our general partner owns a 2% general partner interest in
our partnership and all incentive distribution rights and has sole responsibility for conducting our business and managing
our operations. For more information about our general partner’s board of directors and executive officers, please read
Part III, Item 10 “Directors, Executive Officers of Our General Partner and Corporate Governance.”
10
Table of Contents
Our Operating Assets and Contractual Arrangements
General
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.
Total sales volume (1)
Total feedstock runs (2)
Facility production: (3)
Specialty Products and Solutions:
Lubricating oils
Solvents
Waxes
Fuels, asphalt and other by-products
Total Specialty Products and Solutions
Montana/Renewables:
Gasoline
Diesel
Jet fuel
Asphalt, heavy fuel oils and other
Renewable fuels
Total Montana/Renewables
Year Ended December 31,
2023
2022
% Change
2022
2021
% Change
(In bpd)
79,805
77,200
82,946
80,447
(In bpd)
(3.8)% 82,946
(4.0)% 80,447
79,281
75,818
4.6 %
6.1 %
10,358
7,208
1,326
38,845
57,737
3,898
2,941
449
4,483
6,314
18,085
10,951
7,100
1,452
40,845
60,348
3,409
6,449
820
6,942
—
17,620
(5.4)% 10,951
1.5 % 7,100
(8.7)% 1,452
(4.9)% 40,845
(4.3)% 60,348
14.3 % 3,409
(54.4)% 6,449
(45.2)%
820
(35.4)% 6,942
—
100.0 %
2.6 % 17,620
9,867
6,833
1,335
27,869
45,904
4,907
9,711
901
10,379
—
25,898
11.0 %
3.9 %
8.8 %
46.6 %
31.5 %
(30.5)%
(33.6)%
(9.0)%
(33.1)%
100.0 %
(32.0)%
Performance Brands
1,474
1,434
2.8 % 1,434
1,304
10.0 %
Total facility production (3)
77,296
79,402
(2.7)% 79,402
73,106
8.6 %
(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.
11
Table of Contents
The following table sets forth information about our sales of principal products by segment:
Year Ended December 31,
2023
2022
2021
(In millions)
% of Sales
(In millions)
% of Sales
(In millions)
% of Sales
Specialty Products and Solutions:
Lubricating oils
Solvents
Waxes
Fuels, asphalt and other by-products
Total
Montana/Renewables:
Gasoline
Diesel
Jet fuel
Asphalt, heavy fuel oils and other
Renewable fuels
Total
Performance Brands
$
$
$
$
763.8
398.5
163.9
1,550.7
$ 2,876.9
913.7
18.3 % $
434.9
9.5 %
189.3
3.9 %
37.1 %
1,970.1
68.8 % $ 3,508.0
167.2
144.8
20.5
148.1
513.2
993.8
4.0 % $
3.5 %
0.5 %
3.5 %
12.3 %
23.8 % $
188.1
391.8
41.8
253.2
—
874.9
658.7
19.5 % $
303.7
9.3 %
151.7
4.0 %
42.0 %
997.3
74.8 % $ 2,111.4
4.0 % $
8.4 %
0.9 %
5.4 %
— %
18.7 % $
188.3
324.9
27.5
243.0
—
783.7
20.9 %
9.7 %
4.8 %
31.7 %
67.1 %
6.0 %
10.3 %
0.9 %
7.7 %
— %
24.9 %
310.3
7.4 % $
303.4
6.5 % $
252.9
8.0 %
Consolidated sales
$ 4,181.0
100.0 % $ 4,686.3
100.0 % $ 3,148.0
100.0 %
Please read Note 18 — “Segments and Related Information” in Part II, Item 8 “Financial Statements and
Supplementary Data — Notes to Consolidated Financial Statements” of this Annual Report for additional financial
information about each of our segments and the geographic areas in which we conduct business.
Northwest Louisiana Integrated Specialty Complex
The assets in our Northwest Louisiana integrated specialty complex anchor our Specialty Products and Solutions
business segment. The assets in the Northwest Louisiana integrated specialty complex, primarily consist of our Shreveport
facility, Cotton Valley facility and Princeton facility, which in total, includes 27 processing units and 195 million gallons of
storage capacity across 400 tanks and have a wide variety of specialized hydroprocessing, dewaxing, emulsifying and
distillation capabilities that allow us to meet complex, bespoke customer needs at scale providing an advantaged cost.
Shreveport Facility
The Shreveport facility (“Shreveport”), located on a 240 acre site in Shreveport, Louisiana, currently has aggregate
crude oil throughput capacity of 60,000 bpd and processes paraffinic crude oil and associated feedstocks into fuel products,
paraffinic lubricating oils, waxes, asphalt and by-products.
The Shreveport facility consists of 17 major processing units including hydrotreating, catalytic reforming and
dewaxing units and approximately 3.3 million barrels of storage capacity in 130 storage tanks and related loading and
unloading facilities and utilities. Since our acquisition of the Shreveport facility in 2001, we have expanded the facility’s
capabilities by adding additional processing and blending facilities, adding a second reactor to the high pressure
hydrotreater, resuming production of gasoline, diesel and other fuel products and adding both 18,000 bpd of crude oil
throughput capacity and the capability to run up to 25,000 bpd of sour crude oil.
12
Table of Contents
The following table sets forth historical information about production at our Shreveport facility:
Crude oil throughput capacity
Total feedstock runs (1) (2)
Total facility production (2) (3)
2023
Shreveport Facility
Year Ended December 31,
2022
(In bpd)
60,000
42,453
45,525
60,000
38,248
40,677
60,000
29,971
31,835
2021
(1) Total feedstock runs represent the barrels per day of crude oil and other feedstocks processed at our Shreveport
facility. Total feedstock runs do not include certain interplant feedstocks supplied by our Cotton Valley and Princeton
facilities.
(2) Total facility production represents the barrels per day of specialty products and fuel products yielded from processing
crude oil and other feedstocks. 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.
(3) Total facility production includes certain interplant feedstock supplied to our Cotton Valley and Princeton facilities and
our Karns City facility.
The Shreveport facility has a flexible operational configuration and operating personnel that facilitates the
development of opportunities to enhance profitability. Feedstock and product mix may fluctuate from one period to the
next to capture market opportunities.
The Shreveport facility receives crude oil via tank truck, railcar and a common carrier pipeline system that is operated
by a subsidiary of Plains All American Pipeline, L.P. (“Plains”) and is connected to Shreveport’s facilities. The Plains
pipeline system delivers local supplies of crude oil and condensates from north Louisiana and east Texas. The Plains
pipeline also connects to a Plains terminal in Longview, TX, which gives the refinery access to crude oil in west Texas and
access to the Cushing, Oklahoma storage hub. Crude oil is also purchased from various suppliers, including local
producers, who deliver crude oil to the Shreveport facility via tank truck.
The Shreveport facility also has direct pipeline access to the Enterprise Products Partners L.P. pipeline (“TEPPCO
pipeline”), on which it can ship certain grades of gasoline, diesel and jet fuel. Further, the refinery has direct access to the
Red River Terminal facility, which provides the facility with barge access, via the Red River, to major feedstock and
petroleum products logistics networks on the Mississippi River and Gulf Coast inland waterway system. The Shreveport
facility also ships its finished specialty products throughout the U.S. through both truck and railcar service.
Cotton Valley Facility
The Cotton Valley facility (“Cotton Valley”), located on a 77 acre site in Cotton Valley, Louisiana, currently has
aggregate crude oil throughput capacity of 13,600 bpd, hydrotreating capacity of 6,500 bpd and processes crude oil into
specialty solvents and residual fuel oil. The residual fuel oil is an important feedstock for the production of specialty
products at our Shreveport facility. We believe the Cotton Valley facility produces the most complete, single-facility line of
paraffinic solvents in the U.S.
The Cotton Valley facility consists of three major processing units that include a crude unit, a hydrotreater and a
fractionation train, approximately 625,000 barrels of storage capacity in 74 storage tanks and related loading and unloading
facilities and utilities. Since our acquisition of the Cotton Valley facility in 1995, we have expanded the facility’s
capabilities by installing a hydrotreater that removes aromatics, increased the crude unit processing capability to
13,600 bpd and reconfigured the facility’s fractionation train to improve product quality, enhance flexibility and lower
utility costs.
13
Table of Contents
The following table sets forth historical information about production at our Cotton Valley facility:
Crude oil throughput capacity
Total feedstock runs (1) (2)
Total facility production (2) (3)
2023
Cotton Valley Facility
Year Ended December 31,
2022
(In bpd)
13,600
8,975
5,317
13,600
9,125
5,520
13,600
8,349
4,698
2021
(1) Total feedstock runs do not include certain interplant solvent feedstocks supplied by our Shreveport facility.
(2) Total facility production represents the barrels per day of specialty products yielded from processing crude oil and
other feedstocks. The difference between total facility production and total feedstock runs is primarily a result of the
time lag between the input of feedstocks and the production of finished products, intermediates transferred to internal
sites for further processing, and volume loss.
(3) Total facility production includes certain interplant feedstocks supplied to our Shreveport facility.
The Cotton Valley facility has a flexible operational configuration and operating personnel that facilitates the
development of opportunities to enhance profitability. Feedstock and product mix may fluctuate from one period to the
next to capture market opportunities, which allows us to respond to market changes and customer demands by modifying
the refinery’s product mix. The reconfigured fractionation train also allows the facility to satisfy demand fluctuations
efficiently without large finished product inventory requirements.
The Cotton Valley facility receives crude oil via tank truck. The Cotton Valley facility’s feedstock is primarily low
sulfur and paraffinic crude oil originating from north Louisiana and is purchased from various marketers and gatherers. In
addition, the Cotton Valley facility receives interplant feedstocks for solvent production from the Shreveport facility. The
Cotton Valley facility ships finished products by both truck and railcar service.
Princeton Facility
The Princeton facility (“Princeton”), located on a 208 acre site in Princeton, Louisiana, currently has aggregate crude
oil throughput capacity of 10,000 bpd and processes naphthenic crude oil into lubricating oils and asphalt. In addition,
feedstock is made for the Shreveport facility for further processing into ultra-low sulfur diesel. The asphalt produced at
Princeton may be further processed or blended for coating and roofing product applications at the Princeton facility or
transported to the Shreveport facility for further processing into bright stock.
The Princeton facility consists of seven major processing units, approximately 650,000 barrels of storage capacity in
200 storage tanks and related loading and unloading facilities and utilities. Since our acquisition of the Princeton facility in
1990, we have debottlenecked the crude unit to increase production capacity to 10,000 bpd, increased the hydrotreater’s
capacity to 7,000 bpd and upgraded the facility’s fractionation unit, which has enabled us to produce higher value specialty
products.
14
Table of Contents
The following table sets forth historical information about production at our Princeton facility:
Crude oil throughput capacity
Total feedstock runs (1)
Total facility production (1) (2)
2023
Princeton Facility
Year Ended December 31,
2022
(In bpd)
10,000
7,259
5,660
10,000
7,724
7,787
10,000
7,266
4,881
2021
(1) Total facility production represents the barrels per day of specialty products yielded from processing crude oil and
other feedstocks. The difference between total facility production and total feedstock runs is primarily a result of the
time lag between the input of feedstocks and the production of finished products, intermediates transferred to internal
sites for further processing, and volume loss.
(2) Total facility production includes certain interplant feedstocks supplied to our Shreveport facility.
The Princeton facility has a hydrotreater and significant fractionation capability enabling the refining of high quality
naphthenic lubricating oils at numerous distillation ranges. The Princeton facility’s processing capabilities consist of
atmospheric and vacuum distillation, hydrotreating, asphalt oxidation processing and clay/acid treating. In addition, we
have the necessary tankage and technology to process our asphalt into higher value product applications such as coatings,
road paving and specialty applications.
The Princeton facility receives crude oil via tank truck, railcar and the Plains pipeline system. Its crude oil supply
primarily originates from east Texas, south Texas and north Louisiana, purchased directly from third-party suppliers
under month-to-month evergreen supply contracts and on the spot market. The Princeton facility ships its finished products
throughout the U.S. via truck and railcar service.
Great Falls Specialty Asphalt Facility
The Great Falls specialty asphalt facility (“Great Falls”), located on a 65 acre site in Great Falls, Montana, currently
has aggregate crude oil throughput capacity of 15,000 bpd and processes light and heavy crude oil from Canada into fuel
and asphalt products. In the fourth quarter of 2022, we converted a significant portion of the Great Falls specialty asphalt
facility into a renewable fuels production facility (see below). Upon completion of the conversion project, we continue to
own and operate the conventional Great Falls specialty asphalt facility with a reconfigured processing capacity of 15,000
bpd of Canadian crude. The facility is focused on the production of high-quality specialty asphalt, as well as satisfying
local demand for conventional fuels.
The Great Falls specialty asphalt facility consists of 15 major processing units including hydrotreating, catalytic
reforming, hydrocracking, fluid catalytic cracking and alkylation units, approximately 1.1 million barrels of storage
capacity in 75 tanks and related loading and unloading facilities and utilities.
The following table sets forth historical information about production at the Great Falls specialty asphalt facility:
Great Falls Specialty Asphalt Facility
Crude oil throughput capacity
Total feedstock runs (1) (2)
Total facility production (2)
2021
2023
Year Ended December 31,
2022
(In bpd)
15,000
17,599
17,619
15,000
11,982
11,772
30,000
25,614
25,897
(1) Total feedstock runs represent the barrels per day of crude oil processed at our Great Falls specialty asphalt facility.
15
Table of Contents
(2) Total facility production represents the barrels per day of specialty products and fuel products yielded from processing
crude oil and other feedstocks. The difference between total facility production and total feedstock runs is primarily a
result of the time lag between the input of feedstocks and the production of finished products and volume loss.
Currently, the Great Falls specialty asphalt facility produces liquified petroleum gas, naphtha, gasoline, diesel, jet fuel
and asphalt, which are shipped by railcar and truck service. Finished fuel and asphalt sales are primarily made through spot
agreements and short-term contracts.
The Great Falls specialty asphalt facility purchases crude oil from various suppliers and receives crude oil through the
Interprovincial Bow River South and Rangeland pipeline systems, providing reliable access to high quality conventional
crude oil from western Canada.
In the fourth quarter of 2022, we completed the reconfiguration of our 30,000 bpd Great Falls specialty asphalt facility
into two unrelated facilities, including a 15,000 bpd specialty asphalt facility and a 15,000 bpd renewable fuels facility. The
specialty asphalt facility capitalizes on local access to cost-advantaged Canadian conventional crude oil, while producing
additional fuels and refined products for delivery into the regional market while meeting EPA requirements for gasoline
and diesel product sulfur limits and reducing air emissions. The renewable fuels facility is described below.
Great Falls Renewable Fuels Facility (“Montana Renewables”)
In the fourth quarter of 2022, Montana Renewables LLC, an unrestricted subsidiary of Calumet, completed the
conversion of a significant portion of our Great Falls specialty asphalt facility into a renewable fuels production facility
(the “Montana Renewables Facility”). The Montana Renewables Facility has a permitted throughput capacity of
15,000 bpd to pretreat and convert a wide variety of organic waste and vegetable oils into lower emissions, sustainable
alternatives to fossil fuels, including renewable hydrogen, renewable natural gas, renewable propane, renewable naphtha,
renewable kerosene/sustainable aviation fuel, and renewable diesel.
As part of the conversion project, we also constructed and commissioned an innovative renewable hydrogen unit,
which further lowered carbon intensity and increased the throughput of the Montana Renewables facility. Further, a new
state of the art feedstock pre-treater, which combined with proximity to advantaged feedstocks and low-carbon product
markets provides lasting competitive advantage to Montana Renewables.
Missouri Facility
The Missouri facility (“Missouri”), located on a 22 acre site in Louisiana, Missouri, develops and produces polyol
ester synthetic lubricants for use in refrigeration compressors, commercial aviation and polyol ester base stocks. In
December 2015, we completed a project to more than double the production capacity of the facility from 35 million pounds
to 75 million pounds per year. The facility has approximately 35,000 barrels of storage capacity in 64 tanks and related
loading and unloading facilities and utilities. The facility receives its fatty acids and alcohol feedstocks and additives by
truck and railcar under supply agreements or spot agreements with various suppliers.
The Missouri facility utilizes the latest batch esterification processes designed to ensure blending accuracy while
maintaining production flexibility to meet customer needs.
Calumet Packaging
The Calumet Packaging facility (“Calumet Packaging”), located on a 10 acre site in Shreveport, Louisiana, develops,
blends and packages high performance synthetic lubricants, fuels and solvent products for use in industrial, commercial
and automotive applications. The Calumet Packaging facility’s processing capability includes state-of-the-art blending and
packaging equipment. The facility has approximately 75,000 barrels of storage capacity and related loading and unloading
facilities. The facility receives its base oil feedstocks and additives by truck and rail under supply agreements or spot
agreements with various suppliers.
16
Table of Contents
Royal Purple
The Royal Purple facility (“Royal Purple”), located on a 20 acre site in Porter, Texas, develops, blends and packages
high performance synthetic lubricants and fluid additive products for use in industrial, commercial and automotive
applications. The Royal Purple facility’s processing capability includes 10 in-house packaging and production lines.
Outsourced packaging services for specific products are also fulfilled. The facility has approximately 30,500 barrels of
storage capacity in 91 tanks and related loading and unloading facilities. The facility receives its base oil feedstocks and
additives by truck under supply agreements or spot agreements with various suppliers.
Karns City and Dickinson Facilities and Other Processing Agreements
The Karns City facility (“Karns City”), located on a 225 acre site in Karns City, Pennsylvania, has aggregate base oil
throughput capacity of 3,000 bpd and produces white mineral oils, solvents, petrolatums, gelled hydrocarbons, cable fillers
and natural petroleum sulfonates. The Karns City facility’s processing capability includes hydrotreating, fractionation, acid
treating, filtering, blending and packaging. In addition, the facility has approximately 817,000 barrels of storage capacity in
250 tanks and related loading and unloading facilities and utilities.
The Dickinson facility (“Dickinson”), located on a 28 acre site in Dickinson, Texas, has aggregate base oil throughput
capacity of 1,300 bpd and produces white mineral oils, compressor lubricants and natural petroleum sulfonates. The
Dickinson facility’s processing capability includes acid treating, filtering and blending. The facility has approximately
183,000 barrels of storage capacity in 186 tanks and related loading and unloading facilities and utilities.
These facilities each receive their base oil feedstocks by railcar and truck under supply agreements or spot purchases
with various suppliers, the most significant of which is a supply agreement with Phillips 66. Please read “— Our Crude Oil
and Feedstock Supply” below for further discussion of the long-term supply agreement with Phillips 66.
The following table sets forth the combined historical information about production at our Karns City, Dickinson and
certain other facilities:
Feedstock throughput capacity (1)
Total feedstock runs (2) (3)
Total production (3)
Combined Karns City, Dickinson and Other Facilities
Year Ended December 31,
2022
(in bpd)
2023
2021
11,300
3,396
3,419
11,300
3,482
3,582
11,300
4,368
4,269
(1)
(2)
Includes Karns City, Dickinson and certain other facilities.
Includes feedstock runs at our Karns City and Dickinson facilities as well as throughput at certain third-party facilities
pursuant to supply and/or processing agreements and includes certain interplant feedstocks supplied from our
Shreveport facility.
(3) Total production represents the barrels per day of specialty products yielded from processing feedstocks at our Karns
City and Dickinson facilities and certain third-party facilities pursuant to supply and/or processing agreements. The
difference between total production and total feedstock runs is primarily a result of the time lag between the input of
feedstocks and the production of finished products.
Other Logistics Assets
Terminals are complementary to our refineries and play a key role in moving our products to end-user markets by
providing services including distribution and blending to achieve specified products and storage and inventory
management. In addition to the Burnham terminal, we own and lease additional facilities, primarily related to distribution
of finished products, throughout the U.S.
17
Table of Contents
Burnham Terminal: We own and operate a terminal located on an 11 acre site, in Burnham, Illinois. The Burnham
terminal receives specialty products from certain of our refineries primarily by railcar and distributes them by truck and
railcar to our customers in the Upper Midwest and East Coast regions of the U.S. and in Canada. The terminal includes a
tank farm with 90 tanks having aggregate storage capacity of approximately 150,000 barrels, supplying lube base oils, food
grade white oils and aliphatic solvents, as well as viscosity index additives and tackifiers.
We use approximately 2,050 railcars leased from various lessors. This fleet of railcars enables us to receive and ship
crude oil and distribute various specialty products and fuel products throughout the U.S. and Canada to and from each of
our facilities. In addition, we use approximately 450 leased railcars to source renewable feedstocks and distribute
renewable fuels products into the western half of North America.
Our Crude Oil and Feedstock Supply
We purchase crude oil and other feedstocks from major oil companies as well as from various crude oil gatherers and
marketers in Texas, north Louisiana and Canada. Crude oil supplies at our facilities are as follows:
Facility
Shreveport
Cotton Valley
Great Falls Specialty
Asphalt Facility
Montana Renewables
Facility
Princeton
Crude Oil / Feedstock Slate
West Texas Intermediate (“WTI”), local crude oils from East Texas,
North Louisiana, Arkansas and Light Louisiana Sweet (“LLS”)
Local paraffinic crude oil
Canadian Heavy (e.g. Bow River) and Canadian Light Sour
Mode of Transportation
Tank truck, railcar and Plains
Pipeline
Tank truck
Front Range Pipeline
Organic waste and vegetable oil materials
Railcar
Local and imported naphthenic crude oil
Tank truck, railcar and Plains
Pipeline
In 2023, BP Products North America Inc. (“BP”) supplied us with approximately 71.7% of our total crude oil supply
under term contracts and month-to-month evergreen crude oil supply contracts. In 2023, Macquarie Energy Canada LTD.
(“Macquarie”) supplied us with approximately 18.5% of our total crude oil supply under a crude oil supply agreement.
Each of our refineries is dependent on one or more key suppliers and the loss of any of these suppliers would adversely
affect our financial results to the extent we were unable to find another supplier of this substantial amount of crude oil.
We have short-term and long-term contracts with our crude oil suppliers. For example, a majority of our crude oil
supply contracts with Plains are currently month-to-month and terminable upon 90 days’ notice. Additionally, our crude oil
supply agreement with BP was amended and restated in December 2016, and automatically renews for successive one-year
terms each March unless terminated by either party upon 90 days’ notice (“BP Purchase Agreement”). This agreement has
not been terminated by either party. We also purchase foreign crude oil when its spot market price is attractive relative to
the price of crude oil from domestic sources.
MRL, an unrestricted subsidiary of the Company, has entered into various term supply agreements for renewable
feedstocks that are key to the operations of the Montana Renewables facility.
We have various long-term feedstock supply agreements with Phillips 66, with some agreements operating under the
option to continue on a month-to-month basis thereafter, for feedstocks that are key to the operations of our Karns City and
Dickinson facilities. In addition, certain products of our refineries can be used as feedstocks by these facilities.
We believe that adequate supplies of crude oil and feedstocks will continue to be available to us.
Our cost to acquire crude oil and feedstocks and the prices for which we ultimately can sell refined products depend on
a number of factors beyond our control, including regional and global supply of and demand for crude oil, other feedstocks
and specialty and fuel products. These, in turn, are dependent upon, among other things, the availability of imports, overall
economic conditions, production levels of domestic and foreign suppliers, U.S. relationships with foreign governments,
political affairs and the extent of governmental regulation. We have historically been able to pass on the
18
Table of Contents
costs associated with increased crude oil and feedstock prices to our specialty products customers, although the increase in
selling prices for specialty products typically lags the rising cost of crude oil. From time to time, we use a hedging program
to manage a portion of our commodity price risk.
Our Products, Markets and Customers
Products
We produce a full line of specialty products, including lubricating oils, solvents, waxes, food grade white oils,
pharmaceutical grade petrolatums, and other products, as well as a variety of fuel and fuel related products, including
asphalt and heavy fuel oils. We also blend, package and market high performance specialty products through our Royal
Purple, Bel-Ray, and TruFuel brands. At our Montana Renewables facility, we produce a variety of renewable fuels
products, including 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. Our
customers purchase specialty products primarily as raw material components for consumer-facing and industrial products.
Our customers also purchase renewable fuels, which are consumed to reduce lifecycle carbon emissions.
The following table depicts a representative sample of the diversity of end-use applications for the products we
produce:
Representative Sample of End-Use Applications by Product (1)
Fuels &
Fuel Related
Products
47%
● Gasoline
● Diesel
● Jet fuel
● Marine fuel
● Ethanol free fuels
● Fluid catalytic
cracking feedstock
● Asphalt vacuum
residuals
● Mixed butanes
● Roofing flux
● Paving asphalt
● Heavy fuel oils
Renewable Products
12%
● Renewable hydrogen
● Renewable natural
gas
● Renewable propane
● Renewable naphtha
● Renewable
kerosene/sustainable
aviation fuel
● Renewable diesel
Lubricating Oils
Solvents
Waxes
4%
● Paraffin waxes
● FDA compliant
products
● Candles
● Adhesives
● Crayons
● Floor care
● PVC
● Paint strippers
● Skin & hair care
● Timber
treatment
● Waterproofing
● Pharmaceuticals
● Cosmetics
10%
● Waterless
hand
cleaners
● Alkyd resin
diluents
● Automotive
products
● Calibration
fluids
● Charcoal
lighter fluids
● Chemical
processing
● Drilling
fluids
● Printing inks
● Water
treatment
● Paint and
coatings
● Stains
19%
● Hydraulic oils
● Passenger car
motor oils
● Railroad engine
oils
● Cutting oils
● Compressor oils
● Metalworking
fluids
● Transformer oils
● Rubber process
oils
● Industrial
lubricants
● Gear oils
● Grease
● Automatic
transmission fluid
● Animal feed
dedusting
● Baby oils
● Bakery pan oils
● Catalyst carriers
● Gelatin capsule
lubricants
● Sunscreen
Packaged and Synthetic
Specialty Products
8%
● Refrigeration
compressor oils
● Positive displacement
and roto-dynamic
compressor oils
● Commercial and
military jet engine oil
● Lubricating greases
● Gear oils
● Aviation hydraulic oils
● High performance
small engine fuels
● Two cycle and four
stroke engine oils
● High performance
automotive engine oils
● High performance
industrial lubricants
● High temperature
chain lubricants
● Food contact grade
lubricants
● Charcoal lighter fluids
and other solvents
● Engine treatment
additives
(1) Based on the percentage of total sales for the year ended December 31, 2023. Except for the listed fuel products,
renewable products and certain packaged and synthetic specialty products, we do not produce any of these end-use
products.
19
Table of Contents
Marketing
Our salespeople regularly visit customers and work in conjunction with our marketing department, the laboratories at
our production facilities and our technical services department, to focus on providing additional value to our customers,
such as formulation assistance, regulatory insight, and creating specialized blends and packaging that work optimally for
our customers.
Markets
Specialty Products. The specialty products market represents a small portion of the overall petroleum refining industry
in the U.S. Of the approximately 130 refineries currently in operation in the U.S., only a small number of the refineries are
considered specialty products producers and only a few compete with us in terms of the number of products produced.
Our specialty products are utilized in applications across a broad range of industries, including:
● industrial goods such as finished lubricants, batteries, water treatment chemistry, mining lubricants, oilfield
drilling, electrical and transformer oils, adhesives, refrigeration compressor oils, aviation fluids, and agriculture
applications; and
● consumer goods such as cosmetics, petroleum jelly, lotions, pharmaceuticals, food, candles, paint and coatings,
charcoal lighter fluids, and car care products.
We have the capability to ship our specialty products worldwide. In the U.S., we ship our specialty products via
railcars, trucks and barges. We use our fleet of leased railcars to ship our specialty products and a majority of our specialty
products sales are shipped in trucks owned and operated by several different third-party carriers. For international
shipments, which accounted for less than 10% of our consolidated sales in 2023, we ship via railcars and trucks to several
ports where the product is loaded onto vessels for shipment to customers abroad.
Fuel Products. The fuel products market represents a large portion of the overall petroleum refining industry in the
U.S. Of the approximately 130 refineries currently in operation in the U.S., a large number of the refineries are fuel
products producers; however, only a few compete with us in our local markets.
Renewable Fuel Products. The renewable fuel products market represents a small portion of the overall petroleum
refining industry in the U.S. MRL is a leading independent producer of renewable transportation fuels in North America
and the largest SAF producer in the western hemisphere. The renewable fuels market is in the rapid-growth phase of its life
cycle, highlighted by renewable diesel demand growing at an average annualized rate of 96.3% over the past three years,
and SAF demand quadrupling in the past year. The U.S. government’s SAF Grand Challenge calls for SAF growth from
4.5 million gallons in 2021 to 3.0 billion gallons annually by 2030. We believe we are well positioned to benefit from these
trends.
Gulf Coast Market (PADD 3)
Fuel products produced at our Shreveport facility can be sold locally or to the Midwest region of the U.S. through the
TEPPCO pipeline. Local sales are made from the TEPPCO terminal in Bossier City, Louisiana, located approximately
15 miles from the Shreveport facility, as well as from our own Shreveport facility terminal.
Gasoline, diesel and jet fuel from the Shreveport facility are sold primarily into the Louisiana, Texas and Arkansas
markets, and any excess volumes are sold to marketers further up the TEPPCO pipeline. Should the appropriate market
conditions arise, we have the capability to redirect and sell additional volumes into the Louisiana, Texas and Arkansas
markets rather than transport them to the Midwest region via the TEPPCO pipeline.
The Shreveport facility has the capacity to produce approximately 9,000 bpd of commercial jet fuel that can be
marketed to the U.S. Department of Defense, sold as Jet-A locally or sold via the TEPPCO pipeline, or transferred to the
Cotton Valley facility to be processed further as a feedstock to produce solvents.
20
Table of Contents
Additionally, we produce a number of fuel-related products including fluid catalytic cracking (“FCC”) feedstock,
vacuum residuals and mixed butanes. FCC feedstock is sold to other refiners as a feedstock for their FCC units to make
fuel products. Vacuum residuals are blended or processed further to make asphalt products. Volumes of vacuum residuals
which we cannot process are sold locally into the fuel oil market or sold via railcar to other refiners. Mixed butanes are
primarily available in the summer months and are primarily sold to local marketers. If the mixed butanes are not sold, they
are blended into our gasoline production.
Northwest Market (PADD 4)
Fuel and asphalt products produced at our Great Falls specialty asphalt facility can be sold locally and in Missouri,
Oklahoma, Texas, Arizona, North Dakota, South Dakota, Idaho, Oregon, Utah, Wyoming, Washington, Nevada, California
and Canada. Seasonally, fuel products from the Great Falls specialty asphalt facility are transported to terminals in
Washington and Utah.
Renewable diesel, sustainable aviation fuel, renewable hydrogen, renewable natural gas, renewable propane, and
renewable naphtha produced at our Montana Renewables facility are distributed into renewable markets in the western half
of North America.
Customers
Specialty Products. We have a diverse customer base for our specialty products. In fiscal year 2023, we sold our
specialty products to approximately 2,200 customers. Many of our customers are long-term customers who use our
products in specialty applications, after an approval process ranging from six months to two years.
Fuel Products. We have a diverse customer base for our fuel products. In fiscal year 2023, we sold our fuel products to
approximately 200 customers. Our diverse customer base includes wholesale distributors and retail chains. We are able to
sell the majority of the fuel products we produce at the Shreveport facility to the local markets of Louisiana, Texas and
Arkansas. We also have the ability to ship additional fuel products from the Shreveport facility to the Midwest region
through the TEPPCO pipeline. The majority of our fuel products produced at our Great Falls specialty asphalt facility are
sold to local markets in Montana and Idaho as well as in Canada. The renewable fuel products produced at our Montana
Renewables facility are distributed into renewable markets in the western half of North America.
Renewable Fuels Products. We sell our renewable fuels products to a relatively small number of investment grade
counterparties under multiyear offtake agreements for onward distribution into renewable markets in the western half of
North America. The robust demand during the placement process for the renewable fuels produced at our Montana
Renewables facility allows us to select an established, integrated customer base for our renewable products.
During the years ended December 31, 2023, 2022 and 2021, we had no customer that represented 10% or greater of
consolidated sales.
Competition
Competition in our markets is from a combination of large, integrated petroleum companies and independent refiners.
Many of our competitors are substantially larger than us and are engaged on a national or international basis in many
segments of the petroleum products business, including exploration and production, refining, transportation and marketing.
These competitors may have greater flexibility in responding to or absorbing market changes occurring in one or more of
these business segments. We distinguish our competitors according to the products that they produce. Set forth below is a
description of our significant competitors according to product category.
Naphthenic Lubricating Oils. Our primary competitors in producing naphthenic lubricating oils include Ergon
Refining, Inc., Cross Oil Refining and Marketing, Inc. and San Joaquin Refining Co., Inc.
Paraffinic Lubricating Oils. Our primary competitors in producing paraffinic lubricating oils include Exxon Mobil
Corporation, Motiva Enterprises, LLC, Phillips 66, HF Sinclair Corporation and Chevron Corporation.
21
Table of Contents
Paraffin Waxes. Our primary competitors in producing paraffin waxes include Exxon Mobil Corporation, HF Sinclair
Corporation, The International Group Inc. and Ergon, Inc..
Solvents. Our primary competitors in producing solvents include CITGO Petroleum Corporation, ExxonMobil
Chemical Company and Total S.A.
Polyol ester Based Specialty Products. Our primary competitors in producing polyol ester-based specialty products
include LANXESS, ExxonMobil Corporation, BASF Corporation, Croda International plc, Nyco Products Corporation and
Zschimmer & Schwartz, Inc.
Packaged and Synthetic Specialty Products. Our primary competitors in retail and commercial packaged and synthetic
specialty products include Exxon Mobil Corporation (Mobil 1), Valvoline, Inc. and other independent lubricant
manufacturers. Our primary competitors in industrial packaged and synthetic specialty products include Exxon Mobil
Corporation, Royal Dutch Shell plc, Fuchs and other independent lubricant manufacturers.
Fuel Products and By-Products. Our primary competitors in producing fuel products in the local markets in which we
operate include Delek US Holdings, Exxon Mobil Corporation, Phillips 66 and Cenex.
Renewable Fuel Products. Our primary competitor in producing renewable fuel products in the local markets in which
we operate is Chevron Corporation.
Our ability to compete effectively depends on our responsiveness to customer needs and our ability to maintain
competitive prices and product and service offerings. We believe that our flexibility and customer responsiveness
differentiates us from many of our larger competitors. However, it is possible that new or existing competitors could enter
the markets in which we operate, which could negatively affect our financial performance.
Governmental Regulation
From time to time, we are a party to certain claims and litigation incidental to our business, including claims made by
various taxation and regulatory authorities, such as the IRS, the EPA and the U.S. Occupational Safety and Health
Administration (“OSHA”), as well as various state environmental regulatory bodies and state and local departments of
revenue, as the result of audits or reviews of our business.
Environmental and Occupational Health and Safety Matters
Environmental
We conduct crude oil and specialty refining, blending and terminal operations, certain activities of which are subject to
stringent federal, regional, state and local laws and regulations governing worker health and safety, the discharge of
materials into the environment and environmental protection. These laws and regulations impose legal standards and
obligations that are applicable to our operations, such as requiring the acquisition of permits to conduct regulated activities,
restricting the manner in which we may release materials into the environment, requiring mitigation of pollutant discharges
from current operations that may include incurring capital expenditures to limit or prevent unauthorized releases from our
equipment and facilities, requiring remedial activities to mitigate pollution from former operations, imposing substantial
liabilities for pollution resulting from our operations, and requiring the application of specific health and safety criteria
addressing worker protection. Failure to comply with these laws and regulations may result in the assessment of sanctions,
including administrative, civil and criminal penalties; the imposition of investigatory, remedial or corrective action
obligations or the incurrence of capital expenditures; the occurrence of restrictions, delays or cancellations in the
permitting, development or expansion of projects; and the issuance of injunctive relief limiting or prohibiting our activities
in a particular area.
Moreover, certain of these laws impose joint and several liability and strict liability for costs required to remediate and
restore sites where petroleum hydrocarbons, wastes or other materials have been disposed of or released and areas where
any such contamination has come to be located. In addition, new environmental and worker safety laws and
22
Table of Contents
regulations, amendment of existing laws and regulations, reinterpretation of legal requirements, increased governmental
enforcement or other developments could significantly increase our operational or compliance expenditures, including as
discussed below in more detail.
Remediation of subsurface contamination continues at certain of our refinery sites and is being overseen by the
appropriate governmental agencies. Based on current investigative and remedial activities, we believe that the cost to
control or remediate the soil and groundwater contamination at these refineries will not have a material adverse effect on
our financial condition. However, such costs are often unpredictable and, therefore, there can be no assurance that the
future costs of these remedial projects will not become material.
Great Falls Refinery
In connection with the acquisition of the Great Falls refinery from Connacher Oil and Gas Limited (“Connacher”), we
became a party to an existing 2002 Refinery Initiative Consent Decree (the “Great Falls Consent Decree”) with the EPA
and the Montana Department of Environmental Quality (the “MDEQ”). The material obligations imposed by the Great
Falls Consent Decree have been completed. On September 27, 2012, Montana Refining Company, Inc., received a final
Corrective Action Order on Consent, replacing the refinery’s previously held hazardous waste permit. This Corrective
Action Order on Consent governs the investigation and remediation of contamination at the Great Falls refinery.
We believe the majority of the impacts related to such contamination at the Great Falls refinery are covered by a
contractual indemnity provided by a subsidiary of HF Sinclair Corporation (“the Seller”), the owner and operator of the
Great Falls refinery prior to its acquisition by Connacher, under an asset purchase agreement between the Seller and
Connacher, pursuant to which Connacher acquired the Great Falls refinery.
Under this asset purchase agreement, the Seller agreed to indemnify Connacher and Montana Refining Company, Inc.,
subject to timely notification, certain conditions and certain monetary baskets and caps, for environmental conditions
arising under the Seller’s ownership and operation of the Great Falls refinery and existing as of the date of sale to
Connacher. During 2014, HF Sinclair Corporation (“Holly”) provided us a notice challenging our position that the Seller is
obligated to indemnify our remediation expenses for environmental conditions to the extent arising under Holly’s
ownership and operation of the refinery and existing as of the date of sale to Connacher. On September 22, 2015, we
initiated a lawsuit against Holly and the Sellers. The court ordered that all of the claims be addressed in arbitration. The
arbitration panel confirmed that the sellers of the Great Falls refinery retained the liability for all pre-closing contamination
with respect to third-party claims indefinitely and with respect to first party claims for which the sellers received notice
within five years after the sale of the refinery, which claims are subject to the requirements otherwise set forth in the asset
purchase agreement. Among other things, the panel denied the Company’s demands for reimbursement for costs already
incurred by the Company prior to the arbitration but left open the Company’s ability to make future claims. The Company
expects that it may incur costs to remediate other environmental conditions at the Great Falls refinery. The Company
currently believes that these other costs it may incur will not be material to its financial position or results of operations.
Air Emissions
Our operations are subject to the federal Clean Air Act, as amended (“CAA”), and comparable state and local laws.
Amendments made to the CAA in 1990 require most industrial operations in the U.S. to incur capital expenditures to meet
the air emission control standards that are developed and implemented by the EPA and state environmental agencies. Under
the CAA, facilities that emit regulated air pollutants are subject to stringent regulations, including requirements to install
various levels of control technology on sources of pollutants. In addition, in recent years, the petroleum refining sector has
become subject to stringent federal regulations that impose maximum achievable control technology (“MACT”) on
refinery equipment emitting certain listed hazardous air pollutants. Some of our facilities have been included within the
categories of sources regulated by MACT rules. Our refining and terminal operations that emit regulated air pollutants are
also subject to air emissions permitting requirements that incorporate stringent control technology requirements for which
we may incur significant capital expenditures. Any renewal of those air emissions permits or a need to modify existing or
obtain new air emissions permits has the potential to delay the development of our projects. We can provide no assurance
that future compliance with existing or any new laws, regulations or permit requirements will not have a material adverse
effect on our business, financial position or results of operations. For example, in 2015, the EPA issued a final rule under
23
Table of Contents
the CAA making the National Ambient Air Quality Standard (“NAAQS”) for ground-level ozone more stringent. Since
that time, the EPA has issued area designations with respect to ground-level ozone and final requirements that apply to
state, local and tribal air agencies for implementing the 2015 NAAQS for ground-level ozone. States are expected to
implement more stringent requirements as a result of this new final rule, which could apply to our operations. EPA retained
the 2015 standards for ground-level ozone after a review completed in 2020. In 2021, EPA announced that it would
reconsider this standard, and in August 2023, EPA announced it would begin an entirely new review of the NAAQS for
ground-level ozone. Also, in 2015, the EPA published a final rule that amended three refinery standards already in effect,
imposing additional or, in some cases, new emission control requirements on subject refineries. The final rule requires,
among other things, the monitoring of air concentrations of benzene around the refinery fence line perimeter and submittal
of the fence line monitoring data to the EPA on a quarterly basis; upgraded emissions controls for storage tanks, including
controls for smaller capacity storage vessels and storage vessels storing materials with lower vapor pressures than
previously regulated; enhanced performance requirements for flares including the use of a minimum of three pollution
prevention measures, continuous monitoring of flares and pressure release devices and analysis and remedy of flare release
events; and compliance with emissions standards for delayed coking units. These final rules and any other future air
emissions rulemakings could impact us by requiring installation of new emission controls on some of our equipment,
resulting in longer permitting timelines, and significantly increasing our capital expenditures and operating costs, which
could adversely impact our business.
From time to time the CAA authorizes the EPA to require modifications in the formulation of the refined
transportation fuel products we manufacture in order to limit the emissions associated with the fuel product’s final use. For
example, in February 2000, the EPA published regulations limiting the sulfur content allowed in gasoline. These
regulations, referred to as “Tier 2 Standards,” required the phase-in of gasoline sulfur standards beginning in 2004, with
special provisions for small refiners and for refiners serving those western U.S. states exhibiting lesser air quality
problems. Similarly, the EPA published regulations that limit the sulfur content of highway diesel beginning in 2006 from
its former level of 500 parts per million (“ppm”) to 15 ppm (the “ultra-low sulfur standard”). Our Shreveport and Great
Falls facilities have implemented the sulfur standard with respect to produced gasoline and produced diesel meeting the
ultra-low sulfur standard.
In 2014, the EPA published more stringent sulfur standards, referred to as “Tier 3 Standards,” including requiring that
motor gasoline will not contain more than 10 ppm of sulfur on an annual average basis by January 1, 2017, except in those
instances where refineries received a “small refinery” exemption, in which event the deadline was extended to January 1,
2020. Our Shreveport and Great Falls facilities are fully compliant with the 10 ppm sulfur standard with respect to
produced gasoline. In addition, we are required to meet the Mobile Source Air Toxics (“MSAT”) II Standards adopted by
the EPA to reduce the benzene content of motor gasoline produced at our facilities and have completed capital projects at
our Shreveport and Great Falls facilities to comply with those fuel quality requirements.
The EPA has issued RFS mandates, requiring refiners such as us to blend renewable fuels into the petroleum fuels they
produce and sell in the United States. We, and other refiners subject to RFS, may meet the RFS requirements by blending
the necessary volumes of renewable transportation fuels produced by us or purchased from third parties. To the extent that
refiners are unable to blend renewable fuels into the products they produce in the quantities required to satisfy their
obligations under the RFS program, those refiners may purchase renewable credits, referred to as RINs, to maintain
compliance. To the extent that we exceed the minimum volumetric requirements for blending of renewable transportation
fuels, we generate our own RINs for which we have the option of retaining the RINs for current or future RFS compliance
or selling those RINs on the open market. We are unable to blend sufficient quantities of ethanol and biodiesel to meet our
requirements and would, therefore, may have to purchase an increasing number of RINs. It is not possible at this time to
predict with certainty what those volumes or costs may be. Existing laws and regulations could change, and the minimum
volumes of renewable fuels that must be blended with refined petroleum fuels may increase. For more information on the
RFS program, our participation in the program and risks associated with the program, see the following risk factor under
Part I, Item 1A of this Form 10-K: “The availability and cost of renewable identification numbers and results of litigation
related to our SRE petitions could have a material adverse effect on our results of operations and financial condition and
our ability to make payments on our debt obligations.”
24
Table of Contents
Climate Change
Climate change continues to attract considerable public, governmental and scientific attention in the U.S. and foreign
countries. As a result, numerous proposals have been made and are likely to continue to be made at the international,
national, regional and state levels of government to monitor and limit emissions of greenhouse gases (“GHG”) or to control
such future emissions. Consequently, it is possible that our operations as well as the operations of our customers may
become subject to a series of regulatory, political, litigation and financial risks associated with the processing of fossil fuels
and/or emissions of GHGs. The adoption of international, federal, regional or state legislation or regulations or other
regulatory initiatives that impose more stringent standards for GHG emissions could require us to incur increased
compliance costs or affect the price or availability of certain of our feedstocks or products.
At the federal level, no comprehensive climate change legislation has been implemented to date. However, the EPA
has determined that GHG emissions present a danger to public health and the environment and has adopted regulations
under existing provisions of the federal CAA that, among other things: establish that Prevention of Significant
Deterioration (“PSD”) construction permit programs and Title V operating permit programs will include reviews for GHG
emissions from certain large stationary sources that are also potential major sources of criteria pollutant emissions; require
the monitoring and annual reporting of GHG emissions from certain petroleum and natural gas system sources; implement
CAA emission new source performance standards (“NSPS”) directing the reduction of methane from certain new, modified
or reconstructed facilities in the oil and natural gas sector; and together with the U.S. Department of Transportation
(“DOT”), implement GHG emissions limits on vehicles manufactured for operation in the United States. Additionally,
various states and groups of states have adopted or are considering adopting legislation, regulations or other regulatory
initiatives that are focused on such areas as GHG cap and trade programs, carbon taxes, reporting and tracking programs,
and restriction of emissions. At the international level, there exists the United Nations-sponsored “Paris Agreement,” which
calls upon nations to limit their GHG emissions through individually determined reduction goals every five years after
2020.
There are also increasing financial risks for fossil fuel producers, as stockholders and bondholders currently invested
in fossil-fuel energy companies may elect in the future to shift some or all of their investments into non-fossil fuel energy
related sectors. Institutional lenders who provide financing to fossil-fuel energy companies are beginning to define
sustainable lending practices and there is the possibility that financial institutions will adopt policies that limit funding for
fossil fuel energy companies, as governmental and nongovernmental institutions focus on addressing climate-related risks
in the financial sector. Although we are not an oil or gas producer, it is possible that limitation of investments in and
financings for fossil fuel energy companies could result in the restriction, delay or cancellation of drilling programs or
development or production activities which could affect the price or availability of certain of our feedstocks.
It should also be noted that some scientists have concluded that increasing concentrations of GHG in the earth’s
atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of
storms, floods and other climatic events; if any such effects were to occur, they could have an adverse effect on our
operations.
Hazardous Substances and Wastes
The Comprehensive Environmental Response, Compensation and Liability Act, as amended (“CERCLA”), also
known as the “Superfund” law, and comparable state laws impose liability without regard to fault or the legality of the
original conduct, on certain classes of persons who are considered to be responsible for the release of a hazardous
substance into the environment. Such classes of persons include the current and past owners and operators of sites where a
hazardous substance was released and companies that disposed or arranged for disposal of hazardous substances at offsite
locations, such as landfills. Under CERCLA, these “responsible persons” may be subject to joint and several, strict liability
for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural
resources, and for the costs of certain health studies. Separately, it is not uncommon for neighboring landowners and other
third parties to file claims under relevant state laws for personal injury and property damage allegedly caused by the release
of hazardous substances into the environment. In the course of our operations, we generate wastes or handle substances that
may be regulated as hazardous substances, and we could become subject to liability under CERCLA and comparable state
laws.
25
Table of Contents
We also may incur liability under the Resource Conservation and Recovery Act, as amended (“RCRA”), and
comparable state laws, which impose requirements related to the handling, storage, treatment and disposal of hazardous
and non-hazardous wastes. In the course of our operations, we generate petroleum product wastes and ordinary industrial
wastes that may be regulated as hazardous wastes. In addition, our operations also generate non-hazardous solid wastes,
which are regulated under RCRA and state laws. Historically, our environmental compliance costs under the existing
requirements of RCRA and similar state and local laws have not had a material adverse effect on our results of operations,
and the cost involved in complying with these requirements is not material.
We currently own or operate, and have in the past owned or operated, properties that for many years have been used
for refining and terminal activities. These properties in the past may have been operated by third parties whose treatment
and disposal or release of petroleum hydrocarbons and wastes were not under our control. Although we used operating and
disposal practices that were standard in the industry at the time, petroleum hydrocarbons or wastes have been released on
or under the properties owned or operated by us. These properties and the materials disposed or released on them may be
subject to CERCLA, RCRA and analogous state laws. Under such laws, we could be required to remove or remediate
previously disposed wastes or property contamination or to perform remedial activities to prevent future contamination.
In addition, new laws and regulations, amendment of existing laws and regulations, reinterpretation of legal
requirements, increased governmental enforcement or other developments could significantly increase our operational or
compliance expenditures.
Water Discharges
The Federal Water Pollution Control Act of 1972, as amended, also known as the federal Clean Water Act, and
analogous state laws impose restrictions and stringent controls on the discharge of pollutants, including oil, into regulated
waters. Such discharges are prohibited, except in accordance with the terms of a permit issued by the EPA or the
appropriate state agencies. Any unpermitted release of pollutants, including crude oil or hydrocarbon specialty oils as well
as refined products, could result in penalties, as well as significant remedial obligations. Spill prevention, control, and
countermeasure requirements of federal laws require appropriate containment berms and similar structures to help prevent
the contamination of navigable waters in the event of a petroleum hydrocarbon tank spill, rupture, or leak. Historically, our
environmental compliance costs under the existing requirements of the federal Clean Water Act and similar state laws have
not had a material adverse effect on our results of operations but these laws and their implementing regulations are subject
to change and there can be no assurance that such future costs will not be material.
The primary federal law for oil spill liability is the Oil Pollution Act of 1990, as amended (“OPA”), which addresses
three principal areas of oil pollution — prevention, containment and cleanup. The OPA applies to vessels, offshore
facilities and onshore facilities, including refineries, terminals and associated facilities that may affect waters of the
U.S. Under the OPA, responsible parties, including owners and operators of onshore facilities, may be subject to oil
cleanup costs and natural resource damages as well as a variety of public and private damages from oil spills. Historically,
our past environmental compliance costs under the existing requirements of the OPA have not had a material adverse effect
on our results of operations but this law and its implementing regulations are subject to change and there can be no
assurance that such future costs will not be material.
