Description

I’ll make this one short and sweet as the board is likely well aware of this name, and todd has done a tremendous job over the years of spelling out the long term vision. That being said, we wanted to provide a quick and dirty overview as to where we believe (as todd is fond of saying) the puck is going:

So…here we go again. If this name rubs you the wrong way, your feelings are likely not misguided…

That being said, we believe this is an opportune time to revisit Calumet. We believe the next 6 months should finally bring the catalysts that have been on all of our wish lists for years now. That being said, it comes with it’s own baggage: same MLP structure w/IDR’s and accompanying illiquidity, not out of the woods yet operationally w/MRL, crack risk, credibility of mgmt.

That was a mouthful and I think i need a shower...I wasn't always peddling these kinds of names...well, I guess I was. With all of those obstacles front and center, we still believe this is a business that should be printing EBITDA numbers of $300 mm from Specialty and $250 mm from MRL. You also get Performance Brands and the legacy refinery business that should do $80 mm or so in EBITDA as well (assuming continued strong cracks). Given the recent operational update, we are of the belief that the choppy waters are behind us.

All of those assets for a tidy price of $2.6 bb EV (ignores non-recourse debt).

We believe we will get clarity on the below catalysts over the next 6 months. Why the next 6 months? The company has pointed the elephant gun towards a clean December out of MRL which should position the company to at worst IPO MRL in the first half of the year.

We are of the belief that the playbook goes something like the below:
Clean December EBITDA ~ $20 mm / month
DOE funding of 500-600 mm before Feb ‘24
Collapse IDR’s and c corp conversion (~bogey 10% dilution to the LP / mgmt. also incentivized to get the share price up over the next few months as they begin that discussion)
Float minimum 20% of MRL (if not taken out beforehand)

At the middle of next year, if the team is successful and sells MRL (piece or whole) at north of $3 bb EV, forgive the sum of the parts as it’s fatiguing even to write out (but I believe we are close to realization):
$3 bb – MRL (mgmt. likes $4-$5 bb…but I like all kinds of things I won’t get in this life...that being said, this is a rare asset that will fetch the desired value in the right circumstances...)
$1 bb – Specialty ($300 mm EBITDA…likely low)
$0 – PB / Legacy Refinery (let’s be conservative)
($1.3 bb) Recourse Debt
2.7 bb into 90 mm shares (~10% dilution) translates to $30/unit. That’s a double from where we are and plenty of upside in case things accidentally go right with this mgmt. team.

The next owner of this asset can buy the max SAF, this is cheap enough where we believe your downside is well protected while giving you a decent shot at a double in fairly short order...the below slide is from their most recent Barclays deck which we also recommend reveweing...

Catalyst

DOE

IDR collapse

MRL IPO