Occupational Health and Safety
We are subject to various laws and regulations relating to occupational health and safety, including the federal
Occupational Safety and Health Act, as amended, and comparable state laws. These laws and regulations strictly govern
the protection of the health and safety of employees. In addition, OSHA’s hazard communication standard, the EPA’s
community right-to-know regulations under Title III of CERCLA and similar state statutes require that we maintain
information about hazardous materials used or produced in our operations and provide this information to employees,
contractors, state and local government authorities and customers. We maintain safety and training programs as part of our
ongoing efforts to ensure compliance with applicable laws and regulations. We conduct periodic audits of Process Safety
Management (“PSM”) systems at each of our locations subject to the PSM standard. Our compliance with applicable health
and safety laws and regulations has required, and continues to require, substantial expenditures. Changes in occupational
safety and health laws and regulations or a finding of non-compliance with current laws and regulations could
26
Table of Contents
result in additional capital expenditures or operating expenses, as well as civil penalties and, in the event of a serious injury
or fatality, criminal charges.
Other Environmental and Maintenance Items
We perform preventive and normal maintenance on most, if not all, of our refining and terminal assets and make
repairs and replacements when necessary or appropriate. We also conduct inspections of these assets as required by law or
regulation.
Insurance
Our operations are subject to certain hazards of operations, including fire, explosion and weather-related perils. We
maintain insurance policies, including business interruption insurance for each of our facilities, with insurers in amounts
and with coverage and deductibles that we, with the advice of our insurance advisors and brokers, believe are reasonable
and prudent. We cannot, however, ensure that this insurance will be adequate to protect us from all material expenses
related to potential future claims for personal and property damage or that these levels of insurance will be available in the
future at economical prices. We are not fully insured against certain risks because such risks are not fully insurable,
coverage is unavailable, or premium costs, in our judgment, do not justify such expenditures.
Seasonality
The fuel and fuel related products that we manufacture, including asphalt products, are subject to seasonal demand and
trends. Asphalt demand is generally lower in the first and fourth quarters of the year, as compared to the second and third
quarters, due to the seasonality of the road construction and roofing industries we supply. Demand for gasoline and diesel
is generally higher during the summer months than during the winter months due to seasonal increases in highway traffic
and agricultural activity. In addition, our natural gas costs can be higher during the winter months, as demand for natural
gas as a heating fuel increases during the winter. As a result, our operating results for the first and fourth calendar quarters
may be lower than those for the second and third calendar quarters of each year due to seasonality related to these and other
products that we produce and sell.
Properties
We own and lease the principal properties listed below. The principal properties which we own, as well as others not
listed below, are pledged as collateral under our Collateral Trust Agreement as discussed in Part II, Item 7 “Management’s
Discussion and Analysis of Financial Condition and Results of Operations — Master Derivative Contracts and Collateral
27
Table of Contents
Trust Agreement.” We believe that all properties are suitable for their intended purpose, are being efficiently utilized and
provide adequate capacity to meet demand for the next several years.
Property
Shreveport facility
Great Falls specialty
asphalt facility
Montana Renewables
facility
Princeton facility
Cotton Valley facility
Burnham terminal
Karns City facility
Dickinson facility
Missouri facility
Calumet Packaging facility
Royal Purple facility
Business Segment(s)
Specialty Products and
Solutions
Montana/Renewables
Montana/Renewables
Specialty Products and
Solutions
Specialty Products and
Solutions
Specialty Products and
Solutions
Specialty Products and
Solutions
Specialty Products and
Solutions
Specialty Products and
Solutions
Performance Brands
Performance Brands
Acres
240
65
21
208
77
11
225
28
22
10
20
Owned / Leased
Owned
Owned
Location
Shreveport, Louisiana
Great Falls, Montana
Owned / Leased (1)
Great Falls, Montana
Owned
Princeton, Louisiana
Owned
Cotton Valley, Louisiana
Owned
Burnham, Illinois
Owned
Karns City, Pennsylvania
Owned
Owned
Leased
Owned
Dickinson, Texas
Louisiana, Missouri
Shreveport, Louisiana
Porter, Texas
(1) Montana Renewables LLC, an unrestricted subsidiary of the Company, leases certain property from the Company.
In addition to the items listed above, we lease or own a number of storage tanks, railcars, warehouses, equipment, land,
crude oil loading facilities and precious metals.
Intellectual Property
Our patents relating to our refining operations are not material to us as a whole. Our patents include composition
patents that are integral to certain products in the Specialty Products and Solutions segment. We own, have registered or
have applied for registration of a variety of tradenames, service marks and trademarks for use in our business. The
trademarks, tradenames and design marks under which we conduct our branded business (including Penreco, Orchex,
Royal Purple, Bel-Ray and TruFuel) and other trademarks employed in the marketing of our products are integral to our
marketing operations. We also license intellectual property rights from third parties. We are not aware of any facts as of the
date of this filing which would negatively impact our continuing use of intellectual property or our licensed intellectual
property.
Office Facilities
In addition to our principal properties discussed above, as of December 31, 2023, we were a party to a number of
cancelable and noncancelable leases for certain properties, including our corporate headquarters in Indianapolis, Indiana.
The corporate headquarters lease is for 58,501 square feet of office space. The lease term expires in August 2024. Please
read Note 4 — “Leases” in Part II, Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated
Financial Statements” of this Annual Report for additional information regarding our leases.
While we may require additional office space as our business expands, we believe that our existing facilities are
adequate to meet our needs for the immediate future and that additional facilities will be available on commercially
reasonable terms as needed.
28
Table of Contents
Human Capital Management
We believe that our employees are significant contributors to our success and the future success of our Company,
which depends on our ability to attract, retain and motivate qualified personnel. The skills, experience and industry
knowledge of key employees significantly benefit our operations and performance.
As of February 28, 2024, our general partner employed approximately 1,580 people who provide direct support to our
operations. Of these employees, approximately 600 are covered by collective bargaining agreements.
Employees at the following locations are covered by the following separate collective bargaining agreements:
Facility
Cotton Valley
Princeton
Dickinson
Shreveport
Missouri
Karns City
Great Falls
Union
International Union of Operating Engineers
International Union of Operating Engineers
International Union of Operating Engineers
United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied-
Industrial and Service Workers International Union
United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied-
Industrial and Service Workers International Union
United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied-
Industrial and Service Workers International Union
United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied-
Industrial and Service Workers International Union
Expiration Date
November 19, 2026
August 20, 2024
December 12, 2024
April 30, 2026
April 30, 2025
January 31, 2027
July 31, 2026
None of the employees at the Calumet Packaging facility, the Royal Purple facility or at the Burnham terminal are
covered by collective bargaining agreements. Our general partner considers its employee relations to generally be good,
with no history of work stoppages.
Compensation and Benefits
We have demonstrated a history of investing in our workforce by offering competitive salaries, fair wages and
comprehensive benefits. To foster a stronger sense of ownership and align the interests of our personnel with unitholders,
we provide short-term and long-term incentive programs that include short-term cash bonus awards under our Cash
Incentive Plan and phantom unit awards under our Long-Term Incentive Plan. Awards under these incentive programs are
subject to individual and company performance factors. Furthermore, we offer comprehensive benefits to our full-time
employees working 30 hours or more per week, including long-term disability coverage, comprehensive health insurance,
including vision and dental, employee Health Savings Accounts, including contributions to these accounts by us,
competitive paid time off and sick leave programs, and student loan repayment matching opportunities. In addition, we
provide a 401(k) retirement savings plan to assist our eligible employees in saving for their retirement. To be an employer
of choice and maintain the strength of our workforce, we consistently assess the current business environment and labor
market to refine our compensation and benefits programs and other resources available to our personnel.
Workforce Health and Safety
The safety of our employees is a core tenet of our values, and our safety goal is zero incidents and zero injuries. A
strong safety culture reduces risk, enhances productivity and builds a strong reputation in the communities in which we
operate. We have earned a reputation as a safe and an environmentally responsible operator through continuous
improvement in our safety performance. This makes us more attractive for current and new employees.
We invest in safety training and coaching, promote risk assessments and encourage visible safety leadership.
Employees are empowered and expected to stop or refuse to perform a job if it is not safe or cannot be performed safely.
We sponsor emergency preparedness programs, conduct regular audits to assess our performance and celebrate our
successes in which we acknowledge employees and contractors alike who have exhibited strong safety leadership during
29
Table of Contents
the course of the year. These many efforts combine to create a culture of safety throughout the company and provide a
positive influence on our contractor community.
Diversity, Inclusion and Workplace Culture
We are committed to maintaining a culture where diversity and inclusion are core philosophies across our operations,
including, but not limited to, our decisions around recruitment, promotion, transfer, leaves of absence, compensation,
opportunities for career support and advancement, job performance and other relevant job-related criteria. We embrace an
approach to hiring and advancement that considers the value of diversity, and we are also committed to making
opportunities for development and progress available to all employees so their talents can be fully developed to maximize
our and their success. We believe that creating an environment that cultivates a sense of belonging requires encouraging
employees to continue to educate themselves about each other’s experiences, and we strive to promote the respect and
dignity of all persons. We also believe it is important that we foster education, communication and understanding about
diversity, inclusion and belonging.
Address, Internet Website and Availability of Public Filings
Our principal executive offices are located at 2780 Waterfront Parkway East Drive, Indianapolis, Indiana, 46214 and
our telephone number is (317) 328-5660. Our website is located at www.calumet.com.
Our Securities and Exchange Commission (“SEC”) filings are available on our website as soon as reasonably
practicable after we electronically file such material with, or furnish such material to, the SEC. We make available, free of
charge on our website, our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on
Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). These documents are located on our website at www.calumet.com by
selecting the “Investor Relations” link, and then selecting the “Financial Reporting” link and then selecting the “SEC
Filings” link. We also make available, free of charge on our website, our charters for the Audit and Finance Committee,
Compensation Committee, and Conflicts Committee, and our Related Party Transactions Policy and Code of Business
Conduct and Ethics. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K relating to amendments
to or waivers from any provision of the Code of Business Conduct and Ethics applicable to our executive officers and
directors by posting such information on our website. These documents are located on our website at www.calumet.com by
selecting the “Investor Relations” link, then selecting the “Governance” link, and then selecting “Governance Documents.”
All reports and documents filed with the SEC are also available via the SEC website, www.sec.gov.
The above information is available to anyone who requests it and is free of charge either in print from our website or
upon request by contacting Investor Relations using the contact information listed above. Information on our website is not
incorporated into this Annual Report or our other securities filings and is not a part of them.
Item 1A. Risk Factors
An investment in our common units involves a significant degree of risk. Before you invest in our common units, you
should carefully consider the risk factors discussed or referenced below. If any of the risks discussed below were actually
to occur, our business, financial position or results of operations could be materially adversely affected.
30
Table of Contents
Risks Related to our Business
Results of Operations and Financial Condition
Our business depends on supply and demand fundamentals, which can be adversely affected by numerous
macroeconomic factors outside of our control and which may in turn impact our operational and financial
performance, including our ability to execute our business strategies in the expected time frame.
Such macroeconomic factors include:
● Reduction in the demand for, and the marketability of, our specialty products due to governmental regulations,
including travel bans and restrictions, quarantines, shelter in place orders, and shutdowns;
● increased volatility in product margins;
● the ability or willingness of our suppliers to provide raw materials, equipment, services or supplies for our
operations or otherwise fulfill their contractual obligations, which could reduce our production levels or otherwise
impact our ability to deliver refined or finished lubricant products timely or at all;
● the ability or willingness of our customers to fulfill their contractual obligations or any material reduction in, or
loss of, orders or revenue from our customers;
● occurrence of operational hazards, including terrorism, cyberattacks or domestic vandalism, as well as
information system failures or communication network disruptions;
● increased cost and reduced availability of capital for growth or maintenance expenditures;
● availability and operability of terminals, tankage and pipelines that store and transport our feedstocks and
products;
● the amount of our borrowing base under our revolving credit facility and our ability to issue letters of credit or the
requirement that we post substantial amounts of credit support;
● the impairment of our long-lived assets or goodwill, which could reduce our earnings;
● the impact of any economic downturn, recession, inflationary pressures, further increases in interest rates or other
disruptions of the U.S. and global economies and financial and commodity markets; and
● political tensions, conflicts and war, such as the ongoing conflicts in Ukraine and the Middle East.
Our business has exposure to some commodities which are volatile, and a reduction in our margins will adversely
affect the amount of cash we will have available to operate our business and for payments of our debt obligations.
In many cases, specialty products are produced from intermediates that ultimately originate from crude oil. Typically,
we enjoy a cost advantage from processing crude oil into intermediates that are used as specialty feedstocks. This process
also creates fuels and other by-products, which carry a margin to crude prices. Typically, the total margin of fuels and other
by-products to crude oil is a positive, but in extreme demand scenarios this cost advantage can turn into a short-term
disadvantage. When the margin between product sales prices and feedstock costs tightens, our earnings, profitability and
cash flows are negatively impacted.
A widely used benchmark to track margins in the fuel products industry is the Gulf Coast 2/1/1 crack spread (“Gulf
Coast crack spread”), which represents the gross margin assuming that two barrels of a benchmark crude oil are converted,
or cracked, into one barrel of gasoline and one barrel of diesel. The Gulf Coast 2/1/1 crack spread ranged from a high of
31
Table of Contents
$50.05 per barrel to a low of $13.98 per barrel during 2023 and averaged $31.64 per barrel during 2023 compared to an
average of $39.96 in 2022.
Our actual fuels product margins may vary from the Gulf Coast crack spread due to the actual crude oil used and
products produced, transportation costs, regional differences, and the timing of the purchase of the feedstock and sale of the
refined products, but we use the Gulf Coast crack spread as an indicator of the volatility and general levels of fuels refining
margins.
Our specialty product margins are influenced by the price of our feedstocks, many of which are commodities. If
feedstock prices increase, our margins would fall unless we are able to pass through these price increases to our customers.
For example, during fiscal year 2022, higher material and feedstock costs adversely impacted our margins for our
Performance Brands segment.
Our hedging activities may not be effective in reducing our exposure to commodity price risk and may reduce our
earnings, profitability and cash flows.
From time to time, we utilize derivative financial instruments related to the future price of crude oil, natural gas and
refined products to manage expected outcomes involving commodity price risk. We typically do not enter into derivative
financial instruments to reduce our exposure to prices of the specialty products we sell as there is no established derivative
market for such products.
We limit our derivative transactions to only a portion of the volume of our expected purchase and sales requirements
and, as a result, we will continue to have direct commodity price exposure to the unhedged portion of our expected
purchase and sales requirements. Thus, we could be exposed to significant increases in commodity prices, which would
increase the cost for a portion of our feedstock purchases.
Our actual future purchase and sales requirements may be significantly higher or lower than we estimate at the time we
enter into derivative transactions for such period. If the actual amount is higher than we estimate, we will have greater
commodity price exposure than we intended. If the actual amount is lower than the amount that is subject to our derivative
financial instruments, we might be forced to satisfy all or a portion of our derivative transactions without the benefit of the
cash flow from our sale or purchase of the underlying physical commodity, which may result in a substantial diminution of
our liquidity. As a result, our hedging activities may not be as effective as we intend in reducing our exposure to price risk.
In addition, our hedging activities are subject to the risks that a counterparty may not perform its obligations under the
applicable derivative instrument, the terms of the derivative instruments are imperfect, and our risk management policies
and procedures are not properly followed. It is possible that the steps we take to monitor our derivative financial
instruments may not detect and prevent violations of our risk management policies and procedures, particularly if
deception or other intentional misconduct is involved.
Decreases in the price of inventory and products may lead to a reduction in the borrowing base under our revolving
credit facility and our ability to issue letters of credit or the requirement that we post substantial amounts of cash
collateral for derivative instruments, which could adversely affect our liquidity, financial condition and our ability to
make payments on our debt obligations.
We rely on borrowings and letters of credit under our revolving credit facility to purchase feedstocks for our facilities,
and to lease certain precious metals for use in our operations. The borrowing base under our revolving credit facility is
determined weekly or monthly depending upon availability levels or the existence of a default or event of default.
Reductions in the value of our inventories as a result of lower crude oil prices could result in a reduction in our borrowing
base, which would reduce the amount of financial resources available to meet our operating requirements. If, under certain
circumstances, our available capacity under our revolving credit facility falls below certain threshold amounts, or a default
or event of default exists, then our cash balances in a dominion account established with the administrative agent will be
applied on a daily basis to our outstanding obligations under our revolving credit facility. In addition, decreases in the price
of crude oil or increases in crack spreads may require us to post substantial amounts of cash collateral to our hedging
counterparties in order to maintain our derivative instruments. If, due to our financial condition or other reasons, the
borrowing base under our revolving credit facility decreases, we are limited in our ability to issue letters of credit or we
32
Table of Contents
are required to post substantial amounts of cash collateral to our hedging counterparties, our liquidity, financial condition
and our ability to make payments on our debt obligations could be materially and adversely affected. Please read Part II,
Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital
Resources — Debt and Credit Facilities” for additional information.
We depend on certain third-party pipelines for transportation of feedstocks and products, and if these pipelines
become unavailable to us, our revenues and cash available for payment of our debt obligations could decline.
Our Shreveport facility is interconnected to a pipeline that supplies a portion of its crude oil and a pipeline that ships a
portion of its refined fuel products to customers, such as pipelines operated by subsidiaries of Enterprise Products
Partners L.P. and Plains. Our Great Falls facility receives crude oil through the Front Range pipeline system via the Bow
River Pipeline in Canada. Since we do not own or operate any of these pipelines, their continuing operation is not within
our control.
The unavailability of any of these third-party pipelines for the transportation of crude oil or our refined fuel products,
because of acts of God, accidents, earthquakes or hurricanes, government regulation, terrorism or other third-party events,
could lead to disputes or litigation with certain of our suppliers or a decline in our sales, net income and cash available for
payments of our debt obligations.
The price volatility of utility services may result in decreases in our earnings, profitability and cash flows.
The volatility in costs of natural gas and other utility services, principally electricity, used by our facilities and other
operations affect our net income and cash flows. Natural gas and utility prices are affected by factors outside of our control,
such as supply and demand in both local and regional markets. Natural gas prices have historically been volatile.
For example, daily prices for natural gas as reported on the NYMEX ranged between $4.17 and $1.99 per million
British thermal unit (“MMBtu”) in 2023, and between $9.68 and $3.72 per MMBtu in 2022. Typically, electricity prices
fluctuate with natural gas prices. Future increases in natural gas and utility prices may have a material adverse effect on our
results of operations. However, international natural gas prices have been more volatile, and more expensive, than domestic
prices, which can provide a competitive advantage to domestic plants. This dynamic means that market product prices may
increase more than our utility costs, creating higher margins when natural gas and utility costs increase less than
international competitors’ utility prices. Natural gas and utility costs constituted approximately 15.4% and 14.4% of our
total operating expenses included in cost of sales for the years ended December 31, 2023 and 2022, respectively. As prices
and industry competitive dynamics change, it could adversely affect our profitability and the amount of cash available for
payments of our debt obligations.
Our facilities incur operating hazards, and the potential limits on insurance coverage could expose us to potentially
significant liability costs.
Our facilities are subject to certain operating hazards, and our cash flow from those operations could decline if any of
our facilities experience a major accident, pipeline rupture or spill, explosion or fire, is damaged by severe weather or other
natural disaster, or otherwise is forced to curtail its operations or shut down. These operating hazards could result in
substantial losses due to personal injury and/or loss of life, severe damage to and destruction of property and equipment,
and pollution or other environmental damage. One or more of these developments may result in significant curtailment or
suspension of our related operations.
Although we maintain insurance policies, including personal and property damage and business interruption insurance
for each of our facilities, we cannot ensure that this insurance will be adequate to protect us from all material expenses
related to potential future claims for personal and property damage or significant interruption of operations. Our business
interruption insurance will not apply unless a business interruption exceeds 60 days. Furthermore, we may be unable to
maintain or obtain insurance of the type and amount we desire at reasonable rates. As a result of market conditions,
premiums and deductibles for certain of our insurance policies have increased and could escalate further. In some
instances, certain insurance could become unavailable or available only for reduced amounts of coverage. In addition, we
are not fully insured against all risks incident to our business because certain risks are not fully insurable, coverage is
unavailable,
33
Table of Contents
or premium costs, in our judgment, do not justify such expenditures. For example, we are not insured for all environmental
liabilities, including, but not limited to, product spills and other releases at all of our facilities. If we were to incur a
significant liability for which we are not insured or fully insured, it could affect our financial condition and diminish our
ability to make payments of our debt obligations.
Downtime for maintenance at our refineries and facilities will reduce our revenues and could limit our ability to
make payments of our debt obligations.
Our facilities consist of many processing units, a number of which have been in operation for extended periods of
time. One or more of the units have in the past required, and may in the future require, additional unscheduled downtime
for unanticipated maintenance or repairs that are more frequent than our scheduled turnaround for each unit every one to
five years. Scheduled and unscheduled maintenance reduce our revenues and increase our operating expenses during the
period of time that our processing units are not operating and could limit our ability to make payments of our debt
obligations.
An impairment of our long-lived assets or goodwill could reduce our earnings or negatively impact our financial
condition and results of operations.
We continually monitor our business, the business environment and the performance of our operations to determine if
an event has occurred that indicates that a long-lived asset or goodwill may be impaired. If an event occurs, which is a
determination that involves judgment, we may be required to utilize cash flow projections to assess our ability to recover
the carrying value based on the ability to generate future cash flows. Our long-lived assets and goodwill impairment
analyses are sensitive to changes in key assumptions used in our analysis, such as expected future cash flows, the degree of
volatility in equity and debt markets and our unit price. If the assumptions used in our analysis are not realized, it is
possible a material impairment charge may need to be recorded in the future.
We cannot accurately predict the amount and timing of any impairment of long-lived assets or goodwill. Further, as we
continue to develop our strategy regarding certain of our non-core assets, we will need to continue to evaluate the carrying
value of those assets. Any additional impairment charges that we may take in the future could be material to our results of
operations and financial condition.
Competition in our industry is intense, and an increase in competition in the markets in which we sell our products
could adversely affect our earnings and profitability.
We compete with a broad range of companies within our industry. Because of some of our competitors’ geographic
diversity, larger and more complex refineries, integrated operations and greater resources, some of our competitors may be
better able to withstand volatile market conditions, to obtain crude oil in time of shortage and to bear the economic risks
inherent in all areas of the refining industry.
In addition, we compete with other industries that provide alternative means to satisfy the energy and fuel
requirements of our industrial, commercial and individual consumers. The more successful these alternatives become as a
result of governmental regulations, technological advances, consumer demand, improved pricing or otherwise, the greater
the impact on pricing and demand for our products and our profitability. There are presently significant governmental and
consumer pressures to increase the use of alternative fuels in the United States. While in some areas of our business these
pressures are helpful, in other areas they can pose a significant risk.
We depend on unionized labor for the operation of many of our facilities. Any work stoppages or labor disturbances
at these facilities could disrupt our business and negatively impact our financial condition and results of operations.
Substantially all of our operating personnel at our Shreveport, Great Falls, Princeton, Cotton Valley, Karns City,
Dickinson and Missouri facilities are employed under collective bargaining agreements. If we are unable to renegotiate
these agreements as they expire, any work stoppages or other labor disturbances at these facilities could have an adverse
effect on our business and impact our ability to make payments of our debt obligations. In addition, employees who are not
currently represented by labor unions may seek union representation in the future, and any renegotiation of current
34
Table of Contents
collective bargaining agreements may result in terms that are less favorable to us. Furthermore, our actions or responses to
any such negotiations, labor disputes, strikes or work stoppages could negatively impact how we are perceived and the
impact on our reputation could have adverse effects on our business.
Our method of valuing inventory may result in decreases in net income.
The nature of our business requires us to maintain substantial quantities of inventories. Some of our inventory is
commodity based, providing us little control over the changing market value of these inventories. Because our inventory is
valued at the lower of cost or market (“LCM”) value, if the market value of our inventory were to decline to an amount less
than our cost, we would record a write-down of inventory and a non-cash charge to cost of sales. In periods of decreasing
crude oil or refined product prices, our inventory valuation methodology has resulted in and may in the future result in
decreases in net income.
We depend on key personnel for the success of our business and the loss of those persons could adversely affect our
business and our ability to make payments of our debt obligations.
The loss of the services of any member of senior management or key employee could have an adverse effect on our
business and reduce our ability to make payments of our debt obligations. Our success in hiring, attracting and retaining
senior management and other experienced and highly skilled employees will depend in part on our ability to provide
competitive compensation packages and a high-quality work environment and maintain a desirable corporate culture. We
may not be able to locate or employ on acceptable terms qualified replacements for senior management or other key
employees if their services were no longer available. We do not maintain any key-man life insurance.
We are subject to cybersecurity risks and other cyber incidents resulting in disruption.
Threats to information technology systems associated with cybersecurity risks and cyber incidents or attacks continue
to grow. We depend on information technology systems to run our business. In addition, our use of the internet, cloud
services and other public networks, exposes our business and that of other third parties with whom we do business to
cybersecurity threats. Geopolitical tensions or conflicts, such as ongoing conflict in Ukraine and the Middle East, may
further heighten the risk of cybersecurity incidents. Such incidents could lead to unauthorized access to data and systems,
intentional or inadvertent releases of confidential information, including personally identifiable information, corruption of
data and disruption of critical systems and operations. Despite the security measures we have in place and any additional
measures we may implement in the future, our facilities and systems, and those of our third-party service providers, could
be vulnerable to security breaches, computer viruses, ransomware attacks, phishing attacks, inadvertent data disclosures,
programming errors, human errors or malfeasance, acts of vandalism or other events. Moreover, these threats are constantly
evolving, thereby making it more difficult to successfully defend against them or to implement adequate preventive
measures. We may not have the current capability to detect certain vulnerabilities, or may not detect them in a timely
manner, which may allow those vulnerabilities to persist in our systems over long periods of time. During 2021, we
experienced a minor cybersecurity incident at one of our operating locations, which was effectively contained. Any
disruption of our systems or cybersecurity incident or event resulting in the misappropriation, loss or other unauthorized
disclosure of confidential information, whether by us directly or our third-party service providers, could damage our
reputation, expose us to the risks of litigation and liability or regulatory fines, penalties or intervention, disrupt our
business, require us to incur significant costs to remediate damage resulting from the incident or improve our information
technology systems, or otherwise affect our results of operations, which could materially and adversely affect our business,
results of operations or financial condition. In addition, as cybersecurity incidents continue to evolve in magnitude and
sophistication, and our reliance on digital technologies continues to grow, we have expended and expect to continue to
expend additional resources in order to continue to enhance our cybersecurity measures and to investigate and remediate
any digital systems, related infrastructure, technologies and network security vulnerabilities. While we carry cyber
insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred, that insurance will
continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to
any future claim.
We are also subject to an evolving landscape of laws and regulations in a range of jurisdictions governing the handling
of information and the operation of information systems, including those relating to privacy, cybersecurity and data
35
Table of Contents
protection. Costs associated with compliance with these laws and regulations may increase over time and failure to comply
with these obligations could result in investigations, litigation, fines, penalties, judgments or other proceedings which could
have a material impact on our financial results.
We identified a material weakness in our internal control over financial reporting, and if we are unable to
remediate this material weakness, or if we experience additional material weaknesses or other deficiencies in the future
or otherwise fail to maintain an effective system of internal control, we may not be able to accurately and timely report
our financial results.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such
that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements
may not be prevented or detected on a timely basis. In connection with the preparation of the Company’s consolidated
financial statements for the fiscal year ended December 31, 2023, we identified a material weakness in the design of our
controls within the financial statement close process associated with the subsequent accounting for and measurement of
redeemable noncontrolling interests. The material weakness also existed as of December 31, 2022. Additionally, as
previously disclosed, we previously identified a material weakness in internal control over financial reporting that pertains
to the untimely and insufficient operation of controls in the financial statement close process, including lack of timely
account reconciliation, analysis and review related to all financial statement accounts, which was remediated as of
December 31, 2021.
Remediation efforts place a significant burden on management and add increased pressure to our financial resources
and processes. As a result, we may not be successful in making the improvements necessary to remediate the material
weakness identified by management, be able to do so in a timely manner, or be able to identify and remediate additional
control deficiencies, including material weaknesses, in the future. Additionally, completion of remediation does not provide
assurance that our remediation or other controls will continue to operate properly or remain adequate and we cannot assure
you that we will not identify additional material weaknesses in our internal control over financial reporting in the future.
If we are unable to successfully remediate our existing material weakness or any future material weaknesses or other
deficiencies in our internal control over financial reporting or disclosure controls and procedures, our ability to record,
process and report financial information accurately, and to prepare financial statements within the time periods specified by
the rules and forms of the SEC, could be adversely affected. This failure could negatively affect the market price and
trading liquidity of our common units, cause investors to lose confidence in our reported financial information, subject us
to civil and criminal investigations and penalties and generally materially and adversely impact our business and financial
condition.
We reached a determination to restate certain of our previously issued consolidated financial statements, which
resulted in unanticipated costs and may affect investor confidence and raise reputational issues.
As discussed in Part II, Item 8 “Financial Statements and Supplementary Data — “Notes to Consolidated Financial
Statements,” we reached a determination to restate our consolidated financial statements and related disclosures for the
year ended December 31, 2022 and for the periods ended March 31, 2023, June 30, 2023, and September 30, 2023,
following the identification of an error in the presentation of net income (loss) to partners arising from the misallocation of
net loss from MRHL to noncontrolling interest. The restatement also included other immaterial adjustments to historical
periods. As a result, we have incurred unanticipated costs for accounting and legal fees in connection with or related to the
restatement, and have become subject to a number of additional risks and uncertainties, which may affect investor
confidence in the accuracy of our financial disclosures and may raise reputational issues for our business.
36
Table of Contents
Customers and Suppliers
Our arrangement with J. Aron and Wells Fargo expose us to J. Aron and/or Wells Fargo-related credit and
performance risk as well as potential refinancing risks.
In October 2023, MRL and Wells Fargo Commodities, LLC (“Wells Fargo”) entered into (i) an ISDA 2002 Master
Agreement (together with a related schedule and credit support annex, the “Master Agreement”) and a Renewable Fuel and
Feedstock Repurchase Master Confirmation (together with the Master Agreement, the “MRL Inventory Financing
Agreement”). Pursuant to the MRL Inventory Financing Agreement, Wells Fargo agreed to, among other things, (a)
purchase from MRL renewable feedstocks and finished products located at MRL’s Great Falls, Montana refinery, subject to
MRL’s repurchase obligations with respect thereto, and (b) provide certain financial accommodations to MRL secured by
liens on certain renewable feedstocks and finished products owned by MRL.
In January 2024, the Partnership and J. Aron & Company (“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 Partnership, or extend to the Partnership, financial accommodations secured by crude oil and finished products
located at Calumet Shreveport’s refinery and from time to time, up to maximum volumes specified for crude oil and
categories of finished products, subject to the Partnership’s repurchase obligations with respect thereto.
When we executed the Shreveport Supply and Offtake Agreement, the inventories associated with such agreement
were taken out of our revolving credit facility borrowing base. The inventories associated with the MRL Inventory
Financing Agreement are also not included in our revolving credit facility borrowing base. Should an early termination
event occur, pursuant to the terms of the Supply and Offtake Agreement, we would need to seek alternative sources of
financing, such as putting the inventory associated with the Shreveport Supply and Offtake Agreement back into our
revolving credit facility, to meet our obligation to repurchase the inventory at then current market prices. In addition, upon
expiration of the Shreveport Supply and Offtake Agreement, the cost of repurchasing the inventory may be at higher prices
than we sold the inventory. If the price of the applicable products is well above the price at which we sold the inventory, we
would have to pay more for the inventory than the price we sold the inventory for. If this is the case at the time of
termination and we are unable to include the inventory associated with the Shreveport Supply and Offtake Agreement in
our borrowing base, we could suffer a significant reduction in liquidity if J. Aron terminates the Shreveport Supply and
Offtake Agreement and we have to repurchase the inventories. Similarly, if the MRL Inventory Financing Agreement is
terminated and MRL is unable to obtain alternative sources of financing, MRL could suffer significant reductions in
liquidity.
Indebtedness; Financing
We have a substantial amount of indebtedness, which may adversely affect our cash flow and our ability to operate
our business.
We had approximately $1.9 billion of outstanding indebtedness as of December 31, 2023, and availability for
borrowings of approximately $241.9 million under our senior secured revolving credit facilities. We have the ability to
incur additional debt, including the ability to borrow up to an aggregate principal amount of $650.0 million at any time,
subject to borrowing base limitations, under our revolving credit facility. A tranche of the revolving credit facility includes
a $50.0 million senior secured first loaned in and last to be repaid out (“FILO”) revolving credit facility. In addition, as of
December 31, 2023, MRL had $13.0 million of outstanding indebtedness under a secured revolving credit facility (the
“MRL revolving credit agreement”) that was entered into on November 2, 2022. Our substantial indebtedness could
adversely affect our results of operations, business and financial condition, and our ability to meet our debt obligations. In
addition, our level of indebtedness could have important consequences to us, including the following:
● our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or
other purposes may be impaired, or such financing may not be available on favorable terms;
37
Table of Contents
● covenants contained in our existing and future credit and debt arrangements will require us to meet financial tests
that may affect our flexibility in planning for and reacting to changes in our business, including possible
acquisition opportunities;
● we will need a substantial portion of our cash flow to make principal and interest payments on our indebtedness,
reducing the funds that would otherwise be available for operations, future business opportunities and payments
of our debt obligations;
● our ability to execute our acquisition and divestiture strategy; and
● our debt level will make us more vulnerable than our competitors with less debt to competitive pressures or a
downturn in our business or the economy in general.
Any of these factors could result in a material adverse effect on our business, financial conditions, results of
operations, business prospects and ability to satisfy our obligations under our senior notes, revolving credit facility and the
MRL revolving credit agreement.
Our ability to service our indebtedness will depend upon, among other things, our future financial and operating
performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other
factors, some of which are beyond our control. If our operating results are not sufficient to service our current or future
indebtedness, we will be forced to take actions such as continuing the suspension of distributions to our unitholders,
reducing or delaying our business activities, acquisitions, investments and/or capital expenditures, selling assets,
restructuring or refinancing our indebtedness, or seeking additional equity capital or bankruptcy protection. We may not be
able to effect any of these remedies on satisfactory terms, or at all. Please read Part II, Item 7 “Management’s Discussion
and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Debt and Credit
Facilities” for additional information regarding our indebtedness.
Our financing arrangements contain operating and financial provisions that restrict our business and financing
activities.
The operating and financial restrictions and covenants in our financing arrangements, including our revolving credit
facility, MRL revolving credit agreement, indentures governing each series of our outstanding senior notes and master
derivative contracts, do currently restrict, and any future financing agreements could restrict, our ability to finance future
operations or capital needs or to engage, expand or pursue our business activities, including restrictions on our ability to,
among other things:
● sell assets, including equity interests in our subsidiaries;
● pay distributions on or redeem or repurchase our units or redeem or repurchase any subordinated debt and, in the
case of the 9.25% Senior Secured First Lien Notes due 2024 (the “2024 Secured Notes”), our unsecured notes;
● incur or guarantee additional indebtedness or issue preferred units;
● create or incur certain liens;
● make certain acquisitions and investments;
● redeem or repay other debt or make other restricted payments;
● enter into transactions with affiliates;
● enter into agreements that restrict distributions or other payments from our restricted subsidiaries to us;
38
Table of Contents
● create unrestricted subsidiaries;
● enter into sale and leaseback transactions;
● enter into a merger, consolidation or transfer or sale of assets, including equity interests in our subsidiaries; and
● engage in certain business activities.
Our revolving credit facility also contains a springing financial covenant which provides that only if the Company’s
availability to borrow loans under the revolving credit facility falls below the sum of (a) the greater of (i) (x) 15% of the
borrowing base then in effect at any time that the refinery asset borrowing base component is greater than $0 and (y) 10%
of the borrowing base then in effect at any time that the refinery asset borrowing base component is equal to $0 and (ii)
$45.0 million (which amount is subject to certain increases) plus (b) the amount of FILO Loans outstanding, then we will
be required to maintain as of the end of each fiscal quarter a Fixed Charge Coverage Ratio (as defined in the Credit
Agreement) of at least 1.0 to 1.0. As of December 31, 2023, the Company was in compliance with all covenants under the
revolving credit facility.
Our existing indebtedness imposes, and any future indebtedness may impose, a number of covenants on us regarding
collateral maintenance and insurance maintenance. As a result of these covenants and restrictions, we will be limited in the
manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance
future operations or capital needs.
Our ability to comply with the covenants and restrictions in our revolving credit facility, the MRL revolving credit
agreement, our secured hedge agreements and the indentures governing our senior notes may be affected by events beyond
our control.
If market or other economic conditions deteriorate, our ability to comply with these covenants and restrictions may be
impaired. A failure to comply with the covenants, ratios or tests in our revolving credit facility, the MRL revolving credit
agreement, our secured hedge agreements, the indentures governing our senior notes or any future indebtedness could
result in an event of default under our revolving credit facility, the MRL revolving credit agreement, our secured hedge
agreements, the indentures governing our senior notes or our future indebtedness, which, if not cured or waived, could have
a material adverse effect on our business, financial condition and results of operations. Among other things, in the event of
any default on our indebtedness, our debt holders and lenders:
● will not be required to lend any additional amounts to us;
● could elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be due
and payable;
● could elect to require that all obligations accrue interest at the default rate, if such rate has not already been
imposed;
● may have the ability to require us to apply all of our available cash to repay these borrowings;
● may prevent us from making debt service payments under our other agreements, any of which could result in an
event of default under our notes; or
● in the event of a default by Calumet or its restricted subsidiaries, could foreclose on the collateral pledged
pursuant to the terms of the revolving credit facility or the indenture and security documents governing the 2024
Secured Notes, respectively, or in the event of a default by Montana Renewables Holdings or MRL, could
foreclose on the accounts receivables and open blenders tax credit refunds securing the MRL revolving credit
agreement.
39
Table of Contents
If our existing indebtedness were to be accelerated, there can be no assurance that we would have, or be able to obtain,
sufficient funds to repay such indebtedness in full. Even if new financing were available, it may be on terms that are less
attractive to us than our then existing credit facilities or it may not be on terms that are acceptable to us. In addition, our
obligations under our revolving credit facility are secured by a first priority lien on our accounts receivable, inventory and
substantially all of our cash; the obligations under the MRL revolving credit agreement are secured by accounts receivables
and open blenders tax credit refunds; our obligations under our secured hedge agreements and the BP Purchase Agreement
are secured by a lien on certain of our real property, plant and equipment, fixtures, intellectual property, certain financial
assets, certain investment property, commercial tort claims, chattel paper, documents, instruments and proceeds of the
forgoing (including proceeds of hedge agreements); and the 2024 Secured Notes are secured by a first-priority lien on all of
the fixed assets that secure our obligations under our secured hedge agreements, and if we are unable to repay our
indebtedness under the revolving credit facility, the MRL revolving credit agreement, the 2024 Secured Notes or satisfy the
payment obligations under our secured hedge agreements or the payment obligations under the BP Purchase Agreement or
obtain waivers of such defaults, then the lenders under our revolving credit facility and under the MRL revolving credit
agreement, the counterparties to such agreements, and the holders of the 2024 Secured Notes could seek to foreclose on
these assets. Please read Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of
Operations — Liquidity and Capital Resources — Debt and Credit Facilities,” “— Short-Term Liquidity,” “— Long-Term
Financing” and “— Master Derivative Contracts and Collateral Trust Agreement” for additional information regarding our
long-term debt.
An increase in interest rates will cause our debt service obligations to increase.
Borrowings under both our revolving credit facility and the MRL revolving credit agreement bear interest at a rate
based on the daily Secured Overnight Financing Rate (“SOFR”). As of December 31, 2023, we had $136.7 million
outstanding borrowings under our revolving credit facility, $29.9 million in standby letters of credit were issued under our
revolving credit facility, and $13.0 million of outstanding borrowings under the MRL revolving credit agreement. The
foregoing interest rates are subject to adjustment based on fluctuations in daily SOFR or the prime rate, as applicable. An
increase in the interest rates associated with our floating-rate debt would increase our debt service costs and affect our
results of operations. In addition, an increase in interest rates could adversely affect our future ability to obtain financing or
materially increase the cost of any additional financing.
A change of control could result in us facing substantial repayment obligations under our revolving credit facility,
our senior notes, our secured hedge agreements, our Supply and Offtake Agreements, the MRL revolving credit
agreement, MRL’s financing arrangements with Stonebriar, and MRL’s term loan credit agreement with I Squared
Capital.
There is no restriction in our partnership agreement on the ability of our general partner to enter into a transaction
which would trigger the change of control provisions of our revolving credit facility agreement, the indentures governing
our senior notes, our Collateral Trust Agreement, our Supply and Offtake Agreements, the MRL revolving credit
agreement, MRL’s financing arrangements with Stonebriar, and MRL’s term loan credit agreement with I Squared Capital.
Certain events relating to a change of control of our general partner, our partnership and our operating subsidiaries would
constitute an event of default under our revolving credit facility, our Collateral Trust Agreement and our Supply and
Offtake Agreements. In addition, an event of default under our revolving credit facility would likely constitute an event of
default under the indentures governing our senior notes, our master derivatives contracts and the BP Purchase Agreement.
As a result, upon a change of control event, we may be required to immediately repay the outstanding principal, any
accrued interest on and any other amounts owed by us under our revolving credit facility, the senior notes and Supply and
Offtake Agreements and the outstanding payment obligations under our master derivatives contracts and the BP Purchase
Agreement. In addition, if a change of control event occurs under the MRL revolving credit agreement, MRL may be
required to immediately repay the outstanding principal, any accrued interest on and any other amounts owed by MRL
under the MRL revolving credit agreement. The source of funds for these repayments would be our available cash or cash
generated from other sources and there can be no assurance that we would have, or be able to obtain, sufficient funds to
repay such indebtedness and other payment obligations in full.
In addition, our obligations under our revolving credit facility are secured by a first-priority lien on our accounts
receivable, inventory and substantially all of our cash; the obligations under the MRL revolving credit agreement are
40
Table of Contents
secured by accounts receivables and open blenders tax credit refunds; our 2024 Secured Notes are secured by a first-
priority lien on all of the fixed assets that secure our obligations under our secured hedge agreements; and our obligations
under our master derivatives contracts and the BP Purchase Agreement are secured by a first-priority lien on our and our
subsidiaries’ real property, plant and equipment, fixtures, intellectual property, certain financial assets, certain investment
property, commercial tort claims, chattel paper, documents, instruments and proceeds of the forgoing (including proceeds
of hedge agreements). If we are unable to repay our indebtedness under the revolving credit facility, the 2024 Secured
Notes, or satisfy the payment obligations under our master derivative contracts or the payment obligations under the BP
Purchase Agreement or obtain waivers of such defaults, then the lenders under our revolving credit facility, the holders of
our 2024 Secured Notes, the derivative counterparties under our master derivative contracts and BP, respectively, would
have the right to foreclose on those assets, which would have a material adverse effect on us. Additionally, if we are unable
to repay our indebtedness under the MRL revolving credit agreement, the lenders thereunder would have the right to
foreclose on the accounts receivables and open blenders tax credit refunds securing that facility.
Capital Projects and Future Growth
We make capital expenditures in our facilities to maintain their reliability and efficiency. If we are unable to
complete capital projects at their expected costs and/or in a timely manner, or if the market conditions assumed in our
project economics deteriorate, results of operations or cash flows could be adversely affected.
Delays or cost increases related to the engineering, procurement and construction of new facilities, or improvements
and repairs to our existing facilities and equipment, could have a material adverse effect on our business, financial
condition, results of operations or our ability to make payments on our debt obligations. Such delays or cost increases may
arise as a result of unpredictable factors in the marketplace, many of which are beyond our control, including:
● denial or delay in obtaining regulatory approvals and/or permits;
● changes in government regulations, including environmental and safety regulations;
● unplanned increases in the cost of equipment, materials or labor;
● disruptions in transportation of equipment and materials;
● severe adverse weather conditions, natural disasters or other events (such as equipment malfunctions, explosions,
fires or spills) affecting our facilities, or those of our vendors and suppliers;
● shortages of sufficiently skilled labor, or labor disagreements resulting in unplanned work stoppages;
● market-related increases in a project’s debt or equity financing costs; and/or
● nonperformance or declarations of force majeure by, or disputes with, our vendors, suppliers, contractors or sub-
contractors.
Equipment, even if properly maintained, may require significant capital expenditures and expenses to keep it operating
at optimum efficiency.
Any one or more of these occurrences noted above could have a significant impact on our business or subject us to
significant cost overruns. If we were unable to make up the delays or to recover the related costs, or if market conditions
change, we may not realize the anticipated benefits of our capital projects and it could materially and adversely affect our
financial position, results of operations or cash flows and, as a result, our ability to make payments of our debt obligations.
41
Table of Contents
From time to time, we may seek to divest portions of our business, which could materially affect our results of
operations and result in disruption to other parts of the business.
We may dispose of portions of our current business or assets, based on a variety of factors and strategic considerations,
consistent with our strategy of preserving liquidity and streamlining our business to better focus on the advancement of our
core business. We expect that any potential divestitures of assets will also provide us with cash to reinvest in our business
and repay indebtedness. These dispositions, together with any other future dispositions we make, may involve risks and
uncertainties, including disruption to other parts of our business, potential loss of employees, customers or revenue,
exposure to unanticipated liabilities or result in ongoing obligations and liabilities to us following any such divestiture. In
addition, any such divestitures may not yield the targeted improvements in our business. Any of the foregoing could
adversely affect our financial condition and results of operations or cash flows and, as a result, our ability to make
payments of our debt obligations.
Environmental and Regulatory Matters
We may incur significant environmental remediation costs and liabilities in the operation of our refineries,
facilities, terminals and related facilities.
The operation of our refineries, blending and packaging sites, terminals, and related facilities subject us to the risk of
incurring significant environmental remediation costs and liabilities due to our handling of petroleum hydrocarbons and
wastes or hazardous substances or wastes, because of air emissions and water discharges related to our operations and
activities, and as a result of historical operations and waste disposal practices at our facilities or in connection with our
activities, some of which may have been conducted by prior owners or operators. We could incur significant remedial costs
in the cleanup of any petroleum hydrocarbons or wastes or hazardous substances or wastes that may have been released on,
under or from the properties owned or operated by us. While we believe we have adequately reserved for these
possibilities, such costs and liabilities are difficult to predict and could exceed the amount reserved.
Some environmental laws may impose joint and several, strict liability for releases of petroleum hydrocarbons and
wastes or hazardous substances or wastes, which means in some situations, we could be exposed to liability as a result of
our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or other third
parties. Private parties, including the owners of properties adjacent to our operations and facilities where our petroleum
hydrocarbons or wastes or hazardous substances or wastes are taken for reclamation or disposal, may also have the right to
pursue legal actions to enforce compliance as well as to seek damages for non-compliance with environmental laws and
regulations or for personal injury or property damage. We may not be able to recover some or any of these costs from
insurance or other sources of indemnity. To the extent that the costs associated with meeting any or all of these
requirements are significant and not adequately secured or indemnified for, there could be a material adverse effect on our
business, financial condition and results of operations or cash flows and, as a result, our ability to make payments of our
debt obligations.
We are subject to operational compliance with stringent environmental and occupational health and safety laws
and regulations that may expose us to significant costs and liabilities.
Our refining, blending and packaging site, terminal and related facility operations are subject to stringent federal,
regional, state and local laws and regulations governing worker health and safety, the discharge of materials into the
environment and environmental protection. These laws and regulations impose legal requirements that are applicable to our
operations, including the obligation to obtain permits to conduct regulated activities, the incurrence of significant capital
expenditures for air pollution control equipment to limit or prevent releases of pollutants from our facilities, the
expenditure of significant monies in the application of specific health and safety criteria addressing worker protection, the
requirement to maintain information about hazardous materials used or produced in our operations and to provide this
information to required parties, and the incurrence of significant costs and liabilities for pollution resulting from our
operations or from those of prior owners or operators of our facilities. Numerous federal and state governmental
authorities, such as the U.S. EPA, OSHA and the Louisiana Department of Environmental Quality (“LDEQ”), have the
power to enforce compliance with these laws and regulations and the permits issued under them, often requiring
challenging and costly actions. From time to time, we receive notices of violation, other enforcement proceedings and
regulatory inquiries
42
Table of Contents
from governmental agencies alleging non-compliance with applicable environmental and occupational health and safety
laws and regulations. Failure to comply with such laws and regulations as well as any issued permits and orders may result
in the assessment of administrative, civil, and criminal sanctions, including monetary penalties, the imposition of remedial
or corrective action obligations or the incurrence of capital expenditures, the occurrence of delays or cancellations in the
permitting, development or expansion of projects, litigation, and the issuance of injunctions limiting or preventing some or
all of our operations.
New worker safety and environmental laws and regulations, revised interpretations of such existing laws and
regulations, increased governmental enforcement or other developments could require us to make additional, unforeseen
expenditures. The adoption of more stringent environmental laws or regulations could impact us by requiring installation of
new emission controls on some of our equipment, resulting in longer permitting timelines, and significantly increasing our
capital expenditures and operating costs, which could adversely impact our business, cash flows and results of operation.
Please read Items 1 and 2 “Business and Properties — Environmental and Occupational Health and Safety Matters” for
additional information.
The availability and cost of renewable identification numbers and results of litigation related to our SRE petitions
could have a material adverse effect on our results of operations and financial condition and our ability to make
payments on our debt obligations.
Under the RFS provisions of the Clean Air Act, the EPA sets or adjusts volume mandates for the percentages of four
compliance categories—cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel—to be
blended into gasoline and diesel produced or imported during each calendar year. Most recently, the EPA has established
these volume mandates for RFS program years 2023, 2024 and 2025 under final rules published in June 2023. We, and
other refiners subject to RFS requirements, may meet those requirements by blending the necessary volumes of renewable
transportation fuels into our production. To the extent that refiners cannot blend renewable fuels in the quantities required,
those refiners may purchase renewable credits, referred to as RINs, which are created by blending done by others.
Our Shreveport and Great Falls refineries are normally subject to compliance with the RFS volume mandates. Our
annual 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 approximately 65 million RINs across the four compliance categories.
However, the EPA granted certain of our refineries the small refinery exemption (“SRE”) provided by the RFS in
past years including, most recently, for the 2018 program year. Refineries that receive a SRE are not subject to the RFS
renewable blending requirements for the corresponding calendar year. We have submitted SRE petitions for our Shreveport
and Great Falls refineries for program years 2018, 2019, 2020, 2021, 2022 and 2023. All of these SRE petitions are in
various stages of litigation. For 2018, EPA granted our SREs then later reversed (along with other SRE petitions from other
small refineries) under a “blanket denial” issued in April 2022. The blanket denial included an alternate compliance
approach under which the refineries, in essence, were deemed to have met their 2018 compliance obligations without
tendering additional RINs. EPA’s 2018 alternate compliance approach is being challenged by Growth Energy, which in turn
caused us to appeal the 2018 blanket denial. For 2019 and 2020 our SRE petitions were subject to a separate “blanket
denial” in June 2022 (along with all other SRE petitions from all small refineries for those years) which we have appealed.
For 2021 and 2022 our petitions were denied in July 2023 on the same grounds that EPA applied to our 2019 and 2020
petitions which we have appealed. For 2023 the EPA has not yet acted on our SRE petitions.
Status of Appeals. The U.S. Court of Appeals for the Fifth Circuit in November 2023 found venue to properly reside in
the regional circuit and vacated EPA’s denial of Shreveport refinery’s 2018, 2019 and 2020 SRE petitions on the basis that
EPA’s actions were impermissibly retroactive and arbitrary and capricious and remanded the decision to EPA. Shreveport
refinery’s 2021 and 2022 compliance obligations were stayed on September 14, 2023 while that appeal is pending. The
D.C. Circuit granted a stay relating to the Montana refinery’s 2018, 2019 and 2020 compliance obligations in March 2023,
and a stay of the 2021 and 2022 obligations on October 23, 2023, indicating that the Montana refinery is likely to be
successful on the merits of its appeals which are pending.
We cannot predict the final outcome of these matters or whether they may result in increased RFS program compliance
costs. Moreover, the price of RINs remains subject to extreme volatility, with the potential for significant increases in price
driven by political decisions rather than fundamentals. There also continues to be a shortage of advanced biofuel
43
Table of Contents
production resulting in increased difficulties meeting the original RFS program mandates. Our refineries produce a higher
ratio of diesel than national averages, and since ethanol cannot be blended into diesel we therefore have a more difficult
“compliance pathway” than average. The inability to receive an exemption under the RFS program for one or more of our
refineries; any increase in the final minimum volumes of renewable fuels that must be blended with refined petroleum
fuels; and/or any increase in the cost to acquire RINs may, individually or in the aggregate, have the potential to result in
significant costs in connection with RIN compliance, which costs could be material.
Refer to Note 2 — “Summary of Significant Accounting Policies” under Part II, Item 8 “Financial Statements —
Notes to Consolidated Financial Statements” for further information. Our involvement in such litigation may strain our
resources, increase our costs and distract management, even if we are successful at certain stages. As long as the final
outcome of our SRE petitions remains uncertain, we expect to carry a RINs liability on our consolidated balance sheets and
any changes to such liability will be recognized as a charge or credit to net income (loss). As a result of such charges,
investors may have a negative outlook on our financial position regardless of the actual impact these charges have on our
business. In addition, on January 27, 2022, EPA extended the compliance reporting deadlines and attestation engagement
reporting deadlines for program years 2019, 2020 and 2021, calculated based on the future effective dates of other EPA
RFS rulemakings. Nonetheless, we may in the future become subject to civil penalties if we are not in compliance with the
RFS by such extended compliance deadlines.
Our and our customers’ operations are subject to risks arising out of the threat of climate change, including
regulatory, political, litigation and financial risks, which could result in increased operating and capital costs for our
customers and reduced demand for the products and services we provide.
The threat of climate change continues to attract considerable attention in the United States and foreign countries. As a
result, numerous proposals have been made and are likely to continue to be made at the international, national, regional and
state levels of government to monitor and limit emissions of GHGs as well as to eliminate such future emissions. As a
result, our operations and potentially the operations of our customers are subject to a series of regulatory, political,
physical, litigation and financial risks associated with the production and processing of fossil fuels and emissions of GHGs.
Please see Items 1 and 2 “Business and Properties — Environmental and Occupational Health and Safety Matters” for
more discussion on the threat of climate change and restriction of GHG emissions.
The adoption and implementation of any international, federal, regional or state executive actions, legislation,
regulations or other regulatory initiatives that impose more stringent standards for GHG emissions or put a price on GHG
emissions could result in increased compliance costs, additional operating restrictions or reduced demand for some of our
services and products. Additionally, regulators in Europe and the U.S. have also focused efforts on increased disclosure
related to climate change and mitigation efforts, which may significantly increase compliance burdens and associated
regulatory costs and complexity. Further, increasing concentrations of GHGs in the Earth’s atmosphere may produce
climatic changes that have significant physical effects, such as increased frequency and severity of storms, floods, wildfires
and other climatic events. If any such effects were to occur, they could have an adverse effect on our operations or the
operations of our suppliers and customers and result in more frequent and severe disruptions to our business and those of
our suppliers and customers, increased costs to repair damaged facilities or maintain or resume operations, and increased
insurance costs. Increasing attention to the risks of climate change has also resulted in an increased possibility of lawsuits
or investigations brought by public and private entities against companies in the oil and natural gas sector in connection
with their greenhouse gas emissions. While we do not produce oil or natural gas, if we were to be targeted by any such
litigation or investigations, we may incur liability, which, to the extent that societal pressures or political or other factors
are involved, could be imposed without regard to the causation of or contributions to the asserted damage, or to mitigating
factors.
There are also increasing financial risks if stockholders and bondholders concerned about the potential effects of
climate change may elect in the future to shift some or all of their investments into non-fossil fuel energy related sectors.
Additionally, the lending and investment practices of institutional lenders have been the subject of intensive lobbying
efforts in recent years pressuring such lenders to not to provide funding for oil and natural gas producers. While we do not
produce oil or natural gas, such developments could affect our cost and access to capital. Similarly, political, physical,
financial and litigation risks may result in certain companies engaged in the oil and natural gas production business
restricting, delaying or canceling production activities, incurring liability for infrastructure damages as a result of climatic
44
Table of Contents
changes, or impairing the ability to continue to operate in an economic manner, which also could reduce demand for our
products and services.
The occurrence of one or more of these developments could have a material adverse effect on our business, financial
condition, results of operations and cash flows. Moreover, the increased competitiveness of alternative energy sources
(such as wind, solar, geothermal and tidal), as well as any regulatory or other incentives to conserve energy, could reduce
demand for hydrocarbons and therefore for our products, which could lead to a reduction in our revenues and cash flow
available for payments on our debt obligations. For example, the Inflation Reduction Act of 2022 contains tax inducements
and other provisions that incentivize investment, development, and deployment of alternative energy sources and
technologies.
We could incur substantial costs or disruptions in our business if we cannot obtain or maintain necessary permits
and authorizations or otherwise comply with occupational, environmental and other laws and regulations.
Our operations require numerous permits and authorizations under various occupational, environmental and other laws
and regulations. These authorizations and permits are subject to revocation, renewal or modification and can require
operational changes to limit impacts or potential impacts on the environment and/or the health or safety of workers. New
policy objectives and regulatory initiatives pursued under the Biden Administration as well as changes in leadership or
priorities at the state level may result in more stringent conditions with respect to the acquisition of these authorizations
and permits. Additionally, a violation of an authorization or permit conditions or other legal or regulatory requirements
could result in substantial fines, criminal sanctions, permit revocations, injunctions and/or facility shutdowns. Any or all of
these matters could have a negative effect on our business, results of operations and cash flow available for payments on
our debt obligations.
Subsidiaries
We have a holding company structure in which our subsidiaries conduct our operations and own our operating
assets and our ability to resume distributions to our unitholders and make payments of our debt obligations depends on
the performance of our subsidiaries and their ability to distribute funds to us.
We are a holding company, and our subsidiaries conduct all of our operations and own all of our operating assets. We
have no significant assets other than the equity interests in our subsidiaries. As a result, our ability to make payments of
debt obligations depends on the performance of our subsidiaries and their ability to distribute funds to us. The ability of our
subsidiaries to make distributions to us is restricted by our revolving credit facility and the indentures governing our senior
notes and may be restricted by, among other things, applicable state laws and other laws and regulations. If we are unable
to obtain the funds necessary to distribute cash to our unitholders or make payments of debt obligations, we may be
required to adopt one or more alternatives, such as a refinancing our indebtedness or incurring borrowings under our
revolving credit facility. We cannot assure unitholders that we would be able to refinance our indebtedness or that the terms
on which we could refinance our indebtedness would be favorable.
Risks Related to Montana Renewables
If there is not sufficient demand for renewable energy, if renewable energy projects do not develop or take longer to
develop than we anticipate, or if we do not realize the expected SAF premium, we may be unable to achieve our
investment objectives for MRL, which could have a material adverse impact on our results of operations and financial
condition.
If demand for renewable energy fails to grow sufficiently, we may be unable to achieve our business objectives for
MRL. Many factors will influence the widespread adoption of renewable energy and demand for renewable energy
projects, including:
● cost-effectiveness of renewable energy technologies as compared with conventional and competitive
technologies;
45
Table of Contents
● performance and reliability of renewable energy products as compared with conventional and non-renewable
products;
● fluctuations in economic and market conditions that impact the viability of conventional and competitive
alternative energy sources;
● increases or decreases in the prices of oil, coal and natural gas; and
● availability or effectiveness of government subsidies and incentives.
We also face the risks that SAF cannot generate the premium we currently expect, that a market for SAF does not
evolve as expected and that alternate technologies supersede the expected demand for SAF. Any of these factors may
preclude us from achieving our investment objectives for MRL and, by extension, could have a material adverse impact on
our results of operations and financial condition.
Montana Renewables is subject to numerous operating risks, which could materially adversely impact our results of
operations and financial conditions.
Montana Renewables was formed in 2021 and has a limited operating history, as Montana Renewables has only been
producing renewable fuels since December 2022. The Company is experienced in operating facilities, such as the Montana
Renewables facility, and expects to continue to leverage the Company’s operating experience, as well as its experience in
selling and distributing renewable fuels.
As with any facilities of similar size and nature, the operations of Montana Renewables could be affected by many
factors, including start-up problems, the breakdown or failure of equipment or processes, the performance of Montana
Renewables below expected levels of output or efficiency, renewable feedstock or utility supply disruptions, environmental
proceedings or other litigation that compel cessation of all or a portion of the operations, cyber-security considerations,
increased stringent environmental operating, storage and transportation regulations, and/or, labor disputes. Additionally, the
operations of Montana Renewables could be affected by both natural or man-made catastrophic events beyond our control,
such as fires, earthquakes, floods, severe storms, extreme temperatures, explosions, major accidents, armed conflict,
hostilities, acts of terrorism, health emergencies, cyber and physical attacks and/or similar events.
The occurrence of such events could significantly reduce or eliminate revenues generated by Montana Renewables and
significantly increase the expenses of Montana Renewables, thereby jeopardizing the ability of Montana Renewables to
generate revenues sufficient to pay its outstanding debt obligations. While MRHL will maintain insurance to protect
against certain of these operating risks, the proceeds of such insurance may not be adequate to cover Montana Renewable’s
lost revenues or increased costs. Under such circumstances, no assurance can be given concerning the ability of Montana
Renewables to generate sufficient revenues to make timely payments of its debt obligations.
MRHL may also face civil liabilities or fines in the ordinary course of its business as a result of damages to third
parties. These liabilities may result in MRHL making indemnification payments in accordance with applicable laws to the
extent and in the amount that such indemnification payments are not covered by MRHL’s insurance policies.
MRHL may be unable to attract and retain qualified managers and skilled employees to operate Montana Renewable
facilities efficiently which could adversely affect the operations, cash flows and liquidity of Montana Renewables. The
renewable fuels business requires a highly specialized workforce, and accordingly, it can be difficult to find qualified and
affordable personnel. Additionally, labor expenses may increase as a result of a shortage in the supply of skilled personnel
and MRHL may be forced to incur significant training expenses if unable to hire employees with the requisite skills.
Substantially all operating personnel at Montana Renewables are employed under a collective bargaining agreement. If
MRHL is unable to renegotiate this agreement as it expires, any work stoppages or other labor disturbances could have an
adverse effect on the operations of Montana Renewables and MRHL’s ability to pay outstanding debt obligations.
46
Table of Contents
During the start-up of operation, new facilities like Montana Renewables could be susceptible to operational failures
which may result in temporary maintenance shutdowns. Although the initial commissioning of the facility was successful,
any significant curtailing of production at Montana Renewables may result in materially lower levels of revenues or cash
flows and materially increased expenses for the duration of any downtime and may materially adversely impact the
Company’s results of operations, financial conditions and ability to pay the principal of, redemption premium, if any,
and/or interest on outstanding debt obligations.
Montana Renewables is subject to a number of statutes and regulations that could have an adverse effect on
Montana Renewables’ operations.
We are required to comply with a number of statutes and regulations relating to the environment and the safety and
health of our employees and the public during the operation of our Montana Renewables facility, such as: limits on noise
emissions from the Montana Renewables facility; safety and health standards, practices and procedures applicable to the
operation of the Montana Renewables facility; environmental protection requirements, including standards and limits
relating to the discharge of pollutants and waste to the air, water and land; and employment, hiring and anti-discrimination
requirements relating to the operation of the Montana Renewables facility.
Federal, state, and local laws and regulations protecting the environment require us to obtain permits and other
authorizations to operate the Montana Renewables facility. Changes in such laws could materially and adversely affect our
costs. Permits that have been obtained or will be obtained may be subject to challenge in public proceedings, including the
filing of administrative or judicial appeals contesting the validity or the terms of the permits. If such permits are
challenged, the operation of the Montana Renewables facility may be delayed or prohibited, and elements of our Montana
Renewables facility may need to be removed, redesigned or replaced.
All permits and approvals issued by governmental agencies expire and must be renewed if the permitted activity is not
complete. Renewals of operating permits require ongoing compliance and may result in new requirements being imposed
by governmental agencies. There is no assurance that required renewals will be obtained when required to continue
operation or that the Montana Renewables facility will be able to satisfy the requirements for renewal or continued
operation. The inability to maintain required permits in force and effect, and their amendment, suspension or revocation
would have adverse effects on the Montana Renewables facility’s operations and our financial performance.
A significant component of our product margin consists of a variety of government subsidies and incentives, and
any changes in law that eliminate or reduce these subsidies and incentives would have a material adverse impact on our
results of operations and financial condition.
As with many producers, our margins are supported by federal, state and provincial government programs that
incentivize the production, blending and use of renewable and low-carbon fuels. While the general trend over time has
been for these programs to expand both in number and scope, such continued growth is not guaranteed and is subject to
potential changes in political and public support. For example, since the enactment of the U.S. blender’s tax credit (Section
40A of the IRC) in 2004 with specified sunset dates, there have been several occasions where the renewal and extension of
the credit has been in doubt, only for it to be renewed and extended close to (and in some cases, after) expiration. Many
factors affect political and public support, which cannot be fully evaluated or predicted at this time.
In addition, programs that enjoy political and public support may nonetheless evolve over time in ways that may limit
opportunities for our renewable transportation fuel. For example, in September 2020, California Governor Gavin Newsom
issued Executive Order N-79-20, establishing goals of 100% of new passenger vehicle sales in-state to be zero-emission by
2035, and all heavy-duty truck sales to be zero-emission by 2045. The order further directs the California Air Resources
Board to develop regulations to achieve these goals. While the precise nature of future regulations cannot be predicted, it is
possible that incentives for renewable fuel products may be scaled back or more stringent emission reduction standards
may be adopted to facilitate the transition to zero-emission vehicles. These and similar initiatives reflect an ever evolving
legal and regulatory landscape, which introduces uncertainty in evaluating future governmental support for our products.
Certain regulatory programs feature a periodic update process. The U.S. Renewable Fuel Standard program, for
example, has historically required EPA to set RVOs each year, in light of volumes of four categories of renewable fuels
47
Table of Contents
established by Congress in the Clean Air Act. More recently, EPA promulgated regulations setting RVOs for a three-year
period (2023, 2024 and 2025). The periodic update process featured in the RFS and similar programs nonetheless
introduces a degree of uncertainty in demand for our products on a yearly basis.
Transactions between the Company and MRL present possible conflicts of interest that could have an adverse effect on
the Company if they are not managed appropriately.
MRHL has no assets other than its equity interests in MRL. Several of the Company’s affiliates have been or are
expected to be involved with the operation of Montana Renewables, including the sales and marketing of the renewable
fuels produced by Montana Renewables. The support and experience of the Company’s affiliates are expected to be
important to the success of Montana Renewables. However, no affiliates of the Company are obligated to make any
payments with respect to outstanding debt obligations of MRHL or MRL and any such transactions between the Company
and MRHL or MRL present possible conflicts of interest that could have an adverse effect on the Company if they are not
managed appropriately.
Montana Renewables depends on the Company to provide MRL with services necessary to operate its business. If
the Company were unable or unwilling to provide these services, it would result in a disruption in MRL’s business that
could have an adverse effect on its financial position, financial results and cash flow.
MRL does not directly employ directors, officers or employees. Pursuant to the master services agreement (the
“MSA”) with a wholly-owned subsidiary of the Company, all of MRL’s executive management personnel are employees of
our general partner, and MRL uses a significant number of the Company’s employees to operate the Montana Renewables
facility and provide MRL with general and administrative services as well as services related to information technology,
cybersecurity and data privacy. The failure of the Company to provide accurate and timely service may adversely impact
MRL’s business operations. In addition, if the Company were to become unable or unwilling to provide such services,
MRL would need to develop these services internally or arrange for the services from another service provider, which may
not be possible and which could take time and cause MRL to experience significant interruptions or incur additional costs.
Developing the capabilities internally or by retaining another service provider could have an adverse effect on MRL’s
business, and the services, when developed or retained, may not be of the same quality as provided to us by the Company.
For example, if MRL is not able to obtain adequate information technology and cybersecurity services, MRL may be at a
higher risk for cyberattacks and other interruptions or failures. Additionally, if the MSA were to terminate, MRL would
lose its key personnel.
Increases to the cost of transportation services or equipment related to our feedstock materials and renewable
transportation fuels could materially and adversely affect our sales revenues and cost of operations.
We rely on railroad and trucking companies to transport renewable feedstock materials to the Montana Renewables
facility, and to deliver renewable transportation fuels to our customers. These transportation services are subject to various
hazards, including extreme weather conditions, floods, droughts, work stoppages, delays, accidents such as spills and
derailments and other accidents and other operating hazards. Increasing climate risk may exacerbate weather conditions so
as to materially affect the economics of traditional transportation methods. These transportation operations, equipment and
services are also subject to environmental, safety, and regulatory oversight. Due to concerns related to accidents, local and
national governments could implement new regulations affecting the transportation of our renewable feedstock materials or
renewable transportation fuels. We may be unable to ship the renewable transportation fuels or obtain renewable feedstock
materials as a result of these transportation companies’ failure to operate properly, or if new and more stringent regulatory
requirements are implemented affecting transportation operations or equipment. If there are significant increases in the cost
of such transportation services or equipment, or changes in such costs relative to transportation costs incurred by
competitors, our sales revenues and/or cost of operations could be materially and adversely affected.
48
Table of Contents
Montana Renewable’s operations are dependent on the use of intellectual property licensed to MRL by third parties,
and if MRL fails to comply with our obligations under such license agreements, we may be required to pay damages,
and we could lose license rights that are critical to our business.
Montana Renewable’s operations are dependent upon the use of intellectual property licensed to us by third parties,
and in the future, MRL may enter into additional agreements for certain other intellectual property or technologies. If MRL
fails to comply with terms of its license agreements related to such intellectual property or other technologies, the
applicable licensor may have the right to terminate its license or MRL may be required to pay damages. Termination by the
licensor may cause MRL to lose valuable rights and could prevent MRL from operating the Montana Renewables facility
or otherwise operating its business. Our business may suffer if any current or future licenses terminate, if the licensors fail
to abide by the terms of the license, if the licensors fail to enforce licensed patents against infringing third parties, if the
licensed intellectual property rights are found to be invalid or unenforceable, or if we are unable to enter into necessary
licenses on acceptable terms. In addition, our rights to the licensed intellectual property are licensed to us on a non-
exclusive basis. The owners of these non-exclusively licensed technologies are therefore free to license them to third
parties, including our competitors, on terms that may be superior to those offered to us, which could place us at a
competitive disadvantage. Moreover, our licensors may own or control intellectual property that has not been licensed to us
and, as a result, we may be subject to claims, regardless of their merit, that we are infringing, misappropriating or
otherwise violating the licensor’s rights. In addition, the agreements under which we license intellectual property or
technology from third parties are generally complex, and certain provisions in such agreements may be susceptible to
multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we
believe to be the scope of our rights to the relevant licensed intellectual property or technology or increase what we believe
to be our financial or other obligations under the relevant agreement. Failure to obtain, maintain or renew these licenses,
along with any of the foregoing, could have a material adverse effect on our ability to operate the Montana Renewables
facility.
The production of renewable fuels is a growing industry and we are expected to encounter significant competition
in the marketplace.
The production of renewable fuels is a growing industry and we are expected to encounter significant competition in
the marketplace. Emerging trends that develop as industry production of renewable fuels increases may adversely affect
our business, financial condition, results of operations and prospects. We have encountered and will continue to encounter
risks and difficulties frequently experienced by growing companies in rapidly changing industries, including unpredictable
and volatile revenues and increased expenses as our business continues to grow. In addition, new technologies or methods
of operation may be developed that improve the quality of the fuel, increase production, or decrease the costs of
production.
Risks Related to the Corporate Conversion
The Corporate Conversion is subject to conditions, including some conditions that may not be satisfied on a timely
basis, if at all. Failure to complete the Corporate Conversion, or significant delays in completing the Corporate
Conversion, could negatively affect our business and financial results and the price of our common units or, following
the consummation of the Corporate Conversion, future business and financial results and the price of the common
stock.
The consummation of the Corporate Conversion is subject to a number of conditions. The consummation of the
Corporate Conversion is not assured and is subject to risks, including the risk that the unitholder approval of the transaction
is not obtained. Further, the Corporate Conversion may not be consummated even if such unitholder approval is obtained.
The Restructuring Agreement contains conditions, some of which are beyond the parties’ control, that, if not satisfied or
waived, may prevent, delay or otherwise result in the Corporate Conversion not being consummated.
If the Corporate Conversion is not completed, or if there are significant delays in completing the Corporate
Conversion, our future business and financial results and the trading price of our common units could be negatively
affected or, following the consummation of the Corporation Reorganization, our future business and financial results and
the price of the common stock could be negatively affected, and the parties will be subject to several risks, including the
following (i) there may be negative reactions from the financial markets due to the fact that the current price of the
common
49
Table of Contents
units may reflect a market assumption that the Corporate Conversion will be completed and (ii) the attention of
management will have been diverted to the Corporate Conversion rather than our own operations and pursuit of other
opportunities that could have been beneficial to our business.
Risks Related to Our Partnership Structure
Cash Distributions to Unitholders
We may not have sufficient cash from operations, following the establishment of cash reserves and payment of fees
and expenses, including cost reimbursements to our general partner, to enable us to resume paying distributions to our
unitholders or restore distributions to previous levels.
In April 2016, we announced suspension of our quarterly cash distribution to unitholders and have not paid any
quarterly distributions since. We may not have sufficient available cash from operations in the future to enable us to resume
payment of a distribution to unitholders. The amount of cash we can distribute on our common units principally depends
upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among
other things:
● overall demand for specialty products;
● the level of foreign and domestic production of crude oil and refined products;
● our ability to produce fuel products and specialty products that meet our customers’ unique and precise
specifications;
● the marketing of alternative and competing products;
● the extent of government regulation;
● results of our hedging activities;
● global or national health concerns; and
● overall economic and local market conditions.
In addition, the actual amount of cash we have available for distribution will depend on other factors, some of which
are beyond our control, including:
● the level of capital expenditures we make, including those for acquisitions, if any;
● our debt service requirements;
● fluctuations in our working capital needs;
● our ability to borrow funds and access capital markets;
● restrictions on distributions and on our ability to make working capital borrowings for distributions contained in
our debt instruments; and
● the amount of cash reserves established by our general partner for the proper conduct of our business.
If we generate insufficient cash from our operations for a sustained period of time and/or forecasts demonstrate
expectations of continued future insufficiencies, the board of directors of our general partner may determine not to reinstate
50
Table of Contents
our distribution to unitholders. Any such continued suspension or elimination of distributions may cause the trading price
of our units to decline.
The amount of cash we have available for distribution to unitholders depends primarily on our cash flow and not
solely on profitability.
Unitholders should be aware that the amount of cash we have available for distribution depends primarily upon our
cash flow from operating activities, cash on hand and working capital borrowings, and not solely on profitability, which
will be affected by non-cash items. As a result, we may make cash distributions during periods when we record net losses
and may not make cash distributions during periods when we record net income.
General Partner, The Heritage Group and Partnership Agreement
At February 28, 2024, The Heritage Group and certain of their affiliates own an approximate 20.4% limited
partner interest in us and own and control our general partner, which has sole responsibility for conducting our
business and managing our operations. Our general partner and its affiliates have conflicts of interest and limited
fiduciary duties, which may permit them to favor their own interests to other unitholders’ detriment.
At February 28, 2024, The Heritage Group and certain of their affiliates own an approximate 20.4% limited partner
interest in us. In addition, The Heritage Group and certain of their affiliates control our general partner.
Conflicts of interest may arise between our general partner and its affiliates, on the one hand, and us and our
unitholders, on the other hand. As a result of these conflicts, the general partner may favor its own interests and the
interests of its affiliates over the interests of our unitholders. These conflicts include, among others, the following
situations:
● our general partner is allowed to take into account the interests of parties other than us, such as its affiliates, in
resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders;
● our general partner has limited its liability and reduced its fiduciary duties under our partnership agreement and
has also restricted the remedies available to our unitholders for actions that, without the limitations, might
constitute breaches of fiduciary duty. As a result of purchasing common units, unitholders consent to some
actions and conflicts of interest that might otherwise constitute a breach of fiduciary or other duties under
Delaware law;
● our general partner determines the amount and timing of asset purchases and sales, borrowings, issuance of
additional partnership securities, and reserves, each of which can affect the amount of cash that is distributed to
unitholders;
● our general partner determines which costs incurred by it and its affiliates are reimbursable by us;
● our general partner determines the amount and timing of any capital expenditures and whether a capital
expenditure is a maintenance capital expenditure, which reduces operating surplus, or a capital expenditure for
acquisitions or capital improvements, which does not. This determination can affect the amount of cash that is
available for distribution to our unitholders;
● our general partner has the flexibility to cause us to enter into a broad variety of derivative transactions covering
different time periods, the net cash receipts or payments from which will increase or decrease operating surplus
and adjusted operating surplus, with the result that our general partner may be able to shift the recognition of
operating surplus and adjusted operating surplus between periods to increase the distributions it and its affiliates
receive on their incentive distribution rights; and
● in some instances, our general partner may cause us to borrow funds in order to permit the payment of cash
distributions, even if the purpose or effect of the borrowing is to make incentive distributions.
51
Table of Contents
The Heritage Group and certain of its affiliates may engage in limited competition with us.
Pursuant to the omnibus agreement we entered into in connection with our initial public offering, The Heritage Group
and its controlled affiliates have agreed not to engage in, whether by acquisition or otherwise, the business of refining or
marketing specialty lubricating oils, solvents and wax products as well as gasoline, diesel and jet fuel products in the
continental U.S. for so long as it controls us. This restriction does not apply to certain assets and businesses which are more
fully described under Part III, Item 13 “Certain Relationships and Related Transactions and Director Independence —
Omnibus Agreement.”
The owners of our general partner, other than The Heritage Group, are not prohibited from competing with us, except
to the extent described above. Currently, The Heritage Group is an active marketer of asphalt products and has been
engaged in this business for much longer than us. In certain geographical areas, there can be overlap where both The
Heritage Group and we market asphalt.
Our partnership agreement limits our general partner’s fiduciary duties to our unitholders and restricts the remedies
available to unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.
Our partnership agreement contains provisions that reduce the standards to which our general partner would
otherwise be held by state fiduciary duty law. For example, our partnership agreement:
● permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity
as our general partner. This entitles our general partner to consider only the interests and factors that it desires,
and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates
or any limited partner. Examples include the exercise of its limited call right, its voting rights with respect to the
units it owns, its registration rights and its determination whether or not to consent to any merger or consolidation
of our partnership or amendment of our partnership agreement;
● provides that our general partner will not have any liability to us or our unitholders for decisions made in its
capacity as a general partner so long as it acted in good faith, meaning it believed the decision was in the best
interests of our partnership;
● generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts
committee of the board of directors of our general partner and not involving a vote of unitholders must be on
terms no less favorable to us than those generally being provided to or available from unrelated third parties or be
“fair and reasonable” to us. In determining whether a transaction or resolution is “fair and reasonable,” our
general partner may consider the totality of the relationships between the parties involved, including other
transactions that may be particularly advantageous or beneficial to us; and
● provides that our general partner and its officers and directors will not be liable for monetary damages to us or our
limited partners for any acts or omissions unless there has been a final and non-appealable judgment entered by a
court of competent jurisdiction determining that the general partner or those other persons acted in bad faith or
engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that such
person’s conduct was criminal.
By purchasing a common unit, a unitholder agrees to be bound by the provisions in the partnership agreement,
including the provisions discussed above.
Unitholders have limited voting rights and are not entitled to elect our general partner or its directors.
Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting
our business and, therefore, limited ability to influence management’s decisions regarding our business. Unitholders do not
elect our general partner or its board of directors, and have no right to elect our general partner or its board of directors on
an annual or other continuing basis. The board of directors of our general partner is chosen by the members of our general
partner. Furthermore, if the unitholders are dissatisfied with the performance of our general partner, the vote of
52
Table of Contents
the holders of at least 66 2/3% of all outstanding units voting together as a single class is required to remove the general
partner. At February 28, 2024, the owners of our general partner and certain of their affiliates own approximately 20.4% of
our common units. As a result of these limitations, the price at which the common units trade could be diminished because
of the absence or reduction of a takeover premium in the trading price.
Our partnership agreement restricts the voting rights of those unitholders owning 20% or more of our common
units.
Unitholders’ voting rights are further restricted by the partnership agreement provision providing that any units held
by a person that owns 20% or more of any class of units then outstanding, other than our general partner, its affiliates, their
transferees, and persons who acquired such units with the prior approval of the board of directors of our general partner,
cannot vote on any matter. Our partnership agreement also contains provisions limiting the ability of unitholders to call
meetings or to acquire information about our operations, as well as other provisions limiting the unitholders’ ability to
influence the manner or direction of management.
Our general partner interest or control of our general partner may be transferred to a third party without
unitholder consent.
Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or
substantially all of its assets without the consent of the unitholders. Furthermore, our partnership agreement does not
restrict the ability of the members of our general partner from transferring their respective membership interests in our
general partner to a third party. The new members of our general partner would then be in a position to replace the board of
directors and officers of our general partner with their own choices and thereby control the decisions taken by the board of
directors.
We do not have our own officers and employees and rely solely on the officers and employees of our general partner
and its affiliates to manage our business and affairs.
We do not have our own officers and employees and rely solely on the officers and employees of our general partner
and its affiliates to manage our business and affairs. We can provide no assurance that our general partner will continue to
provide us the officers and employees that are necessary for the conduct of our business nor that such provision will be on
terms that are acceptable to us. If our general partner fails to provide us with adequate personnel, our operations could be
adversely impacted and our cash available for payments of our debt obligations could be reduced.
We may issue additional common units without unitholder approval, which would dilute our current unitholders’
existing ownership interests.
We may issue an unlimited number of limited partner interests of any type without the approval of our unitholders. Our
partnership agreement does not give our unitholders the right to approve our issuance of common units or equity securities
ranking junior to the common units at any time. In addition, our partnership agreement does not prohibit the issuance by
our subsidiaries of equity securities, which may effectively rank senior to the common units. The issuance of additional
common units or other equity securities of equal or senior rank to the common units will have the following effects:
● our unitholders’ proportionate ownership interest in us may decrease;
● the amount of cash available for distribution on each unit may decrease;
● the relative voting strength of each previously outstanding unit may be diminished;
● the market price of the common units may decline; and
● the ratio of taxable income to distributions, if any may increase.
53
Table of Contents
Our general partner’s determination of the level of cash reserves may reduce the amount of available cash for
distribution to unitholders.
Our partnership agreement requires our general partner to deduct from operating surplus cash reserves that it
establishes are necessary to fund our future operating expenditures. In addition, our partnership agreement also permits our
general partner to reduce available cash by establishing cash reserves for the proper conduct of our business, to comply
with applicable law or agreements to which we are a party, or to provide funds for future distributions to partners. These
reserves will affect the amount of cash available for distribution to unitholders.
Cost reimbursements due to our general partner and its affiliates will reduce cash available for payments of our
debt obligations.
Prior to making any distribution on the common units, we will reimburse our general partner and its affiliates for all
expenses they incur on our behalf. Any such reimbursement will be determined by our general partner and will reduce the
cash available for payments of our debt obligations. These expenses will include all costs incurred by our general partner
and its affiliates in managing and operating us. Please read Part III, Item 13 “Certain Relationships and Related
Transactions and Director Independence.”
Our general partner has a limited call right that may require unitholders to sell their units at an undesirable time or
price.
If at any time our general partner and its affiliates own more than 80% of the issued and outstanding common units,
our general partner will have the right, but not the obligation, which right it may assign to any of its affiliates or to us, to
acquire all, but not less than all, of the common units held by unaffiliated persons at a price not less than their then-current
market price. As a result, unitholders may be required to sell their common units to our general partner, its affiliates or us at
an undesirable time or price and may not receive any return on their investment. Unitholders may also incur a tax liability
upon a sale of their common units. At February 28, 2024, our general partner and its affiliates own approximately 20.4% of
our common units.
Unitholder liability may not be limited if a court finds that unitholder action constitutes control of our business.
A general partner of a partnership generally has unlimited liability for the obligations of the partnership, except for
those contractual obligations of the partnership that are expressly made without recourse to the general partner. Our
partnership is organized under Delaware law and we conduct business in a number of other states. The limitations on the
liability of holders of limited partner interests for the obligations of a limited partnership have not been clearly established
in some of the other states in which we do business. Unitholders could be liable for any and all of our obligations as if they
were a general partner if:
● a court or government agency determined that we were conducting business in a state but had not complied with
that particular state’s partnership statute; or
● unitholders’ right to act with other unitholders to remove or replace the general partner, to approve some
amendments to our partnership agreement or to take other actions under our partnership agreement constitute
“control” of our business.
Unitholders may have liability to repay distributions that were wrongfully distributed to them.
Under certain circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them.
Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, which we call the Delaware Act, we may
not make a distribution to our unitholders if the distribution would cause our liabilities to exceed the fair value of our
assets. Delaware law provides that for a period of three years from the date of the impermissible distribution, limited
partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be
liable to the limited partnership for the distribution amount. Purchasers of units who become limited partners are liable for
the obligations of the transferring limited partner to make contributions to the partnership that are known to the purchaser
54
Table of Contents
of the units at the time it became a limited partner and for unknown obligations if the liabilities could be determined from
the partnership agreement. Liabilities to partners on account of their partnership interest and liabilities that are non-
recourse to the partnership are not counted for purposes of determining whether a distribution is permitted.
Tax Risks to Common Unitholders
Our tax treatment depends on our status as a partnership for U.S. federal income tax purposes, as well as not being
subject to a material amount of entity-level taxation by individual states or local entities. If the IRS were to treat us as a
corporation or we became subject to a material amount of entity-level taxation for state or local tax purposes, our cash
available to make payments of our debt obligations could be substantially reduced.
Despite the fact that we are organized as a limited partnership under Delaware law, we would be treated as a
corporation for federal income tax purposes unless we satisfy a “qualifying income” requirement. We requested and
obtained a favorable private letter ruling from the IRS to the effect that, based on facts presented in the private letter ruling
request, our income from refining, blending, processing, packaging, marketing and distribution of lubricants will constitute
“qualifying income” within the meaning of Section 7704 of the Code. Based upon our current operations and private letter
rulings we have received with respect to certain aspects of our business, we believe we satisfy the qualifying income
requirement. However, no ruling has been requested regarding our treatment as a partnership for U.S. Federal income tax
purposes. Failing to meet the qualifying income requirement or a change in current law could cause us to be treated as a
corporation for federal income tax purposes or otherwise subject us to taxation as an entity.
If we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our taxable
income at the corporate tax rate. Because a tax would be imposed upon us as a corporation, our cash available for payment
of our other debt obligations could be substantially reduced.
From time to time, members of Congress propose and consider substantive changes to the existing U.S. federal income
tax laws that affect publicly-traded partnerships including the elimination of partnership tax treatment for certain publicly
traded partnerships. The enactment of such a law or the modification or interpretation of an existing law could subject us to
taxation as a corporation or otherwise subjects us to a material amount of entity-level taxation for federal, state or local
income tax purposes. At the state level, several states have been evaluating ways to subject partnerships to entity-level
taxation through the imposition of state income, franchise, or other forms of taxation. For example, we are required to pay
the Texas Margin Tax each year at a maximum effective rate of 0.75% for our “margin,” as defined in the law, apportioned
to Texas in the prior year. Imposition of these or similar types of federal and state taxes on us in the jurisdictions in which
we operate or in other jurisdictions to which we may expand could substantially reduce our cash available for payment of
principal and interest on our senior notes and our other debt obligations.
Our tax treatment or the tax treatment of our unitholders could be subject to potential legislative, judicial or
administrative changes and differing interpretations, possibly on a retroactive basis.
Current law may change so as to cause us to be treated as a corporation for federal income tax purposes or otherwise
subject us to entity-level taxation. From time to time the U.S. government considers substantive changes to the existing
federal income tax laws that affect publicly traded partnerships. We are unable to predict whether any such additional
legislation or any other tax-related proposals will ultimately be enacted. Moreover, any modification to the federal income
tax laws and interpretations thereof may or may not be applied retroactively. Any such changes could materially adversely
impact a unitholder’s investment in our common units.
If the IRS contests the federal income tax positions we take, the market for our common units may be adversely
impacted and the cost of any IRS contest will reduce our cash available for distribution to our unitholders or to make
payments of our debt obligations.
We have not requested a ruling from the IRS, and the IRS has not otherwise made any determination, regarding our
status as a partnership for federal income tax purposes The IRS may adopt positions that differ from the positions we take.
It may be necessary to resort to administrative or court proceedings to attempt to sustain some or all of the positions we
take, and a court may not ultimately agree with some or all of our positions. Any contest with the IRS may materially and
55
Table of Contents
adversely impact the market for our common units and the price at which they trade. In addition, our costs of any contest
with the IRS will be borne indirectly by our unitholders as the costs will reduce our cash available for distribution and for
payments of our debt obligations.
The IRS may challenge aspects of our proration method, and, if successful, we would be required to change the
allocation of items of income, gain, loss and deduction among our unitholders.
We prorate our items of income, gain, loss and deduction between transferors and transferees of our common units
each month based upon the ownership of our common units on the first business day of each month, instead of on the basis
of the date a particular unit is transferred. The U.S. Department of Treasury and the IRS issued Treasury Regulations that
permit publicly traded partnerships to use a monthly simplifying convention that is similar to ours, but they do not
specifically authorize all aspects of the proration method we have adopted. If the IRS were to successfully challenge this
method, we could be required to change the allocation of items of income, gain, loss and deduction among our unitholders.
We have adopted certain valuation methodologies in determining a unitholder’s allocations of income, gain, loss
and deduction. The IRS may challenge these methodologies or the resulting allocations, and such a challenge could
adversely affect the value of our common units.
In determining the items of income, gain, loss and deduction allocable to our unitholders, including when we issue
additional units, we must determine the fair market value of our assets. Although we may from time to time consult with
professional appraisers regarding valuation matters, we make many fair market value estimates using a methodology based
on the market value of our common units as a means to measure the fair market value of our assets. The IRS may challenge
these valuation methods and the resulting allocations of income, gain, loss and deduction.
A successful IRS challenge to these methods or allocations could adversely affect the amount, character and timing of
taxable income or loss being allocated to our unitholders. It also could affect the amount of gain from our unitholders’ sale
of our common units and could have a negative impact on the value of our common units or result in audit adjustments to
our unitholders’ tax returns without the benefit of additional deductions.
Our unitholders may be required to pay taxes on their share of our income even if they do not receive any
distributions from us.
Our unitholders will be required to pay any federal income taxes and, in some cases, state and local income taxes on
their share of our taxable income even if they receive no distributions from us. Our unitholders may not receive
distributions from us equal to their share of our taxable income or even equal to the actual tax liability that results from that
income.
We may engage in transactions to de-lever the Partnership and manage our liquidity that may result in income and gain
to our unitholders. For example, if we sell assets and use the proceeds to repay existing debt or fund capital expenditures,
our unitholders may be allocated taxable income and gain resulting from the sale. The ultimate effect of any such
allocations will depend on the unitholder’s individual tax position with respect to its units. Unitholders are encouraged to
consult their tax advisors with respect to the consequences of potential transactions that may result in income and gain to
unitholders.
Tax gain or loss on the disposition of our common units could be more or less than expected.
If our unitholders sell their common units, they will recognize a gain or loss equal to the difference between the
amount realized and their tax basis in those common units. Prior distributions to our unitholders in excess of the total net
taxable income they were allocated for a common unit, which decreased their tax basis in that common unit, will, in effect,
become taxable income to our unitholders if the common unit is sold at a price greater than their tax basis in that common
unit, even if the price they receive is less than their original cost. A substantial portion of the amount realized, whether or
not representing gain, may be taxed as ordinary income due to potential recapture items, including depreciation recapture.
In addition, because the amount realized includes a unitholder’s share of nonrecourse liabilities, if our unitholders sell their
common units, they may incur a tax liability in excess of the amount of cash received from the sale.
56
Table of Contents
Tax-exempt entities and foreign persons face unique tax issues from owning our common units that may result in
adverse tax consequences to them.
Investment in our common units by tax-exempt entities, such as employee benefit plans and individual retirement
accounts (known as IRAs) raises issues unique to them. For example, virtually all of our income allocated to organizations
that are exempt from U.S. federal income tax, including IRAs and other retirement plans, will be unrelated business taxable
income and will be taxable to them.
Non-U.S. unitholders are generally taxed and subject to income tax filing requirements by the United States on income
effectively connected with a U.S. trade or business (“effectively connected income”). A unitholder’s share of our income,
gain, loss and deduction, and any gain from the sale of our units will generally be considered “effectively connected
income.” As a result, distributions to a non-U.S. unitholder will be subject to withholding at the highest applicable effective
tax rate and a non-U.S. unitholder who sells or otherwise disposes of a unit will also be subject to U.S. federal income tax
on the gain realized from the sale or disposition of that unit. Distributions to foreign persons will be reduced by
withholding taxes at the highest applicable effective tax rate, and foreign persons will be required to file U.S. federal tax
returns and pay tax on their share of our taxable income. Upon the sale, exchange or other disposition of a common unit by
a foreign person, the transferee is generally required to withhold 10% of the amount realized on such sale, exchange or
other disposition if any portion of the gain on such sale, exchange or other disposition would be treated as effectively
connected with a U.S. trade or business. The U.S. Department of the Treasury and the IRS have recently issued final
regulations providing guidance on the application of these rules for transfers of certain publicly traded partnership interests,
including transfers of our common units. Under these regulations, the “amount realized” on a transfer of our common units
will generally be the amount of gross proceeds paid to the broker effecting the applicable transfer on behalf of the
transferor, and such broker will generally be responsible for the relevant withholding obligations. Distributions to foreign
persons may also be subject to additional withholding under these rules to the extent a portion of a distribution is
attributable to an amount in excess of our cumulative net income that has not previously been distributed. The U.S.
Department of the Treasury and the IRS have provided that these rules will generally not apply to transfers of, or
distributions on, our common units occurring before January 1, 2023.
Our unitholders may be subject to state and local taxes and return filing requirements in states where they do not
live as a result of investing in our common units.
In addition to federal income taxes, our unitholders may be subject to other taxes, including state and local taxes,
unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in
which we conduct business or own property now or in the future, even if they do not live in any of those jurisdictions. Our
unitholders may be required to file tax returns and pay taxes in some or all of these various jurisdictions or be subject to
penalties for failure to comply with those requirements. We currently own assets and conduct business in 32 states, most of
which impose a personal income tax.
If the IRS makes audit adjustments to our income tax returns, it may assess and collect any taxes (including any
applicable penalties and interest) resulting from such audit adjustment directly from us, in which case our cash
available for distribution to our unitholders or to make payments of our debt obligations might be substantially reduced.
If the IRS makes audit adjustments to our income tax returns, it may assess and collect any taxes (including any
applicable penalties and interest) resulting from such audit adjustment directly from us. Generally, we expect to elect to
have our unitholders take such audit adjustment into account in accordance with their interests in us during the tax year
under audit, but there can be no assurance that such election will be made, or applicable, in all circumstances. If we are
unable to have our unitholders take such audit adjustment into account in accordance with their interests in us during the
tax year under audit, our current unitholders may bear some or all of the economic burden resulting from such audit
adjustment, even if such unitholders did not own units in us during the tax year under audit. If, as a result of any such audit
adjustment, we are required to make payments of taxes, penalties and interest, our cash available for distribution to our
unitholders and for payments of our debt obligations might be substantially reduced.
57
Table of Contents
A unitholder whose common units are the subject of a securities loan (e.g., a loan to a “short seller” to cover a
short sale of common units) may be considered as having disposed of those common units. If so, the unitholder would
no longer be treated for tax purposes as a partner with respect to those common units during the period of the loan and
may recognize gain or loss from the disposition.
Because there are no specific rules governing the U.S. federal income tax consequence of loaning a partnership
interest, a unitholder whose common units are the subject of a securities loan may be considered to have disposed of the
loaned units. In that case, the unitholder may no longer be treated for tax purposes as a partner with respect to those
common units during the period of the loan and the unitholder may recognize gain or loss from such disposition. Moreover,
during the period of the loan, any of our income, gain, loss or deduction with respect to those common units may not be
reportable by the unitholder and any cash distributions received by the unitholder as to those common units could be fully
taxable as ordinary income. Unitholders desiring to assure their status as partners and avoid the risk of gain recognition
from a securities loan are urged to consult a tax advisor to determine whether it is advisable to modify any applicable
brokerage account agreements to prohibit their brokers from lending their common units.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
We maintain a cyber risk management program designed to identify, assess, manage, mitigate, and respond to
cybersecurity threats. An analysis of the impact, likelihood, and management preparedness of cybersecurity threats to our
strategic priorities is integrated into our enterprise risk management program and enterprise risk assessment process. This
is intended to provide cross-functional visibility, as well as executive leadership oversight, to address and mitigate
associated risks. Our internal IT group audits our information security programs, and the results are reported to our
executive management and the Risk Committee of our Board of Directors by the Director of Information Technology. We
also engage third party firms to identify, assess, and manage cybersecurity risks in alignment with cybersecurity standards.
We further employ systems and processes designed to oversee, identify, and reduce the potential impact of a cybersecurity
incident at a third-party vendor, service provider or customer or otherwise implicating the third-party technology and
systems we use. We also carry cybersecurity insurance to protect against potential losses arising from a cybersecurity
incident.
Our policies and procedures also address the oversight, identification, and mitigation of cybersecurity risks associated
with our use of third-party service providers. Our policy requires that each third-party service provider go through a
mandatory IT Security Governance review and obtain formal approval by our IT Security Governance group before it can
be used.
We have an Incident Response Plan (“IRP”) that defines and documents procedures for assessing, identifying, and
managing a cybersecurity incident. The IRP sets out a coordinated approach to investigating, containing, documenting and
mitigating incidents, including reporting findings and keeping senior management and other key stakeholders informed and
involved as appropriate. In general, our incident response process aligns with the NIST framework and focuses on four
phases: preparation; detection and analysis; containment, eradication and recovery; and post-incident remediation. The IRP
applies to all personnel (including third-party partners) that perform functions or services require access to secure
Company information, and to all devices and network services that are owned or managed by the Company. We also have
protocols by which material cybersecurity incidents are escalated within the Company and, where appropriate, reported to
the Board of Directors.
Our Director of Information Technology, who has extensive cybersecurity knowledge and skills gained from over
twenty years of work experience at the Company and elsewhere, heads the team responsible for implementing, monitoring
and maintaining cybersecurity and data protection practices across our business and reports directly to the Executive Vice
President — Chief Financial Officer. The Director of Information Technology receives reports on cybersecurity threats
from a number of experienced information security officers responsible for various parts of the business on an ongoing
basis and in conjunction with management, regularly reviews risk management measures implements by the Company to
58
Table of Contents
identify and mitigate data protection and cybersecurity risks. Our Director of Information Technology works with Legal to
oversee compliance with legal, regulatory, and contractual security requirements.
Our Board has delegated the primary responsibility to oversee cybersecurity matters to the Risk Committee. Aside
from more immediate reporting of material incidents to our Board of Directors as described above, our Director of
Information Technology provides our Risk Committee an update on cybersecurity at least every other quarter and more
often as necessary. This update includes metrics on the effectiveness of technical and human security controls,
cybersecurity training program compliance, internal and third-party cybersecurity incidents, and cybersecurity risks.
Risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially
affected us, including our business strategy, results of operations or financial condition. If our systems, or our customers' or
suppliers' systems, for protecting against cybersecurity incidents prove to be insufficient, a cybersecurity incident could
have a material adverse effect on our business, operations, or consolidated financial condition. As part of our overall risk
mitigation strategy, the Company maintains cyber insurance coverage; however, such insurance may not be sufficient in
type or amount to cover us against claims related to cybersecurity incidents or other related breaches. Please refer to Part I,
Item 1A “Risk Factors — Risks Related to Our Business” for additional information about our cybersecurity risks.
Item 3. Legal Proceedings
We are not a party to, and our property is not the subject of, any pending legal proceedings other than ordinary routine
litigation incidental to our business. Our operations are subject to a variety of risks and disputes normally incident to our
business. As a result, we may, at any given time, be a defendant in various legal proceedings and litigation arising in the
ordinary course of business. Please read Items 1 and 2 “Business and Properties — Environmental and Occupational
Health and Safety Matters” for a description of our current regulatory matters related to the environment, health and safety.
Additionally, the information provided under Note 6 — “Commitments and Contingencies” in Part II, Item 8 “Financial
Statements and Supplementary Data — Notes to Consolidated Financial Statements” is incorporated herein by reference.
Item 4. Mine Safety Disclosures
Not applicable.
59
Table of Contents
PART II
Item 5. Market for Registrant’s Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common units are quoted and traded on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “CLMT.”
As of February 28, 2024, there were approximately 23 unitholders of record of our common units. As of February 28,
2024, there were 80,223,093 common units outstanding.
Cash Distribution Policy
General. Within 45 days after the end of each quarter, we distribute our available cash (as defined in our partnership
agreement), if any, to unitholders of record on the applicable record date.
Available Cash. Available cash generally means, for any quarter, all cash on hand at the end of the quarter:
● less the amount of cash reserves established by our general partner to:
● provide for the proper conduct of our business;
● comply with applicable law, any of our debt instruments or other agreements; and
● provide funds for distributions to our unitholders and to our general partner for any one or more of the next
four quarters.
● plus all cash on hand on the date of determination of available cash for the quarter resulting from working capital
borrowings made after the end of the quarter for which the determination is being made. Working capital
borrowings are generally borrowings that will be made under our revolving credit facility and in all cases are used
solely for working capital purposes or to pay distributions to partners.
Cash Distribution Policy. We distribute to the holders of common units on a quarterly basis at least the minimum
quarterly distribution of $0.45 per unit, or $1.80 in aggregate per year, to the extent we have sufficient cash from our
operations after establishment of cash reserves and payment of fees and expenses, including payments to our general
partner. However, since April 2016, we have not paid, and there is no guarantee that we will pay the minimum quarterly
distribution on the units in any quarter. Please read “— Distribution Suspension.” Even if our cash distribution policy is not
modified or revoked, the amount of distributions paid under our policy and the decision to make any distribution is
determined by our general partner, taking into consideration the terms of our partnership agreement. We will be prohibited
from making any distributions to unitholders if it would cause an event of default, or an event of default exists, under our
debt instruments, including our Credit Agreement and the indentures governing our 2024 Secured Notes, 11.00% Senior
Notes due 2025 (the “2025 Notes”), 8.125% Senior Notes due 2027 (the “2027 Notes”), and 9.75% Senior Notes due 2028
(the “2028 Notes”). Please read Note 8 — “Long-Term Debt” in Part II, Item 8 “Financial Statements and Supplementary
Data” for a discussion of the restrictions in our debt instruments that restrict our ability to make distributions.
General Partner Interest and Incentive Distribution Rights. Our general partner is entitled to 2% of all quarterly
distributions since inception that we make prior to our liquidation. As of February 28, 2024, this general partner interest is
represented by 1,637,206 general partner units. Our general partner has the right, but not the obligation, to contribute a
proportionate amount of capital to us to maintain its current general partner interest. The general partner’s 2% interest in
these distributions may be reduced if we issue additional units in the future and our general partner does not contribute a
proportionate amount of capital to us to maintain its 2% general partner interest. Our general partner also currently holds
incentive distribution rights that entitle it to receive increasing percentages, up to a maximum of 50%, of the cash we
distribute from operating surplus (as defined in our partnership agreement) in excess of $0.495 per unit. The maximum
distribution of 50% includes distributions paid to our general partner on its 2% general partner interest, and assumes that
60
Table of Contents
our general partner maintains its general partner interest at 2%. The maximum distribution of 50% does not include any
distributions that our general partner may receive on units that it owns. Our general partner earned no incentive distribution
rights for the years ended December 31, 2023 and 2022.
Our general partner is entitled to incentive distributions if the amount we distribute to unitholders with respect to any
quarter exceeds specified target levels shown below:
Minimum Quarterly Distribution
First Target Distribution
Second Target Distribution
Third Target Distribution
Thereafter
Distribution Suspension
Total Quarterly
Distribution
Target Amount
Per Common Unit
$0.45
up to $0.495
above $0.495 up to $0.563
above $0.563 up to $0.675
above $0.675
Marginal Percentage
Interest in Distributions
Unitholders General Partner
98 %
98 %
85 %
75 %
50 %
2 %
2 %
15 %
25 %
50 %
In April 2016 and effective beginning the first quarter 2016, the board of directors of our general partner suspended
payment of our quarterly cash distribution. We currently are not permitted to resume cash distributions pursuant to the
terms of the indentures governing our senior notes.
Equity Compensation Plans
The equity compensation plan information required by Item 201(d) of Regulation S-K in response to this Item 5 is
incorporated by reference from Part III, Item 12 “Security Ownership of Certain Beneficial Owners and Management and
Related Unitholder Matters” of this Annual Report.
Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
None.
Item 6. Reserved
61
Table of Contents
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The historical consolidated financial statements included in this Annual Report reflect all of the assets, liabilities and
results of operations of Calumet Specialty Products Partners, L.P. and its consolidated subsidiaries (“Calumet,” the
“Company,” “we,” “our,” or “us”). The following discussion analyzes the financial condition and results of operations of
the Company for the years ended December 31, 2023, 2022 and 2021. Unitholders should read the following discussion
and analysis of the financial condition and results of operations of the Company in conjunction with the historical
consolidated financial statements and notes included elsewhere in this Annual 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 18 — “Segments and Related
Information” under Part II, Item 8 “Financial Statements and Supplementary Data — Notes to 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.
Restatement of Previously Issued Financial Statements:
We have restated our previously issued financial statements contained in this Annual Report on Form 10-K. Refer to
the “Explanatory Note” preceding Items 1 and 2. Business and Properties, for background on the restatement, the fiscal
periods impacted, control considerations, and other information. See Note 21 — “Restatement of Prior Period” and Note 22
— “Quarterly Financial Data (Unaudited)” under Part II, Item 8 “Financial Statements and Supplementary Data —
Notes to Consolidated Financial Statements,” for additional information related to the restatement, including descriptions
of the misstatements and the impacts on our financial statements.
Recent Developments
Corporate Conversion
On November 9, 2023, we entered into a Partnership Restructuring Agreement (as amended, the “Restructuring
Agreement”) with our general partner, The Heritage Group and the other owners of our general partner (the “Sponsor
Parties”) to effectuate a corporate transition of the Company to Calumet, Inc., a newly formed Delaware corporation (“New
Calumet”).
Pursuant to the Restructuring Agreement and the transaction documents to be entered into in connection therewith, at
the closing of the transactions contemplated by the Restructuring Agreement (the “Corporate Conversion”), among other
things:
62
Table of Contents
● each common unit representing a limited partnership interest in the Company will be exchanged for one
share of New Calumet’s common stock (“Common Stock”);
● all equity interests in our general partner (which currently owns all of our incentive distribution rights
and our 2.0% General Partner interest in the Company) will be exchanged for 5.5 million shares of Common
Stock and warrants to purchase 2.0 million shares of Common Stock, each exercisable for one share of
Common Stock at an exercise price of $20.00 per share and expiring three years from the date of issuance,
which shares and warrants will be issued to the owners of our general partner;
● as a result of the Corporate Conversion, our general partner will become a wholly owned subsidiary of
New Calumet, and its incentive distribution rights and 2.0% General Partner interest will be cancelled, and
the Company will become a wholly owned subsidiary of New Calumet; the New Calumet Common Stock
will continue to trade on Nasdaq.
On February 9, 2024, we entered into the First Amendment to the Partnership Restructuring Agreement (the
“Restructuring Agreement Amendment”) with our general partner and the Sponsor Parties. Pursuant to the Restructuring
Agreement Amendment, as of the date of the closing of the Corporate Conversion (the “Closing”), New Calumet will be
governed by a board of directors (the “New Calumet Board”) of 10 directors, classified into three classes. The initial
directors of New Calumet will be appointed by The Heritage Group, together with its affiliates, related trusts, trustees,
family members, successors and assigns (“THG”), and following the Closing, (i) for so long as THG owns at least 16.7%
of the outstanding shares of New Calumet’s common stock, par value $0.01 per share (“Common Stock”), THG will have
the right to nominate two directors; (ii) for so long as THG owns less than 16.7% but 5% or more of the outstanding shares
of Common Stock, THG will have the right to nominate one director; and (iii) at such time as THG ceases to own at least
5% of the outstanding shares of Common Stock, THG will not have the right to nominate any directors. In addition, the
Restructuring Agreement Amendment sets forth certain Partnership unitholder approvals that are conditions to the Closing
and provides that our general partner will make an election to be taxed as an association taxable as a corporation for U.S.
federal income tax purposes prior to the Closing.
On February 9, 2024, we entered into a Conversion Agreement (the “Conversion Agreement”) with New Calumet,
Calumet Merger Sub I LLC, a wholly owned subsidiary of New Calumet, Calumet Merger Sub II LLC, a wholly owned
subsidiary of New Calumet, our general partner and the Sponsor Parties to effectuate the Corporate Conversion.
The Board has unanimously approved the terms of the Conversion Agreement and the transactions contemplated
thereby and has resolved to recommend that the Partnership’s unitholders approve the Conversion Agreement. The Board
approved the Conversion Agreement following the recommendation and special approval of the Conflicts Committee.
The consummation of the Corporate Conversion is subject to certain customary conditions, including, among others:
(i) approval of the Conversion Agreement and certain related matters specified in the Restructuring Agreement by the
holders of a majority of our outstanding common units; (ii) the absence of any law or injunction prohibiting the
consummation of the transactions contemplated by the Conversion Agreement; (iii) the effectiveness of a registration
statement on Form S-4 to be filed by New Calumet with respect to the registration of the shares of Common Stock to be
issued in the Corporate Conversion; (iv) approval for listing of the Common Stock on the Nasdaq Stock Market LLC; (v)
expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended; (vi) the election by our general partner to be taxed as an association taxable as a corporation for U.S. federal
income tax purposes; (vii) subject to specified materiality standards, the accuracy of certain representations and warranties
of the other party; and (viii) compliance by the other party in all material respects with its covenants.
The Conversion Agreement may be terminated: (i) by the mutual written consent of the Partnership and the Sponsor
Parties; (ii) if, upon the conclusion of the meeting of our unitholders called to approve the Corporate Conversion, the
required unitholder approvals have not been obtained; (iii) if the Closing has not occurred on or before August 7, 2024; or
(iv) upon the occurrence of certain other events specified in the Conversion Agreement.
63
Table of Contents
For additional information, please read our Current Reports on Form 8-K filed with the Securities and Exchange
Commission on November 9, 2023 and February 12, 2024. Please also read Part I, Item 1A “Risk Factors — The Corporate
Conversion is subject to conditions, including some conditions that may not be satisfied on a timely basis, if at all. Failure
to complete the Corporate Conversion, or significant delays in completing the Corporate Conversion, could negatively
affect our business and financial results and the price of our common units or, following the consummation of the
Corporate Conversion, future business and financial results and the price of the common stock.”
Note Purchase Agreement
On February 23, 2024, we entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with certain
qualified institutional buyers and institutional accredited investors, pursuant to which we agreed to sell $200.0 million
aggregate principal amount of a new series of our 9.25% Senior Secured First Lien Notes due 2029 (the “2029 Secured
Notes”) in a private placement transaction in reliance on an exemption from registration under Section 4(a)(2) of the
Securities Act. The 2029 Secured Notes will mature on July 15, 2029 and will be issued at par. The closing of the issuance
of the 2029 Secured Notes is expected to occur on March 7, 2024, subject to customary closing conditions.
We intend to use the net proceeds from the private placement of the 2029 Secured Notes, together with cash on hand,
to redeem all of the outstanding 2024 Secured Notes and $50.0 million aggregate principal amount of the outstanding 2025
Notes.
2023 Update
Outlook and Trends
During the fourth quarter of 2023, our business continued to benefit from a healthy margin environment. Demand for
our products remained healthy across most of the enterprise, and we expect margins to continue to remain strong. We
believe low unemployment, stabilizing raw material and packaging costs, and lower than normal industry inventories point
to a continuation of this trend. 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.
Our Specialty Products and Solutions segment continues to perform well. Market demand is relatively high compared
to historical averages, and we continue to leverage the benefits of our fully integrated specialty business in this market. As
expected, margins continued to slowly normalize relative to record highs experienced in the second half of 2022. Our
Montana Renewables facility returned to normal operations in early December 2023 following the successful completion
of the steam drum replacement and turnaround. During the months of August, September and October, the Montana
Renewables facility operated at 50% utilization and the plant was in turnaround nearly the entire month of November. The
market price of feedstocks has decreased dramatically, and the business consumed old feed from inventory, which is
significantly more expensive than the current market, upon return to normal operations in December. Results in our
Performance Brands segment continued to trend better versus the prior year as input and packaging costs have stabilized,
price increases from previous periods have largely held, and industrial volume demand continues to grow.
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 to withstand one.
Contingencies
For a summary of litigation and other contingencies, please read Note 6 — “Commitments and Contingencies” under
Part II, Item 8 “Financial Statements and Supplementary Data — Notes to 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.
64
Table of Contents
Financial Results
We reported net income of $48.1 million in 2023, versus a net loss of $173.3 million in 2022. We reported Adjusted
EBITDA (as defined in Item 7 “Management’s Discussion and Analysis — Non-GAAP Financial Measures”) of $260.5
million in 2023, versus $390.0 million in 2022. We used cash from operating activities of $14.9 million in 2023, versus
generating cash from operating activities of $100.6 million in 2022.
Please read Item 7 “Management’s Discussion and Analysis — Non-GAAP Financial Measures” for a reconciliation
of EBITDA, Adjusted EBITDA and Distributable Cash Flow 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 $251.2 million in 2023 compared to $379.4 million
in the prior year. Compared to the prior year, Specialty Products and Solutions 2023 segment Adjusted EBITDA was
unfavorably impacted by lower throughput volumes as a result of the planned turnarounds completed at our Cotton Valley,
Shreveport and Princeton facilities during the current year coupled with the impact of unplanned outages as a result of the
severe weather experienced in Northwest Louisiana during the current year. The specialties and fuels margin environments
continue to slowly regress from record highs, but remain strong compared to historical averages and continue to benefit our
business.
Montana/Renewables segment Adjusted EBITDA was $30.2 million in 2023 compared to $75.8 million in 2022.
Compared to the prior year, Montana/Renewables 2023 segment Adjusted EBITDA was unfavorably impacted by lower
throughput volumes as a result of throughput constraints caused by the ruptured steam drum and a turnaround at our
Montana Renewables facility during the current year period, coupled with the impact of lower production volumes as a
result of modifying our legacy Great Falls specialty asphalt facility to operate at a new and reduced nameplate capacity as
part of the conversion to renewable fuel production. In addition to this, current year results were unfavorably impacted by
higher material costs, primarily as it related to higher priced pre-treated feedstocks to support the start-up of the feedstock
pre-treatment and SAF units.
Performance Brands segment Adjusted EBITDA was $47.9 million in 2023 compared to $20.2 million in 2022.
Compared to the prior year, Performance Brands segment Adjusted EBITDA was favorably impacted by an increase in net
unit margins as a result of input costs stabilizing in our branded and consumer markets and an increase in industrial
volumes. The segment also benefited from a partial payout of our ongoing business interruption claims and received $8.2
million of insurance payments during the current year.
Corporate segment Adjusted EBITDA was negative $68.8 million in 2023 versus negative $85.4 million in 2022
primarily due to lower labor and benefits related expenses.
Liquidity Update
As of December 31, 2023, we had total liquidity of $249.8 million comprised of $7.9 million of unrestricted cash and
$241.9 million of availability under our revolving credit facilities. As of December 31, 2023, our revolving credit facilities
had a $421.5 million borrowing base, $149.7 million in outstanding borrowings and $29.9 million of outstanding standby
letters of credit. 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 7 “Management’s
Discussion and Analysis — Liquidity and Capital Resources” and Part I, Item 1A. “Risk Factors” 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
65
Table of Contents
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. For more information, see Part I, Item 1A, “Risk Factors
— The availability and cost of renewable identification numbers and results of litigation related to our SRE petitions could
have a material adverse effect on our results of operations and financial condition and our ability to make payments on our
debt obligations.”
For the year ended December 31, 2023, we recorded a gain of $231.2 million for RINs, as compared to an expense of
$197.5 million for RINs for the year ended December 31, 2022. 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 II, Item 8 “Financial Statements — Notes to
Consolidated Financial Statements” for further information on the Company’s RINs obligation.
Unrestricted Subsidiaries
See Note 19 — “Unrestricted Subsidiaries” under Part II, Item 8 “Financial Statements — Notes to Consolidated
Financial Statements” 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 and 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, and fuel and renewable fuel products.
The prices of crude oil, specialty products and fuel 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 may also 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 products. Please read
Note 9 — “Derivatives” under Part II, Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated
Financial Statements.”
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;
66
Table of Contents
● 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 typically 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; and
(d) depreciation and amortization.
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.
67
Table of Contents
Results of Operations
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.
Total sales volume (1)
Total feedstock runs (2)
Facility production: (3)
Specialty Products and Solutions:
Lubricating oils
Solvents
Waxes
Fuels, asphalt and other by-products
Total Specialty Products and Solutions
Montana/Renewables:
Gasoline
Diesel
Jet fuel
Asphalt, heavy fuel oils and other
Renewable fuels
Total Montana/Renewables
Performance Brands
Total facility production (3)
2023
Year Ended December 31,
2022
(In bpd)
82,946
80,447
79,805
77,200
2021
79,281
75,818
10,358
7,208
1,326
38,845
57,737
3,898
2,941
449
4,483
6,314
18,085
10,951
7,100
1,452
40,845
60,348
3,409
6,449
820
6,942
—
17,620
9,867
6,833
1,335
27,869
45,904
4,907
9,711
901
10,379
—
25,898
1,474
1,434
1,304
77,296
79,402
73,106
(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.
68
Table of Contents
The following table reflects our consolidated results of operations and includes the non-GAAP financial measures
EBITDA, Adjusted EBITDA and Distributable Cash Flow. For a reconciliation of EBITDA, Adjusted EBITDA and
Distributable Cash Flow to Net income (loss), our most directly comparable financial performance measure calculated and
presented in accordance with GAAP, please read “Non-GAAP Financial Measures.”
Sales
Cost of sales
Gross profit
Operating costs and expenses:
Selling
General and administrative
Taxes other than income taxes
Loss on impairment and disposal of assets
Other operating (income) expense
Operating income (expense)
Other income (expense):
Interest expense
Debt extinguishment costs
Gain (loss) on derivative instruments
Other income (expense):
Total other expense
Net income (loss) before income taxes
Income tax expense
Net income (loss)
EBITDA
Adjusted EBITDA
Distributable Cash Flow
2023
$ 4,181.0
3,729.3
451.7
2021
Year Ended December 31,
2022
(In millions)
$ 4,686.3
4,334.6
351.7
$ 3,148.0
3,005.1
142.9
54.9
133.0
21.5
3.5
(28.4)
267.2
53.9
143.4
13.7
0.7
8.1
131.9
(221.7)
(5.9)
9.9
0.2
(217.5)
49.7
1.6
$
48.1
$
418.3
260.5
$
(86.2) $
(175.9)
(41.4)
(81.7)
(2.8)
(301.8)
(169.9)
3.4
(173.3) $
$
104.3
$
390.0
$
87.8
$
$
$
$
52.8
151.1
12.5
4.1
8.0
(85.6)
(149.5)
(0.5)
(23.3)
0.3
(173.0)
(258.6)
1.5
(260.1)
(1.4)
110.3
(120.1)
69
Table of Contents
Non-GAAP Financial Measures
We include in this Annual Report the non-GAAP financial measures EBITDA, Adjusted EBITDA and Distributable
Cash Flow. We provide reconciliations of EBITDA, Adjusted EBITDA and Distributable Cash Flow to Net income (loss),
our most directly comparable financial performance measure calculated and presented in accordance with GAAP.
EBITDA, Adjusted EBITDA and Distributable Cash Flow 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.
We believe 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. Historically, we considered net income (loss) to be the most
directly comparable GAAP measure to EBITDA. We believe net income (loss) is the most directly comparable GAAP
measure to EBITDA.
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 Distributable Cash Flow for any period as Adjusted EBITDA less replacement and environmental capital
expenditures, turnaround costs, cash interest expense (consolidated interest expense less non-cash interest expense), gain
(loss) from unconsolidated affiliates, net of cash distributions and income tax expense (benefit).
We define Adjusted EBITDA Margin as Adjusted EBITDA divided by sales.
The definition of Adjusted EBITDA presented in this Annual Report is similar to the calculation of “Consolidated
Cash Flow” contained in the indentures governing our senior notes. We are required to report Consolidated Cash Flow to
the holders of our senior notes and Adjusted 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
70
Table of Contents
“Liquidity and Capital Resources — Debt and Credit Facilities” for additional details regarding the covenants governing
our debt instruments.
EBITDA, Adjusted EBITDA and Distributable Cash Flow 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, Adjusted EBITDA and Distributable Cash Flow, 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, Adjusted EBITDA and Distributable Cash Flow are only three of several measurements that management
utilizes. Moreover, our EBITDA, Adjusted EBITDA and Distributable Cash Flow may not be comparable to similarly
titled measures of another company because all companies may not calculate EBITDA, Adjusted EBITDA and
Distributable Cash Flow in the same manner.
The following tables present a reconciliation of Net income (loss), our most directly comparable GAAP financial
performance measure to EBITDA, Adjusted EBITDA and Distributable Cash Flow, for each of the periods indicated.
Reconciliation of Net income (loss) to EBITDA, Adjusted EBITDA and
Distributable Cash Flow:
Net income (loss)
Add:
Interest expense
Depreciation and amortization
Income tax expense
EBITDA
Add:
LCM / LIFO (gain) loss
Unrealized (gain) loss on derivative instruments
Debt extinguishment costs
Amortization of turnaround costs
Loss on impairment and disposal of assets
RINs mark-to-market (gain) loss
Equity-based compensation and other items
Other non-recurring expenses (1)
Noncontrolling interest adjustments
Adjusted EBITDA
Less:
Replacement and environmental capital expenditures (2)
Cash interest expense (3)
Turnaround costs
Income tax expense
Distributable Cash Flow
2023
Year Ended December 31,
2022
(In millions)
2021
$
48.1
$
(173.3) $
(260.1)
221.7
146.9
1.6
418.3
35.6
(33.0)
5.9
36.1
3.5
(290.2)
20.2
60.9
3.2
260.5
$
$
$
$
81.2
216.0
47.9
1.6
(86.2) $
$
$
$
$
$
175.9
98.3
3.4
104.3
6.6
45.9
41.4
23.1
0.7
115.7
34.4
15.6
2.3
390.0
77.9
158.3
62.6
3.4
87.8
149.5
107.7
1.5
(1.4)
(50.3)
24.4
0.5
17.0
4.1
57.7
50.7
7.6
—
110.3
29.0
138.9
61.0
1.5
(120.1)
$
$
$
$
$
$
(1) For the year ended December 31, 2023, other non-recurring expenses included a $50.6 million charge to cost of sales
for losses under firm purchase commitments. For the year ended December 31, 2022, other non-recurring expenses
included a $13.0 million charge to cost of sales for losses under firm purchase commitments.
(2) Replacement capital expenditures are defined as those capital expenditures which do not increase operating capacity or
reduce operating costs and exclude turnaround costs. Environmental capital expenditures include asset additions to
meet or exceed environmental and operating regulations.
(3) Represents consolidated interest expense less non-cash interest expense.
71
Table of Contents
Year Ended December 31, 2023, Compared to Year Ended December 31, 2022
Sales. Sales decreased $505.3 million, or 10.8%, to $4,181.0 million in 2023 from $4,686.3 million in 2022. Sales for
each of our principal product categories in these periods were as follows:
Year Ended December 31,
2023
% Change
(Dollars in millions, except barrel and per barrel data)
2022
Sales by segment:
Specialty Products and Solutions:
Lubricating oils
Solvents
Waxes
Fuels, asphalt and other by-products (1)
Total Specialty Products and Solutions
Total Specialty Products and Solutions sales volume (in barrels)
Average Specialty Products and Solutions sales price per barrel
Montana/Renewables:
Gasoline
Diesel
Jet Fuel
Asphalt, heavy fuel oils and other (2)
Renewable fuels
Total Montana/Renewables
Total Montana/Renewables sales volume (in barrels)
Average Montana/Renewables sales price per barrel
Performance Brands:
Total Performance Brands (3)
Total Performance Brands sales volume (in barrels)
Average Performance Brands sales price per barrel
Total sales
Total Specialty Products and Solutions, Montana/Renewables, and
Performance Brands sales volume (in barrels)
$
$
$
$
$
$
$
$
$
763.8
398.5
163.9
1,550.7
2,876.9
21,468,000
134.01
167.2
144.8
20.5
148.1
513.2
993.8
7,149,000
139.01
310.3
512,000
606.05
4,181.0
$
$
$
$
$
$
$
$
$
913.7
434.9
189.3
1,970.1
3,508.0
22,461,000
156.18
188.1
391.8
41.8
253.2
—
874.9
7,298,000
119.88
303.4
517,000
586.85
(16.4)%
(8.4)%
(13.4)%
(21.3)%
(18.0)%
(4.4)%
(14.2)%
(11.1)%
(63.0)%
(51.0)%
(41.5)%
100.0 %
13.6 %
(2.0)%
16.0 %
2.3 %
(1.0)%
3.3 %
4,686.3
(10.8)%
29,129,000
30,276,000
(3.8)%
(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) polyol ester
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 our Royal Purple, Bel-Ray and Calumet Packaging facilities.
The components of the $631.1 million decrease in Specialty Products and Solutions segment sales in 2023, as
compared to 2022, were as follows:
Volume
Sales price
Total Specialty Products and Solutions segment sales decrease
72
Dollar Change
(In millions)
$
$
(155.3)
(475.8)
(631.1)
Table of Contents
Specialty Products and Solutions segment sales decreased period over period, primarily due to the weaker price
environment in the current year period and lower throughput. The unfavorable volumes impact was due to planned
turnarounds at our Shreveport, Cotton Valley, and Princeton facilities in the current year period and unplanned outages as a
result of the severe weather experienced in Northwest Louisiana during the current year.
The components of the $118.9 million increase in Montana/Renewables segment sales in 2023, as compared to 2022,
were as follows:
Sales price
Volume
Total Montana/Renewables segment sales increase
Dollar Change
(In millions)
$
$
136.6
(17.7)
118.9
Montana/Renewables segment sales increased primarily due to higher sales prices resulting from sales of higher priced
renewable fuels in the current year period. Lower volumes were the result of throughput constraints caused by the ruptured
steam drum and a turnaround at our Montana Renewables facility, coupled with the unfavorable impact as a result of
modifying our legacy Great Falls asphalt plant to operate at a new and lower nameplate capacity.
The components of the $6.9 million increase in Performance Brands segment sales in 2023, as compared to 2022, were
as follows:
Sales price
Volume
Total Performance Brands segment sales increase
Dollar Change
(In millions)
$
$
9.6
(2.7)
6.9
Performance Brands segment sales increased primarily due to increases in product prices.
Gross Profit. Gross profit increased $100.0 million, or 28.4%, to $451.7 million in 2023 from $351.7 million in 2022.
Gross profit for our business segments were as follows:
Year Ended December 31,
% Change
2022
(Dollars in millions, except per barrel data)
2023
Gross profit by segment:
Specialty Products and Solutions:
Gross profit
Percentage of sales
Specialty Products and Solutions gross profit per barrel
Montana/Renewables:
Gross profit (loss)
Percentage of sales
Montana/Renewables gross profit (loss) per barrel
Performance Brands:
Gross profit
Percentage of sales
Performance Brands gross profit per barrel
$
$
$
$
$
402.2
$
14.0 %
$
18.73
325.5
9.3 %
14.49
(32.6)
$
(3.3)%
$
(4.56)
(29.4)
(3.4)%
(4.03)
$
82.1
26.5 %
55.6
18.3 %
$ 160.35
$ 107.54
23.6 %
4.7 %
29.3 %
10.9 %
0.1 %
13.2 %
47.7 %
8.2 %
49.1 %
Total gross profit
Percentage of sales
$
451.7
$
10.8 %
351.7
7.5 %
28.4 %
3.3 %
73
Table of Contents
The components of the $76.7 million increase in Specialty Products and Solutions segment gross profit in 2023, as
compared to 2022, were as follows:
Year ended December 31, 2022 reported gross profit
Cost of materials
Operating costs
LCM / LIFO inventory adjustments
Volumes
Sales price
RINs expense
Year ended December 31, 2023 reported gross profit
Dollar Change
(In millions)
$
$
325.5
360.3
(18.5)
(12.1)
(36.7)
(475.8)
259.5
402.2
The increase in Specialty Products and Solutions segment gross profit for the year ended December 31, 2023, as
compared to the same period in 2022, was primarily due to the significant decline in RINs prices in the current year. This
impact was partially off-set by lower specialties and fuels unit margins as a result of the weaker margin environment
experienced during the current year period. Also, current year results were unfavorably impacted by higher operating
expenses and lower volumes as a result of planned turnarounds completed at our Shreveport, Cotton Valley, and Princeton
facilities and unplanned outages as a result of severe weather experienced in Northwest Louisiana during the current year
period.
The components of the $3.2 million decrease in Montana/Renewables segment gross profit (loss) in 2023, as compared
to 2022, were as follows:
Year ended December 31, 2022 reported gross profit (loss)
Cost of materials
Loss on firm purchase commitments
LCM / LIFO inventory adjustments
Volumes
RINs expense
Operating costs
Sales price
Year ended December 31, 2023 reported gross profit (loss)
Dollar Change
(In millions)
(29.4)
(110.3)
(37.6)
(14.6)
(3.7)
136.1
(109.8)
136.7
(32.6)
$
$
The increase in Montana/Renewables segment gross profit for the year ended December 31, 2023, as compared to the
same period in 2022, was primarily due to the significant decline in RINs prices in the current year. This impact was
coupled with the favorable impact of higher margins associated with sales of renewable fuels products at our Montana
Renewables facility in the current year period. The unfavorable impact for lower production volumes and higher operating
costs were associated with the start-up of the Montana Renewables facility and the modification of our legacy Great Falls
specialty asphalt facility. Also, volumes were unfavorably impacted due to throughput constraints caused by the ruptured
steam drum and a turnaround completed at our Montana Renewables during the current year period. These impacts were
coupled with the unfavorable impact of a charge for losses under firm purchase commitments recorded in the current year
period.
74
Table of Contents
The components of the $26.5 million increase in Performance Brands segment gross profit in 2023, as compared to
2022, were as follows:
Year ended December 31, 2022 reported gross profit
Sales price
Operating costs
LCM / LIFO inventory adjustments
Volume
Cost of materials
Year ended December 31, 2023 reported gross profit
Dollar Change
(In millions)
$
$
55.6
9.6
6.3
(2.3)
(0.7)
13.6
82.1
The increase in Performance Brands segment gross profit for the year ended December 31, 2023, as compared to the
same period in 2022, was primarily driven by higher unit margins as a result of input costs stabilizing in our branded and
consumer markets. The favorable impact for operating costs was the result of partial receipt of proceeds from the
Company’s business interruption insurance policy recorded in the current year period.
General and administrative. General and administrative expenses decreased $10.4 million, or 7.3%, to $133.0 million
in 2023 from $143.4 million in 2022. The decrease was due primarily to a $5.4 million decrease in labor and benefits
expenses.
Interest expense. Interest expense increased $45.8 million, or 26.0%, to $221.7 million in 2023 from $175.9 million in
2022. The increase was primarily due to interest expense incurred for our 2028 Notes and the MRL Term Loan Credit
Agreement in the current year period, which was absent the prior year comparative period. The increase in interest expense
in the current year period was partially offset by the absence of interest expense incurred in the prior year comparative
period for outstanding borrowings under the MRL credit facility, which were repaid in August 2022.
Gain (loss) on derivative instruments. There was a $9.9 million gain on derivative instruments in 2023, compared to a
$81.7 million loss in the same period in 2022. The $23.1 million realized loss on derivative instruments in the current year
period was primarily due to the settlement of our crack spread swaps positions during the period. The unrealized gain on
derivative instruments was primarily the result of a $42.9 million unrealized gain on crack spread swaps positions, partially
offset by the unrealized loss on the inventory financing embedded derivative of $9.9 million in the current year period,
compared to an unrealized loss of $14.6 million in the prior year comparative period.
Debt extinguishment costs. There was a $5.9 million loss for debt extinguishment costs in 2023, compared to a $41.4
million loss for debt extinguishment costs in 2022. Debt extinguishment costs in the prior year period comprised of $2.1
million in conjunction with the repurchase of $36.5 million aggregate principal amount of the 2025 Notes and $38.3
million in conjunction with the repayment of all borrowings under the MRL credit facility. Please refer to Note 8 “Long-
Term Debt” in Part II, Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated Financial
Statements” for additional information.
Year Ended December 31, 2022, Compared to Year Ended December 31, 2021
Refer to Item 7 “Management’s Discussion and Analysis — Year Ended December 31, 2022, Compared to Year Ended
December 31, 2021” of our 2022 Annual Report for a description of the factors impacting our results of operations for the
year ended December 31, 2022 in comparison to the year ended December 31, 2021.
75
Table of Contents
Liquidity and Capital Resources
Our principal sources of cash have historically included cash flow from operations, proceeds from public equity
offerings, proceeds from notes offerings, bank borrowings and other financial arrangements. Principal uses of cash have
included capital expenditures, acquisitions, distributions to our limited partners and general partner and debt service. We
may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity
securities, in open market purchases, privately negotiated transactions, tender offers or otherwise. Such repurchases or
exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and
other factors. The amounts involved may be material.
In general, we expect that our short-term liquidity needs, including debt service, working capital, replacement and
environmental capital expenditures and capital expenditures related to internal growth projects, will be met primarily
through cash on hand, projected cash flow from operations, borrowing capacity under our revolving credit facilities and
asset sales.
On June 27, 2023, the Company issued and sold $325.0 million in aggregate principal amount of 2028 Notes, in a
private placement pursuant to Section 4(a)(2) of the Securities Act to eligible purchasers at par. The Company received net
proceeds of $319.1 million, after deducting the initial purchasers’ discount and offering expenses. On June 28, 2023, the
Company used approximately $125.5 million (excluding accrued and unpaid interest and related expenses) of the proceeds
from the offering of the 2028 Notes to fund the repurchase of (i) approximately $21.0 million in aggregate principal
amount of 2024 Secured Notes and (ii) $100.0 million in aggregate principal amount of the 2025 Notes and pay related
premiums, in each case, in connection with the completion of the Company’s tender offers. Please refer to Note 8 —
“Long-Term Debt” in Part II, Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated Financial
Statements” for additional information.
On April 19, 2023, MRL and MRHL entered into the MRL Term Loan Credit Agreement, that provides for a $75.0
million term loan facility with a maturity date of April 19, 2028. Please refer to Note 8 — “Long-Term Debt” in Part II,
Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements” for additional
information.
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 II, Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements” for
additional information.
On February 23, 2024, the Company announced that it delivered (i) a notice of conditional redemption for all of the
2024 Secured Notes at a redemption price of par, plus accrued and unpaid interest to but not including the redemption date
of March 9, 2024, and (ii) a notice of conditional redemption for $50.0 million aggregate principal amount of the 2025
Notes at a redemption price of par, plus accrued and unpaid interest to but not including the redemption date of April 15,
2024.
The Company’s obligation to redeem all of the 2024 Secured Notes and $50.0 million aggregate principal amount of
the 2025 Notes, in each case, is conditioned upon, on or before March 9, 2024, the completion of a private placement of at
least $200.0 million aggregate principal amount of the Company’s senior debt securities. The Company will publicly
announce and notify the holders of the 2024 Secured Notes, the holders of the 2025 Notes and Wilmington Trust, National
Association, as trustee, if the foregoing condition is not satisfied or waived, whereupon the redemptions will be revoked
and the 2024 Secured Notes and the 2025 Notes called for redemption will remain outstanding. Please refer to Note 23 —
“Subsequent Events” in Part II, Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated Financial
Statements” for additional information.
76
Table of Contents
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 II, Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements” for
additional information.
On October 3, 2023, Montana Renewables, LLC (“MRL”) and Wells Fargo Commodities, LLC (“Wells Fargo”)
entered into (a) an ISDA 2002 Master Agreement (the “Master Agreement), (ii) a Schedule to the ISDA 2002 Master
Agreement (the “Schedule”), (iii) a Credit Support Annex to the ISDA 2002 Master Agreement (the “Credit Support
Annex”), and (iv) a Renewable Fuel and Feedstock Repurchase Master Confirmation (together with the Master Agreement,
the Schedule and the Credit Support Annex, collectively the “MRL Supply and Offtake Agreement” and, together with the
Shreveport Supply and Offtake Agreement, the “Supply and Offtake Agreements”). Pursuant to the MRL Supply and
Offtake Agreement, Wells Fargo agreed to, among other things, (a) purchase from MRL renewable feedstocks and finished
products located at MRL’s Great Falls facility, subject to MRL’s repurchase obligations with respect thereto, and (b)
provide certain financial accommodations to MRL secured by liens on certain renewable feedstocks and finished products
owned by MRL. The MRL Supply and Offtake Agreement replaced MRL’s previous inventory financing agreement with
Macquarie, which terminated on October 3, 2023. Please refer to Note 7 — “Inventory Financing Agreements” in Part II,
Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements” for additional
information.
We expect to fund planned capital expenditures in 2024 of approximately $110 million to $140 million primarily with
cash on hand, and cash flows from operations. Future internal growth projects or acquisitions may require expenditures in
excess of our then-current cash flow from operations and borrowing availability under our revolving credit facilities and
may require us to issue debt or equity securities in public or private offerings or incur additional borrowings under bank
credit facilities to meet those costs. 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.
The borrowing base on our revolving credit facilities decreased from approximately $477.4 million as of
December 31, 2022, to approximately $421.5 million at December 31, 2023, resulting in a corresponding decrease in our
borrowing availability from approximately $337.6 million at December 31, 2022, to approximately $241.9 million at
December 31, 2023. Total liquidity, consisting of cash and available funds under our revolving credit facilities, decreased
from $372.8 million at December 31, 2022 to $249.8 million at December 31, 2023.
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
77
Table of Contents
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 most recent two years:
Net cash provided by (used) in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net increase (decrease) in cash, cash equivalents and restricted cash
$
$
2023
Year Ended December 31,
2022
(In millions)
100.6
(536.0)
348.7
(86.7) $
(14.9) $
(271.8)
266.2
(20.5) $
$
2021
(44.0)
(82.8)
139.3
12.5
Operating Activities. Operating activities used cash of $14.9 million in 2023 compared to providing cash of $100.6
million in 2022. The change was primarily driven by a decrease in net unit margins as a result of the weaker margin
environment experienced during the current year period.
Investing Activities. Investing activities used cash of $271.8 million in 2023 compared to a use of cash of $536.0
million in 2022. 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 both periods were mainly related to our Montana Renewables project.
Financing Activities. Financing activities provided cash of $266.2 million in 2023 compared to providing cash of
$348.7 million in 2022. The change is primarily due to the borrowings we received from the issuance of the 2028 Notes
and the MRL Term Loan Credit Agreement, partially offset by repayments of our 2024 Secured Notes, 2025 Notes and the
payments made to terminate the Great Falls Supply and Offtake Agreement (as defined below). In addition to this, cash
provided by financing activities in the prior year comparative period included $372.9 million of proceeds for other
financing activities, mostly related to our MRL asset financing arrangements, and $250.0 million of proceeds received for
the sale of preferred units in MRHL. Please refer to Note 20 — “Redeemable Noncontrolling Interest” for additional
information regarding the issuance and sale of preferred units and Note 8 — “Long-Term Debt - MRL Asset Financing
Arrangements” under Part II, Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated Financial
Statements” for additional information regarding the MRL asset financing arrangements.
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):
Capital improvement expenditures
Replacement capital expenditures
Environmental capital expenditures
Turnaround capital expenditures
Total
$
$
78
2023
Year Ended December 31,
2022
(In millions)
458.3
$
69.2
8.7
62.6
598.8
$
$
$
190.6
69.9
11.3
47.9
319.7
2021
53.9
24.0
5.0
61.0
143.9
Table of Contents
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 December 31, 2023, our primary debt and credit instruments consisted of:
● $650.0 million senior secured revolving credit facility maturing in January 2027 (after giving effect to the Fourth
Amendment to our revolving credit facility (the “Credit Facility Amendment”)), 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”);
● $179.0 million of 9.25% Senior Secured First Lien Notes due 2024;
● $413.5 million of 11.00% Senior Notes due 2025;
● $325.0 million of 8.125% Senior Notes due 2027;
● $325.0 million of 9.25% Senior Notes due 2028 (“2028 Notes”);
● $74.4 million of borrowings under our MRL Term Loan Credit Agreement; and
● $384.6 million of financing through our MRL asset financing arrangements.
We were in compliance with all covenants under our debt instruments in place as of December 31, 2023, and believe
we have adequate liquidity to conduct our business.
On June 27, 2023, the Company issued and sold $325.0 million in aggregate principal amount of 2028 Notes, in a
private placement pursuant to Section 4(a)(2) of the Securities Act to eligible purchasers at par. The Company received net
proceeds of $319.1 million, after deducting the initial purchasers’ discount and offering expenses. On June 28, 2023, the
Company used approximately $125.5 million (excluding accrued and unpaid interest and related expenses) of the proceeds
from the offering of the 2028 Notes to fund the repurchase of (i) approximately $21.0 million in aggregate principal
amount of 2024 Secured Notes and (ii) $100.0 million in aggregate principal amount of the 2025 Notes and pay related
premiums, in each case, in connection with the completion of the Company’s tender offers. Please refer to Note 8 —
“Long-Term Debt” in Part II, Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated Financial
Statements” for additional information.
On April 19, 2023, MRL and MRHL entered into the MRL Term Loan Credit Agreement, that provides for a $75.0
million term loan facility with a maturity date of April 19, 2028. Please refer to Note 8 — “Long-Term Debt” in Part II,
79
Table of Contents
Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements” for additional
information.
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 II, Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements” for
additional information.
On February 23, 2024, the Company announced that it delivered (i) a notice of conditional redemption for all of the
2024 Secured Notes at a redemption price of par, plus accrued and unpaid interest to but not including the redemption date
of March 9, 2024, and (ii) a notice of conditional redemption for $50.0 million aggregate principal amount of the 2025
Notes at a redemption price of par, plus accrued and unpaid interest to but not including the redemption date of April 15,
2024.
The Company’s obligation to redeem all of the 2024 Secured Notes and $50.0 million aggregate principal amount of
the 2025 Notes, in each case, is conditioned upon, on or before March 9, 2024, the completion of a private placement of at
least $200.0 million aggregate principal amount of the Company’s senior debt securities. The Company will publicly
announce and notify the holders of the 2024 Secured Notes, the holders of the 2025 Notes and Wilmington Trust, National
Association, as trustee, if the foregoing condition is not satisfied or waived, whereupon the redemptions will be revoked
and the 2024 Secured Notes and the 2025 Notes called for redemption will remain outstanding. Please refer to Note 23 —
“Subsequent Events” in Part II, Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated Financial
Statements” for additional information.
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 II, Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements” for
additional information.
On October 3, 2023, Montana Renewables, LLC (“MRL”) and Wells Fargo Commodities, LLC (“Wells Fargo”)
entered into (a) an ISDA 2002 Master Agreement (the “Master Agreement), (ii) a Schedule to the ISDA 2002 Master
Agreement (the “Schedule”), (iii) a Credit Support Annex to the ISDA 2002 Master Agreement (the “Credit Support
Annex”), and (iv) a Renewable Fuel and Feedstock Repurchase Master Confirmation (together with the Master Agreement,
the Schedule and the Credit Support Annex, collectively the “MRL Supply and Offtake Agreement” and, together with the
Shreveport Supply and Offtake Agreement, the “Supply and Offtake Agreements”). Pursuant to the MRL Supply and
Offtake Agreement, Wells Fargo agreed to, among other things, (a) purchase from MRL renewable feedstocks and finished
products located at MRL’s Great Falls facility, subject to MRL’s repurchase obligations with respect thereto, and (b)
provide certain financial accommodations to MRL secured by liens on certain renewable feedstocks and finished products
owned by MRL. The MRL Supply and Offtake Agreement replaced MRL’s previous inventory financing agreement with
Macquarie, which terminated on October 3, 2023. Please refer to Note 7 — “Inventory Financing Agreements” in Part II,
Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements” for additional
information.
80
Table of Contents
Please refer to Note 7 — “Inventory Financing Agreements” in Part II, Item 8 “Financial Statements and
Supplementary Data — Notes to Consolidated Financial Statements” for additional information regarding our Supply and
Offtake Agreements.
Short-Term Liquidity
As of December 31, 2023, our principal sources of short-term liquidity were (i) approximately $241.9 million of
availability under our revolving credit facilities, (ii) inventory financing agreements related to our Shreveport facility and
Montana Renewables facility and (iii) $7.9 million of unrestricted cash on hand. Borrowings under our revolving credit
facility 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 facility, please read Note 8 — “Long-
Term Debt” in Part II, Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated Financial
Statements.”
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 (other than distributions of Available Cash (as defined in our partnership agreement) to our common
unitholders) through the issuance of long-term notes or additional common units.
From time to time, we issue long-term debt securities referred to as our senior notes. All of our outstanding senior
notes, other than the 2024 Secured Notes, are unsecured obligations that rank equally with all of our other senior debt
obligations to the extent they are unsecured. As of December 31, 2023, we had $179.0 million in 2024 Secured Notes,
$413.5 million in 2025 Notes, $325.0 million in 2027 Notes, and $325.0 million in 2028 Notes outstanding. The 2024
Secured Notes and the related guarantees are secured by a first priority lien (subject to certain exceptions) on all the fixed
assets that secure our obligations under the secured hedge agreements, as governed by the Collateral Trust Agreement,
which governs how secured hedging counterparties and holders of the 2024 Secured Notes share collateral pledged as
security for the payment obligations owed by us to the secured hedging counterparties under their respective master
derivatives contracts and the holders of the 2024 Secured Notes. In addition, as of December 31, 2023, we had $384.6
million of debt outstanding for our MRL asset financing arrangements and $50.8 million of other debt outstanding for the
Shreveport terminal asset financing arrangement. Borrowings under the MRL asset financing arrangements are obligations
of our unrestricted subsidiaries MRL and MRHL solely, and are non-recourse to the Company and its restricted
subsidiaries. For additional information regarding our MRL asset financing arrangements, see Note 8 — “Long-Term
Debt” under Part II, Item 8 “Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements”
in this Annual Report.
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 more information regarding our senior notes, please read Note 8 — “Long-Term Debt” under Part II, Item 8
“Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements” in this Annual Report.
Master Derivative Contracts and Collateral Trust Agreement
Under our credit support arrangements, our payment obligations under all of our master derivatives contracts for
commodity hedging generally are secured by a first priority lien on our and our subsidiaries’ real property, plant and
equipment, fixtures, intellectual property, certain financial assets, certain investment property, commercial tort claims,
chattel paper, documents, instruments and proceeds of the foregoing (including proceeds of hedge arrangements). We had
no additional letters of credit or cash margin posted with any hedging counterparty as of December 31, 2023. Our master
derivatives contracts and Collateral Trust Agreement (as defined below) continue to impose a number of covenant
limitations on our operating and financing activities, including limitations on liens on collateral, limitations on dispositions
of collateral and collateral maintenance and insurance requirements. For financial reporting purposes, we do not offset the
81
Table of Contents
collateral provided to a counterparty against the fair value of our obligation to that counterparty. Any outstanding collateral
is released to us upon settlement of the related derivative instrument liability.
Our various hedging agreements contain language allowing our hedge counterparties to request additional collateral if
a specified credit support threshold is exceeded. However, these credit support thresholds are set at levels that would
require a substantial increase in hedge exposure to require us to post additional collateral. As a result, we do not expect
further increases in fuel products crack spreads or interest rates to significantly impact our liquidity due to requirements to
post additional collateral.
Additionally, we have a collateral trust agreement (the “Collateral Trust Agreement”) which governs how secured
hedging counterparties and holders of the 2024 Secured Notes share collateral pledged as security for the payment
obligations owed by us to the secured hedging counterparties under their respective master derivatives contracts and the
holders of the 2024 Secured Notes. The Collateral Trust Agreement limits to $150.0 million the extent to which forward
purchase contracts for physical commodities are covered by, and secured under, the Collateral Trust Agreement and the
Parity Lien Security Documents (as defined in the Collateral Trust Agreement). There is no such limit on financially settled
derivative instruments used for commodity hedging. Subject to certain conditions set forth in the Collateral Trust
Agreement, we have the ability to add secured hedging counterparties from time to time.
Credit Ratings
In October 2023, S&P reaffirmed a rating of B- on our senior unsecured notes and revised our outlook to stable. In
January 2022, Moody’s reaffirmed a rating of Caa1 on our senior unsecured notes and a Company rating of B3, with the
stable outlook maintained. Our 2024 Secured Notes issued in 2020 are rated B+ by S&P and B1 by Moody’s.
Equity Transactions
In April 2016, the board of directors of our general partner suspended payment of our quarterly cash distribution.
Seasonality Impacts on Liquidity
The fuel and fuel related products that we manufacture, including asphalt products, are subject to seasonal demand and
trends. Asphalt demand is generally lower in the first and fourth quarters of the year, as compared to the second and third
quarters, due to the seasonality of the road construction and roofing industries we supply. Demand for gasoline and diesel
is generally higher during the summer months than during the winter months due to seasonal increases in highway traffic
and agricultural activity. In addition, our natural gas costs can be higher during the winter months, as demand for natural
gas as a heating fuel increases during the winter. As a result, our operating results for the first and fourth calendar quarters
may be lower than those for the second and third calendar quarters of each year due to seasonality related to these and other
products that we produce and sell.
Critical Accounting Estimates
The preparation of our consolidated financial statements in accordance with GAAP requires us to use estimates and
make judgements and assumptions about future events that affect the reported amounts of assets, liabilities, revenue,
expenses, and the related disclosures. Considerable judgement is often involved in making these determinations. Critical
estimates are those that require the most difficult, subjective or complex judgements in the preparation of the financial
statements and the accompanying notes. We evaluate these estimates and judgements on a regular basis. We believe our
assumptions and estimates are reasonable and appropriate. However, the use of different assumptions could result in
significantly different results and actual results could differ from those estimates. The following discussion of accounting
estimates is intended to supplement the Summary of Significant Accounting Policies presented in Note 2 to our
consolidated financial statements in Part II, Item 8.
82
Table of Contents
We consider an accounting estimate to be critical if:
● The accounting estimate requires us to make assumptions about matters that are highly uncertain at the time the
accounting estimate is made; and
● We reasonably could have used different estimates in the current period, or changes in these estimates are
reasonably likely to occur from period to period as new information becomes available, and a change in these
estimates would have a material impact on our financial condition or results from operations.
Valuation of Goodwill
We assess goodwill for impairment annually and whenever events or changes in circumstances indicate its carrying
value may not be recoverable. The Company tests goodwill either quantitatively or qualitatively for impairment. The
Company assessed goodwill for impairment qualitatively during the year ended December 31, 2023 and qualitatively and
quantitatively during the year ended December 31, 2022.
In assessing the qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit
is less than its carrying amount, we assess relevant events and circumstances that may impact the fair value and the
carrying amount of the reporting unit. The identification of relevant events and circumstances and how these may impact a
reporting unit’s fair value or carrying amount involve significant judgment and assumptions. The judgment and
assumptions include the identification of macroeconomic conditions, industry and market considerations, cost factors,
overall financial performance and Company specific events and the assessment on whether each relevant factor will impact
the impairment test positively or negatively and the magnitude of any such impact.
In the first step of the quantitative assessment, our assets and liabilities, including existing goodwill and other
intangible assets, are assigned to the identified reporting units to determine the carrying value of the reporting units. If the
carrying value of a reporting unit is in excess of its fair value, an impairment may exist, and we must perform an
impairment analysis, in which the implied fair value of the goodwill is compared to its carrying value to determine the
impairment charge, if any.
When performing the quantitative assessment, as required in the impairment test, the fair value of the reporting unit is
determined using the income approach. The income approach focuses on the income-producing capability of an asset,
measuring the current value of the asset by calculating the present value of its future economic benefits such as cash
earnings, cost savings, corporate tax structure and product offerings. Value indications are developed by discounting
expected cash flows to their present value at a rate of return that incorporates the risk-free rate for the use of funds, the
expected rate of inflation, and risks associated with the reporting unit. If the carrying value of a reporting unit is in excess
of its fair value, an impairment would be recognized in an amount equal to the excess that the carrying value exceeded the
estimated fair value, limited to the carrying value of goodwill.
Inputs used to estimate the fair value of the Company’s reporting units are considered Level 3 inputs of the fair value
hierarchy and include the following:
● The Company’s financial projections for its reporting units are based on its analysis of various supply and
demand factors which include, among other things, industry-wide capacity, planned utilization rates, end-user
demand, crack spreads, capital expenditures and economic conditions. Such estimates are consistent with those
used in the Company’s planning and capital investment reviews and include recent historical prices and published
forward prices.
● The discount rate used to measure the present value of the projected future cash flows is based on a variety of
factors, including market and economic conditions, operational risk, regulatory risk and political risk. This
discount rate is also compared to recent observable market transactions, if possible.
For Level 3 measurements, significant increases or decreases in long-term growth rates or discount rates in isolation or
in combination could result in a significantly lower or higher fair value measurement.
83
Table of Contents
Fair values calculated for the purpose of testing our goodwill for impairment are estimated using the expected present
value of future cash flows method and comparative market prices when appropriate. Significant judgment is involved in
performing these fair value estimates since the results are based on forecasted assumptions.
Meaningful factors that would significantly impact our financial projections are changes in customer demand levels or
loss of significant portions of our business. We believe that the assumptions and estimates used in the assessment of our
goodwill as of October 1, 2023 were reasonable.
Valuation of Finite Long-Lived Assets
Property, plant and equipment and intangible assets with finite lives are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the estimated
undiscounted future cash flows related to the asset are less than the carrying value, we recognize a loss equal to the
difference between the carrying value and the estimated fair value, usually determined by the estimated discounted future
cash flows of the asset. When a decision has been made to dispose of property, plant and equipment prior to the end of the
previously estimated useful life, depreciation estimates are revised to reflect the use of the asset over the shortened
estimated useful life.
Estimated undiscounted future cash flows are used for the purpose of testing our finite long-lived assets for
impairment. Fair values calculated for the purpose of measuring impairments on finite long-lived assets are estimated using
the expected present value of future cash flows method and comparative market prices when appropriate. Significant
judgment is involved in estimating undiscounted future cash flows and performing these fair value estimates since the
results are based on forecasted assumptions.
We base our estimated undiscounted future cash flows and fair value estimates on projected financial information
which we believe to be reasonable. However, actual results may differ from these projections.
Valuation of Renewable Identification Numbers (“RINs”) Obligation
The Company’s RINs volume obligation (“RVO” or “RINs Obligation”) is an estimated provision if future purchase of
RINs were to be required in order to satisfy the U.S. Environmental Protection Agency’s (“EPA”) requirement to blend
renewable fuels into certain transportation fuel products pursuant to the Renewable Fuel Standard (“RFS”) of the Clean Air
Act (“CAA”). A RIN is a 38-character number assigned to each physical gallon of renewable fuel produced in or imported
into the United States. The EPA sets annual volume obligations for the percentage of renewable fuels that must be blended
into transportation fuels consumed in the U.S. Compliance is demonstrated by tendering RINs to the EPA documenting that
blending has been accomplished or by obtaining a Small Refinery Exemption as provided in the Clean Air Act. Prior to
2018, the Company historically received the Small Refinery Exemption after qualifying on the merits and has historically
not been obligated to make these purchases during these years. The Company’s petitions for the Small Refinery Exemption
for compliance years 2018-2022 ultimately were denied by the EPA. EPA’s denials of those petitions is subject to litigation,
as described in Note 2 — “Summary of Significant Accounting Policies.” Future exemptions are the subject of future
annual applications. The RIN obligation is a non-financial instrument representing a quantity that cannot be settled
financially.
The Company accounts for its current period RVO by multiplying the quantity of RINs shortage (based on actual
results) by the period end RINs spot price, which is recorded as both a current and long-term liability in the consolidated
balance sheets. These liabilities are revalued at the end of each subsequent accounting period, which produce non-cash
mark-to-market adjustments that are reflected in cost of sales in the consolidated statements of operations (with the
exception of RINs for compliance year 2019 related to the San Antonio refinery, which amount is reflected in other
operating expense in the consolidated statements of operations). RINs generated by blending may be sold or held to offset
future RVO. Any gains or losses from RINs sales are recorded in cost of sales in the consolidated statements of operations.
Our RINs Obligation is measured at the RINs spot prices obtained from an independent pricing service as of each
balance sheet date. However, certain vintage RINs are very thinly traded, and the period end spot prices might not be an
accurate reflection of the actual amount that we could purchase RINs in the open market in the quantities that would be
84
Table of Contents
required to satisfy our RINs volume obligation. Please read Note 2 — “Summary of Significant Accounting Policies” for
further information on our RINs obligation.
We believe that our small refineries (“the refineries”) qualify for SREs on the merits and we have asked EPA to
approve our petitions. The Company has previously applied for and received SREs through 2018, following a structure
procedure administered by the EPA. According to documentation we have received from the EPA, the analysis prepared by
the Department of Energy (“DOE”) under this procedure showed that the Company’s refineries met the criteria for
disproportionate economic hardship for the 2018, 2019 and 2020 compliance years. The reversal of our previously
approved 2018 SRE in April 2022, the blanket denial in June 2022 by EPA of our 2019 and 2020 petitions, and the blanket
denial in July 2023 by EPA of our 2021 and 2022 petitions were based on EPA’s retroactive across-the-board determination
despite the affirmative findings from the DOE that the refineries met the criteria for disproportionate economic hardship.
Management believes that we have viable legal arguments to challenge the denials, including that the denials are
inconsistent with the CAA, the Administrative Procedure Act, EPA’s regulations, the DOE’s analysis and/or the factual
record, and are unlawful retroactive applications of a new standard. In November 2023, the Fifth Circuit ruled in the
Partnership’s favor on the merits of its challenge as it relates to the Shreveport refinery’s 2019 and 2020 SRE petitions,
vacated EPA’s denial and remanded it to the EPA, and held that EPA’s denial was impermissibly retroactive and also
violated federal law. In January 2024, the Fifth Circuit denied a request to rehear the case. The court’s mandate issued in
January 2024, and these SRE petitions are before EPA once again for further consideration consistent with the court’s
opinion. The challenge before the D.C. Circuit remains pending. As with any legal action, a challenge to an EPA decision
denying the refineries’ SRE petitions may ultimately be unsuccessful. This would present a number of uncertainties and
complexities caused primarily by the passage of time since we first submitted the SRE petitions, including for example the
potential expiration and/or unavailability or limited availability in the market of vintage 2019, 2020, 2021 and 2022 RINs,
the specifics of other potential forthcoming EPA actions, the results of other parties’ potential litigation avenues and
outcomes, and post-litigation uncertainties around the timing and magnitude of any resolution.
Based on current information we believe the most likely outcome is either successful appellate litigation or reaching an
alternative resolution. If we are ultimately successful in obtaining the refineries’ SREs (or a non-enforcement equivalent),
the value of the liability would be zero. If we are ultimately unsuccessful in our appeals, the timing, amount and form our
actual liability may depend upon the resolution obtained, potentially as part of subsequent, additional litigation. For
example, if resolution for the 2019 and 2020 compliance years used the market price of RINs on the day the EPA was
obligated to rule on the refineries’ 2019 SRE petitions, the value of the liability would be approximately $50.7 million.
Recent Accounting Pronouncements
For a summary of recently issued and adopted accounting standards applicable to us, please read Note 2 — “Summary
of Significant Accounting Policies” in Part II, Item 8 “Financial Statements and Supplementary Data — Notes to
Consolidated Financial Statements.”
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
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
85
Table of Contents
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 our general partner 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 Part II, Item 8 “Financial Statements and Supplementary Data — Notes to
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 general partner’s 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.
86
Table of Contents
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 December 31, 2023 and December 31, 2022, which we
disclose in Note 8 — “Long-Term Debt” and Note 10 — “Fair Value Measurements” under Part II, Item 8 “Financial
Statements and Supplementary Data — Notes to Consolidated Financial Statements.”
Financial Instrument:
2024 Secured Notes
2025 Notes
2027 Notes
2028 Notes
Revolving credit facility
MRL revolving credit facility
MRL Term Loan Credit Agreement
Shreveport terminal asset financing arrangement
MRL asset financing arrangements
December 31, 2023
December 31, 2022
Fair Value Carrying Value Fair Value Carrying Value
(In millions)
$ 179.7
$ 421.1
$ 320.7
$ 325.7
$ 136.7
$ 13.0
$ 74.4
$ 50.8
$ 384.6
$
$
$
$
$
$
$
$
$
178.8
411.5
322.3
319.7
134.4
12.4
71.6
50.1
381.6
$ 203.7
$ 536.1
$ 305.4
$
$ 104.0
$
$
$ 58.2
$ 370.1
$
$
$
— $
$
— $
— $
$
$
199.3
509.2
321.5
—
100.9
(0.6)
—
57.2
368.8
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 $500.0 million revolving credit facility as of
December 31, 2023, with borrowings bearing interest at the prime rate or SOFR, at our option, plus the applicable margin.
We had $149.7 million of outstanding variable rate debt as of December 31, 2023 and $104.0 million of outstanding
variable rate debt as of December 31, 2022. Holding other variables constant (such as debt levels), a 100 basis point change
in interest rates on our variable rate debt as of December 31, 2023, would be expected to have an impact on Net income
(loss) of approximately $1.5 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.
87
Table of Contents
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Calumet GP, LLC
General Partner and the Partners of Calumet Specialty Products Partners, L.P.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Calumet Specialty Products Partners, L.P. (“the
Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income
(loss), partners' capital (deficit) and cash flows for each of the three years in the period ended December 31, 2023, and the
related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022,
and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in
conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) and our report dated February 29, 2024, expressed an adverse opinion thereon.
Restatement of 2022 Financial Statements
As discussed in Note 21 to the consolidated financial statements, the 2022 consolidated financial statements have been
restated to correct a misstatement.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our
opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex
judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a
separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
88
Table of Contents
Description of the Matter
How We Addressed the Matter in
Our Audit
Renewable Identification Numbers (“RINs”) Obligation
As of December 31, 2023, the Company’s RINs obligation was $277.3 million. As
described in Note 2 to the consolidated financial statements, the RINs obligation is
an estimated provision for the future purchase of RINs in order to satisfy the U.S.
Environmental Protection Agency’s (“EPA”) annual requirement
to blend
renewable fuels into certain transportation fuel products pursuant to the Renewable
Fuel Standard.
Auditing management’s RINs obligation was complex and judgmental due to
estimation uncertainty in the Company’s determination of the RINs obligation
under the Renewable Fuel Standard. The complexity and estimation uncertainty was
primarily due to the calculation of the RINs shortage and the pricing assumptions,
respectively.
We obtained an understanding, evaluated the design and tested the operating
effectiveness of the Company’s controls over the RINs obligation estimation
process. For example, we tested controls over management’s review of the
methodology used to calculate the obligation and the RINs shortage and pricing
assumptions, as noted above.
To audit the Company’s RINs obligation, our audit procedures included, among
others, evaluating the appropriateness of management’s methodology to calculate
the RINs obligation under the Renewable Fuel Standard including testing the
completeness and accuracy of the underlying data used by management in
estimating the amount of the obligation. We involved our specialists to assist in our
evaluation of management’s methodology. Additionally, we compared the prices
utilized by the Company in their estimate of the RINs obligation to a third-party
pricing source.
We have served as the Company’s auditor since 2002.
/s/ Ernst & Young LLP (PCAOB ID 42)
Indianapolis, Indiana
February 29, 2024
89
Table of Contents
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
Current assets:
Cash and cash equivalents
Accounts receivable, net:
ASSETS
Trade, less allowance for credit losses of $1.2 million and $1.3 million, respectively
Other
Inventories
Derivative assets
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Goodwill
Other intangible assets, net
Operating lease right-of-use assets
Other noncurrent assets, net
Total assets
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
Current liabilities:
Accounts payable
Accrued interest payable
Accrued salaries, wages and benefits
Other taxes payable
Obligations under inventory financing agreements
Current portion of RINs obligation
Derivative liabilities
Current portion of operating lease liabilities
Other current liabilities
Current portion of long-term debt
Total current liabilities
Pension and postretirement benefit obligations
Other long-term liabilities
Long-term operating lease liabilities
Long-term RINs obligation, less current portion
Long-term debt, less current portion
Total liabilities
Commitments and contingencies
Redeemable noncontrolling interest
Partners’ capital (deficit):
Limited partners’ interest (79,967,363 units and 79,189,583 units, issued and
outstanding at December 31, 2023 and December 31, 2022, respectively)
General partner’s interest
Accumulated other comprehensive loss
Total partners’ capital (deficit)
Total liabilities and partners’ capital (deficit)
Year Ended December 31,
2022
2023
(In millions, except unit data)
(As Restated)
$
7.9
$
35.2
252.4
33.8
286.2
439.4
9.6
51.6
794.7
1,506.3
173.0
28.5
114.4
134.4
2,751.3
322.0
48.7
87.1
13.5
190.4
277.3
—
75.6
42.4
55.7
1,112.7
4.2
10.4
39.0
—
1,829.7
2,996.0
245.6
(484.4)
1.3
(7.2)
(490.3)
2,751.3
$
$
$
$
$
$
244.7
22.4
267.1
497.7
—
19.6
819.6
1,482.0
173.0
36.3
107.5
122.6
2,741.0
442.0
34.6
93.0
9.5
221.8
398.9
26.5
70.7
34.3
19.6
1,350.9
4.8
18.3
37.1
77.5
1,540.1
3,028.7
245.6
(525.3)
0.3
(8.3)
(533.3)
2,741.0
$
$
$
$
$
$
See accompanying notes to consolidated financial statements.
90
Table of Contents
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Sales
Cost of sales
Gross profit
Operating costs and expenses:
Selling
General and administrative
Taxes other than income taxes
Loss on impairment and disposal of assets
Other operating (income) expense
Operating income (loss)
Other income (expense):
Interest expense
Debt extinguishment costs
Gain (loss) on derivative instruments
Other income (expense)
Total other expense
Net income (loss) before income taxes
Income tax expense
Net income (loss)
Allocation of net income (loss) to partners:
Net income (loss) attributable to partners
Less:
General partners’ interest in net income (loss)
Net income (loss) available to limited partners
Weighted average limited partner units outstanding:
Basic and diluted
Limited partners’ interest basic and diluted net income (loss)
per unit:
Limited partners’ interest
2023
Year Ended December 31,
2022
(In millions, except unit and per unit data)
(As Restated)
2021
$
4,181.0
3,729.3
451.7
$
4,686.3
4,334.6
351.7
3,148.0
3,005.1
142.9
54.9
133.0
21.5
3.5
(28.4)
267.2
(221.7)
(5.9)
9.9
0.2
(217.5)
49.7
1.6
48.1
48.1
1.0
47.1
$
$
$
53.9
143.4
13.7
0.7
8.1
131.9
(175.9)
(41.4)
(81.7)
(2.8)
(301.8)
(169.9)
3.4
(173.3)
(173.3)
(3.5)
(169.8)
$
$
$
52.8
151.1
12.5
4.1
8.0
(85.6)
(149.5)
(0.5)
(23.3)
0.3
(173.0)
(258.6)
1.5
(260.1)
(260.1)
(5.2)
(254.9)
80,075,530
79,336,283
78,980,839
0.59
$
(2.14)
$
(3.23)
$
$
$
$
$
See accompanying notes to consolidated financial statements.
91
Table of Contents
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income (loss)
Other comprehensive income:
Defined benefit pension and retiree health benefit plans
Total other comprehensive income
Comprehensive income (loss) attributable to partners’ capital (deficit)
$
$
2023
Year Ended December 31,
2022
(In millions)
(As Restated)
$
(173.3) $
48.1
1.1
1.1
49.2
$
1.8
1.8
(171.5) $
2021
(260.1)
2.2
2.2
(257.9)
See accompanying notes to consolidated financial statements.
92
Table of Contents
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL (DEFICIT)
Accumulated
Other
Partners’ Capital (Deficit)
Comprehensive
General
Limited
Loss
Partner Partners
Total
(In millions)
Balance at December 31, 2020
Other comprehensive income
Net loss
Settlement of tax withholdings on equity-based incentive
compensation
Amortization of phantom units
Balance at December 31, 2021
Other comprehensive income
Net loss
Settlement of phantom units
Settlement of tax withholdings on equity-based incentive
compensation
Modification of phantom units
Amortization of phantom units
Balance at December 31, 2022 (As Restated)
Other comprehensive income
Net income
Settlement of phantom units
Settlement of tax withholdings on equity-based incentive
compensation
Amortization of phantom units
Balance at December 31, 2023
$
$
$
$
$
(12.3)
2.2
—
—
—
$
(10.1)
1.8
—
—
—
—
—
$
(8.3)
1.1
—
—
—
—
$
(7.2)
$ (125.3)
9.0
—
—
(5.2)
(254.9)
$ (128.6)
2.2
(260.1)
(0.6)
2.0
$ (378.8)
—
—
3.8
—
(3.5)
—
(169.8)
8.2
—
(4.1)
13.5
5.7
$ (525.3)
—
—
—
0.3
—
1.0
—
—
47.1
2.8
(0.6)
2.0
$ (385.1)
1.8
(173.3)
8.2
(4.1)
13.5
5.7
$ (533.3)
1.1
48.1
2.8
—
—
1.3
(9.7)
0.7
$ (484.4)
(9.7)
0.7
$ (490.3)
See accompanying notes to consolidated financial statements.
93
Table of Contents
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
$
2023
Year Ended December 31,
2022
(In millions)
(As Restated)
(173.3)
$
$
48.1
Depreciation and amortization
Amortization of turnaround costs
Non-cash interest expense
Debt extinguishment costs
Non-cash RINs (gain) expense
Unrealized (gain) loss on derivative instruments
Loss on impairment and disposal of assets
Equity based compensation
Lower of cost or market inventory adjustment
Other non-cash activities
Changes in assets and liabilities
Accounts receivable
Inventories
Prepaid expenses and other current assets
Turnaround costs
Other assets
Accounts payable
Accrued interest payable
Accrued salaries, wages and benefits
Other taxes payable
Other liabilities
Net cash provided by (used in) operating activities
Investing activities
Additions to property, plant and equipment
Proceeds from sale of property, plant and equipment
Net cash used in investing activities
Financing activities
Proceeds from borrowings — revolving credit facility
Repayments of borrowings — revolving credit facility
Proceeds from borrowings — MRL revolving credit agreement
Repayments of borrowings — MRL revolving credit agreement
Proceeds from borrowings — senior notes
Repayments of borrowings — senior notes
Payments on finance lease obligations
Proceeds from inventory financing
Payments on inventory financing
Proceeds from sale of redeemable noncontrolling interest in subsidiary
Payments for issuance of Preferred Units
Proceeds from MRL Credit Facility
Repayments of borrowings — MRL Credit Facility
Proceeds from other financing obligations
Payments on other financing obligations
Debt issuance costs
Net cash provided by financing activities
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Cash and cash equivalents
Restricted cash
Supplemental disclosure of cash flow information
Interest paid, net of capitalized interest
Supplemental disclosure of non-cash investing activities
Non-cash property, plant and equipment additions
146.8
36.1
5.7
1.6
(199.1)
(33.0)
3.5
14.7
33.2
0.5
(19.2)
25.1
(25.9)
(47.9)
(10.2)
(12.4)
15.3
(17.1)
4.0
15.3
(14.9)
(271.8)
—
(271.8)
2,185.0
(2,152.3)
93.2
(80.2)
325.0
(121.0)
(1.0)
1,712.0
(1,753.9)
—
—
—
—
102.0
(30.1)
(12.5)
266.2
(20.5)
35.2
14.7
7.9
6.8
201.9
31.3
$
$
$
$
$
98.3
23.1
17.6
41.4
197.5
45.9
0.7
17.3
19.4
2.2
(14.1)
(190.5)
(5.6)
(62.6)
—
56.9
8.4
9.5
(2.1)
10.6
100.6
(536.2)
0.2
(536.0)
1,695.1
(1,591.1)
—
—
325.0
(363.1)
(0.9)
2,166.0
(2,132.6)
250.0
(4.4)
—
(347.3)
372.9
(15.6)
(5.3)
348.7
(86.7)
121.9
35.2
35.2
$
$
— $
151.4
136.9
$
$
$
$
$
$
$
See accompanying notes to consolidated financial statements.
94
2021
(260.1)
107.7
17.0
10.6
0.5
149.5
24.4
4.1
50.7
(44.7)
2.4
(91.4)
(27.0)
(3.7)
(61.0)
—
71.0
(3.2)
17.1
2.1
(10.0)
(44.0)
(82.9)
0.1
(82.8)
1,122.1
(1,230.1)
—
—
—
(150.0)
(0.6)
1,046.7
(999.2)
—
—
300.0
—
70.0
(7.6)
(12.0)
139.3
12.5
109.4
121.9
38.1
83.8
142.9
51.4
Table of Contents
1. Description of the Business
Calumet Specialty Products Partners, L.P. (the “Company”) is a publicly-traded Delaware limited partnership listed on
the Nasdaq Global Select Market (“Nasdaq”) under the ticker symbol “CLMT.” The general partner of the Company is
Calumet GP, LLC, a Delaware limited liability company. As of December 31, 2023, the Company had 79,967,363 limited
partner common units and 1,631,987 general partner equivalent units outstanding. The general partner owns 2% of the
Company and all of the incentive distribution rights (as defined in the Company’s partnership agreement, “IDRs”), while
the remaining 98% is owned by limited partners.
The Company manufactures, formulates, and markets a diversified slate of specialty branded products and renewable
fuels to customers across a broad range of consumer-facing and industrial markets. Calumet is headquartered in
Indianapolis, Indiana and operates twelve facilities throughout North America.
2. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements and related notes reflect the accounts of the Company, its wholly-owned
subsidiaries, and its majority-owned subsidiaries. All intercompany profits, transactions and balances have been
eliminated.
Reclassifications
Certain amounts in the prior years’ consolidated financial statements have been reclassified to conform to the
current year presentation.
Use of Estimates
The Company’s consolidated financial statements are prepared in conformity with U.S. generally accepted accounting
principles (“GAAP”) which require management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash include all highly liquid investments with a maturity of three months or less
at the time of purchase.
Restricted cash as of December 31, 2023 represents cash that is legally restricted under the MRL Term Loan Credit
Agreement, and it is included in prepaid expenses and other current assets in the consolidated balance sheets. Restricted
cash as of December 31, 2021 represents cash that was legally restricted under the MRL Credit Facility because it was only
available for capital additions related to the renewable diesel project.
Accounts Receivable
The Company performs periodic credit evaluations of customers’ financial condition and generally does not require
collateral. Accounts receivable are carried at their face amounts. The Company maintains an allowance for credit losses for
estimated losses in the collection of accounts receivable. The Company makes estimates regarding the future ability of its
customers to make required payments based on historical experience, the age of the accounts receivable balances, credit
quality of its customers, current economic conditions, expected future trends and other factors that may affect customers’
ability to pay. Individual accounts are written off against the allowance for credit losses after all reasonable collection
efforts have been exhausted.
95
Table of Contents
The activity in the allowance for credit losses was as follows (in millions):
Beginning balance
Provision
Write-offs, net
Ending balance
Inventories
2023
December 31,
2022
2021
$
$
$
1.3
(0.1)
—
$
1.2
$
2.0
(0.7)
—
$
1.3
0.8
1.2
—
2.0
The cost of inventory is recorded using the last-in, first-out (“LIFO”) method. Costs include crude oil and other
feedstocks, labor, processing costs and refining overhead costs. Inventories are valued at the lower of cost or market value.
The replacement cost of these inventories, based on current market values, would have been $67.8 million and $99.9
million higher than the carrying value of inventory as of December 31, 2023 and 2022, respectively.
For the years ended December 31, 2023 and 2022, the Company sold inventory comprised of crude oil, refined
products and renewable feedstocks under Supply and Offtake Agreements as described in Note 7 — “Inventory Financing
Agreements” related to the Great Falls, Shreveport and Montana Renewables facilities.
Inventories consist of the following (in millions):
Raw materials
Work in process
Finished goods
December 31, 2023
Supply and
Offtake
Agreements (1)
27.6
$
36.7
79.1
143.4
$
$
$
Titled
Inventory
61.6
72.3
162.1
296.0
$
$
Total
89.2
109.0
241.2
439.4
$
$
Titled
Inventory
December 31, 2022 (As Restated)
Supply and
Offtake
Agreements (1)
22.5
$
95.7
80.4
198.6
99.3
62.5
137.3
299.1
$
$
$
Total
121.8
158.2
217.7
497.7
(1) Amounts represent LIFO value and do not necessarily represent the value at which the inventory was sold. Please read
Note 7 — “Inventory Financing Agreements” for further information.
Under the LIFO inventory method, the most recently incurred costs are charged to cost of sales and inventories are
valued at the earliest acquisition costs, resulting in a better matching of costs and revenues. For the year ended
December 31, 2023, the Company recorded an increase (exclusive of lower of cost or market (“LCM”) adjustments) of
$2.4 million in cost of sales in the consolidated statements of operations due to the liquidation of inventory layers. For the
years ended December 31, 2022 and 2021, the Company recorded decreases (exclusive of LCM adjustments) of $12.8
million and $5.6 million, respectively, in cost of sales in the consolidated statements of operations due to the liquidation of
inventory layers.
In addition, the use of the LIFO inventory method may result in increases or decreases to cost of sales in years that
inventory volumes decline as the result of charging cost of sales with LIFO inventory costs generated in prior periods. In
periods of rapidly declining prices, LIFO inventories may have to be written down to market value due to the higher costs
assigned to LIFO layers in prior periods. During the years ended December 31, 2023 and 2022, the Company recorded an
increase in cost of sales in the consolidated financial statements of operations of $33.2 million and $19.4 million,
respectively, substantially all of which was the result of declining market prices for renewable feedstocks at our Montana
Renewables facility. During the year ended December 31, 2021, the Company recorded a decrease in cost of sales in the
consolidated statements of operations of $44.7 million due to the sale of inventory previously adjusted through the LCM
valuation.
96
Table of Contents
Derivatives
The Company is exposed to fluctuations in the price of numerous commodities, such as crude oil (its principal raw
material), as well as the sales prices of gasoline, diesel, natural gas and jet fuel. Given the historical volatility of
commodity prices, these fluctuations can significantly impact sales, gross profit and net income. Therefore, the Company
utilizes derivative instruments primarily to minimize its price risk and volatility of cash flows associated with the purchase
of crude oil, natural gas, and the sale of fuel products. The Company employs various hedging strategies and does not hold
or issue derivative instruments for trading purposes. For further information, please read Note 9 — “Derivatives.”
On a regular basis, the Company enters into commodity contracts with counterparties for the purchase or sale of crude
oil, blendstocks and various finished products. These contracts usually qualify for the normal purchase / normal sale
exemption under ASC 815 and, as such, are not measured at fair value.
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of cost. Depreciation is calculated using the straight-line method
over the estimated useful lives. Assets under finance leases are amortized over the lesser of the useful life of the asset or
the term of the lease.
Property, plant and equipment, including depreciable lives, consisted of the following (in millions):
Land
Buildings and improvements (10 to 40 years)
Machinery and equipment (10 to 20 years)
Furniture, fixtures and software (5 to 10 years)
Assets under finance leases (1 to 14 years) (1)
Construction-in-progress
Less accumulated depreciation
December 31,
2023
$
8.9
40.4
2,460.0
47.1
7.4
39.5
2,603.3
(1,097.0)
$ 1,506.3
2022
8.9
35.6
2,153.7
48.7
6.9
222.5
2,476.3
(994.3)
1,482.0
$
$
(1) Assets under finance leases consist of buildings and machinery and equipment. As of December 31, 2023 and 2022,
finance lease assets are recorded net of accumulated amortization of $5.0 million and $4.1 million, respectively.
Under the composite depreciation method, the cost of partial retirements of a group is charged to accumulated
depreciation. However, when there are dispositions of complete groups or significant portions of groups, the cost and
related accumulated depreciation are retired, and any gain or loss is reflected in earnings.
During 2023, 2022 and 2021, the Company incurred $225.1 million, $194.5 million and $151.1 million, respectively,
of interest expense of which $3.4 million, $18.6 million and $1.6 million, respectively, was capitalized as a component of
property, plant and equipment.
The Company periodically assesses its operations and legal requirements to determine if recognition of an asset
retirement obligation is necessary. The Company has not recorded an asset retirement obligation as of December 31, 2023
or 2022 given the timing of any retirement and related costs are currently indeterminable.
During the years ended December 31, 2023, 2022 and 2021, the Company recorded $138.6 million, $88.7 million and
$95.9 million, respectively, of depreciation expense on its property, plant and equipment. Depreciation expense included
$0.9 million, $0.7 million and $0.7 million for the years ended 2023, 2022 and 2021, respectively, related to the Company’s
finance lease assets.
97
Table of Contents
The Company capitalizes the cost of computer software developed or obtained for internal use. Capitalized software is
amortized using the straight-line method over five years. As of December 31, 2023 and 2022, the Company had $41.9
million and $43.5 million, respectively, of capitalized software costs. As of December 31, 2023 and 2022, the Company
had $40.5 million and $41.4 million, respectively, of accumulated depreciation related to the capitalized software costs.
During the years ended December 31, 2023, 2022 and 2021, the Company recorded $0.7 million, $5.4 million and $7.8
million, respectively, of amortization expense on capitalized computer software.
Goodwill
Goodwill represents the excess of purchase price over fair value of the net assets acquired in various acquisitions.
Please read Note 5 — “Goodwill and Other Intangible Assets” for more information. The Company assesses goodwill for
impairment annually and whenever events or changes in circumstances indicate its carrying value may not be recoverable
in accordance with ASC 350, Intangibles — Goodwill and Other (Topic 350) and ASU 2017-04, Intangibles—Goodwill
and Other (Topic 350): Simplifying the Test for Goodwill Impairment. Under ASC 350, an entity has the option to first
assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is
more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of
events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than
its carrying amount, then performing the impairment test is unnecessary. The Company tests goodwill either quantitatively
or qualitatively for impairment. The Company assessed goodwill for impairment qualitatively for the year ended
December 31, 2023 and qualitatively and quantitatively for the year ended December 31, 2022.
In assessing the qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit
is less than its carrying amount, the Company assesses relevant events and circumstances that may impact the fair value
and the carrying amount of the reporting unit. The identification of relevant events and circumstances and how these may
impact a reporting unit’s fair value or carrying amount involve significant judgment and assumptions. The judgment and
assumptions include the identification of macroeconomic conditions, industry and market considerations, cost factors,
overall financial performance and Company specific events and making the assessment on whether each relevant factor
will impact the impairment test positively or negatively and the magnitude of any such impact.
In the first step of the quantitative assessment, the Company’s assets and liabilities, including existing goodwill and
other intangible assets, are assigned to the identified reporting units to determine the carrying value of the reporting units.
Under ASU 2017-04, goodwill impairment testing is done by comparing the fair value of the reporting unit to its carrying
value. If the carrying amount exceeds the fair value, the Company would recognize an impairment charge for the amount
that the reporting unit’s carrying value exceeds the fair value, not to exceed the total amount of goodwill allocated to that
reporting unit.
When performing the quantitative assessment, the fair value of the reporting units is determined using the income
approach. The income approach focuses on the income-producing capability of the reporting unit, measuring the current
value of the reporting unit by calculating the present value of its future economic benefits such as cash earnings, cost
savings, corporate tax structure and product offerings. Value indications are developed by discounting expected cash flows
to their present value at a rate of return that incorporates the risk-free rate for the use of funds, the expected rate of
inflation, and risks associated with the reporting unit. For more information, please read Note 5 — “Goodwill and Other
Intangible Assets.”
Finite-Lived Intangible Assets
Finite-lived intangible assets consist of intangible assets associated with customer relationships, tradenames, trade
secrets, patents and royalty agreements that were acquired in various acquisitions. The majority of these assets are being
amortized using undiscounted estimated future cash flows over the term of the related agreements. Intangible assets
associated with customer relationships are being amortized using the undiscounted estimated future cash flows method
based upon assumed rates of annual customer attrition. For more information, please read Note 5 — “Goodwill and Other
Intangible Assets.”
98
Table of Contents
Other Noncurrent Assets
Other noncurrent assets include turnaround costs. Turnaround costs represent capitalized costs associated with the
Company’s periodic major maintenance and repairs and the net carrying value of turnaround costs included in other
noncurrent assets in the consolidated balance sheets were $129.3 million and $119.7 million as of December 31, 2023 and
2022, respectively. The Company capitalizes these costs and amortizes the costs on a straight-line basis over the lives of the
turnaround assets which is generally two to five years. These amounts are net of accumulated amortization of $68.9 million
and $54.0 million at December 31, 2023 and 2022, respectively.
Renewable Identification Numbers (“RINs”) Obligation
The Company’s RINs volume obligation (“RVO” or “RINs Obligation”) is an estimated provision if future purchase of
RINs were to be required in order to satisfy the U.S. Environmental Protection Agency’s (“EPA”) requirement to blend
renewable fuels into certain transportation fuel products pursuant to the Renewable Fuel Standard (“RFS”) of the Clean Air
Act (“CAA”). The Company has historically not been obligated to make these purchases. A RIN is a 38-character number
assigned to each physical gallon of renewable fuel produced in or imported into the United States. The EPA sets annual
volume obligations for the percentage of renewable fuels that must be blended into transportation fuels consumed in the
U.S. Compliance is demonstrated by tendering RINs to the EPA documenting that blending has been accomplished or by
obtaining a Small Refinery Exemption as provided in the Clean Air Act. Prior to 2018, the Company historically received
the Small Refinery Exemption after qualifying on the merits. The Company’s petitions for the Small Refinery Exemption
for compliance years 2018-2022 ultimately were denied by the EPA. EPA’s denials of those petitions is subject to litigation,
as described below. Future exemptions are the subject of future annual applications. The RIN obligation is a non-financial
instrument representing a quantity that cannot be settled financially.
The Company accounts for its current period RVO by multiplying the quantity of RINs shortage (based on actual
results) by the period end RINs spot price, which is recorded as both a current and long-term liability in the consolidated
balance sheets. These liabilities are revalued at the end of each subsequent accounting period, which produce non-cash
mark-to-market adjustments that are reflected in cost of sales in the consolidated statements of operations (with the
exception of RINs for compliance year 2019 related to the San Antonio refinery, which amount is reflected in other
operating expense in the consolidated statements of operations). RINs generated by blending may be sold or held to offset
future RVO. Any gains or losses from RINs sales are recorded in cost of sales in the consolidated statements of operations.
The RFS provision of the CAA allows small refineries to apply at any time for a Small Refinery Exemption (“SRE”)
from the renewable blending requirements, and we have applied in respect of compliance years 2019, 2020, 2021, 2022
and 2023.
2018 RVO. In April 2022, EPA issued new decisions denying 36 petitions from small refineries seeking SREs for
program year 2018 that had been remanded by the U.S. Court of Appeals for the D.C. Circuit to EPA. EPA had previously
granted 31 of these 36 petitions in August 2019, including petitions from the Company. Concurrent with the April 2022
denial action, EPA provided an alternate compliance approach to allow these 31 small refineries to meet their 2018
compliance obligations without purchasing or redeeming additional RINs. In April 2022, the Company filed a petition for
review of EPA’s denial of the 2018 SRE petition for the Shreveport refinery in the U.S. Court of Appeals for the Fifth
Circuit. In June 2022, the Company filed a petition for review of EPA’s denial of the 2018 SRE petition for the Montana
refinery in the U.S. Court of Appeals for the Ninth Circuit and filed a protective petition for review in the U.S. Court of
Appeals for the D.C. Circuit challenging the EPA’s denials of both the Shreveport and Montana refineries’ petitions. Upon
a motion made by EPA, the Ninth Circuit dismissed the Company’s appeal of the denial of the Montana refinery’s 2018
SRE petition for improper venue in favor of the D.C. Circuit appeal. EPA filed a similar motion to dismiss or transfer in the
Fifth Circuit; however, the Fifth Circuit denied EPA’s motion and ordered the merits panel to consider both the merits of
the appeal and the venue question raised by EPA. These 2018 RVO appeals were consolidated with the 2019-2020 RVO
appeals described below.
2019-2020 RVO. In June 2022, EPA issued final decisions denying 69 pending petitions from small refineries seeking
SREs for compliance years 2016 to 2021, including petitions submitted by the Company seeking exemptions for
program years 2019 and 2020, based on an across-the-board determination that no small refinery suffers disproportionate
99
Table of Contents
economic hardship from the RFS program, a contention which was subsequently rejected by the Government
Accountability Office. In September 2022, EPA finalized an alternative RIN retirement schedule for small refineries. The
alternative RIN retirement schedule allows the use of RINs generated in post-2020 compliance years to meet the 2020 RFS
obligations. The Company’s small refineries are eligible to use this alternative schedule. In August 2022, the Company
filed a petition for review of EPA’s denial of the 2019 and 2020 SRE petitions for the Shreveport refinery in the U.S. Court
of Appeals for the Fifth Circuit, and a petition for review of EPA’s denial of the 2019 and 2020 SRE petitions for the
Montana refinery in the U.S. Court of Appeals for the Ninth Circuit. The Company again filed a protective petition for
review in the U.S. Court of Appeals for the D.C. Circuit challenging both of the EPA’s denials. These appeals have been
consolidated with the applicable program year 2018 appeals. Upon a motion made by EPA, the Ninth Circuit transferred
the Company’s Montana appeal, which is now pending in the D.C. Circuit. The Fifth Circuit denied EPA’s request to
dismiss or transfer the appeal, ruling that merits panel will also consider EPA’s argument that the Shreveport refinery
appeals should be transferred to the D.C. Circuit. The Company filed motions in both appeals asking the circuit courts to
stay the Company’s 2019 and 2020 RFS obligations while the merits appeals are pending. In January 2023, the Fifth
Circuit granted the Company’s motion for stay relating to the Shreveport refinery, and in March 2023, the D.C. Circuit
granted the Company’s motion for stay relating to the Montana refinery. The stays granted by each of the respective
circuits hold that the Company is likely to be successful on the merits of its appeals. In November 2023, the Fifth Circuit
issued its decision and found that venue for the appeal is proper in the Fifth Circuit and that EPA’s denial of the Shreveport
refinery’s petitions for program years 2018-2020 was improper. The Fifth Circuit vacated the EPA’s denials of those
petitions and remanded the petitions to EPA.
2021-2022 RVO. In October 2022, Calumet applied for SREs for 2021 and 2022 compliance years. In April 2023, the
Company filed for injunctive relief in both the District Court of Montana and the Western District Court of Louisiana to
force EPA to make a decision on the Montana and Shreveport refineries’ joint 2021 and 2022 SRE applications. In July
2023, EPA issued final decisions denying 26 pending petitions from small refineries seeking SREs for compliance years
2016 to 2023, including petitions submitted by the Company seeking exemptions for program years 2021 and 2022, based
on the same approach and analysis described in the June 2022 denials. EPA’s denial decision renders the district court
actions moot, and the Company voluntarily dismissed those actions. The Company then filed appeals of the denials with
the Fifth Circuit and D.C. Circuit. In September 2023, the Fifth Circuit granted the Company’s motion for stay relating to
the Shreveport refinery for its appeal of the denial for program years 2021 and 2022, and in October 2023, the D.C. Circuit
granted the Company’s motion for stay relating to the Montana refinery’s appeal of the denial for program years 2021 and
2022. The Company’s appeals of the denial of the Shreveport and Great Falls refinery petitions for program years 2021 and
2022 remain pending in the Fifth Circuit and D.C. Circuit, respectively.
Expenses related to RFS compliance have the potential to remain a significant expense for the Specialty Products and
Solutions and Montana/Renewables segments. If legal or regulatory changes occur that have the effect of increasing the
RINs Obligation, increasing the market price of RINs, or eliminating or narrowing the availability of SREs, the Company
could be required to purchase additional RINs in the open market, which may materially increase the costs related to RFS
compliance and could have a material adverse effect on the results of operations and liquidity.
As of December 31, 2023 and 2022, as restated, the Company had a RINs Obligation recorded on the consolidated
balance sheets of $277.3 million and $476.4 million, respectively.
Impairment of Long-Lived Assets
The Company periodically evaluates the carrying value of long-lived assets to be held and used, including finite-lived
intangible assets, when events or circumstances warrant such a review. The carrying value of a long-lived asset to be held
and used is considered impaired when the anticipated separately identifiable undiscounted cash flows from such an asset
are less than the carrying value of the asset. In such an event, a write-down of the asset would be recorded through a charge
to operations, based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is
determined primarily using anticipated cash flows assumed by a market participant discounted at a rate commensurate with
the risk involved. Long-lived assets to be disposed of other than by sale are considered held and used until disposal.
During the years ended December 31, 2023 and 2022, the Company did not identify any impairment indicators that
suggested the carrying values of its long-lived assets are not recoverable at the asset groups within the Specialty Products
100
Table of Contents
and Solutions, Montana/Renewables, Performance Brands and Corporate segments. As a result of the long-lived asset
impairment assessment performed, no impairment charges were recorded for the years ended December 31, 2023, 2022 and
2021.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue Recognition, which states that revenue is
recognized when control of the promised goods are transferred to the customer, in an amount that reflects the consideration
to which the Company expects to be entitled in exchange for those goods. Please read Note 3 — “Revenue Recognition”
for additional information on our revenue recognition accounting policies and elections.
Revenues associated with transactions commonly called buy/sell contracts, in which the purchase and sale of inventory
with the same counterparty are entered into “in contemplation” of one another, are combined and reported as a net purchase
in cost of sales in the consolidated statements of operations.
Concentrations of Credit Risk
The Company performs periodic credit evaluations of its customers’ financial condition and in some instances requires
cash in advance or letters of credit prior to shipment for domestic orders. For international orders, letters of credit are
generally required, and the Company maintains insurance policies which cover certain export orders. The Company
maintains an allowance for credit losses for estimated losses resulting from the inability of its customers to make required
payments. The allowance for credit losses is developed based on several factors including historical experience, the age of
the accounts receivable balances, credit quality of the Company’s customers, current economic conditions, expected future
trends and other factors that may affect customers’ ability to pay, which exist as of the balance sheet dates. If the financial
condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. The Company has derivative positions with a limited number of counterparties. The
evaluation of these counterparties is performed quarterly in connection with the Company’s ASC 820-10, Fair Value
Measurements and Disclosures, valuations to determine the impact of the counterparty credit risk on the valuation of its
derivative instruments.
Earnings per Unit
The Company calculates earnings per unit under ASC 260-10, Earnings per Share. The Company treats incentive
distribution rights (“IDRs”) as participating securities for the purposes of computing earnings per unit in the period that the
general partner becomes contractually entitled to receive IDRs. Also, the undistributed earnings are allocated to the
partnership interests based on the allocation of earnings to the Company’s partners’ capital accounts as specified in the
Company’s partnership agreement.
Unit-Based Compensation
For unit-based compensation equity awards, compensation expense is recognized in the Company’s consolidated
financial statements on a straight-line basis over the awards’ vesting periods based on their fair values on the dates of grant.
The unit-based compensation awards vest over a period not exceeding four years. The amount of compensation expense
recognized at any date is at least equal to the portion of the grant date value of the award that is vested at that date. For
more information, please read Note 12 — “Unit-Based Compensation.”
Unit-based compensation liability awards are awards that are currently expected to be settled in cash on their vesting
dates rather than in units (“Liability Awards”). Liability Awards are recorded in accrued salaries, wages and benefits based
on the vested portion of the fair value of the awards on the balance sheet date. The fair value of Liability Awards is updated
at each balance sheet date and changes in the fair value of the vested portions of the Liability Awards are recorded as
increases or decreases to compensation expense. The Company recognizes forfeitures as they occur. Please read Note 12 —
“Unit-Based Compensation” for more information on Liability Awards.
101
Table of Contents
Advertising Expenses
The Company expenses advertising costs as incurred which totaled $10.6 million, $9.1 million and $7.4 million for
the years ended December 31, 2023, 2022, and 2021, respectively. Advertising expenses are reported as selling expenses in
the consolidated statements of operations.
3. Revenue Recognition
The following is a description of principal activities from which the Company generates revenue. Revenues are
recognized when control of the promised goods are transferred to the customer, in an amount that reflects the consideration
to which the Company expects to be entitled in exchange for those goods. To determine revenue recognition for
arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps:
(i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the
transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize
revenue when (or as) the entity satisfies a performance obligation. At contract inception, once the contract is determined to
be within the scope of ASC 606, the Company assesses the goods promised within each contract and determines the
performance obligations and assesses whether each promised good is distinct. The Company then recognizes as revenue
the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance
obligation is satisfied.
Products
The Company manufactures, formulates, and markets a diversified slate of specialty branded products to customers in
various consumer-facing and industrial markets. In addition, the Company produces fuel and fuel related products,
including gasoline, diesel, jet fuel, asphalt, and other fuels products. At our Montana Renewables facility, we process a
variety of geographically advantaged renewable feedstocks into renewable fuels, including: renewable diesel, sustainable
aviation fuel, renewable hydrogen, renewable natural gas, renewable propane, and renewable naphtha. These renewable
fuels are distributed into renewable markets in the western half of North America. The Company also blends, packages and
markets high-performance branded specialty products through its Royal Purple, Bel-Ray, and TruFuel brands.
The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to
be the contracts with a customer. For each contract, the Company considers the promise to transfer products, each of which
are distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates
whether the price is subject to variable consideration such as product returns, rebates or other discounts to determine the
net consideration to which the Company expects to be entitled. The Company transfers control and recognizes revenue
upon shipment to the customer or, in certain cases, upon receipt by the customer in accordance with contractual terms.
Revenue is recognized when obligations under the terms of a contract with a customer are satisfied and control of the
promised goods are transferred to the customer. The contract with the customer states the final terms of the sale, including
the description, quantity and price of each product or service purchased. For fuel products, payment is typically due in full
between 2 to 30 days of delivery or the start of the contract term, such that payment is typically collected 2 to 30 days
subsequent to the satisfaction of performance obligations. For renewable fuel products, payment is typically due in full
between 7 to 14 days of delivery or the start of the contract term, such that payment is typically collected 7 to 14 days
subsequent to the satisfaction of performance obligations. For specialty products, payment is typically due in full between
30 to 90 days of delivery or the start of the contract term, such that payment is typically collected 30 to 90 days subsequent
to the satisfaction of performance obligations. In the normal course of business, the Company does not accept product
returns unless the item is defective as manufactured. The expected costs associated with a product assurance warranty
continues to be recognized as expense when products are sold. The Company does not offer promised services that could
be considered warranties that are sold separately or provide a service in addition to assurance that the related product
complies with agreed upon specifications. The Company establishes provisions based on the methods described in ASC
606 for estimated returns and warranties as variable consideration when determining the transaction price.
102
Table of Contents
Excise and Sales Taxes
The Company assesses, collects and remits excise taxes associated with the sale of certain of its fuel products.
Furthermore, the Company collects and remits sales taxes associated with certain sales of its products to non-exempt
customers. The Company excludes excise taxes and sales taxes that are collected from customers from the transaction price
in its contracts with customers. Accordingly, revenue from contracts with customers is net of sales-based taxes that are
collected from customers and remitted to taxing authorities.
Shipping and Handling Costs
Shipping and handling costs are deemed to be fulfillment activities rather than a separate distinct performance
obligation.
Cost of Obtaining Contracts
The Company may incur incremental costs to obtain a sales contract, which under ASC 606 should be capitalized and
amortized over the life of the contract. The Company has elected to apply the practical expedient in ASC 340-40-50-5
allowing the Company to expense these costs since the contracts are short-term in nature with a contract term of one year
or less.
Contract Balances
Under product sales contracts, the Company invoices customers for performance obligations that have been satisfied,
at which point payment is unconditional. Accordingly, a product sales contract does not give rise to contract assets or
liabilities under ASC 606. The Company’s receivables, net of allowance for expected credit losses from contracts with
customers as of December 31, 2023 and 2022, as restated, was $252.4 million and $244.7 million, respectively.
Transaction Price Allocated to Remaining Performance Obligations
The Company’s product sales are short-term in nature with a contract term of one year or less. The Company has
utilized the practical expedient in ASC 606-10-50-14 exempting the Company from disclosure of the transaction price
allocated to remaining performance obligations if the performance obligation is part of a contract that has an original
expected duration of one year or less. Additionally, each unit of product generally represents a separate performance
obligation; therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining
performance obligations is not required.
4. Leases
The Company has various operating and finance leases primarily for the use of land, storage tanks, railcars, equipment,
precious metals and office facilities that have remaining lease terms of greater than one year to sixteen years, some of
which include options to extend the lease for up to 32 years, and some of which include options to terminate the lease
within one year.
103
Table of Contents
Supplemental balance sheet information related to the Company’s leases for the periods presented were as follows (in
millions):
Assets:
Operating lease assets
Finance lease assets
Total leased assets
Liabilities:
Current
Operating
Finance
Non-current
Operating
Finance
Total lease liabilities
Classification:
Other noncurrent assets, net
Property, plant and equipment, net (1)
Other current liabilities
Current portion of long-term debt
Other long-term liabilities
Long-term debt, less current portion
December 31,
December 31,
2023
2022
$
$
$
$
114.4
2.4
116.8
75.6
1.1
39.0
1.9
117.6
$
$
$
$
107.5
2.8
110.3
70.7
0.9
37.1
2.5
111.2
(1) As of December 31, 2023 and 2022, finance lease assets are recorded net of accumulated amortization of $5.0 million
and $4.1 million, respectively.
Lease expense for lease payments is recognized on a straight-line basis over the lease term. The components of lease
expense related to the Company’s leases for the periods presented were as follows (in millions):
Lease Costs:
Fixed operating lease cost
Short-term operating lease cost (1)
Variable operating lease cost (2)
Finance lease cost:
Classification:
Cost of Sales; SG&A Expenses
Cost of Sales; SG&A Expenses
Cost of Sales; SG&A Expenses
Amortization of finance lease assets
Interest on lease liabilities
Cost of Sales
Interest expense
Total lease cost
2023
December 31,
2022
2021
$
$
75.6
9.5
3.6
0.9
0.2
89.8
$
$
75.4
8.2
19.2
0.7
1.3
104.8
$
$
51.5
7.8
13.8
0.7
0.4
74.2
(1) The Company’s leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets.
(2) The Company’s railcar leases typically include a mileage limit the railcar can travel over the life of the lease. For any
mileage incurred over this limit, the Company is obligated to pay an agreed upon dollar value for each mile that is
traveled over the limit.
Operating lease expense included in the consolidated statements of operations was $88.7 million, $102.8 million and
$73.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. Cash paid related to operating lease
obligations approximated lease expense for 2023, 2022 and 2021, respectively.
104
Table of Contents
As of December 31, 2023, the Company had estimated minimum commitments for the payment of rentals under leases
which, at inception, had a noncancelable term of more than one year, as follows (in millions):
Maturity of Lease Liabilities
Operating
Leases (1)
Finance
Leases (2)
Total
2024
2025
2026
2027
2028
Thereafter
Total
Less: Interest
Present value of lease liabilities
Less obligations due within one year
Long-term lease obligation
$
$
$
$
81.8
18.8
9.8
7.1
4.3
4.9
126.7
12.1
114.6
75.6
39.0
$
$
$
$
$
1.2
0.9
0.8
0.3
0.1
—
3.3
$
0.3
3.0
1.1
1.9
$
$
83.0
19.7
10.6
7.4
4.4
4.9
130.0
12.4
117.6
76.7
40.9
(1) As of December 31, 2023, the Company’s operating lease payments included no material options to extend lease terms
that are reasonably certain of being exercised. The Company has no legally binding minimum lease payments for
leases signed but not yet commenced as of December 31, 2023.
(2) As of December 31, 2023, the Company’s finance lease payments included no material options to extend lease terms
that are reasonably certain of being exercised. In addition, the Company has no legally binding minimum lease
payments for leases that have been signed but not yet commenced as of December 31, 2023.
Weighted-Average Lease Term and Discount Rate
The weighted-average remaining lease term and weighted-average discount rate for the Company’s operating and
finance leases for the periods presented were as follows:
Lease Term and Discount Rate:
Weighted-average remaining lease term (years):
Operating leases
Finance leases
Weighted-average discount rate:
Operating leases
Finance leases
5. Goodwill and Other Intangible Assets
December 31,
2023
December 31,
2022
2.6
3.1
8.6 %
7.3 %
2.7
3.9
6.9 %
7.1 %
For the years ended December 31, 2023 and 2022, the Company performed its annual goodwill assessment for each of
the years then ended, and determined that the fair value of each of its reporting units with goodwill exceeded its carrying
value. Thus, no impairment charge for goodwill related to the Specialty Products and Solutions segment or Performance
Brands segment was recorded in the consolidated statements of operations for the years ended December 31, 2023 and
2022, respectively. There is no goodwill within the reporting units for the Montana/Renewables segment or the Corporate
segment.
Inputs used to estimate the fair value of the Company’s reporting units are considered Level 3 inputs of the fair value
hierarchy and include the following:
● The Company’s financial projections for its reporting units are based on its analysis of various supply and
demand factors which include, among other things, industry-wide capacity, its planned utilization rate, end-user
demand, crack spreads, capital expenditures and economic conditions. Such estimates are consistent with those
used in the
105
Table of Contents
Company’s planning and capital investment reviews and include recent historical prices and published forward
prices.
● The discount rate used to measure the present value of the projected future cash flows is based on a variety of
factors, including market and economic conditions, operational risk, regulatory risk and political risk. This
discount rate is also compared to recent observable market transactions, if possible.
For Level 3 measurements, significant increases or decreases in long-term growth rates or discount rates in isolation or
in combination could result in a significantly lower or higher fair value measurement.
Changes in goodwill balances for the periods indicated below are as follows (in millions):
Specialty
Products and
Solutions
Performance
Brands
Consolidated
Total
Net balance as of December 31, 2021
Additions
Impairment (1)
Net balance as of December 31, 2022
Additions
Impairment (1)
Net balance as of December 31, 2023
$
$
$
49.3
49.3 $
—
—
$
—
—
$
49.3
123.7
123.7 $
—
—
$
—
—
$
123.7
173.0
—
—
173.0
—
—
173.0
(1) Total accumulated goodwill impairment as of December 31, 2023 and 2022, is $35.5 million.
Other intangible assets consist of the following (in millions):
Customer relationships
Tradenames
Trade secrets
Patents
Royalty agreements
Weighted
Average Life
(Years)
21
10
12
11
19
18
December 31, 2023
December 31, 2022
Accumulated
Accumulated
Gross Amount Amortization Gross Amount Amortization
(153.6)
$
(23.7)
(50.1)
(1.6)
(3.9)
(232.9)
(158.8) $
(24.9)
(51.2)
(1.6)
(4.2)
(240.7) $
181.8 $
26.8
52.9
1.6
6.1
269.2
181.8 $
26.8
52.9
1.6
6.1
269.2
$
$
$
Tradenames, trade secrets, patents and royalty agreements are being amortized to properly match expenses with the
undiscounted estimated future cash flows over the terms of the related agreements or the period expected to be benefited.
The costs of agreements with terms allowing for the potential extension of such agreements are being amortized based on
the initial term only. Customer relationships are being amortized to properly match expenses with the undiscounted
estimated future cash flows based upon assumed rates of annual customer attrition. For the years ended
December 31, 2023, 2022 and 2021, the Company recorded amortization expense of intangible assets of $7.8 million, $9.5
million and $11.8 million, respectively.
106
Table of Contents
As of December 31, 2023, the Company estimates that amortization of intangible assets for the next five years will be
as follows (in millions):
Year
2024
2025
2026
2027
2028
6. Commitments and Contingencies
Contingencies
Amortization
Amount
6.5
4.9
3.8
3.2
2.3
$
$
$
$
$
From time to time, the Company is a party to certain claims and litigation incidental to its business, including claims
made by various taxation and regulatory authorities, such as the Internal Revenue Service, the EPA and the U.S.
Occupational Safety and Health Administration (“OSHA”), as well as various state environmental regulatory bodies and
state and local departments of revenue, as the result of audits or reviews of the Company’s business. In addition, the
Company has property, business interruption, general liability and various other insurance policies that may result in
certain losses or expenditures being reimbursed to the Company.
Environmental
The Company conducts crude oil and specialty refining, blending and terminal operations and such activities are
subject to stringent federal, regional, state and local laws and regulations governing worker health and safety, the discharge
of materials into the environment and environmental protection. These laws and regulations impose obligations that are
applicable to the Company’s operations, such as requiring the acquisition of permits to conduct regulated activities,
restricting the manner in which the Company may release materials into the environment, requiring remedial activities or
capital expenditures to mitigate pollution from former or current operations, requiring the application of specific health and
safety criteria addressing worker protection and imposing substantial liabilities for pollution resulting from its operations.
Failure to comply with these laws and regulations may result in the assessment of sanctions, including administrative, civil
and criminal penalties; the imposition of investigatory, remedial or corrective action obligations or the incurrence of capital
expenditures; the occurrence of delays in the permitting, development or expansion of projects and the issuance of
injunctive relief limiting or prohibiting Company activities. Moreover, certain of these laws impose joint and several, strict
liability for costs required to remediate and restore sites where petroleum hydrocarbons, wastes or other materials have
been released or disposed. In addition, new laws and regulations, new interpretations of existing laws and regulations,
increased governmental enforcement or other developments, some of which legal requirements are discussed below, could
significantly increase the Company’s operational or compliance expenditures.
Remediation of subsurface contamination is in process at certain of the Company’s refinery sites and is being overseen
by the appropriate state agencies. Based on current investigative and remedial activities, the Company believes that the soil
and groundwater contamination at these refineries can be controlled or remediated without having a material adverse effect
on the Company’s financial condition. However, such costs are often unpredictable and, therefore, there can be no
assurance that the future costs will not become material.
Occupational Health and Safety
The Company is subject to various laws and regulations relating to occupational health and safety, including the
federal Occupational Safety and Health Act, as amended, and comparable state laws. These laws and regulations strictly
govern the protection of the health and safety of employees. In addition, OSHA’s hazard communication standard, the
EPA’s community right-to-know regulations under Title III of the federal Comprehensive Environmental Response,
Compensation and Liability Act, as amended, and similar state statutes require the Company to maintain information about
hazardous materials used or produced in the Company’s operations and provide this information to employees, contractors,
107
Table of Contents
state and local government authorities and customers. The Company maintains safety and training programs as part of its
ongoing efforts to promote compliance with applicable laws and regulations. The Company conducts periodic audits of
process safety management systems at each of its locations subject to this standard. The Company’s compliance with
applicable health and safety laws and regulations has required, and continues to require, substantial expenditures. Changes
in occupational safety and health laws and regulations or a finding of non-compliance with current laws and regulations
could result in additional capital expenditures or operating expenses, as well as civil penalties and, in the event of a serious
injury or fatality, criminal charges.
Labor Matters
The Company has approximately 600 employees covered by various collective bargaining agreements, or
approximately 38% of its total workforce of approximately 1,580 employees. These agreements have expiration dates of
April 30, 2026, July 31, 2026, November 19, 2026, January 31, 2027, April 30, 2025, August 20, 2024 and December 12,
2024. The Company has approximately 93 employees, or 6% of its total workforce, who are covered by a collective
bargaining agreement which will expire in less than one year and does not expect any work stoppages.
Other Matters, Claims and Legal Proceedings
The Company is subject to other matters, claims and litigation incidental to its business. The Company has recorded
accruals with respect to certain of its matters, claims and litigation where appropriate, that are reflected in the audited
consolidated financial statements but are not individually considered material. For other matters, claims and litigation, the
Company has not recorded accruals because it has not yet determined that a loss is probable or because the amount of loss
cannot be reasonably estimated. While the ultimate outcome of matters, claims and litigation currently pending cannot be
determined, the Company currently does not expect these outcomes, individually or in the aggregate (including matters for
which the Company has recorded accruals), to have a material adverse effect on its financial position, results of operations
or cash flows. The outcome of any matter, claim or litigation is inherently uncertain, however, and if decided adversely to
the Company, or if the Company determines that settlement of particular litigation is appropriate, the Company may be
subject to liability that could have a material adverse effect on its financial position, results of operations or cash flows.
Standby Letters of Credit
The Company has agreements with various financial institutions for standby letters of credit which have been issued
primarily to vendors. As of December 31, 2023 and 2022, the Company had outstanding standby letters of credit of $29.9
million and $35.8 million, respectively, under its senior secured revolving credit facility (the “revolving credit facility”).
Please read Note 8 — “Long-Term Debt” for additional information regarding the Company’s revolving credit facility. At
December 31, 2023 and 2022, the maximum amount of letters of credit the Company could issue under its revolving credit
facility was subject to borrowing base limitations, with a maximum letter of credit sublimit equal to $255.0 million, which
may be increased with consent of the Agent (as defined in the Credit Agreement) to 90% of revolver commitments then in
effect ($500.0 million at December 31, 2023 and 2022).
As of December 31, 2023 and 2022, the Company had availability to issue letters of credit of approximately $238.2
million and approximately $337.6 million, respectively, under its revolving credit facility.
Crude Oil Supply, Other Feedstocks and Finished Products
Purchase commitments consist primarily of obligations to purchase fixed volumes of crude oil, other feedstocks and
finished products for resale from various suppliers based on current market prices at the time of delivery. The Company is
currently purchasing a majority of its crude oil under month-to-month evergreen contracts or on a spot basis. Certain other
feedstocks are purchased under various term supply agreements.
108
Table of Contents
As of December 31, 2023, the estimated minimum purchase commitments under the Company’s crude oil, other
feedstock supply and finished product agreements were as follows (in millions):
Year
2024 (1)
2025
2026
2027
2028
Thereafter
Total
$
Commitment
181.9
28.2
28.2
13.7
—
—
252.0
$
(1) For the year ended December 31, 2023, the Company recorded a $50.6 million charge to cost of sales for expected
future losses under firm purchase commitments.
Throughput Contract
Prior to 2020, the Company entered into a long-term agreement to transport crude oil at a minimum of 5,000 bpd
through a pipeline, which commenced service in the second quarter of 2020. The agreement also contains a capital
recovery charge that increases 2% per annum. The agreement is for seven years.
As of December 31, 2023, the estimated minimum unconditional purchase commitments, including the capital
recovery charge, under the agreement were as follows (in millions):
Year
2024
2025
2026
2027
2028
Thereafter
Total (1)
Commitment
4.0
4.0
4.0
2.4
—
—
14.4
$
$
(1) As of December 31, 2023, the estimated minimum payments for the unconditional purchase commitments have been
accrued and are included in other current liabilities and other long-term liabilities in the consolidated balance sheets.
This liability was accrued due to the fact that the contract was entered into to supply crude to a divested facility.
7. Inventory Financing Agreements
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.
In March 2017, the Company entered into an agreement with Macquarie to support the operations of the Great Falls
refinery (as amended, the “Great Falls Supply and Offtake Agreement”). The Great Falls Supply and Offtake Agreement
terminated on December 13, 2023. The inventories that were previously associated with the Great Falls Supply and Offtake
Agreement were added back to our revolving credit facility borrowing base. Upon termination of the Great Falls Supply
and Offtake Agreement, the Company recognized a $17.9 million realized loss on derivative instruments, which was
109
Table of Contents
included in gain (loss) on derivative instruments in the consolidated statements of operations for the year ended December
31, 2023.
On October 3, 2023, Montana Renewables, LLC (“MRL”) and Wells Fargo Commodities, LLC (“Wells Fargo”)
entered into (a) an ISDA 2002 Master Agreement (the “Master Agreement”), (ii) a Schedule to the ISDA 2002 Master
Agreement (the “Schedule”), (iii) a Credit Support Annex to the ISDA 2002 Master Agreement (the “Credit Support
Annex”), and (iv) a Renewable Fuel and Feedstock Repurchase Master Confirmation (together with the Master Agreement,
the Schedule and the Credit Support Annex, collectively the “MRL Supply and Offtake Agreement” and, together with the
Shreveport Supply and Offtake Agreement, the “Supply and Offtake Agreements”). Pursuant to the MRL Supply and
Offtake Agreement, Wells Fargo agreed to, among other things, (a) purchase from MRL renewable feedstocks and finished
products located at MRL’s Great Falls facility, subject to MRL’s repurchase obligations with respect thereto, and (b)
provide certain financial accommodations to MRL secured by liens on certain renewable feedstocks and finished products
owned by MRL. The MRL Supply and Offtake Agreement replaced MRL’s previous inventory financing agreement with
Macquarie, which terminated on October 3, 2023. Upon termination of the inventory financing agreement with Macquarie,
the Company recognized a $7.7 million realized gain on derivative instruments, which was included in gain (loss) on
derivative instruments in the consolidated statements of operations for the year ended December 31, 2023.
While title to certain inventories will reside with the counterparties to the arrangements, the Supply and Offtake
Agreements are accounted for by the Company similar to a product financing arrangement; therefore, the inventories sold
to the counterparties will continue to be included in the Company’s consolidated balance sheets until processed and sold to
a third party.
For the years ended December 31, 2023, 2022 and 2021, the Company incurred an expense of $32.0 million,
$30.6 million, and $15.4 million, respectively, for financing costs related to the Supply and Offtake Agreements, which are
included in interest expense in the Company’s consolidated statements of operations.
The Company’s inventory financing arrangements with Macquarie in effect as of December 31, 2023, as it related to
the Company’s Shreveport facility, and in effect as of December 31, 2022, as it related to the Company’s Shreveport and
Great Falls facilities, included a deferred payment arrangement (the “Deferred Payment Arrangement”) whereby the
Company could defer payments on just-in-time crude oil purchases from Macquarie owed under the agreements up to the
value of the collateral provided (90% of the collateral was inventory). The deferred amounts under the Deferred Payment
Arrangement bore interest at a rate equal to the SOFR plus 3.25% per annum. Amounts outstanding under the Deferred
Payment Arrangement were included in obligations under inventory financing agreements in the Company’s consolidated
balance sheets. Changes in the amount outstanding under the Deferred Payment Arrangement were included within cash
flows from financing activities in the consolidated statements of cash flows. As of December 31, 2022 and December 31,
2021, the Company had $14.1 million and $36.0 million of deferred payments outstanding, for the inventory financing
arrangements with Macquarie then in effect, respectively.
110
Table of Contents
8. Long-Term Debt
Long-term debt consisted of the following (in millions):
Borrowings under amended and restated senior secured revolving credit agreement with
third-party lenders, interest payments quarterly, borrowings due January 2027, weighted
average interest rates of 7.4% and 4.7% for the year ended December 31, 2023 and the
year ended December 31, 2022, respectively.
Borrowings under amended secured MRL revolving credit agreement with third-party
lender, interest payments quarterly, borrowings due November 2027, weighted average
interest rate of 11.2% for the year ended December 31, 2023.
Borrowings under the 2024 Secured Notes, interest at a fixed rate of 9.25%, interest
payments semiannually, borrowings due July 2024, effective interest rate of 9.5% for the
years ended December 31, 2023 and December 31, 2022. (1)
Borrowings under the 2025 Notes, interest at a fixed rate of 11.0%, interest payments
semiannually, borrowings due April 2025, effective interest rate of 11.4% for the years
ended December 31, 2023 and December 31, 2022.
Borrowings under the 2027 Notes, interest at a fixed rate of 8.125%, interest payments
semiannually, borrowings due July 2027, effective interest rate of 8.3% for the years
ended December 31, 2023 and December 31, 2022.
Borrowings under the 2028 Notes, interest at a fixed rate of 9.75%, interest payments
semiannually, borrowings due July 2028, effective interest rate of 10.0% for the year
ended December 31, 2023.
MRL Term Loan Credit Agreement
Shreveport terminal asset financing arrangement
MRL asset financing arrangements
Finance lease obligations, at various interest rates, interest and principal payments
monthly through June 2028
Less unamortized debt issuance costs (2)
Less unamortized discounts
Total debt
Less current portion of long-term debt
Total long-term debt
December 31,
December 31,
2023
2022 (As Restated)
$
136.7
$
104.0
13.0
—
179.0
200.0
413.5
513.5
325.0
325.0
325.0
74.4
50.8
384.6
3.0
(16.1)
(3.5)
1,885.4
55.7
1,829.7
$
$
$
$
—
—
58.2
370.1
3.4
(12.1)
(2.4)
1,559.7
19.6
1,540.1
(1) As of December 31, 2023, $149.0 million of outstanding borrowings under the 2024 Secured Notes have been
excluded from current liabilities, as the outstanding borrowings are obligated to be redeemed, conditioned upon, on or
before March 9, 2024, the completion of a private placement of at least $200.0 million aggregate principal amount of
the Company’s senior debt securities. Refer to Note 23 — “Subsequent Events” for additional information.
(2) Deferred debt issuance costs are being amortized by the effective interest rate method over the lives of the related debt
instruments. These amounts are net of accumulated amortization of $26.6 million and $22.3 million at
December 31, 2023 and 2022, respectively.
Senior Notes
9.75% Senior Notes due 2028 (the “2028 Notes”)
On June 27, 2023, the Company issued and sold $325.0 million in aggregate principal amount of 2028 Notes, in a
private placement pursuant to Section 4(a)(2) of the Securities Act to eligible purchasers at par. The Company received net
proceeds of $319.1 million, after deducting the initial purchasers’ discount and offering expenses, which the Company used
a portion of the net proceeds to fund offers (collectively, the “Tender Offers”) to purchase (i) any and all of its outstanding
$200.0 million in aggregate principal amount of 2024 Secured Notes (as defined below) and (ii) up to $100.0
111
Table of Contents
million in aggregate principal amount of its outstanding 2025 Notes (as defined below) and pay related premiums and
expenses, with the remaining net proceeds to be used for general partnership purposes, including debt repayment. On June
28, 2023, in connection with the early settlement of the Tender Offers, the Company used approximately $125.5 million
(excluding accrued and unpaid interest and related expenses) of the proceeds from the offering of the 2028 Notes to fund
the repurchase of (i) approximately $21.0 million in aggregate principal amount of 2024 Secured Notes and (ii) $100.0
million in aggregate principal amount of the 2025 Notes and pay related premiums. Interest on the 2028 Notes is paid
semiannually in arrears on January 15 and July 15 of each year, beginning on July 15, 2024.
8.125% Senior Notes due 2027 (the “2027 Notes”)
On January 20, 2022, the Company issued and sold $325.0 million in aggregate principal amount of 2027 Notes, in a
private placement pursuant to Section 4(a)(2) of the Securities Act to eligible purchasers at par. The Company received net
proceeds of $319.1 million, after deducting the initial purchasers’ discount and offering expenses, which the Company
used, along with cash on hand, to fund the redemption of $325.0 million aggregate principal amount of its 2023 Senior
Notes at a redemption price of par, plus accrued and unpaid interest to the redemption date of February 11, 2022. In
conjunction with the redemption of the 2023 Senior Notes, the Company recorded a loss from debt extinguishment of $1.0
million, which is reflected in loss from debt extinguishment in the consolidated statements of operations for the year ended
December 31, 2022. Interest on the 2027 Notes is paid semiannually in arrears on January 15 and July 15 of each year,
beginning on July 15, 2022.
11.00% Senior Notes due 2025 (the “2025 Notes”)
On October 11, 2019, the Company issued and sold $550.0 million in aggregate principal amount of 11.00% Senior
Notes due April 15, 2025, in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities Act”), to eligible purchasers at par. The Company received net proceeds of $539.9 million net of initial
purchasers’ fees and estimated expenses, which it used, along with revolver borrowings and cash on hand, to fund the
redemption of $761.2 million in aggregate principal amount of outstanding 6.50% Notes due 2021. Interest on the 2025
Notes is paid semiannually in arrears on April 15 and October 15 of each year.
On July 6, 2020, the Company commenced a consent solicitation to holders of the 2025 Notes for amendments to the
indenture governing the 2025 Notes to allow for the consummation of the 2024 Notes Exchange Transaction. On August 5,
2020, the Company executed the First Supplemental Indenture to the indenture governing the 2025 Notes to allow the 2024
Notes Exchange Transaction.
During the year ended December 31, 2022, the Company repurchased $36.5 million aggregate principal amount of its
2025 Notes at an average price of 104.3% of par value, plus accrued and unpaid interest thereon up to, but not including
the respective transaction dates. In conjunction with the repurchases of the 2025 Notes during the year ended December 31,
2022, the Company recorded a loss from debt extinguishment of $2.1 million, which is reflected in loss from debt
extinguishment in the consolidated statements of operations.
9.25% Senior Secured First Lien Notes due 2024 (the “2024 Secured Notes”)
On August 5, 2020, we consummated a transaction whereby we exchanged approximately $200.0 million aggregate
principal amount of our outstanding 2022 Notes for $200.0 million aggregate principal amount of newly issued 2024
Secured Notes, approximately at par (the “2024 Notes Exchange Transaction”). Interest on the 2024 Secured Notes is paid
semiannually in arrears on January 15 and July 15 of each year, beginning on January 15, 2021. The 2024 Secured
Notes are secured by a first priority lien (subject to certain exceptions) on all the fixed assets that secure the Company’s
obligations under their secured hedge agreements, as governed by the Collateral Trust Agreement.
7.75% Senior Notes due 2023 (the “2023 Notes”)
On March 27, 2015, the Company issued and sold $325.0 million in aggregate principal amount of 7.75% Senior
Notes due April 15, 2023 in a private placement pursuant to Section 4(a)(2) of the Securities Act, to eligible purchasers at a
discounted price of 99.257 percent of par. The Company received net proceeds of approximately $317.0 million net of
112
Table of Contents
discount, initial purchasers’ fees and expenses, which the Company used to fund the redemption of $178.8 million in
aggregate principal amount of outstanding 9.625% Senior Notes due 2020 on April 28, 2015, to repay borrowings
outstanding under its revolving credit facility and for general partnership purposes, including planned capital expenditures
at the Company’s facilities and working capital. Interest on the 2023 Notes was paid semiannually in arrears on April 15
and October 15 of each year.
On February 11, 2022, the Company redeemed $325.0 million in aggregate principal amount of the 2023 Notes at a
redemption price of par, plus accrued and unpaid interest. In conjunction with the redemption of the 2023 Senior Notes, the
Company recorded a loss from debt extinguishment of $1.0 million, which is reflected in loss from debt extinguishment in
the consolidated statements of operations for the year ended December 31, 2022.
Senior Notes
The 2024 Secured Notes, 2025 Notes, 2027 Notes and 2028 Notes (collectively, the “Senior Notes”) are subject to
certain automatic customary releases, including the sale, disposition, or transfer of capital stock or substantially all of the
assets of a subsidiary guarantor, designation of a subsidiary guarantor as unrestricted in accordance with the applicable
indenture, exercise of legal defeasance option or covenant defeasance option, liquidation or dissolution of the subsidiary
guarantor and a subsidiary guarantor ceases to both guarantee other Company debt and to be an obligor under the revolving
credit facility. The Company’s operating subsidiaries may not sell or otherwise dispose of all or substantially all of their
properties or assets to, or consolidate with or merge into, another company if such a sale would cause a default under the
indentures governing the Senior Notes.
The indentures governing the Senior Notes contain covenants that, among other things, restrict the Company’s ability
and the ability of certain of the Company’s subsidiaries to: (i) sell assets; (ii) pay distributions on, redeem or repurchase the
Company’s common units or redeem or repurchase its subordinated debt; (iii) make investments; (iv) incur or guarantee
additional indebtedness or issue preferred units; (v) create or incur certain liens; (vi) enter into agreements that restrict
distributions or other payments from the Company’s restricted subsidiaries to the Company; (vii) consolidate, merge or
transfer all or substantially all of the Company’s assets; (viii) engage in transactions with affiliates and (ix) create
unrestricted subsidiaries. These covenants are subject to important exceptions and qualifications. At any time when the
Senior Notes are rated investment grade by either Moody’s Investors Service, Inc. (“Moody’s”) or S&P Global Ratings
(“S&P”) and no Default or Event of Default, each as defined in the indentures governing the Senior Notes, has occurred
and is continuing, many of these covenants will be suspended. As of December 31, 2023, the Company was in compliance
with all covenants under the indentures governing the Senior Notes.
MRL Asset Financing Arrangements
On August 5, 2022, Montana Renewables, LLC (“MRL”), a wholly owned subsidiary of the Company, entered into
Equipment Schedule No. 2 (the “Equipment Schedule”) and an Interim Funding Agreement (the “Funding Agreement”)
with Stonebriar Commercial Finance LLC (“Stonebriar”). The Equipment Schedule and the Funding Agreement each
constitute a schedule under the Master Lease Agreement (the “Lease Agreement”) dated as of December 31, 2021 between
MRL and Stonebriar. The Equipment Schedule provides that Stonebriar will purchase from and lease back to MRL a
hydrocracker, intended to produce renewable diesel and related products, for a purchase price of $250.0 million. The
Funding Agreement provides $100.0 million in financing for the design and construction of a feedstock pre-treater facility.
The transactions with Stonebriar described in this paragraph are referred to herein as the “MRL Asset Financing
Arrangements.” The Company has recorded the MRL asset financing arrangements as a financial liability in the
consolidated balance sheets.
Fourth Amendment to Third Amended and Restated Senior Secured Revolving Credit Facility
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
113
Table of Contents
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”).
The borrowing capacity at December 31, 2023, under the revolving credit facility was approximately $404.8 million.
As of December 31, 2023, the Company had $136.7 million of outstanding borrowings under the revolving credit facility
and outstanding standby letters of credit of $29.9 million, leaving approximately $238.2 million of unused capacity.
The revolving credit facility contains various covenants that limit, among other things, the Company’s ability to: incur
indebtedness; grant liens; dispose of certain assets; make certain acquisitions and investments; redeem or prepay other debt
or make other restricted payments such as distributions to unitholders; enter into transactions with affiliates; and enter into
a merger, consolidation or sale of assets. Further, the revolving credit facility contains a springing financial covenant which
provides that only if the Company’s availability to borrow loans under the revolving credit facility falls below the sum of
(a) the greater of (i) (x) 15% of the borrowing base then in effect at any time that the refinery asset borrowing base
component is greater than $0 and (y) 10% of the borrowing base then in effect at any time that the refinery asset borrowing
base component is equal to $0 and (ii) $45.0 million (which amount is subject to certain increases) plus (b) the amount of
FILO Loans outstanding, then we will be required to maintain as of the end of each fiscal quarter a Fixed Charge Coverage
Ratio (as defined in the Credit Agreement) of at least 1.0 to 1.0. As of December 31, 2023, the Company was in
compliance with all covenants under the revolving credit facility.
MRL Revolving Credit Agreement
On November 2, 2022 (the “Effective Date”), MRL entered into, as borrower, a Credit Agreement (the “MRL
Revolving Credit Agreement”) with Montana Renewables Holdings LLC (“MRHL”), the parent company of MRL, and
Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent and lender, which MRL Revolving Credit
Agreement provides for a secured revolving credit facility in the maximum amount of $90.0 million outstanding, with the
option to request additional commitments of up to $15.0 million, and with a maturity date of November 2, 2027. The
borrowing capacity at December 31, 2023, under the MRL Revolving Credit Agreement was approximately $16.7 million.
As of December 31, 2023, MRL had $13.0 million of outstanding borrowings under the MRL Revolving Credit Agreement
and no outstanding standby letters of credit, leaving approximately $3.7 million of unused capacity.
MRL Credit Facility
On November 18, 2021 (the “Closing Date”), MRL, Montana Renewables Holdings LLC (“Montana Renewables
Holdings”), the parent of MRL and an unrestricted, non-guarantor subsidiary of the Partnership for purposes of the
agreements governing the Partnership’s indebtedness, Oaktree Fund Administration, LLC and the lenders from time to time
party thereto (the “Oaktree Lenders”) entered into a Credit Agreement, which provides for a $300.0 million senior secured
term loan facility (the “MRL Credit Facility”). On the Closing Date, $300.0 million was drawn under the MRL Credit
Facility to finance the transfer for value of various assets at the Great Falls refinery, including the hydrocracker, a hydrogen
plant, and several products tanks to MRL. The MRL Credit Facility is not subject to amortization and matures on
November 18, 2024. The MRL Credit Facility is secured by substantially all of the assets of MRL and a pledge of 100% of
the equity interest in MRL held by Montana Renewables Holdings.
The interest rate per annum applicable to the MRL Credit Facility is 8.00%. If interest on the MRL Credit Facility is
not paid when due on any quarterly interest payment date (each, a “Quarterly Date”), then interest for the immediately
preceding quarterly period shall be deemed to have accrued in an amount equal to the product of (i) the percentage of the
interest amount that was not paid in cash on the relevant Quarterly Date multiplied by (ii) 2.00% per annum above the
interest rate otherwise applicable thereto, which amount, in each case, shall be added to the principal balance of the loans
then outstanding under the MRL Credit Facility.
On August 5, 2022, the Company repaid all borrowings outstanding under the MRL credit facility with a combination
of proceeds from the issuance and sale of preferred units in MRHL and the Stonebriar Transactions (as defined herein). In
conjunction with the redemption of the MRL credit facility, the Company recorded a loss from debt extinguishment of
$38.3 million, which is reflected in loss from debt extinguishment in the consolidated statements of operations for the year
ended December 31, 2022. Please refer to Note 20 — “Redeemable Noncontrolling Interest” for additional information
114
Table of Contents
regarding the issuance and sale of preferred units in MRHL and Note 8 — “Long-Term Debt — MRL Asset Financing
Arrangements” for additional information regarding the Stonebriar Transactions.
MRL Term Loan Credit Agreement
On April 19, 2023, MRL and MRHL entered into a Credit Agreement (the “MRL Term Loan Credit Agreement”) with
a group of financial institutions, including I Squared Capital and Delaware Trust Company, as administrative agent, that
provides for a $75.0 million term loan facility with a maturity date of April 19, 2028 (the “Maturity Date”). The MRL
Term Loan Credit Agreement provides for a variable interest rate based on the SOFR plus 6.0% to 7.3% per annum. The
borrowings under the MRL Term Loan Credit Agreement are repayable in quarterly installments commencing on June 30,
2023, in an amount equal to 0.25% of the outstanding principal amount under the MRL Term Loan Credit Agreement as of
each quarterly payment date, plus additional principal payments to the extent MRL has excess cash flows, pursuant to the
terms of the MRL Term Loan Credit Agreement. The remaining borrowings under the MRL Term Loan Credit Agreement
are repayable on the Maturity Date.
Master Derivative Contracts
The Company’s payment obligations under all of the Company’s master derivatives contracts for commodity hedging
generally are secured by a first priority lien on the Company’s real property, plant and equipment, fixtures, intellectual
property, certain financial assets, certain investment property, commercial tort claims, chattel paper, documents,
instruments and proceeds of the foregoing (including proceeds of hedge arrangements). The Company had no additional
letters of credit or cash margin posted with any hedging counterparty as of December 31, 2023. The Company’s master
derivatives contracts and Collateral Trust Agreement (as defined below) continue to impose a number of covenant
limitations on the Company’s operating and financing activities, including limitations on liens on collateral, limitations on
dispositions of collateral and collateral maintenance and insurance requirements.
Collateral Trust Agreement
The Company has a collateral trust agreement (“The Collateral Trust Agreement”) which governs how various secured
Company creditors, including secured hedging counterparties, our creditor on a forward purchase contract for physical
commodities, and holders of our 2024 Secured Notes share collateral pledged as security for the payment of respective
payment obligations to them. The Collateral Trust Agreement limits to $150.0 million the extent to which forward purchase
contracts for physical commodities are covered by, and secured under, the Collateral Trust Agreement and the Parity Lien
Security Documents (as defined in the Collateral Trust Agreement). There is no such limit on financially settled derivative
instruments used for commodity hedging. Subject to certain conditions set forth in the Collateral Trust Agreement, the
Company has the ability to add secured parties from time to time.
115
Table of Contents
Maturities of Long-Term Debt
As of December 31, 2023, principal payments on debt obligations and future minimum rentals on finance lease
obligations are as follows (in millions):
Year
2024 (1)
2025
2026
2027
2028
Thereafter
Total
Maturity
205.3
442.4
31.9
524.1
423.3
278.0
1,905.0
$
$
(1) As of December 31, 2023, $149.0 million of outstanding borrowings under the 2024 Secured Notes have been
excluded from current liabilities, as the outstanding borrowings are obligated to be redeemed, conditioned upon, on or
before March 9, 2024, the completion of a private placement of at least $200.0 million aggregate principal amount of
the Company’s senior debt securities. Refer to Note 23 — “Subsequent Events” for additional information.
9. Derivatives
The Company is exposed to price risks due to fluctuations in the price of crude oil, refined products, natural gas and
precious metals. The Company uses various strategies to reduce its exposure to commodity price risk. The strategies to
reduce the Company’s risk utilize both physical forward contracts and financially settled derivative instruments, such as
swaps, collars, options and futures, to attempt to reduce the Company’s exposure with respect to:
● crude oil purchases and sales;
● fuel product sales and purchases;
● natural gas purchases;
● precious metals purchases; and
● fluctuations in the value of crude oil between geographic regions and between the different types of crude oil such
as New York Mercantile Exchange West Texas Intermediate (“NYMEX WTI”), Light Louisiana Sweet, Western
Canadian Select (“WCS”), WTI Midland, Mixed Sweet Blend, Magellan East Houston and ICE Brent.
The Company manages its exposure to commodity markets, credit, volumetric and liquidity risks to manage its 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 the
Company’s derivative instruments will affect its 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.
The Company does not speculate with derivative instruments or other contractual arrangements that are not associated with
its business objectives.
Speculation is defined as increasing the Company’s natural position above the maximum position of its physical assets
or trading in commodities, currencies or other risk bearing assets that are not associated with the Company’s business
activities and objectives. The Company’s positions are monitored routinely by a risk management committee to ensure
compliance with its stated risk management policy and documented risk management strategies. All strategies are reviewed
on an ongoing basis by the Company’s risk management committee, which will add, remove or revise strategies in
116
Table of Contents
anticipation of changes in market conditions and/or its risk profiles. Such changes in strategies are to position the Company
in relation to its risk exposures in an attempt to capture market opportunities as they arise.
As of December 31, 2023 and 2022, the Company was obligated to repurchase crude oil and refined products from its
counterparties, then in effect, at the termination of the Supply and Offtake Agreements in certain scenarios. The Company
has determined that the redemption feature on the initially recognized liability related to the Supply and Offtake
Agreements is an embedded derivative indexed to commodity prices. As such, the Company has accounted for this
embedded derivative at fair value with changes in the fair value, if any, recorded in gain (loss) on derivative instruments in
the Company’s consolidated statements of operations please read Note 7 — “Inventory Financing Agreements" for
additional information. The Company recognizes all derivative instruments at their fair values as either current assets or
current liabilities in the consolidated balance sheets (please read Note 10 — “Fair Value Measurements”). Fair value
includes any premiums paid or received and unrealized gains and losses. Fair value does not include any amounts
receivable from or payable to counterparties, or collateral provided to counterparties. Derivative asset and liability amounts
with the same counterparty are netted against each other for financial reporting purposes in accordance with the provisions
of our master netting arrangements.
The following tables summarize the Company’s gross fair values of its derivative instruments, presenting the impact of
offsetting derivative assets in the Company’s consolidated balance sheets (in millions):
December 31, 2023
December 31, 2022
Derivative instruments not designated as hedges:
Specialty Products and Solutions segment:
Balance Sheet
Location
Crack spread swaps
Total derivative instruments
Derivative assets /
Other noncurrent
assets, net
Gross
Amounts
Offset in the
Condensed
Amounts of Consolidated
Recognized
Gross
Balance
Sheets
Assets
Net Amounts
of Assets
Presented
in the
Condensed
Consolidated
Gross
Amounts
Offset in the
Condensed
Amounts of Consolidated
Recognized
Gross
Balance
Sheets
Net Amounts
of Assets
Presented
in the
Condensed
Consolidated
Balance Sheets
Balance Sheets Assets
$
$
11.6
11.6
$
$
— $
— $
11.6
11.6
$
$
— $
— $
— $
— $
—
—
117
Table of Contents
The following tables summarize the Company’s gross fair values of its derivative instruments, presenting the impact of
offsetting derivative liabilities in the Company’s consolidated balance sheets (in millions):
December 31, 2023
December 31, 2022
Net Amounts
of Liabilities
Presented in
the
Condensed
Amounts of Consolidated Consolidated Amounts of Consolidated
Balance
Recognized
Sheets
Liabilities
Gross
Amounts
Offset in the
Condensed
Gross
Amounts
Offset in the
Condensed
Recognized
Liabilities
Balance
Sheets
Balance
Sheets
Gross
Gross
Net Amounts
of Liabilities
Presented in
the
Condensed
Consolidated
Balance Sheets
$
(52.5)
$
— $
(52.5)
$
(38.0)
$
— $
(38.0)
—
—
—
(50.6)
19.3
(31.3)
Derivative instruments not designated as hedges:
Specialty Products and Solutions segment:
Balance Sheet
Location
Inventory financing
obligation
Crack spread swaps
Obligations under
inventory financing
agreements
Derivative liabilities /
Other long-term
liabilities
Montana/Renewables segment:
Inventory financing
obligation
Obligations under
inventory financing
agreements
Total derivative instruments
$
(52.5)
$
— $
(52.5)
$
(104.4)
$
30.6
$
—
—
—
(15.8)
11.3
(4.5)
(73.8)
Certain of the Company’s outstanding derivative instruments are subject to credit support agreements with the
applicable counterparties which contain provisions setting certain credit thresholds above which the Company may be
required to post agreed-upon collateral, such as cash or letters of credit, with the counterparty to the extent that the
Company’s mark-to-market net liability, if any, on all outstanding derivatives exceeds the credit threshold amount per such
credit support agreement. The majority of the credit support agreements covering the Company’s outstanding derivative
instruments also contain a general provision stating that if the Company experiences a material adverse change in its
business, in the reasonable discretion of the counterparty, the Company’s credit threshold could be lowered by such
counterparty. The Company does not expect that it will experience a material adverse change in its business. The cash flow
impact of the Company’s derivative activities are included within cash flows from operating activities in the consolidated
statements of cash flows.
Derivative Instruments Not Designated as Hedges
For derivative instruments not designated as hedges, the change in fair value of the asset or liability for the period is
recorded to gain (loss) on derivative instruments in the consolidated statements of operations. Upon the settlement of a
derivative not designated as a hedge, the gain or loss at settlement is recorded to gain (loss) on derivative instruments in the
consolidated statements of operations. The Company has entered into crack spread swaps and crude oil basis swaps that are
not designated as cash flow hedges for accounting purposes. However, these instruments provide economic hedges of the
purchases and sales of the Company’s natural gas, crude oil, gasoline and refined products.
118
Table of Contents
The Company recorded the following gains (losses) in its consolidated statements of operations related to its derivative
instruments not designated as hedges (in millions):
Type of Derivative
Specialty Products and Solutions segment:
Inventory financing obligation
Crack spread swaps
Crude oil swaps
Montana/Renewables segment:
Inventory financing obligation
Total
Derivative Positions
Amount of Realized
Loss Recognized in Gain (Loss) on
Derivative
Instruments
Year Ended December 31,
2023
2022
Amount of Unrealized Gain (Loss)
Recognized in Gain (Loss) on Derivative
Instruments
Year Ended December 31,
2022
2023
$
$
— $
(21.8)
—
(1.3)
(23.1) $
— $
(35.0)
(0.8)
—
(35.8) $
(14.5)
42.9
$
—
4.6
33.0
$
(20.6)
(31.3)
—
6.0
(45.9)
At December 31, 2023, the Company had the following notional contract volumes related to outstanding derivative
instruments:
Derivative instruments not designated as hedges:
Crack spread swaps - sales
10. Fair Value Measurements
Notional Contract Volumes by
Year of Maturity
Total
Outstanding
Notional
2024
Unit of Measure
2,928,000
2,928,000
Barrels
The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
Observable inputs are from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions
about the factors market participants would use in valuing the asset or liability developed based upon the best information
available in the circumstances. These tiers include the following:
● Level 1 — inputs include observable unadjusted quoted prices in active markets for identical assets or liabilities
● Level 2 — inputs include other than quoted prices in active markets that are either directly or indirectly
observable
● Level 3 — inputs include unobservable inputs in which little or no market data exists, therefore requiring an
entity to develop its own assumptions
In determining fair value, the Company uses various valuation techniques and prioritizes the use of observable inputs.
The availability of observable inputs varies from instrument to instrument and depends on a variety of factors including the
type of instrument, whether the instrument is actively traded and other characteristics particular to the instrument. For
many financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely
accepted by market participants and the valuation does not require significant management judgment. For other financial
instruments, pricing inputs are less observable in the marketplace and may require management judgment.
119
Table of Contents
Recurring Fair Value Measurements
Derivative Assets and Liabilities
Derivative instruments are reported in the accompanying consolidated financial statements at fair value. The
Company’s derivative instruments consist of over-the-counter (“OTC”) contracts, which are not traded on a public
exchange. Substantially all of the Company’s derivative instruments are with counterparties that have long-term credit
ratings of at least A3 and BBB+ by Moody’s and S&P, respectively.
To estimate the fair values of the Company’s commodity derivative instruments, the Company uses the forward rate,
the strike price, contractual notional amounts, the risk free rate of return and contract maturity. Various analytical tests are
performed to validate the counterparty data. The fair values of the Company’s derivative instruments are adjusted for
nonperformance risk and creditworthiness of the hedging entities through the Company’s credit valuation adjustment
(“CVA”). The CVA is calculated at the counterparty level utilizing the fair value exposure at each payment date and
applying a weighted probability of the appropriate survival and marginal default percentages. The Company uses the
counterparty’s marginal default rate and the Company’s survival rate when the Company is in a net asset position at the
payment date and uses the Company’s marginal default rate and the counterparty’s survival rate when the Company is in a
net liability position at the payment date.
Observable inputs utilized to estimate the fair values of the Company’s derivative instruments were based primarily on
inputs that are readily available in public markets or can be derived from information available in publicly quoted markets.
Based on the use of various unobservable inputs, principally non-performance risk, creditworthiness of the hedging entities
and unobservable inputs in the forward rate, the Company has categorized these derivative instruments as Level 3.
Significant increases (decreases) in any of those unobservable inputs in isolation would result in a significantly lower
(higher) fair value measurement. The Company believes it has obtained the most accurate information available for the
types of derivative instruments it holds. Please read Note 9 — “Derivatives” for further information on derivative
instruments.
Pension Assets
Pension assets are reported at fair value in the accompanying consolidated financial statements. At December 31, 2023
and 2022, the Company’s investments associated with its Pension Plan (as such term is hereinafter defined) consisted of
(i) cash and cash equivalents, (ii) fixed income bond funds, (iii) mutual equity funds, and (iv) mutual balanced funds. The
fixed income bond funds, mutual equity funds, and mutual balanced funds that are measured at fair value using a market
approach based on quoted prices from national securities exchanges are categorized in Level 1 of the fair value hierarchy.
The fixed income bond funds, mutual equity funds, and mutual balanced funds that are measured at fair value using a
market approach based on prices obtained from an independent pricing service are categorized in Level 2 of the fair value
hierarchy.
Liability Awards
Unit-based compensation Liability Awards are awards that are currently expected to be settled in cash on their vesting
dates, rather than in equity units. The Liability Awards are categorized as Level 1 because the fair value of the Liability
Awards is based on the Company’s quoted closing unit price as of each balance sheet date.
Precious Metals Obligations
The fair value of precious metals obligations is based upon unadjusted exchange-quoted prices and is, therefore,
classified within Level 1 of the fair value hierarchy.
120
Table of Contents
Hierarchy of Recurring Fair Value Measurements
The Company’s recurring assets and liabilities measured at fair value were as follows (in millions):
December 31, 2023
Level 1 Level 2 Level 3 Total
December 31, 2022 (As Restated)
Level 1 Level 2 Level 3 Total
Assets:
Derivative assets:
Crack spread swaps
Total derivative assets
Pension plan investments
Total recurring assets at fair value
Liabilities:
Derivative liabilities:
Inventory financing obligation
Crack spread swaps
Total derivative liabilities
Precious metals obligations
Liability awards
Total recurring liabilities at fair value
$ — $ — $ 11.6
$ — $ — $ 11.6
$ 23.5
$
$ 23.5
$
$
$
$ — $
$
$ 11.6
3.5
3.5
11.6
11.6
27.0
38.6
$ — $ — $ — $ —
$ — $ — $ — $ —
26.4
$
26.4
$
$ — $
$ — $
$ 23.0
$ 23.0
3.4
3.4
$ — $ — $ (52.5) $ (52.5) $ — $ — $ (42.5) $ (42.5)
— — —
(31.3)
$ — $ — $ (52.5) $ (52.5) $ — $ — $ (73.8) $ (73.8)
(7.5)
(6.9)
(64.2)
(52.9)
$ (71.1) $ — $ (52.5) $ (123.6) $ (60.4) $ — $ (73.8) $ (134.2)
— —
— —
— —
— —
— — — (31.3)
(7.5)
(52.9)
(6.9)
(64.2)
The table below sets forth a summary of net changes in fair value of the Company’s Level 3 financial assets and
liabilities (in millions):
Fair value at January 1,
Realized loss on derivative instruments
Unrealized gain (loss) on derivative instruments
Settlements
Fair value at December 31,
Total gain (loss) included in net income (loss) attributable to changes in unrealized gain
(loss) relating to financial assets and liabilities held as of December 31,
$
$
$
(73.8)
(23.1)
33.0
23.1
(40.8)
33.0
$
$
$
(27.9)
(35.8)
(45.9)
35.8
(73.8)
(45.9)
For the Year Ended December 31,
2023
2022
Nonrecurring Fair Value Measurements
Certain non-financial assets and liabilities are measured at fair value on a nonrecurring basis and are subject to fair
value adjustments in certain circumstances, such as when there is evidence of impairment.
The Company assesses goodwill for impairment annually and whenever events or changes in circumstances indicate
its carrying value may not be recoverable. The fair value of the reporting units is determined using the income approach.
The income approach focuses on the income-producing capability of an asset, measuring the current value of the asset by
calculating the present value of its future economic benefits such as cash earnings, cost savings, corporate tax structure and
product offerings. Value indications are developed by discounting expected cash flows to their present value at a rate of
return that incorporates the risk-free rate for the use of funds, the expected rate of inflation and risks associated with the
reporting unit. These assets would generally be classified within Level 3, in the event that the Company were required to
measure and record such assets at fair value within its consolidated financial statements. Please read Note 5 — “Goodwill
and Other Intangible Assets” for further information on goodwill impairment.
The Company periodically evaluates the carrying value of long-lived assets to be held and used, including finite-lived
intangible assets and property plant and equipment, when events or circumstances warrant such a review. Fair value is
determined primarily using anticipated cash flows assumed by a market participant discounted at a rate commensurate with
the risk involved and these assets would generally be classified within Level 3, in the event that the Company was
121
Table of Contents
required to measure and record such assets at fair value within its consolidated financial statements. Please read Note 2 —
“Summary of Significant Accounting Policies” for further information on long-lived asset impairment.
Estimated Fair Value of Financial Instruments
Cash, cash equivalents and restricted cash
The carrying value of cash, cash equivalents and restricted cash are each considered to be representative of their fair
value.
Debt
The estimated fair value of long-term debt at December 31, 2023 and 2022, consists primarily of senior notes. The
estimated aggregate fair value of the Company’s 2024 Secured Notes and 2025, 2027 and 2028 Senior Notes defined as
Level 2 was based upon quoted prices for identical or similar liabilities in markets that are not active. The carrying value of
borrowings, if any, under the Company’s revolving credit facility, MRL Revolving Credit Agreement, MRL asset financing
arrangements, MRL term loan credit agreement, finance lease obligations and other obligations are classified as Level 3.
Please read Note 8 — “Long-Term Debt” for further information on long-term debt.
The Company’s carrying value and estimated fair value of the Company’s financial instruments, carried at adjusted
historical cost, were as follows (in millions):
Financial Instrument:
2024 Secured Notes, 2025 Notes, 2027 Notes, and 2028 Notes
Revolving credit facility
MRL revolving credit agreement
MRL term loan credit agreement
Shreveport terminal asset financing arrangement
MRL asset financing arrangements
Finance leases and other obligations
December 31, 2023
Level Fair Value Carrying Value
December 31, 2022
Fair Value Carrying Value
2
3
3
3
3
3
3
$ 1,247.2 $
136.7 $
$
13.0 $
$
74.4 $
$
$
50.8 $
384.6 $
$
3.0 $
$
1,232.3
134.4
12.4
71.6
50.1
381.6
3.0
$ 1,045.2 $
104.0 $
$
— $
$
$
—
58.2 $
$
370.1 $
$
3.4 $
$
1,030.0
100.9
(0.6)
—
57.2
368.8
3.4
11. Partners’ Capital (Deficit)
Units Authorized
As of December 31, 2023 and 2022, the Company has 92,473,023 of common units authorized for issuance.
Units Outstanding
Of the 79,967,363 common units outstanding at December 31, 2023, 63,271,967 common units were held by the
public, with the remaining 16,695,396 common units held by the Company’s affiliates (including members of the
Company’s general partner and their families).
Significant information regarding rights of the limited partners includes the following:
● Rights to receive distributions of available cash within 45 days after the end of each quarter, to the extent the
Company has sufficient cash from operations after the establishment of cash reserves.
● Limited partners have limited voting rights on matters affecting the Company’s business. The general partner may
consider only the interests and factors that it desires and has no duty or obligation to give any consideration of
any interests of the Company’s limited partners. Limited partners have no right to elect the board of directors of
the Company’s general partner.
122
Table of Contents
● The vote of the holders of at least 66 2/3% of all outstanding units voting together as a single class is required to
remove the general partner. Any holder, other than the general partner or the general partner’s affiliates, that owns
20% or more of any class of units outstanding cannot vote on any matter.
● The Company may issue an unlimited number of limited partner interests without the approval of the limited
partners.
● Limited partners may be required to sell their units to the general partner if at any time the general partner owns
more than 80% of the issued and outstanding common units.
Distributions and Incentive Distribution Rights
The Company’s general partner is entitled to incentive distributions if the amount it distributes to unitholders with
respect to any quarter exceeds specified target levels shown below:
Minimum Quarterly Distribution
First Target Distribution
Second Target Distribution
Third Target Distribution
Thereafter
Total Quarterly
Distribution Per Common Unit
Target Amount
$0.45
up to $0.495
above $0.495 up to $0.563
above $0.563 up to $0.675
above $0.675
Marginal Percentage
Interest in Distributions
Unitholders
98 %
98 %
85 %
75 %
50 %
General Partner
2 %
2 %
15 %
25 %
50 %
The Company’s ability to make distributions is limited by its debt instruments. The revolving credit facility generally
permits the Company to make cash distributions to unitholders as long as immediately after giving effect to such a cash
distribution the Company has availability under the revolving credit facility at least the greater of (i) 15% of the Aggregate
Borrowing Base (as defined in the credit agreement) then in effect, and (ii) $60.0 million (which amount is subject to
increase in proportion to revolving commitment increases). Further, the revolving credit facility contains a springing
financial covenant which provides that only if the Company’s availability to borrow loans under the revolving credit
facility falls below the sum of (a) the greater of (i) (x) 15% of the borrowing base then in effect at any time that the refinery
asset borrowing base component is greater than $0 and (y) 10% of the borrowing base then in effect at any time that the
refinery asset borrowing base component is equal to $0 and (ii) $45.0 million (which amount is subject to certain increases)
plus (b) the amount of FILO Loans outstanding, then we will be required to maintain as of the end of each fiscal quarter a
Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of at least 1.0 to 1.0. The indentures governing the
Company’s various senior notes restrict the Company’s ability to make cash distributions. Under the indenture governing
the 2024 Secured Notes and 2025 Senior Notes, the Company may pay distributions to its unitholders in an amount equal
to available cash from operating surplus (as defined in the Company’s partnership agreement) with respect to its preceding
fiscal quarter, subject to certain customary adjustments described in the indentures, if the Company’s fixed charge coverage
ratio (as defined in the indentures) for the most recently ended four full fiscal quarters is not less than 3.0 to 1.0. If
the Company’s fixed charge coverage ratio is less than 3.0 to 1.0, the Company will be able to pay distributions to its
unitholders up to an amount equal to a $25.0 million basket, subject to certain customary adjustments described in the
indentures. The indentures governing the 2027 Senior Notes reduces this minimum fixed charge coverage ratio to 2.5 to
1.0.
The Company’s distribution policy is as defined in its partnership agreement. In April 2016, the board of directors of
the Company’s general partner determined to suspend payment of the Company’s quarterly cash distribution to unitholders
and the Company is not currently permitted to resume cash distributions pursuant to the terms of the indentures governing
the Company’s outstanding senior notes. The Company made no distributions to its partners for the years ended
December 31, 2023 and 2022. For the years ended December 31, 2023 and 2022, the general partner was allocated no
incentive distribution rights.
123
Table of Contents
12. Unit-Based Compensation
The Company’s general partner originally adopted a Long-Term Incentive Plan on January 24, 2006, which was
amended and restated effective December 10, 2015 and further amended effective December 9, 2021 (the “LTIP”), for its
employees, consultants and directors and its affiliates who perform services for the Company. The LTIP provides for the
grant of restricted units, phantom units, unit options and substitute awards and, with respect to unit options and phantom
units, the grant of distribution equivalent rights (“DERs”). Following unitholder approval of the December 9, 2021
amendment to the LTIP, which was obtained on February 16, 2022, an aggregate of 5,283,960 common units may be
delivered pursuant to awards under the LTIP. Units withheld to satisfy the Company’s general partner’s tax withholding
obligations are available for delivery pursuant to other awards. The LTIP is administered by the compensation committee
of the Company’s general partner’s board of directors.
Liability Awards are awards that are currently expected to be settled in cash on their vesting dates, rather than in equity
units. Phantom unit Liability Awards are recorded in accrued salaries, wages and benefits in the consolidated balance
sheets based on the vested portion of the fair value of the awards on the balance sheet date. The fair value of Liability
Awards is updated at each balance sheet date and changes in the fair values of the vested portions of the awards are
recorded as increases or decreases to compensation expense within general and administrative expense in the consolidated
statements of operations.
Phantom Units
Non-employee directors and certain management level employees of the Company’s general partner have been granted
phantom units under the terms of the LTIP as part of their respective compensation packages related to fiscal years 2023
and 2022. The phantom units granted to non-employee directors and employees related to fiscal years 2023 and 2022 vest
in full on the third anniversary following the grant date. Although ownership of common units related to the vesting of
such LTIP phantom units does not transfer to the recipients until the phantom units vest, the recipients have DERs on these
phantom units from the date of grant.
Non-employee directors and certain senior management level employees of the Company’s general partner are eligible
to defer their earned director fees or earned annual cash incentive amounts, respectively, into the Deferred Compensation
Plan. When such individuals elect to defer any portion of their compensation into the plans, these deferred amounts are
credited to the participant in the form of phantom units. The compensation committee may recommend a matching
contribution for the deferred amounts at its discretion.
For unit-based compensation equity awards, the Company uses the market price of its common units on the grant date
to calculate the fair value and related compensation cost of the phantom units. The Company amortizes this compensation
cost to partners’ capital (deficit) and general and administrative expense in the consolidated statements of operations using
the straight-line method over the service period, as it expects these units to fully vest.
124
Table of Contents
A summary of the Company’s non-vested phantom units as of December 31, 2023, and the changes during the years
ended December 31, 2023 and 2022, are presented below:
Non-vested at January 1, 2021
Granted
Vested
Forfeited
Non-vested at December 31, 2021
Granted
Vested
Forfeited
Non-vested at December 31, 2022
Granted
Vested
Forfeited
Non-vested at December 31, 2023
Number of
Phantom Units
Weighted-
Average
Grant Date Fair Value
2,370,868
821,964
(1,002,338)
(61,933)
2,128,561
931,926
(1,706,783)
(39,322)
1,314,382
1,216,817
(1,144,542)
(159,080)
1,227,577
$
$
$
$
2.21
4.71
3.34
3.68
2.31
15.02
5.61
6.62
6.58
17.53
11.08
11.89
9.83
For the year ended December 31, 2023, compensation expense of $21.8 million was recognized in the consolidated
statements of operations related to phantom unit grants. For the year ended December 31, 2022, compensation expense of
$32.9 million was recognized in the consolidated statements of operations related to phantom unit grants. As of
December 31, 2023, there was a total of $14.8 million of unrecognized compensation costs related to non-vested phantom
unit grants, all of which was attributable to Liability Awards. These costs are expected to be recognized over a weighted-
average period of approximately two years. The total fair value of phantom units vested during the years ended
December 31, 2023 and 2022, was $19.8 million and $26.1 million, respectively.
13. Employee Benefit Plans
Defined Contribution Plan
The Company has a domestic defined contribution plan administered by its general partner for (i) all full-time
employees that are eligible to participate in the plan (the “401(k) Plan”). Participants in the 401(k) Plan are allowed to
contribute 1% to 70% of their pre-tax earnings to the plan, subject to government imposed limitations. The Company
matches 100% of each 1% of eligible compensation contributed by the participant up to 4% and 50% of each additional 1%
of eligible compensation contributed up to 6%, for a maximum contribution by the Company of 5% of eligible
compensation contributed per participant. The 401(k) Plan also includes a profit-sharing component for eligible employees.
Contributions under the profit-sharing component are determined by the board of directors of the Company’s general
partner and are discretionary. The funding policy is consistent with funding requirements of applicable laws and
regulations.
The Company recorded the following 401(k) Plan matching contribution expense in the consolidated statements of
operations (in millions):
401(k) Plan matching contribution expense
Defined Benefit Pension Plan
Year Ended December 31,
2022
2021
2023
$
7.0
$
6.9
$
5.9
The Company has domestic noncontributory defined benefit plans for those salaried employees as well as those
employees represented by either the United Steelworkers (the “USW”) or the International Union of Operating Engineers
(the “IUOE”); who (i) were formerly employees of Penreco and became employees of the Company as a result of the
125
Table of Contents
acquisition of Penreco on January 3, 2008 (the “Penreco Pension Plan”) or (ii) were formerly employees of Montana
Refining Company, Inc. and who became employees of the Company as a result of the acquisition of the Great Falls
refinery on October 1, 2012 (the “Great Falls Pension Plan” and together with the Penreco Pension Plan, the “Pension
Plan”).
Both the Penreco Pension Plan and the Great Falls Pension Plans were last amended in 2009 and 2015 respectively,
which curtailed employees covered by the plans from accumulating additional benefits in subsequent years following the
amendment date.
During 2023, the Company made an immaterial amount of contributions to its Pension Plan and expects to contribute
less than $0.1 million to its Pension Plan in 2024.
The accumulated and projected benefit obligations for the Pension Plan were $31.2 million as of each of
December 31, 2023 and 2022. For the years ended December 31, 2023 and 2022, the discount rate used to determine the
benefit obligations was 4.97% and 5.19%, respectively, for the Penreco Pension Plan and 5.05% and 5.16%, respectively,
for the Great Falls Pension Plan. For the years ended December 31, 2023 and 2022, the expected rate of return on plan
assets was 5.25% and 4.50%, respectively, for the Penreco Pension Plan and 6.00% and 4.50%, respectively, for the Great
Falls Pension Plan. The fair value of plan assets was $27.0 million and $26.4 million as of December 31, 2023 and 2022,
respectively. The estimated benefit payments for the Pension Plan, which reflect expected future service, as appropriate, are
expected to be less than $2.6 million in each of the next five years.
14. Accumulated Other Comprehensive Loss
The table below sets forth a summary of changes in accumulated other comprehensive loss by component for the years
ended December 31, 2023 and 2022 (in millions):
Accumulated other comprehensive loss at December 31, 2021
Other comprehensive income before reclassifications
Net current period other comprehensive income
Accumulated other comprehensive loss at December 31, 2022
Other comprehensive income before reclassifications
Net current period other comprehensive income
Accumulated other comprehensive loss at December 31, 2023
15. Income Taxes
Defined Benefit
Pension And
Retiree Health
Benefit Plans
$
$
$
(10.1)
1.8
1.8
(8.3)
1.1
1.1
(7.2)
$
$
$
Total
(10.1)
1.8
1.8
(8.3)
1.1
1.1
(7.2)
The Company, as a partnership, is generally not liable for federal and state income taxes on the earnings of Calumet
Specialty Products Partners, L.P., its wholly-owned subsidiaries, and its majority owned subsidiaries. However, the
Company conducts certain activities through immaterial, wholly-owned subsidiaries that are corporations, which in certain
circumstances are subject to federal, state and local income taxes. Additionally, the Company is subject to franchise taxes
in certain states. Income taxes on the earnings of the Company, with the exception of the above-mentioned taxes, are the
responsibility of its partners, with earnings of the Company included in partners’ earnings.
For the years ended December 31, 2023, 2022, and 2021, the Company recognized income tax expense of $1.6
million, $3.4 million, and $1.5 million, respectively.
As a result of the Company’s analysis, management has determined that the Company does not have any material
uncertain tax positions.
126
Table of Contents
16. Earnings per Unit
The following table sets forth the computation of basic and diluted earnings per limited partner unit (in millions,
except unit and per unit data):
Numerator for basic and diluted earnings per limited partner unit:
Net income (loss)
Less:
General partner’s interest in net income (loss)
Net income (loss) attributable to limited partners
Denominator for earnings per limited partner unit:
2023
Year Ended December 31,
2022 (As Restated)
2021
$
$
48.1
$
(173.3)
$
(260.1)
1.0
47.1
$
(3.5)
(169.8)
$
(5.2)
(254.9)
Basic weighted average limited partner units outstanding
80,075,530
79,336,283
78,980,839
Effect of dilutive securities:
Incremental units (1)
Diluted weighted average limited partner units outstanding (2)
Limited partners’ interest basic net income (loss) per unit:
Limited partners’ interest
Limited partners’ interest diluted net income (loss) per unit:
Limited partners’ interest
—
80,075,530
—
79,336,283
—
78,980,839
$
$
0.59
0.59
$
$
(2.14)
(2.14)
$
$
(3.23)
(3.23)
(1) There were no incremental units that would have been dilutive in the computation of earnings per limited partner unit
for the year ended December 31, 2023.
(2) Total diluted weighted average limited partner units outstanding excludes a de-minimis amount of potentially dilutive
phantom units which would have been anti-dilutive for the years ended December 31, 2022, and 2021.
17. Transactions with Related Parties
During the years ended December 31, 2023, 2022, and 2021, the Company had product sales to related parties of $8.4
million, $16.5 million, and $19.9 million, respectively. Trade accounts and other receivables from related parties at
December 31, 2023 and 2022 were $1.7 million and $1.9 million, respectively. The Company also had purchases from
related parties during the years ended December 31, 2023, 2022, and 2021 of $16.5 million, $11.7 million, and $9.7
million, respectively. Accounts payable to related parties were $5.9 million and $1.5 million, at December 31, 2023 and
2022, respectively.
The general partner employs all of the Company’s employees and the Company reimburses the general partner for
certain of its expenses.
18. Segments and Related Information
Segment Reporting
The Company determines its reportable segments based on how the business is managed internally for the products
sold to customers, including how results are reviewed and resources are allocated by the chief operating decision makers
(“CODM”). The Company’s operations are managed by the CODM using the following reportable segments:
● Specialty Products and Solutions. The Specialty Products and Solutions segment consists of our customer-
focused solutions and formulations businesses, covering multiple specialty product lines, anchored by our unique
integrated complex in Northwest Louisiana. In this segment, we manufacture and market a wide variety of
solvents, waxes, customized lubricating oils, white oils, petrolatums, gels, esters, and other products. Our
127
Table of Contents
specialty products are sold to domestic and international customers who purchase them primarily as raw material
components for consumer-facing and industrial products.
● Montana/Renewables. The Montana/Renewables segment is composed of our Great Falls specialty asphalt
facility and our Montana Renewables facility. At our Montana Renewables 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.
● Performance Brands. The Performance Brands segment includes our fast-growing portfolio of high-quality, high-
performing brands. In this segment, we blend, package, and market high performance products through our Royal
Purple, Bel-Ray, and TruFuel brands.
● Corporate. The Corporate segment primarily consists of general and administrative expenses not allocated to the
Montana/Renewables, Specialty Products and Solutions, or Performance Brands segments.
The accounting policies of the reporting segments are the same as those described in the summary of significant
accounting policies as disclosed in Note 2 — “Summary of Significant Accounting Policies,” except that the disaggregated
financial results for the reporting segments have been prepared using a management approach, which is consistent with the
basis and manner in which management internally disaggregates financial information for the purposes of assisting internal
operating decisions. The Company accounts for inter-segment sales and transfers using market-based transfer pricing. The
Company will periodically refine its expense allocation methodology for its segment reporting as more specific
information becomes available and the industry or market changes. The Company evaluates performance based upon
Adjusted EBITDA (a non-GAAP financial measure). The Company defines 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.
128
Table of Contents
Reportable segment information is as follows (in millions):
Year Ended December 31, 2023
Sales:
External customers
Inter-segment sales
Total sales
Adjusted EBITDA
Reconciling items to net income:
Depreciation and amortization
LCM / LIFO (gain) loss
Loss on impairment and disposal of assets
Interest expense
Debt extinguishment costs
Unrealized gain on derivatives
RINs mark-to-market gain
Other non-recurring expenses
Equity-based compensation and other
items
Income tax expense
Noncontrolling interest adjustments
Net income
Specialty
Products and Performance
Solutions (1)
Brands (2)
Montana/
Renewables (3) Corporate Eliminations
Consolidated
Total
$ 2,876.9
17.2
$ 2,894.1
$
251.2
$
$
$
310.3
0.3
310.6
47.9
$
$
$
993.8
993.8
—
$ — $
—
$ — $
— $ 4,181.0
(17.5)
—
(17.5) $ 4,181.0
30.2
$ (68.8) $
— $
260.5
76.8
(2.1)
—
27.9
—
(28.4)
(201.1)
9.9
2.0
—
0.1
—
—
—
95.2
35.7
3.5
65.4
0.4
(4.6)
(89.1)
1.1
—
—
128.3
5.5
—
—
—
—
—
—
—
—
—
$
183.0
35.6
3.5
221.7
5.9
(33.0)
(290.2)
60.9
20.2
1.6
3.2
48.1
Capital expenditures
PP&E, net
$
$
82.2
373.0
$
$
2.3
33.4
$
$
234.6
1,097.9
$
$
0.6
2.0
$
$
— $
319.7
— $ 1,506.3
129
Table of Contents
Year Ended December 31, 2022 (As Restated)
Sales:
External customers
Inter-segment sales
Total sales
Adjusted EBITDA
Reconciling items to net loss:
Depreciation and amortization
LCM / LIFO (gain) loss
Loss on impairment and disposal of
assets
Interest expense
Debt extinguishment costs
Unrealized (gain) loss on derivatives
RINs mark-to-market loss
Other non-recurring expenses
Equity-based compensation and other
items
Income tax expense
Noncontrolling interest adjustments
Net loss
Specialty
Products and Performance
Solutions (4) (5)
Brands
Montana/
Renewables (3) Corporate Eliminations
Consolidated
Total
$
$
$
$
$
$
3,508.0
24.7
3,532.7
379.4
63.0
(14.2)
303.4
$
—
$
303.4
874.9
874.9
—
$ — $
—
$ — $
— $
(24.7)
(24.7) $
4,686.3
—
4,686.3
20.2
$
75.8
$ (85.4) $
— $
390.0
11.3
(0.3)
41.1
21.1
6.0
—
—
—
121.4
6.6
—
—
0.7
—
—
0.7
32.3
—
51.9
75.0
1.2
—
—
—
29.8
38.3
(6.0)
40.7
112.6
3.1
—
—
—
—
—
—
$
175.9
41.4
45.9
115.7
15.6
34.4
3.4
2.3
(173.3)
Capital expenditures
PP&E, net
$
$
68.4
382.4
$
$
2.0
34.1
$
$
528.1
1,062.7
$
$
0.3
2.8
$
$
— $
— $
598.8
1,482.0
130
Table of Contents
Year Ended December 31, 2021
Sales:
External customers
Inter-segment sales
Total sales
Adjusted EBITDA
Reconciling items to net loss:
Depreciation and amortization
LCM / LIFO gain
Loss on impairment and disposal of assets
Interest expense
Unrealized loss on derivatives
RINs mark-to-market loss
Other non-recurring expenses
Equity-based compensation and other items
Income tax expense
Net loss
Specialty
Products and Performance Montana/
Solutions
Brands
Renewables Corporate Eliminations
Consolidated
Total
$ 2,111.4
16.1
$ 2,127.5
$
104.6
$
$
$
252.9
$
—
$
252.9
783.7
783.7
—
$ — $
—
$ — $
— $
(16.1)
(16.1) $
3,148.0
—
3,148.0
33.8
$
44.4
$ (72.5) $
— $
110.3
68.5
(35.1)
3.1
18.5
16.3
40.9
13.6
(3.8)
0.1
0.3
—
—
34.6
(11.4)
0.8
8.3
8.1
16.8
8.0
—
0.1
122.4
—
—
—
—
—
—
—
—
$
124.7
(50.3)
4.1
149.5
24.4
57.7
8.1
50.7
1.5
(260.1)
Capital expenditures
PP&E, net
$
$
57.6
375.5
$
$
3.3
34.3
$
$
83.0
531.3
$ — $
$
8.6
$
— $
— $
143.9
949.7
(1) For the year ended December 31, 2023, Adjusted EBITDA for the Specialty Products and Solutions segment included
a $9.5 million gain recorded in cost of sales in the consolidated statements of operations for proceeds received under
the Company’s property damage insurance policy.
(2) For the year ended December 31, 2023, Adjusted EBITDA for the Performance Brands segment included a $8.2
million gain recorded in cost of sales in the consolidated statements of operations for proceeds received under the
Company’s business interruption insurance policy.
(3) For the year ended December 31, 2023, Adjusted EBITDA for the Montana/Renewables segment excluded a $50.6
million charge to cost of sales in the consolidated statements of operations for losses under firm purchase
commitments. For the year ended December 31, 2022, Adjusted EBITDA for the Montana/Renewables segment
excluded a $13.0 million charge to cost of sales in the consolidated statements of operations for losses under firm
purchase commitments.
(4) For the year ended December 31, 2022, Adjusted EBITDA for the Specialty Products and Solutions segment included
a $13.9 million gain recorded in cost of sales in the consolidated statements of operations for proceeds received under
the Company’s business interruption insurance policy. The Company incurred business losses due to increased costs
arising from a polar vortex that occurred in 2021 in northwest Louisiana. As a result, the Company filed a contingent
business interruption claim. Specifically, the losses included a loss of throughput at the Shreveport refinery and
additional transportation related expenses.
(5) For the year ended December 31, 2022, Adjusted EBITDA for the Specialty Products and Solutions segment included
a $4.4 million gain recorded in cost of sales in the consolidated statements of operations for proceeds received under
the Company’s property damage insurance policy as a result of damages caused by a polar vortex that occurred in
2021.
131
Table of Contents
Geographic Information
International sales accounted for less than ten percent of consolidated sales in each of the years ended
December 31, 2023, 2022, and 2021 respectively.
Product Information
The Company offers specialty, fuels, renewable fuels and packaged products primarily in categories consisting of
lubricating oils, solvents, waxes, gasoline, diesel, jet fuel, asphalt, heavy fuel oils, renewable fuels, high-performance
branded specialty products, and other specialty and fuels products. The following table sets forth the major product
category sales for each segment (dollars in millions):
2023
Year Ended December 31,
2022 (As Restated)
2021
Specialty Products and Solutions:
Lubricating oils
Solvents
Waxes
Fuels, asphalt and other by-products
Total
Montana/Renewables:
Gasoline
Diesel
Jet fuel
Asphalt, heavy fuel oils and other
Renewable fuels
Total
Performance Brands:
Consolidated sales
Major Customers
913.7
18.3 % $
434.9
9.5 %
3.9 %
189.3
37.2 % 1,970.1
68.9 % $ 3,508.0
4.0 % $
3.5 %
0.5 %
3.5 %
12.3 %
23.8 % $
188.1
391.8
41.8
253.2
—
874.9
19.5 % $
658.7
9.3 %
303.7
4.0 %
151.7
997.3
42.0 %
74.8 % $ 2,111.4
4.0 % $
8.4 %
0.9 %
5.4 %
—
18.7 % $
188.3
324.9
27.5
243.0
—
783.7
20.9 %
9.7 %
4.8 %
31.7 %
67.1 %
6.0 %
10.3 %
0.9 %
7.7 %
— %
24.9 %
$
763.8
398.5
163.9
1,550.7
$ 2,876.9
167.2
144.8
20.5
148.1
513.2
993.8
$
$
$
310.3
7.4 % $
303.4
6.5 % $
252.9
8.0 %
$ 4,181.0
100.0 % $ 4,686.3
100.0 % $ 3,148.0
100.0 %
During the years ended December 31, 2023, 2022, and 2021 the Company had no customer that represented 10% or
greater of consolidated sales.
Major Suppliers
During the years ended December 31, 2023, 2022, and 2021 the Company had two counterparties that supplied
approximately 90.2%, 86.2%, and 90.2%, respectively, of its crude oil supply.
19. Unrestricted Subsidiaries
As defined in the indentures governing the Company’s outstanding senior notes, an unrestricted subsidiary means
Montana Renewables Holdings, MRL and any other subsidiary of the Company, other than Calumet Finance Corp., that is
designated by the Company’s general partner’s board of directors as an unrestricted subsidiary, but only to the extent that
such subsidiary:
● has no indebtedness other than non-recourse debt owing to any person other than the Company or any of its
restricted subsidiaries, except to the extent permitted by the indentures of the senior notes;
132
Table of Contents
● is not party to any agreement, contract, arrangement or understanding with the Company or any restricted
subsidiary of the Company unless the terms of any such agreement, contract, arrangement or other understanding
are no less favorable to the Company or such restricted subsidiary than those that might be obtained at the time
from persons who are not affiliates of the Company, except to the extent permitted by the indentures of the senior
notes;
● is a person with respect to which neither the Company nor any of its restricted subsidiaries has any direct or
indirect obligation (a) to subscribe for additional equity interests or (b) to maintain or preserve such person’s
financial condition or to cause such person to achieve any specified levels of operating results, except to the
extent permitted by the indentures of the senior notes; and
● has not guaranteed or otherwise directly or indirectly provided credit support for any indebtedness of the
Company or any of its restricted subsidiaries.
For the years ended December 31, 2023 and December 31, 2022, respectively, Montana Renewables Holdings and
MRL were the only unrestricted subsidiaries of the Company. In accordance with the indentures governing the Company’s
outstanding senior notes, the following table sets forth certain financial information of (i) the Company and its restricted
subsidiaries, on a combined basis, (ii) the Company’s unrestricted subsidiaries, on a combined basis, and (iii) the Company
and its subsidiaries, on a consolidated basis, in each case, as of December 31, 2023 and December 31, 2022, respectively.
Parent
Company and
December 31, 2023
Cash and cash equivalents
Accounts receivable - trade
Accounts receivable - other
Inventory
Prepaid expenses and other current assets
Property, plant and equipment, net
Operating lease right-of-use assets
Other noncurrent assets, net
Accounts payable
Accrued interest payable
Other taxes payable
Obligations under inventory financing agreements
Other current liabilities
Current portion of operating lease liabilities
Current portion of long-term debt
Long-term operating lease liabilities
Long-term debt
Redeemable noncontrolling interest
Partners’ capital (deficit)
133
Consolidated
Total
Restricted Unrestricted
Subsidiaries
7.3
$
230.7
$
24.8
$
353.1
$
14.6
$
731.7
$
108.1
$
127.3
$
282.4
$
47.8
$
11.9
$
126.0
$
20.4
$
72.2
$
38.8
$
$
36.0
$
1,381.0
$
$
Subsidiaries Eliminations
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
— $
7.9
— $
$
252.4
— $
$
33.8
— $
$
439.4
— $
$
— $
51.6
$
— $ 1,506.3
$
114.4
— $
$
134.4
$
— $
322.0
$ (293.7) $
48.7
— $
$
— $
$
13.5
190.4
— $
$
42.4
— $
$
75.6
— $
$
55.7
— $
$
$
39.0
— $
$ (100.0) $ 1,829.7
245.6
— $
$
(490.3)
(18.8) $
(174.3) $ (297.2) $
0.6
21.7
9.0
86.3
37.0
774.6
6.3
7.1
333.3
0.9
1.6
64.4
22.0
3.4
16.9
3.0
548.7
245.6
Table of Contents
December 31, 2022 (As Restated)
Cash and cash equivalents
Accounts receivable - trade
Accounts receivable - other
Inventory
Prepaid expenses and other current assets
Property, plant and equipment, net
Operating lease right-of-use assets
Other noncurrent assets, net
Accounts payable
Obligations under inventory financing agreements
Other current liabilities
Current portion of operating lease liabilities
Current portion of long-term debt
Long-term operating lease liabilities
Long-term debt
Redeemable noncontrolling interest
Partners’ capital (deficit)
Parent
Company and
Consolidated
Total
Restricted Unrestricted
Subsidiaries
9.4
$
238.4
$
20.5
$
369.8
$
13.6
$
760.7
$
105.7
$
113.8
$
307.2
$
158.2
$
21.2
$
70.1
$
7.9
$
$
35.9
1,183.5
$
$
$
Subsidiaries Eliminations
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
— $
(456.3) $
35.2
— $
$
25.8
244.7
— $
$
6.3
22.4
— $
$
1.9
497.7
— $
$
127.9
— $
19.6
$
6.0
— $ 1,482.0
$
721.3
107.5
— $
$
1.8
122.6
$
— $
8.8
442.0
$ (130.8) $
265.6
221.8
— $
$
63.6
34.3
— $
$
13.1
70.7
— $
$
0.6
19.6
— $
$
11.7
— $
$
37.1
1.2
— $ 1,540.1
$
356.6
245.6
245.6
— $
$
(533.3)
(18.8) $
(58.2) $
The following table sets forth certain financial information of the Company’s unrestricted subsidiaries, on a combined
basis, as of December 31, 2023, 2022 and 2021, respectively.
2023
Year Ended December 31,
2022 (As Restated)
2021
Sales
Cost of sales
Gross profit (loss)
Operating costs and expenses:
General and administrative
Taxes other than income taxes
Loss on impairment and disposal of assets
Operating loss
Other income (expense):
Interest expense
Debt extinguishment costs
Gain on derivative instruments
Other income
Total other expense
Net loss
20. Redeemable Noncontrolling Interest
$
$
$
(In millions, except unit and per unit data)
513.2
651.0
(137.8)
65.9
77.8
(11.9)
$
22.1
4.3
3.4
(167.6)
(77.8)
—
5.3
1.1
(71.4)
(239.0)
$
2.0
—
—
(13.9)
(32.8)
(38.3)
11.3
0.4
(59.4)
(73.3)
$
6.9
5.0
1.9
2.1
—
—
(0.2)
(5.2)
—
—
—
(5.2)
(5.4)
On August 5, 2022 (the “Closing Date”), MRHL issued and sold 12,500,000 preferred units (“Preferred Units”) in
MRHL to an affiliate of Warburg Pincus LLC for $250.0 million for an immediate cash payment of $200.0 million and the
agreement to pay the remaining $50.0 million in cash not later than October 3, 2022 (the “Deferred Purchase Price”) in
exchange for a 14.2045% Percentage Interest in MRHL. The Company received the cash payment for the Deferred
Purchase Price on October 3, 2022. The Preferred Units are not interest bearing and carry certain minimum return
thresholds.
134
Table of Contents
Holders of the Preferred Units are entitled to receive a preferred return equal to the greater of (i) an internal rate of
return, or IRR, as defined in the Second Amended and Restated Limited Liability Company Agreement of MRHL (the
“Second A&R LLC Agreement”), equal to 8.0% and (ii) a multiple on invested capital, or MOIC (as defined in the Second
A&R LLC Agreement), initially equal to 1.35 and increasing by 0.01 each anniversary of the Closing Date up to a
maximum MOIC equal to 1.40 on or after the fifth anniversary of the Closing Date (the “Preferred Return”). Pursuant to
the Second A&R LLC Agreement, MRHL is required to distribute all Available Cash (as defined in the Second A&R LLC
Agreement), to the members of MRHL (the “Members”) in the following priority: (i) 37.5% to the holders of the Preferred
Units and 62.5% to all other Members pro rata based on their Percentage Interests (as defined in the Second A&R LLC
Agreement) until the holders of the Preferred Units receive the Preferred Return and (ii) thereafter, 100.0% to the Members
pro rata based on their Percentage Interests. Additionally, pursuant to the Second A&R LLC Agreement the Company is
required to make distributions to the Members sufficient to enable them to pay, on a quarterly basis, federal, state and local
taxes arising from the allocations made to such members. Further, such distributions are determined by the Company and
shall be made within thirty (30) days after the close of each applicable quarter. Any tax liability distributions shall be
treated as an advance against, and shall reduce the amount of, the next distribution that the members would otherwise
receive pursuant to the agreement.
At any time following the fifth anniversary of the Closing Date, if MRHL has not had an Initial Public Offering or
Change of Control (each as defined in the Second A&R LLC Agreement), Warburg has the right to initiate an Initial Public
Offering or Change of Control transaction pursuant to the terms of the Second A&R LLC Agreement. Upon the closing of
a Qualified Initial Public Offering (as defined in the Second A&R LLC Agreement), each of MRHL and Warburg have the
right to elect to convert all (but not less than all) of the Preferred Units (i) first by MRHL paying each holder of Preferred
Units an amount in cash equal to such holder’s Preferred Return (to the extent not already paid) and (ii) thereafter, the
Preferred Units automatically convert into the same number of common units of MRHL and will be entitled to participate
in any distributions of Available Cash to the Members in proportion to their respective Percentage Interests. The Second
A&R LLC Agreement also provides certain drag-along rights in connection with a Change of Control, subject to a
minimum preferred return requirement for certain transactions that are consummated before the third anniversary of the
Closing Date.
The redeemable noncontrolling interest in MRHL is reflected as temporary equity in the consolidated balance sheets
due to the redemption features described above and included a balance of $245.6 million as of December 31, 2023 and
2022, as restated, respectively, which reflects the amount recorded for the Preferred Units at their issuance date fair value,
net of issuance costs. As of the reporting date, there are no triggering, change of control, early redemption or monetization
events that are probable that would require us to revalue the Preferred Units.
21. Restatement of Prior Period
The Company has restated its consolidated financial statements as of and for the year ended December 31, 2022. This
restatement corrects the error related to the attribution of net loss from MRHL to noncontrolling interest for the year ended
December 31, 2022. The Company previously allocated its net loss to noncontrolling interest based on the relative
ownership interest of the equity holders in MRHL, which was approximately 14% for the noncontrolling interest. The
Partnership has subsequently determined that, under applicable accounting standards, no portion of the net loss from
MRHL should have been allocated to noncontrolling interest. In addition to the restatement error described above, the
Company has corrected certain items that were concluded as immaterial, individually and in the aggregate, to the financial
statements for the year ended December 31, 2022.
135
Table of Contents
The effects of the restatement on the consolidated balance sheet as of December 31, 2022 are summarized in the
following table:
As Previously
Reported
December 31, 2022
(In millions, except unit data)
Effect of
Restatement
As Restated
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net:
Trade, less allowance for credit losses of $1.3 million
Other
Inventories
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Goodwill
Other intangible assets, net
Operating lease right-of-use assets
Other noncurrent assets, net
Total assets
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
Current liabilities:
Accounts payable
Accrued interest payable
Accrued salaries, wages and benefits
Other taxes payable
Obligations under inventory financing agreements
Current portion of RINs obligation
Other current liabilities
Current portion of operating lease liabilities
Current portion of long-term debt
Derivative liabilities
Total current liabilities
Pension and postretirement benefit obligations
Other long-term liabilities
Long-term operating lease liabilities
Long-term RINs obligation, less current portion
Long-term debt, less current portion
Total liabilities
Commitments and contingencies
Redeemable noncontrolling interest
Partners’ capital (deficit):
Limited partners’ interest (79,189,583 units issued and
outstanding at December 31, 2022)
General partner’s interest
Accumulated other comprehensive loss
Total partners’ capital (deficit)
Total liabilities and partners’ capital (deficit)
$
$
$
$
$
$
$
35.2
$
— $
245.7
22.3
268.0
498.0
19.2
820.4
1,482.0
173.0
36.3
107.5
122.6
2,741.8
442.4
34.6
93.0
9.5
221.8
399.3
34.3
70.7
20.0
26.5
1,352.1
4.8
18.3
37.1
77.5
1,539.7
3,029.5
250.0
(529.9)
0.5
(8.3)
(537.7)
2,741.8
$
$
$
$
$
$
(1.0)
0.1
(0.9)
(0.3)
0.4
(0.8)
—
—
—
—
—
(0.8)
(0.4)
—
—
—
—
(0.4)
—
—
(0.4)
—
(1.2)
—
—
—
—
0.4
(0.8)
(4.4)
4.6
(0.2)
—
4.4
(0.8)
$
$
$
$
$
$
35.2
244.7
22.4
267.1
497.7
19.6
819.6
1,482.0
173.0
36.3
107.5
122.6
2,741.0
442.0
34.6
93.0
9.5
221.8
398.9
34.3
70.7
19.6
26.5
1,350.9
4.8
18.3
37.1
77.5
1,540.1
3,028.7
245.6
(525.3)
0.3
(8.3)
(533.3)
2,741.0
136
Table of Contents
The effects of the restatement on the consolidated statement of operations for the year ended December 31, 2022 are
summarized in the following table:
As Previously
Reported
Year Ended December 31, 2022
Effect of
Restatement
(In millions, except unit and per unit data)
4,686.7
4,335.9
350.8
(0.4)
(1.3)
0.9
$
$
As Restated
4,686.3
4,334.6
351.7
53.9
143.4
13.7
0.7
8.1
131.9
(175.9)
(41.4)
(81.7)
(2.8)
(301.8)
(169.9)
3.4
(173.3)
—
(173.3)
(173.3)
(3.5)
(169.8)
53.9
141.0
13.7
0.7
8.1
133.4
(175.9)
(41.4)
(81.7)
(2.8)
(301.8)
(168.4)
3.4
(171.8)
(6.7)
(165.1)
(165.1)
(3.3)
(161.8)
$
$
$
$
79,336,283
—
2.4
—
—
—
(1.5)
—
—
—
—
—
(1.5)
—
(1.5)
6.7
(8.2)
(8.2)
(0.2)
(8.0)
—
$
$
$
$
(2.04)
$
(0.10)
$
(2.14)
79,336,283
Sales
Cost of sales
Gross profit
Operating costs and expenses:
Selling
General and administrative
Taxes other than income taxes
Loss on impairment and disposal of assets
Other operating expense
Operating income
Other expense:
Interest expense
Debt extinguishment costs
Loss on derivative instruments
Other expense
Total other expense
Net loss before income taxes
Income tax expense
Net loss
Net loss attributable to noncontrolling interest
Net loss attributable to partners
Allocation of net loss to partners:
Net loss attributable to partners
Less:
General partners’ interest in net loss
Net loss available to limited partners
Weighted average limited partner units outstanding:
Basic and diluted
Limited partners’ interest basic and diluted net loss per unit:
Limited partners’ interest
$
$
$
$
$
$
137
Table of Contents
The effects of the restatement on the consolidated statement of comprehensive income (loss) for the year ended
December 31, 2022 are summarized in the following table:
Net loss
Other comprehensive income:
Defined benefit pension and retiree health benefit plans
Total other comprehensive income
Comprehensive loss
Less: Comprehensive loss attributable to noncontrolling interest
Comprehensive loss attributable to partners’ capital (deficit)
Year Ended December 31, 2022
As Previously
Effect of
Reported
Restatement
As
Restated
(In millions)
(171.8) $
(1.5) $
(173.3)
1.8
1.8
(170.0) $
(6.7)
(163.3) $
—
—
(1.5) $
6.7
(8.2) $
1.8
1.8
(171.5)
—
(171.5)
$
$
$
The effects of the restatement on the consolidated statement of partners’ capital (deficit) for the year ended
December 31, 2022 are summarized in the following table:
Accumulated
Other
Comprehensive
Loss
Partners’ Capital (Deficit)
General
Partner
Limited
Partners
Total
Balance at December 31, 2021 (as previously reported)
Other comprehensive income
Net loss attributable to partners
Settlement of phantom units
Settlement of tax withholdings on equity-based incentive compensation
Modification of phantom units
Amortization of phantom units
Adjustment to ASC 480 redemption value
Balance at December 31, 2022
Restatement Impacts
Net loss attributable to partners
Settlement of phantom units
Adjustment to ASC 480 redemption value
Balance at December 31, 2022 (restatement impacts)
Balance at December 31, 2021 (as previously reported)
Other comprehensive income
Net loss attributable to partners
Settlement of phantom units
Settlement of tax withholdings on equity-based incentive compensation
Modification of phantom units
Amortization of phantom units
Balance at December 31, 2022 (as restated)
$
$
$
$
$
138
$
(10.1)
1.8
—
—
—
—
—
—
$
(8.3)
—
—
—
— $
$
(10.1)
1.8
—
—
—
—
—
$
(8.3)
(In millions)
3.8
$
—
(3.3)
—
—
—
—
—
$
0.5
(0.2)
—
—
$
(0.2)
3.8
$
—
(3.5)
—
—
—
—
$
0.3
(378.8)
—
(161.8)
6.7
(4.1)
13.5
5.7
(11.1)
(529.9)
$ (385.1)
1.8
(165.1)
6.7
(4.1)
13.5
5.7
(11.1)
$ (537.7)
(8.0)
1.5
11.1
4.6
$
(8.2)
1.5
11.1
4.4
—
(378.8)
(169.8)
8.2
(4.1)
13.5
5.7
(525.3)
$ (385.1)
1.8
(173.3)
8.2
(4.1)
13.5
5.7
$ (533.3)
Table of Contents
The effects of the restatement on the consolidated statement of cash flows for the year ended December 31, 2022 are
summarized in the following table:
Operating activities
Net loss
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization
Amortization of turnaround costs
Non-cash interest expense
Debt extinguishment costs
Non-cash RINs expense
Unrealized loss on derivative instruments
Loss on impairment and disposal of assets
Equity based compensation
Lower of cost or market inventory adjustment
Other non-cash activities
Changes in assets and liabilities
Accounts receivable
Inventories
Prepaid expenses and other current assets
Turnaround costs
Accounts payable
Accrued interest payable
Accrued salaries, wages and benefits
Other taxes payable
Other liabilities
Net cash provided by operating activities
Investing activities
Additions to property, plant and equipment
Proceeds from sale of property, plant and equipment
Net cash used in investing activities
Financing activities
Proceeds from borrowings — revolving credit facility
Repayments of borrowings — revolving credit facility
Proceeds from borrowings — senior notes
Repayments of borrowings — senior notes
Payments on finance lease obligations
Proceeds from inventory financing
Payments on inventory financing
Proceeds from sale of redeemable noncontrolling interest in subsidiary
Payments for issuance of Preferred Units
Repayments of borrowings — MRL Credit Facility
Proceeds from other financing obligations
Payments on other financing obligations
Debt issuance costs
Net cash provided by financing activities
Net decrease in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Cash and cash equivalents
Restricted cash
Supplemental disclosure of non-cash investing activities
Non-cash property, plant and equipment additions
Supplemental disclosure of non-cash investing activities
Non-cash property, plant and equipment additions
Year Ended December 31, 2022
As Previously
Reported
Effect of
Restatement
(In millions)
As Restated
$
(171.8)
$
(1.5)
$
(173.3)
98.3
23.1
17.6
41.4
197.9
45.9
0.7
15.8
19.4
2.2
(15.0)
(190.8)
(5.2)
(62.6)
57.3
8.4
9.5
(2.1)
10.6
100.6
(536.2)
0.2
(536.0)
1,695.1
(1,591.1)
325.0
(363.1)
(0.9)
2,166.0
(2,132.6)
250.0
(4.4)
(347.3)
372.9
(15.6)
(5.3)
348.7
(86.7)
121.9
35.2
35.2
$
$
— $
151.4
136.9
$
$
—
—
—
—
(0.4)
—
—
1.5
—
—
0.9
0.3
(0.4)
—
(0.4)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
— $
— $
— $
— $
—
98.3
23.1
17.6
41.4
197.5
45.9
0.7
17.3
19.4
2.2
(14.1)
(190.5)
(5.6)
(62.6)
56.9
8.4
9.5
(2.1)
10.6
100.6
(536.2)
0.2
(536.0)
1,695.1
(1,591.1)
325.0
(363.1)
(0.9)
2,166.0
(2,132.6)
250.0
(4.4)
(347.3)
372.9
(15.6)
(5.3)
348.7
(86.7)
121.9
35.2
35.2
—
151.4
136.9
$
$
$
$
$
139
Table of Contents
22. Quarterly Financial Data (Unaudited)
The Company has restated its unaudited interim condensed consolidated financial statements for the periods ended
March 31, 2023, June 30, 2023, and September 30, 2023. This restatement corrects the error related to the attribution of net
loss from MRHL to noncontrolling interest for all restated periods. The Company previously allocated its net loss to
noncontrolling interest based on the relative ownership interest of the equity holders in MRHL, which was approximately
14% for the noncontrolling interest. The Partnership has subsequently determined that, under applicable accounting
standards, no portion of the net loss from MRHL should have been allocated to noncontrolling interest. In addition to the
restatement error described above, the Company has corrected certain items that were concluded as immaterial,
individually and in the aggregate, to the unaudited interim condensed consolidated financial statements for the periods
ended March 31, 2023, June 30, 2023, and September 30, 2023.
As of and for the Three Months Ended March 31, 2023
The effects of the restatement on the condensed consolidated balance sheet as of March 31, 2023 are summarized in
the following table:
As Previously
Reported
March 31, 2023
(In millions, except unit data)
Effect of
Restatement
As Restated
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net:
Trade, less allowance for credit losses of $1.5 million
Other
Inventories
Derivative assets
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Other noncurrent assets, net
Total assets
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
Current liabilities:
Accounts payable
Accrued interest payable
Accrued salaries, wages and benefits
Obligations under inventory financing agreements
Current portion of RINs obligation
Other current liabilities
Current portion of long-term debt
Total current liabilities
Other long-term liabilities
Long-term RINs obligation, less current portion
Long-term debt, less current portion
Total liabilities
Commitments and contingencies
Redeemable noncontrolling interest
Partners’ capital (deficit):
Limited partners’ interest (79,835,801 units issued and
outstanding at March 31, 2023)
General partner’s interest
Accumulated other comprehensive loss
Total partners’ capital (deficit)
Total liabilities and partners’ capital (deficit)
$
$
$
$
$
$
$
11.2
$
262.2
34.7
296.9
454.8
7.1
29.9
799.9
1,543.2
421.4
2,764.5
394.3
39.5
75.1
204.0
419.5
112.7
20.6
1,265.7
52.9
25.2
1,696.8
3,040.6
250.0
$
$
$
$
(518.9) $
1.1
(8.3)
(526.1)
2,764.5
$
140
— $
—
—
—
—
—
—
—
—
—
— $
— $
—
1.6
—
—
—
—
1.6
—
—
—
1.6
$
(4.4) $
$
3.2
(0.4)
—
2.8
— $
11.2
262.2
34.7
296.9
454.8
7.1
29.9
799.9
1,543.2
421.4
2,764.5
394.3
39.5
76.7
204.0
419.5
112.7
20.6
1,267.3
52.9
25.2
1,696.8
3,042.2
245.6
(515.7)
0.7
(8.3)
(523.3)
2,764.5
Table of Contents
The effects of the restatement on the condensed consolidated statement of operations for the three months ended
March 31, 2023 are summarized in the following table:
As Previously
Reported
Three Months Ended March 31, 2023
Effect of
Restatement
(In millions, except unit and per unit data)
As Restated
Sales
Cost of sales
Gross profit
Operating costs and expenses:
Selling
General and administrative
Other operating expense
Operating income
Other income (expense):
Interest expense
Gain on derivative instruments
Other expense
Total other expense
Net income before income taxes
Income tax expense
Net income
Net loss attributable to noncontrolling interest
Net income attributable to partners
Allocation of net income to partners:
Net income attributable to partners
Less:
General partners’ interest in net income
Net income available to limited partners
Weighted average limited partner units outstanding:
Basic
Diluted
Limited partners’ interest basic and diluted net income per unit:
Limited partners’ interest
Limited partners’ interest diluted net income per unit:
Limited partners’ interest
$
1,036.9
$
940.2
96.7
13.5
37.0
3.0
43.2
(49.2)
25.5
(0.2)
(23.9)
19.3
0.5
18.8
(9.9)
28.7
28.7
0.6
28.1
79,830,671
79,939,985
0.35
0.35
$
$
$
$
$
$
$
$
$
$
$
$
141
0.4
0.5
(0.1)
—
0.1
—
(0.2)
—
—
—
—
(0.2)
—
(0.2)
9.9
(10.1)
(10.1)
(0.2)
(9.9)
$
$
$
$
$
1,037.3
940.7
96.6
13.5
37.1
3.0
43.0
(49.2)
25.5
(0.2)
(23.9)
19.1
0.5
18.6
—
18.6
18.6
0.4
18.2
—
—
(0.12)
(0.12)
$
$
79,830,671
79,939,985
0.23
0.23
Table of Contents
The effects of the restatement on the condensed consolidated statement of comprehensive income (loss) for the three
months ended March 31, 2023 are summarized in the following table:
Net income
Other comprehensive income:
Defined benefit pension and retiree health benefit plans
Total other comprehensive income
Comprehensive income attributable to partners’ capital (deficit)
Less: Comprehensive loss attributable to noncontrolling interest
Comprehensive income attributable to partners’ capital (deficit)
$
$
$
As Previously
Reported
Three Months Ended March 31, 2023
Effect of
Restatement
(In millions)
(0.2)
$
18.8
$
As Restated
18.6
—
—
18.8
(9.9)
28.7
$
$
—
—
(0.2)
9.9
(10.1)
$
$
—
—
18.6
—
18.6
The effects of the restatement on the condensed consolidated statement of cash flow for the three months ended
March 31, 2023 are summarized in the following table:
Operating activities
Net income
Non-cash RINs gain
Unrealized gain on derivative instruments
Other non-cash activities
Changes in assets and liabilities
Net cash used in operating activities
Investing activities
Additions to property, plant and equipment
Net cash used in investing activities
Financing activities
Proceeds from borrowings — revolving credit facility
Repayments of borrowings — revolving credit facility
Proceeds from borrowings — MRL revolving credit agreement
Proceeds from inventory financing
Payments on inventory financing
Proceeds from other financing obligations
Payments on other financing obligations
Net cash provided by financing activities
Net decrease in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Cash and cash equivalents
Restricted cash
Supplemental disclosure of non-cash investing activities
Non-cash property, plant and equipment additions
Three Months Ended March 31, 2023
As Previously
Reported
Effect of
Restatement
(In millions)
As Restated
$
18.8
(32.1)
(41.0)
67.8
(40.2)
(26.7)
(130.4)
(130.4)
559.0
(437.0)
18.7
388.5
(404.1)
20.8
(12.8)
133.1
(24.0)
35.2
11.2
11.2
$
$
— $
95.1
$
(0.2)
$
—
—
(1.5)
1.7
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
— $
— $
— $
18.6
(32.1)
(41.0)
66.3
(38.5)
(26.7)
(130.4)
(130.4)
559.0
(437.0)
18.7
388.5
(404.1)
20.8
(12.8)
133.1
(24.0)
35.2
11.2
11.2
—
95.1
$
$
$
$
$
142
Table of Contents
As of and for the Three and Six Months Ended June 30, 2023
The effects of the restatement on the condensed consolidated balance sheet as of June 30, 2023 are summarized in the
following table:
June 30, 2023
(In millions, except unit data)
As Previously
Reported
Effect of
Restatement
As Restated
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net:
Trade, less allowance for credit losses of $1.2 million
Other
Inventories
Derivative assets
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Other noncurrent assets, net
Total assets
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
Current liabilities:
Accounts payable
Accrued interest payable
Accrued salaries, wages and benefits
Obligations under inventory financing agreements
Current portion of RINs obligation
Other current liabilities
Current portion of long-term debt
Total current liabilities
Other long-term liabilities
Long-term RINs obligation, less current portion
Long-term debt, less current portion
Total liabilities
Commitments and contingencies
Redeemable noncontrolling interest
Partners’ capital (deficit):
Limited partners’ interest (79,958,262 units issued and outstanding
at June 30, 2023)
General partner’s interest
Accumulated other comprehensive loss
Total partners’ capital (deficit)
Total liabilities and partners’ capital (deficit)
$
$
$
$
$
$
$
143
36.0
$
— $
252.8
62.5
315.3
439.9
14.7
41.5
847.4
1,536.4
420.4
2,804.2
278.2
35.7
74.4
213.1
475.1
99.8
21.9
1,198.2
54.4
25.1
1,824.3
3,102.0
250.0
(540.3)
0.7
(8.2)
(547.8)
2,804.2
$
$
$
$
$
$
—
—
—
0.4
—
—
0.4
—
—
0.4
0.4
—
—
—
—
—
—
0.4
—
—
—
0.4
(4.4)
4.9
(0.5)
—
4.4
0.4
$
$
$
$
$
$
36.0
252.8
62.5
315.3
440.3
14.7
41.5
847.8
1,536.4
420.4
2,804.6
278.6
35.7
74.4
213.1
475.1
99.8
21.9
1,198.6
54.4
25.1
1,824.3
3,102.4
245.6
(535.4)
0.2
(8.2)
(543.4)
2,804.6
Table of Contents
The effects of the restatement on the condensed consolidated statement of operations for the three and six months
ended June 30, 2023 are summarized in the following table:
As Previously
Three Months Ended June 30, 2023
Effect of
Restatement
Reported
$
1,017.8
$
— $
Six Months Ended June 30, 2023
Effect of
As Previously
As Restated Reported
(In millions, except unit and per unit data)
Restatement As Restated
Sales
Cost of sales
Gross profit
Operating costs and expenses:
Selling
General and administrative
Other operating expense
Operating income
Other income (expense):
Interest expense
Gain on derivative instruments
Other expense
Total other expense
Net loss before income taxes
Income tax expense
Net loss
Net loss attributable to noncontrolling interest
Net loss attributable to partners
Allocation of net loss to partners:
Net loss attributable to partners
Less:
General partners’ interest in net loss
Net loss available to limited partners
Weighted average limited partner units
outstanding:
Basic
Diluted
Limited partners’ interest basic net loss per unit:
Limited partners’ interest
Limited partners’ interest diluted net loss per unit:
Limited partners’ interest
946.4
71.4
15.5
27.3
5.2
23.4
(55.8)
14.3
(5.5)
(47.0)
(23.6)
0.4
(24.0)
(5.5)
(18.5)
(18.5)
(0.4)
(18.1)
$
$
$
$
80,152,648
80,152,648
$
$
(0.23)
(0.23)
$
$
$
$
$
$
144
(0.1)
0.1
—
(1.6)
—
1.7
—
—
—
—
1.7
$
1.7
5.5
(3.8) $
(3.8) $
(0.1)
(3.7) $
$
1,017.8
946.3
71.5
2,054.7 $
1,886.6
168.1
0.4 $
0.4
—
2,055.1
1,887.0
168.1
15.5
25.7
5.2
25.1
(55.8)
14.3
(5.5)
(47.0)
(21.9)
0.4
(22.3)
$
—
$
(22.3)
29.0
64.3
8.2
66.6
(105.0)
39.8
(5.7)
(70.9)
(4.3)
0.9
(5.2) $
(15.4)
10.2 $
—
(1.5)
—
1.5
—
—
—
—
1.5
1.5 $
15.4
(13.9) $
(22.3)
(0.5)
(21.8)
$
$
10.2 $
(13.9) $
0.2
10.0 $
(0.3)
(13.6) $
29.0
62.8
8.2
68.1
(105.0)
39.8
(5.7)
(70.9)
(2.8)
0.9
(3.7)
—
(3.7)
(3.7)
(0.1)
(3.6)
— 80,152,648
— 80,152,648
79,992,637
80,102,432
— 79,992,637
(109,795) 79,992,637
(0.04) $
(0.27)
(0.04) $
(0.27)
$
$
0.13 $
(0.18) $
(0.05)
0.12 $
(0.17) $
(0.05)
Table of Contents
The effects of the restatement on the condensed consolidated statement of comprehensive income (loss) for the three
and six months ended June 30, 2023 are summarized in the following table:
Three Months Ended June 30, 2023
Six Months Ended June 30, 2023
As Previously
Effect of
As Previously
Effect of
Reported
Restatement
As
Restated
Reported
Restatement
As
Restated
Net loss
Other comprehensive income:
Defined benefit pension and retiree health benefit plans
Total other comprehensive income
Comprehensive loss attributable to partners’ capital (deficit)
Less: Comprehensive loss attributable to noncontrolling
interest
Comprehensive loss attributable to partners’ capital (deficit)
$
$
$
(24.0) $
0.1
0.1
(23.9) $
(5.5)
(18.4) $
1.7
$
—
—
1.7
$
(In millions)
$
(22.3)
0.1
0.1
(22.2)
$
(5.2) $
0.1
0.1
(5.1) $
1.5
$
—
—
1.5
$
5.5
(3.8) $
—
$
(22.2)
(15.4)
10.3
$
15.4
(13.9) $
(3.7)
0.1
0.1
(3.6)
—
(3.6)
The effects of the restatement on the condensed consolidated statement of cash flow for the six months ended June 30,
2023 are summarized in the following table:
As Previously
Reported
Six Months Ended June 30, 2023
Effect of
Restatement
(In millions)
As Restated
Operating activities
Net loss
Non-cash RINs expense
Unrealized gain on derivative instruments
Other non-cash activities
Changes in assets and liabilities
Net cash used in operating activities
Investing activities
Additions to property, plant and equipment
Net cash used in investing activities
Financing activities
Proceeds from borrowings — revolving credit facility
Repayments of borrowings — revolving credit facility
Proceeds from borrowings — MRL revolving credit agreement
Repayments of borrowings — MRL revolving credit agreement
Proceeds from borrowings — senior notes
Repayments of borrowings — senior notes
Proceeds from inventory financing
Payments on inventory financing
Proceeds from other financing obligations
Payments on other financing obligations
Net cash provided by financing activities
Net increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Cash and cash equivalents
Restricted cash
Supplemental disclosure of non-cash investing activities
Non-cash property, plant and equipment additions
$
$
$
$
$
(5.2)
23.4
(55.1)
102.2
(117.9)
(52.6)
(208.2)
(208.2)
1,084.8
(1,101.0)
37.2
(18.7)
325.0
(121.0)
791.2
(796.6)
95.8
(28.5)
268.2
7.4
35.2
42.6
36.0
6.6
41.7
$
$
$
$
$
1.5
$
—
—
(1.5)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
— $
— $
— $
(3.7)
23.4
(55.1)
100.7
(117.9)
(52.6)
(208.2)
(208.2)
1,084.8
(1,101.0)
37.2
(18.7)
325.0
(121.0)
791.2
(796.6)
95.8
(28.5)
268.2
7.4
35.2
42.6
36.0
6.6
41.7
As of and for the Three and Nine Months Ended September 30, 2023
The effects of the restatement on the condensed consolidated balance sheet as of September 30, 2023 are summarized
in the following table:
145
Table of Contents
As Previously
Reported
September 30, 2023
(In millions, except unit data)
Effect of
Restatement
As Restated
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net:
Trade, less allowance for credit losses of $1.3 million
Other
Inventories
Derivative assets
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Other noncurrent assets, net
Total assets
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
Current liabilities:
Accounts payable
Accrued interest payable
Accrued salaries, wages and benefits
Obligations under inventory financing agreements
Current portion of RINs obligation
Other current liabilities
Current portion of long-term debt
Total current liabilities
Other long-term liabilities
Long-term RINs obligation, less current portion
Long-term debt, less current portion
Total liabilities
Commitments and contingencies
Redeemable noncontrolling interest
Partners’ capital (deficit):
Limited partners’ interest (79,964,002 units issued and
outstanding at September 30, 2023)
General partner’s interest
Accumulated other comprehensive loss
Total partners’ capital (deficit)
Total liabilities and partners’ capital (deficit)
$
$
$
$
$
$
$
13.7
$
285.0
62.8
347.8
447.7
5.2
49.0
863.4
1,526.9
414.5
2,804.8
342.1
41.2
82.9
237.9
326.3
85.2
204.6
1,320.2
57.5
16.5
1,608.2
3,002.4
250.0
(442.3)
2.8
(8.1)
(447.6)
2,804.8
$
$
$
$
$
$
146
— $
—
—
—
—
—
—
—
—
—
— $
— $
—
—
—
—
—
—
—
—
—
—
— $
(4.4)
$
$
5.0
(0.6)
—
4.4
— $
13.7
285.0
62.8
347.8
447.7
5.2
49.0
863.4
1,526.9
414.5
2,804.8
342.1
41.2
82.9
237.9
326.3
85.2
204.6
1,320.2
57.5
16.5
1,608.2
3,002.4
245.6
(437.3)
2.2
(8.1)
(443.2)
2,804.8
Table of Contents
The effects of the restatement on the condensed consolidated statement of operations for the three and nine months
ended September 30, 2023 are summarized in the following table:
As Previously
Three Months Ended September 30, 2023
Effect of
Restatement
Reported
As Previously
Nine Months Ended September 30, 2023
Effect of
Restatement
As Restated
$
1,149.4
$
As Restated Reported
(In millions, except unit and per unit data)
— $
0.1
(0.1)
3,204.1
2,774.4
429.7
1,149.4
887.9
261.5
$
$
Sales
Cost of sales
Gross profit
Operating costs and expenses:
Selling
General and administrative
Other operating (income) expense
Operating income
Other income (expense):
Interest expense
Debt extinguishment costs
Loss on derivative instruments
Other income
Total other expense
Net income before income taxes
Income tax expense
Net income
Net loss attributable to noncontrolling
interest
Net income attributable to partners
Allocation of net income to partners:
Net income attributable to partners
Less:
General partners’ interest in net income
Non-vested share based payments
Net income available to limited partners
Weighted average limited partner units
outstanding:
Basic
Diluted
887.8
261.6
12.4
40.2
(4.1)
213.1
(58.7)
(0.3)
(54.3)
0.6
(112.7)
100.4
0.5
99.9
(3.1)
103.0
103.0
2.1
0.1
100.8
$
$
$
$
80,172,810
80,277,483
Limited partners’ interest basic net income
per unit:
Limited partners’ interest
Limited partners’ interest diluted net income
per unit:
Limited partners’ interest
$
$
1.26
1.26
0.4
0.5
(0.1)
—
(1.5)
—
1.4
—
—
—
—
—
1.4
1.4
18.5
(17.1)
(17.1)
(0.4)
—
(16.7)
—
—
(0.20)
(0.21)
$
$
$
$
$
$
$
3,204.5
2,774.9
429.6
41.4
103.0
4.1
281.1
(163.7)
(5.5)
(14.5)
0.1
(183.6)
97.5
1.4
96.1
—
96.1
96.1
1.9
0.1
94.1
80,046,930
80,148,519
1.18
1.17
—
—
—
(0.1)
—
—
—
—
—
(0.1)
—
(0.1)
3.1
(3.2)
(3.2)
(0.1)
—
(3.1)
$
$
$
$
12.4
40.2
(4.1)
213.0
(58.7)
(0.3)
(54.3)
0.6
(112.7)
100.3
0.5
99.8
—
99.8
99.8
2.0
0.1
97.7
$
$
$
$
41.4
104.5
4.1
279.7
(163.7)
(5.5)
(14.5)
0.1
(183.6)
96.1
1.4
94.7
(18.5)
113.2
113.2
2.3
0.1
110.8
— 80,172,810
80,387,278
109,795
80,046,930
80,148,519
(0.04)
(0.04)
$
$
1.22
1.22
$
$
1.38
1.38
$
$
$
$
$
$
$
$
$
$
$
$
147
Table of Contents
The effects of the restatement on the condensed consolidated statement of comprehensive income (loss) for the three
and nine months ended September 30, 2023 are summarized in the following table:
Net income
Other comprehensive income:
Defined benefit pension and retiree health benefit
plans
Total other comprehensive income
Comprehensive income attributable to partners’
capital (deficit)
Less: Comprehensive loss attributable to
noncontrolling interest
Comprehensive income attributable to partners’
capital (deficit)
$
$
$
Three Months Ended September 30, 2023
As Previously
Effect of
Nine Months Ended September 30, 2023
Effect of
As Previously
Reported
Restatement
As
Restated
Reported
Restatement As Restated
99.9
$
(0.1) $
(In millions)
99.8
$
94.7
$
1.4
$
96.1
0.1
0.1
—
—
0.1
0.1
0.2
0.2
—
—
100.0
$
(0.1) $
99.9
$
94.9
$
1.4
$
(3.1)
3.1
—
(18.5)
18.5
103.1
$
(3.2) $
99.9
$
113.4
$
(17.1) $
0.2
0.2
96.3
—
96.3
The effects of the restatement on the condensed consolidated statement of cash flows for the nine months ended
September 30, 2023 are summarized in the following table:
As Previously
Reported
Nine Months Ended September 30, 2023
Effect of
Restatement
(In millions)
As Restated
Operating activities
Net income
Non-cash RINs gain
Unrealized gain on derivative instruments
Other non-cash activities
Changes in assets and liabilities
Net cash used in operating activities
Investing activities
Additions to property, plant and equipment
Net cash used in investing activities
Financing activities
Proceeds from borrowings — revolving credit facility
Repayments of borrowings — revolving credit facility
Proceeds from borrowings — MRL revolving credit agreement
Repayments of borrowings — MRL revolving credit agreement
Proceeds from borrowings — senior notes
Repayments of borrowings — senior notes
Proceeds from inventory financing
Payments on inventory financing
Proceeds from other financing obligations
Payments on other financing obligations
Net cash provided by financing activities
Net decrease in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Cash and cash equivalents
Restricted cash
Supplemental disclosure of non-cash investing activities
Non-cash property, plant and equipment additions
94.7
(134.0)
(18.8)
147.4
(96.7)
(7.4)
(240.3)
(240.3)
1,585.6
(1,618.5)
79.0
(79.0)
325.0
(121.0)
1,229.3
(1,235.2)
101.5
(33.8)
232.9
(14.8)
35.2
20.4
13.7
6.7
31.7
$
$
$
$
$
$
$
$
$
$
148
1.4
$
—
—
(1.5)
0.1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
— $
— $
— $
96.1
(134.0)
(18.8)
145.9
(96.6)
(7.4)
(240.3)
(240.3)
1,585.6
(1,618.5)
79.0
(79.0)
325.0
(121.0)
1,229.3
(1,235.2)
101.5
(33.8)
232.9
(14.8)
35.2
20.4
13.7
6.7
31.7
Table of Contents
Effect of Restatement on the Condensed Consolidated Statement of Partners’ Capital (Deficit)
The effects of the restatement on the condensed consolidated statement of partners’ capital (deficit) for each of the
three months period ended March 31, 2023, June 30, 2023, and September 30, 2023 and for the nine months period ended
September 30, 2023 are summarized in the following table:
Accumulated
Other
Comprehensive
Loss
Partners’ Capital (Deficit)
General
Partner
Limited
Partners
Total
Balance at December 31, 2022 (as reported)
Net income attributable to partners
Settlement of tax withholdings on equity-based incentive compensation
Settlement of phantom units
Amortization of phantom units
Adjustment to ASC 480 redemption value
Balance at March 31, 2023
Restatement Impacts
Net loss attributable to partners
Settlement of phantom units
Adjustment to ASC 480 redemption value
Balance at March 31, 2023 (restatement impacts)
Balance at December 31, 2022 (as restated)
Net income attributable to partners
Settlement of tax withholdings on equity-based incentive compensation
Settlement of phantom units
Amortization of phantom units
Balance at March 31, 2023 (as restated)
Balance at March 31, 2023 (as reported)
Other comprehensive income
Net loss attributable to partners
Settlement of tax withholdings on equity-based incentive compensation
Settlement of phantom units
Amortization of phantom units
Adjustment to ASC 480 redemption value
Balance at June 30, 2023 (as reported)
Restatement Impacts
Net loss attributable to partners
Adjustment to ASC 480 redemption value
Balance at June 30, 2023 (restatement impacts)
Balance at March 31, 2023 (as restated)
Other comprehensive income
Net loss attributable to partners
Settlement of tax withholdings on equity-based incentive compensation
Settlement of phantom units
Amortization of phantom units
Balance at June 30, 2023 (as restated)
Balance at June 30, 2023 (as reported)
Other comprehensive income
Net income attributable to partners
Amortization of phantom units
Adjustment to ASC 480 redemption value
Balance at September 30, 2023 (as reported)
Restatement Impacts
Net loss attributable to partners
Adjustment to ASC 480 redemption value
Balance at September 30, 2023 (restatement impacts)
Balance at June 30, 2023 (as restated)
Other comprehensive income
Net income attributable to partners
Amortization of phantom units
Balance at September 30, 2023 (as restated)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
149
(8.3)
$
—
—
—
—
—
$
(8.3)
—
—
—
— $
(8.3)
$
—
—
—
—
$
(8.3)
$
(8.3)
0.1
—
—
—
—
—
$
(8.2)
—
—
— $
$
(8.3)
0.1
—
—
—
—
$
(8.2)
$
(8.2)
0.1
—
—
—
$
(8.1)
—
—
— $
$
(8.2)
0.1
—
—
$
(8.1)
(In millions)
0.5
$
0.6
—
—
—
—
$
1.1
(0.2)
—
—
$
(0.2)
$
0.3
0.4
—
—
—
$
0.7
1.1
$
—
(0.4)
—
—
—
—
$
0.7
(0.1)
—
$
(0.1)
0.7
$
—
(0.5)
—
—
—
$
0.2
0.7
$
—
2.1
—
—
$
2.8
(0.1)
—
$
(0.1)
0.2
$
—
2.0
—
$
2.2
(529.9)
28.1
(7.9)
0.5
0.2
(9.9)
(518.9)
(9.9)
(1.5)
9.9
(1.5)
(525.3)
18.2
(7.9)
(1.0)
0.3
(515.7)
$
$
$
$
$
(518.9)
$
—
(18.1)
(1.7)
3.7
0.2
(5.5)
(540.3)
(3.7)
5.5
1.8
(515.7)
—
(21.8)
(1.7)
3.7
0.1
(535.4)
$
$
$
$
(540.3)
$
—
100.9
0.2
(3.1)
(442.3)
$
(3.1)
3.1
— $
(535.4)
—
97.8
0.3
(437.3)
$
$
(537.7)
28.7
(7.9)
0.5
0.2
(9.9)
(526.1)
(10.1)
(1.5)
9.9
(1.7)
(533.3)
18.6
(7.9)
(1.0)
0.3
(523.3)
(526.1)
0.1
(18.5)
(1.7)
3.7
0.2
(5.5)
(547.8)
(3.8)
5.5
1.7
(523.3)
0.1
(22.3)
(1.7)
3.7
0.1
(543.4)
(547.8)
0.1
103.0
0.2
(3.1)
(447.6)
(3.2)
3.1
(0.1)
(543.4)
0.1
99.8
0.3
(443.2)
Table of Contents
Accumulated
Other
Comprehensive
Loss
Partners’ Capital (Deficit)
Limited
General
Partners
Partner
Total
Balance at December 31, 2022 (as restated)
Other comprehensive income
Net income attributable to partners
Settlement of tax withholdings on equity-based incentive compensation
Settlement of phantom units
Amortization of phantom units
Adjustment to ASC 480 redemption value
Balance at September 30, 2023
Restatement Impacts
Net loss attributable to partners
Settlement of phantom units
Adjustment to ASC 480 redemption value
Balance at September 30, 2023 (restatement impacts)
Balance at December 31, 2022 (as restated)
Other comprehensive income
Net income attributable to partners
Settlement of phantom units
Settlement of tax withholdings on equity-based incentive compensation
Amortization of phantom units
Balance at September 30, 2023 (as restated)
$
$
$
$
$
23. Subsequent Events
$
(8.3)
0.2
—
—
—
—
—
$
(8.1)
—
—
—
— $
$
(8.3)
0.2
—
—
—
—
$
(8.1)
(In millions)
0.3
$
—
2.3
—
—
—
—
$
2.6
(0.4)
—
—
$
(0.4)
$
0.3
—
1.9
—
—
—
$
2.2
(525.3)
$
—
110.9
(9.6)
4.2
0.7
(18.5)
(437.6)
(16.7)
(1.5)
18.5
0.3
$
$
(525.3)
$
—
94.2
2.7
(9.6)
0.7
(437.3)
$
(533.3)
0.2
113.2
(9.6)
4.2
0.7
(18.5)
(443.1)
(17.1)
(1.5)
18.5
(0.1)
(533.3)
0.2
96.1
2.7
(9.6)
0.7
(443.2)
As of February 23, 2024, the fair value of the Company’s derivative instruments has changed by approximately $5.6
million subsequent to December 31, 2023.
On February 23, 2024, the Company announced that it delivered (i) a notice of conditional redemption for all of the
2024 Secured Notes at a redemption price of par, plus accrued and unpaid interest to but not including the redemption date
of March 9, 2024, and (ii) a notice of conditional redemption for $50.0 million aggregate principal amount of the 2025
Notes at a redemption price of par, plus accrued and unpaid interest to but not including the redemption date of April 15,
2024.
The Company’s obligation to redeem all of the 2024 Secured Notes and $50.0 million aggregate principal amount of
the 2025 Notes, in each case, is conditioned upon, on or before March 9, 2024, the completion of a private placement of at
least $200.0 million aggregate principal amount of the Company’s senior debt securities. The Company will publicly
announce and notify the holders of the 2024 Secured Notes, the holders of the 2025 Notes and Wilmington Trust, National
Association, as trustee, if the foregoing condition is not satisfied or waived, whereupon the redemptions will be revoked
and the 2024 Secured Notes and the 2025 Notes called for redemption will remain outstanding.
150
Table of Contents
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Conclusion Regarding Effectiveness of Disclosure Controls and Procedures
As required by Rule 13a-15(b) of 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 Annual Report. Based upon that evaluation and in connection
with the restatement of our 2022 consolidated financial statements, our principal executive officer and principal financial
officer have concluded that as of December 31, 2023, due to the material weakness in our internal control over financial
reporting as described below, our disclosure controls and procedures were not effective as of December 31, 2023. In
addition, our disclosure controls and procedures were not effective as of December 31, 2022.
Our disclosure controls and procedures were not effective to provide reasonable assurance that the information
required to be disclosed by us in reports that we file 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.
Management’s Report on Internal Control Over Financial Reporting
The management of Calumet Specialty Products Partners, L.P. (the “Company”) is responsible for establishing and
maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in
accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and board of directors of the Company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may
deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31,
2023, based on criteria for effective internal control over financial reporting described in “Internal Control - Integrated
Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)
(“COSO”). Based on this evaluation, management concluded that we did not maintain effective internal control over
financial reporting as of December 31, 2023, due to the material weakness described below.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be
prevented or detected on a timely basis.
In connection with the preparation of the Company’s consolidated financial statements for the fiscal year ended
December 31, 2023, we identified a material weakness in the design of our controls within the financial statement close
process associated with the subsequent accounting for and measurement of redeemable noncontrolling interests. The
material weakness also existed as of December 31, 2022.
151
Table of Contents
This material weakness resulted in material errors in the attribution of Net losses to redeemable noncontrolling interest
and the Net losses attributable to partners, which resulted in a restatement of the previously issued financial statements as
of and for the year ended December 31, 2022 and as of and for each interim period during the year ended December 31,
2023, as more fully described in Note 21 — Restatement of Prior Period and Note 22 — Quarterly Financial Data
(Unaudited) to the consolidated financial statements included herein. In addition to the restatement errors described above,
the Company has corrected certain items that were concluded as immaterial, individually and in the aggregate, to the
financial statements for the restated periods. These immaterial adjustments to the restated periods are being corrected as a
part of the restatement.
Remediation of Material Weakness
We have evaluated the material weakness and have implemented and continue to implement a plan of remediation to
strengthen our internal controls over financial reporting which includes implementing new controls and increased rigor of
financial reporting controls that will address subsequent measurement of redeemable noncontrolling interests, including
consideration of attribution of income and loss to redeemable noncontrolling interests. Consistent with past practice,
preparation and reviews of technical accounting memos will operate for all material non-routine transactions. Management
will engage third party resources with technical accounting expertise to assist in evaluating the appropriate accounting
treatment of subsequent measurement of redeemable noncontrolling interests, and to ensure that appropriate controls are in
place to evaluate the ongoing accounting for redeemable noncontrolling interests. The remediation efforts are intended to
address the deficiencies and enhance our overall internal control environment.
We believe the measures described above along with other elements of our remediation plan will remediate the
material weakness identified and strengthen our internal control over financial reporting. While we believe that these
efforts will improve our internal control over financial reporting, the implementation of our remediation is currently
ongoing and will require validation and testing of the design and operating effectiveness of our internal controls over a
sustained period of financial reporting cycles.
We are committed to continuing to improve our internal control processes and have implemented the steps described
above. We will also continue to review, optimize and enhance our financial reporting controls and procedures. As we
continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to
address control deficiencies or we may modify certain of the remediation measures described above.
Changes in Internal Control over Financial Reporting
Other than the actions to remediate the material weakness in our internal control over financial reporting as described
above, both of which were ongoing as of the date of issuance of this Annual Report on Form 10-K, and the material
weakness noted above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2023 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
152
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Calumet GP, LLC
General Partner and the Partners of Calumet Specialty Products Partners, L.P.
Opinion on Internal Control Over Financial Reporting
We have audited Calumet Specialty Products Partners, L.P.’s internal control over financial reporting as of December 31,
2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, because of the effect of
the material weakness described below on the achievement of the objective of the control criteria, Calumet Specialty
Products Partners, L.P. (the Company) has not maintained effective internal control over financial reporting as of December
31, 2023, based on the COSO criteria.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that
there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will
not be prevented or detected on a timely basis. The following material weakness has been identified and included in
management’s assessment. Management has identified a material weakness in design of controls in the financial statement
close process related to the Company’s accounting for and subsequent measurement of the redeemable noncontrolling
interest.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related
consolidated statements of operations, comprehensive income (loss), partners' capital (deficit) and cash flows for each of
the three years in the period ended December 31, 2023, and the related notes. This material weakness was considered in
determining the nature, timing and extent of audit tests applied in our audit of the 2023 consolidated financial statements,
and this report does not affect our report dated February 29, 2024, which expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides
a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
153
Table of Contents
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Indianapolis, Indiana
February 29, 2024
154
Table of Contents
Item 9B. Other Information
During the three months ended December 31, 2023, no director or officer of the Company adopted or terminated a
“Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of
Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
155
Table of Contents
Item 15. Exhibits
(a)(1) Consolidated Financial Statements
PART IV
The consolidated financial statements of Calumet Specialty Products Partners, L.P. are included in Part II, Item 8
“Financial Statements and Supplementary Data.”
(a)(2) Financial Statement Schedules
All schedules are omitted because they are not applicable, or the required information is shown in the consolidated
financial statements or notes thereto.
(a)(3) Exhibits
See Index to Exhibits of this Annual Report.
185
Table of Contents
Exhibit Number
2.1
2.2
2.3
3.1
3.2
3.3
3.4
3.5
3.6
3.7
4.1
4.2
4.3
4.4
4.5
Index to Exhibits
Description
— Partnership Restructuring Agreement, dated as of November 9, 2023, by and among the
Partnership, the General Partner and the other parties thereto (incorporated by reference to
Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on
November 9, 2023 (File No. 000-51734)).
— First Amendment to Partnership Restructuring Agreement, dated as of February 9, 2024, by
and among Calumet Specialty Products Partners, L.P., Calumet GP, LLC and the other parties
thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed with the Commission on February 12, 2024 (File No. 000-51734)).
— Conversion Agreement, dated as of February 9, 2024, by and among Calumet Specialty
Products Partners, L.P., Calumet GP, LLC, Calumet, Inc., Calumet Merger Sub I LLC,
Calumet Merger Sub II LLC and the other parties thereto (incorporated by reference to Exhibit
10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on February
12, 2024 (File No. 000-51734)).
— Certificate of Limited Partnership of Calumet Specialty Products Partners, L.P. (incorporated
by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1 filed with
the Commission on October 7, 2005 (File No. 333-128880)).
— First Amended and Restated Agreement of Limited Partnership of Calumet Specialty Products
Partners, L.P. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on
Form 8-K filed with the Commission on February 13, 2006 (File No. 000-51734)).
— Amendment No. 1 to the First Amended and Restated Agreement of Limited Partnership of
Calumet Specialty Products Partners, L.P. (incorporated by reference to Exhibit 3.1 to the
Registrant’s Current Report on Form 8-K filed with the Commission on July 11, 2006 (File
No. 000-51734)).
— Amendment No. 2 to First Amended and Restated Agreement of Limited Partnership of
Calumet Specialty Products Partners, L.P. (incorporated by reference to Exhibit 3.1 to the
Registrant’s Current Report on Form 8-K filed with the Commission on April 18, 2008 (File
No. 000-51734)).
— Amendment No. 3 to First Amended and Restated Agreement of Limited Partnership of
Calumet Specialty Products Partners, L.P. (incorporated by reference to Exhibit 3.1 to the
Registrant’s Current Report on Form 8-K filed with the Commission on January 4, 2018 (File
No. 000-51734)).
— Certificate of Formation of Calumet GP, LLC (incorporated by reference to Exhibit 3.3 to the
Registrant’s Registration Statement on Form S-1 filed with the Commission on October 7,
2005 (File No. 333-128880)).
— Amended and Restated Limited Liability Company Agreement of Calumet GP, LLC
(incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed
with the Commission on February 13, 2006 (File No. 000-51734)).
— Specimen Unit Certificate representing common units (incorporated by reference to Exhibit
3.7 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on
November 4, 2010 (File No. 000-51734)).
— Description of Common Units (incorporated by reference to Exhibit 4.6 to the Registrant’s
Annual Report on Form 10-K filed with the Commission on March 5, 2020 (File No. 000-
51734)).
— Indenture, dated October 11, 2019, by and among Calumet Specialty Products Partners, L.P.,
Calumet Finance Corp., the guarantors party thereto and Wilmington Trust, National
Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current
Report on Form 8-K filed with the Commission on October 11, 2019 (File No. 000-51734)).
— Form of 11.00% Senior Notes due 2025 (included in Exhibit 4.3).
— Indenture, dated as of August 5, 2020, by and among Calumet Specialty Products Partners,
L.P., Calumet Finance Corp., the guarantors party thereto and Wilmington Trust, National
186
Table of Contents
Exhibit Number
4.6
4.7
4.8
4.9
4.10
10.1
10.2†
10.3†
10.4
10.5
10.6
10.7
10.8
10.9
Description
Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current
Report on Form 8-K filed with the Commission on August 5, 2020 (File No. 000-51734)).
— Form of 9.25% Senior Secured First Lien Note due 2024 (included in Exhibit 4.5).
— Indenture, dated January 20, 2022, by and among Calumet Specialty Products Partners, L.P.,
Calumet Finance Corp., the guarantors party thereto and Wilmington Trust, National
Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current
Report on Form 8-K filed with the Commission on January 24, 2022 (File No. 000-51734)).
— Form of 8.125% Senior Notes due 2027 (included in Exhibit 4.7).
— Indenture, dated June 27, 2023, by and among Calumet Specialty Products Partners, L.P.,
Calumet Finance Corp., the guarantors party thereto and Wilmington Trust, National
Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current
Report on Form 8-K filed with the Commission on June 29, 2023 (File No. 000-51734)).
— Form of 9.75% Senior Notes due 2028 (included in Exhibit 4.9).
— Amended Crude Oil Sale Contract, effective April 1, 2008, between Plains Marketing, L.P.
and Calumet Shreveport Fuels, LLC (incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K filed with the Commission on March 20, 2008 (File
No. 000-51734)).
— Calumet Specialty Products Partners, L.P. Executive Deferred Compensation Plan, dated
December 18, 2008 and effective January 1, 2009 (incorporated by reference to Exhibit 10.1 to
the Registrant’s Current Report on Form 8-K filed with the Commission on December 22,
2008 (File No. 000-51734)).
— Form of Phantom Unit Grant Agreement (incorporated by reference to Exhibit 10.3 to the
Registrant’s Annual Report on Form 10-K filed with the Commission on March 15, 2023 (File
No. 000-51734)).
— Omnibus Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K filed with the Commission on February 13, 2006 (File No. 000-51734)).
— Third Amended and Restated Credit Agreement, dated as of February 23, 2018, by and among
Calumet Specialty Products Partners, L.P. and certain of its subsidiaries as Borrowers, certain
of its subsidiaries as Guarantors, the Lenders, Bank of America, N.A., as Agent, JPMorgan
Chase Bank, N.A and Wells Fargo Bank, N.A., as Co-Syndication Agents (incorporated by
reference from exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the
commission on March 1, 2018 (File-No. 000-51734)).
— First Amendment to Third Amended and Restated Credit Agreement, dated as of September 4,
2019, by and among Calumet Specialty Products Partners, L.P. and certain of its subsidiaries
as Borrowers, certain of its subsidiaries as Guarantors, the Lenders, Bank of America, N.A., as
Agent, JPMorgan Chase Bank, N.A. and Wells Fargo Bank, N.A., as Co-Syndication Agents
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed with the Commission on September 6, 2019 (File No. 000-51734)).
— Consent and Amendment No. 2 to Third Amended and Restated Credit Agreement dated as of
November 18, 2021, by and among Calumet Specialty Products Partners, L.P., Bank of
America, N.A., and the other parties thereto (incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K filed with the Commission on November 24, 2021
(File No. 000-51734)).
— Third Amendment to Credit Agreement dated as of January 20, 2022, by and among Calumet
Specialty Products Partners, L.P., Bank of America, N.A., and the other parties signatory
thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed with the Commission on January 24, 2022 (File No. 000-51734))
— Amended and Restated Collateral Trust Agreement, dated as of April 20, 2016, among
Calumet Specialty Products Partners, L.P., the obligors party thereto, the secured hedge
counterparties party thereto and Wilmington Trust, National Association, as Trustee and
Collateral Trustee (incorporated by reference to exhibit 10.1 to the Registrant’s Current Report
on Form 8-K filed with the commission on April 21, 2016 (File No. 000-51734)).
187
Table of Contents
Exhibit Number
10.10
10.11†
10.12†
10.13
10.14†
10.15†
10.16
10.17
10.18
10.19
10.20#
10.21†
10.22
Description
— Second Amended and Restated Intercreditor Agreement, dated April 20, 2016, by and among
the Collateral Trustee, Bank of America, N.A., as administrative agent, and the obligors named
therein (incorporated by reference to exhibit 10.2 to the Registrant’s Current Report on Form
8-K filed with the commission on April 21, 2016 (File No. 000-51734)).
— Amended and Restated Long-Term Incentive Plan, effective as of December 10, 2015
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed with the Commission on December 11, 2015 (File No. 000-51734)).
— First Amendment to Calumet GP, LLC Amended and Restated Long-Term Incentive Plan,
effective as of December 9, 2021 (incorporated by reference to Exhibit 10.2 to the Registrant’s
Current Report on Form 8-K filed with the Commission on February 22, 2022 (File No. 000-
51734)
— Buyer Parent Guaranty, dated as of August 11, 2017, by and between Husky Oil Operations
Limited and Calumet Lubricants Co., Limited Partnership (incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on
August 14, 2017 (File No. 000-51734)).
— Employment Letter, effective as of February 29, 2016, by and between Calumet GP, LLC and
Bruce A. Fleming (incorporated by reference to Exhibit 10.27 to the Registrant’s Annual
Report on Form 10-K filed with the Commission on March 4, 2022 (File No. 000-51734)).
— Scott Obermeier Promotion Letter, effective as of January 27, 2020, between Calumet GP,
LLC and Scott Obermeier (incorporated by reference to Exhibit 10.28 to the Registrant’s
Annual Report on Form 10-K filed with the Commission on March 4, 2022 (File No. 000-
51734)).
— Amendment No. 1 to Amended and Restated Collateral Trust Agreement, dated as of July 31,
2020, by and among the Partnership, the obligors party thereto and Wilmington Trust, National
Association, as collateral trustee (incorporated by reference to Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed with the Commission on August 5, 2020 (File No. 000-
51734)).
— Consent to Third Amended and Restated Credit Agreement, dated July 3, 2020, by and among
Calumet Specialty Products Partners, L.P. and certain of its subsidiaries, as Borrowers, the
Lenders party thereto and Bank of America, N.A., as Agent (incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on
July 6, 2020 (File No. 000-51734)).
— Master Lease Agreement, together with Property Schedule No. 1 thereto, each dated as of
February 12, 2021, and each by and between Stonebriar Commercial Finance LLC and
Calumet Shreveport Refining, LLC (incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K filed with the commission on February 16, 2021
(File No. 000-51734)).
— Master Lease Agreement, dated December 31, 2021, by and between Montana Renewables,
LLC and Stonebriar Commercial Finance LLC (incorporated by reference to Exhibit 10.1 to
the Registrant’s Current Report on Form 8-K filed with the Commission on January 6, 2022
(File No. 000-51734)).
— Interim Funding Agreement, dated December 31, 2021, by and between Montana Renewables,
LLC and Stonebriar Commercial Finance LLC (incorporated by reference to Exhibit 10.2 to
the Registrant’s Current Report on Form 8-K filed with the Commission on January 6, 2022
(File No. 000-51734)).
— Todd Borgmann Promotion Letter, effective as of May 1, 2022, between Calumet GP, LLC and
Todd Borgmann (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report
on Form 8-K filed with the Commission on March 1, 2022 (File No. 000-51734)).
— Preferred Unit Purchase Agreement, among Montana Renewables Holdings LLC, Calumet
Specialty Products Partners, L.P., WPGG 14 United Aggregator, L.P. and, solely for the
purposes of Section 4.4, Calumet GP, LLC, dated as of August 5, 2022 (incorporated by
reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the
Commission on November 9, 2022 (File No. 000-51734)).
188
Table of Contents
Exhibit Number
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34†
Description
— Second Amended and Restated Limited Liability Company Agreement of Montana
Renewables Holdings LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed with the Commission on August 10, 2022 (File No. 000-
51734)).
— Equipment Schedule No. 2, dated August 5, 2022, by and between Montana Renewables, LLC
and Stonebriar Commercial Finance LLC (incorporated by reference to Exhibit 10.3 to the
Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 9, 2022
(File No. 000-51734)).
— Interim Funding Agreement, dated August 5, 2022, by and between Montana Renewables,
LLC and Stonebriar Commercial Finance LLC (incorporated by reference to Exhibit 10.4 to
the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 9,
2022 (File No. 000-51734)).
— Amendment to Interim Funding Agreement, dated August 5, 2022, by and between Montana
Renewables, LLC and Stonebriar Commercial Finance LLC (incorporated by reference to
Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on
November 9, 2022 (File No. 000-51734)).
— Credit Agreement, dated November 2, 2022, by and among Montana Renewables, LLC,
Montana Renewables Holdings LLC and Wells Fargo Bank, National Association, as agent
and lender (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on
Form 8-K filed with the Commission on November 7, 2022 (File No. 000-51734)).
— Change of Control Protection Plan, effective March 13, 2023 (incorporated by reference to
Exhibit 10.49 to the Registrant’s Annual Report on Form 10-K filed with the Commission on
March 15, 2023 (File No. 000-51734)).
— Credit Agreement dated April 19, 2023, among Montana Renewables, LLC, as Borrower,
Montana Renewable Holdings LLC, as Holdings, the lenders from time to time party hereto,
and Delaware Trust Company, as Administrative Agent (incorporated by reference to Exhibit
10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August
4, 2023 (File No. 000-51734)).
— Collateral Trust and Intercreditor Agreement dated as of April 19, 2023, among Montana
Renewables Holdings LLC, as Holdings, Montana Renewables, LLC, as Company, the Other
Obligors from time to time party hereto, Delaware Trust Company, as Administrative Agent,
the Other Parity Lien Representatives, from time to time party thereto, and Wilmington Trust,
National Association, as Collateral Trustee (incorporated by reference to Exhibit 10.2 to the
Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 4, 2023
(File No. 000-51734)).
— Amendment No. 1 to Credit Agreement, dated as of April 4, 2023, by and among Montana
Renewables, LLC, Montana Renewables Holdings LLC and Wells Fargo Bank, National
Association, as agent and lender (incorporated by reference to Exhibit 10.3 to the Registrant’s
Quarterly Report on Form 10-Q filed with the Commission on August 4, 2023 (File No. 000-
51734)).
— Amendment No. 2 to Credit Agreement and Amendment No. 1 to Guaranty and Security
Agreement, dated as of April 19, 2023, by and among Montana Renewables, LLC, Montana
Renewables Holdings LLC and Wells Fargo Bank, National Association, as agent and lender
(incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q
filed with the Commission on August 4, 2023 (File No. 000-51734)).
— Amendment No. 3 to Credit Agreement, dated as of July 26, 2023, by and among Montana
Renewables, LLC, Montana Renewables Holdings LLC and Wells Fargo Bank, National
Association, as agent and lender (incorporated by reference to Exhibit 10.5 to the Registrant’s
Quarterly Report on Form 10-Q filed with the Commission on August 4, 2023 (File No. 000-
51734)).
— Employment Letter, effective as of September 11, 2023, by and between Calumet GP, LLC
and David A. Lunin (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly
Report on Form 10-Q filed with the Commission on November 9, 2023 (File No. 000-51734)).
189
Table of Contents
Exhibit Number
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
21.1*
23.1*
31.1*
31.2*
32.1**
97.1*
101.INS*
101.SCH*
101.CAL*
101.DEF*
101.LAB*
101.PRE*
104*
Description
— ISDA 2002 Master Agreement, dated October 3, 2023, by and among Montana Renewables,
LLC and Wells Fargo Commodities, LLC (incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K filed with the Commission on October 10, 2023 (File
No. 000-51734)).
— Schedule to the ISDA 2002 Master Agreement, dated October 3, 2023, by and among
Montana Renewables, LLC and Wells Fargo Commodities, LLC (incorporated by reference to
Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on
October 10, 2023 (File No. 000-51734)).
— Credit Support Annex to the Schedule to the ISDA 2002 Master Agreement, dated October 3,
2023, by and among Montana Renewables, LLC and Wells Fargo Commodities, LLC as
lender (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form
8-K filed with the Commission on October 10, 2023 (File No. 000-51734)).
— Renewable Fuel and Feedstock Repurchase Master Confirmation, dated October 3, 2023, by
and among Montana Renewables, LLC and Wells Fargo Commodities, LLC (incorporated by
reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed with the
Commission on October 10, 2023 (File No. 000-51734)).
— Monetization Master Agreement, dated as of January 17, 2024, among J. Aron & Company
LLC, Calumet Shreveport Refining, LLC, Calumet Refining, LLC and Calumet Specialty
Products Partners, L.P. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K filed with the Commission on January 24, 2024 (File No. 000-51734)).
— Financing Agreement, dated as of January 17, 2024, among J. Aron & Company LLC,
Calumet Shreveport Refining, LLC and Calumet Refining, LLC (incorporated by reference to
Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on
January 24, 2024 (File No. 000-51734)).
— Supply and Offtake Agreement, dated as of January 17, 2024, among J. Aron & Company
LLC, Calumet Shreveport Refining, LLC and Calumet Refining, LLC (incorporated by
reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the
Commission on January 24, 2024 (File No. 000-51734)).
— Fourth Amendment to Third Amended and Restated Credit Agreement, dated as of January 17,
2024, by and among Calumet Specialty Products Partners, L.P., Bank of America, N.A, and
the other parties signatory thereto (incorporated by reference to Exhibit 10.4 to the
Registrant’s Current Report on Form 8-K filed with the Commission on January 24, 2024 (File
No. 000-51734)).
— Note Purchase Agreement, dated February 23, 2024, by and among the Partnership, Finance
Corp., the General Partner, the Guarantors and the purchasers named therein (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the
Commission on February 23, 2024 (File No. 000-51734)).
— List of Subsidiaries of Calumet Specialty Products Partners, L.P.
— Consent of Ernst & Young, LLP, independent registered public accounting firm.
— Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
— Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
— Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of the
Sarbanes-Oxley Act of 2002.
— Calumet Specialty Products Partners, L.P. Clawback Policy.
— Inline XBRL Instance Document - the instance document does not appear in the Interactive
Data File because its XBRL tags are embedded within the Inline XBRL document.
— Inline XBRL Taxonomy Extension Schema Document.
— Inline XBRL Taxonomy Extension Calculation Linkbase Document.
— Inline XBRL Taxonomy Extension Definition Linkbase Document.
— Inline XBRL Taxonomy Extension Label Linkbase Document.
— Inline XBRL Taxonomy Extension Presentation Linkbase Document.
— The cover page from the Company’s Annual Report on Form 10-K for the year ended
December 31, 2023, formatted Inline XBRL (included within the Exhibit 101 attachments)
190
Table of Contents
†
*
**
#
Identifies management contract and compensatory plan arrangements.
Filed herewith.
Furnished herewith.
Certain confidential information contained in this agreement has been omitted because it is both (i) not material
and (ii) the type of information that the Partnership treats as private or confidential.
Item 16. Form 10-K Summary
None.
191
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
By: CALUMET GP, LLC
its general partner
By: /s/ Todd Borgmann
Todd Borgmann
Chief Executive Officer
Date: February 29, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name
/s/ Todd Borgmann
Todd Borgmann
/s/ David Lunin
David Lunin
/s/ Ryan A. Willman
Ryan A. Willman
/s/ Stephen P. Mawer
Stephen P. Mawer
/s/ James S. Carter
James S. Carter
/s/ Karen A. Twitchell
Karen A. Twitchell
/s/ Paul C. Raymond III
Paul C. Raymond III
/s/ Daniel J. Sajkowski
Daniel J. Sajkowski
/s/ Amy M. Schumacher
Amy M. Schumacher
/s/ Daniel L. Sheets
Daniel L. Sheets
/s/ Jennifer G. Straumins
Jennifer G. Straumins
/s/ John (“Jack”) G. Boss
John (“Jack”) G. Boss
Title
Date
Chief Executive Officer of Calumet GP, LLC
(Principal Executive Officer)
Executive Vice President and Chief
Financial Officer of Calumet GP, LLC
(Principal Financial Officer)
Chief Accounting Officer of Calumet GP,
LLC (Principal Accounting Officer)
Director and Chairman of the Board of
Calumet GP, LLC
Director of Calumet GP, LLC
Director of Calumet GP, LLC
Director of Calumet GP, LLC
Director of Calumet GP, LLC
Director of Calumet GP, LLC
Director of Calumet GP, LLC
Director of Calumet GP, LLC
Director of Calumet GP, LLC
192
Date: February 29, 2024
Date: February 29, 2024
Date: February 29, 2024
Date: February 29, 2024
Date: February 29, 2024
Date: February 29, 2024
Date: February 29, 2024
Date: February 29, 2024
Date: February 29, 2024
Date: February 29, 2024
Date: February 29, 2024
Date: February 29, 2024