Ladies and gentlemen, thank you for standing by and welcome to the Calumet Specialty Products Partners first quarter earnings results conference call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions].I would now like to hand the conference over to your speaker today. Joseph Caminiti, Investor Relations. Thank you. You may begin.

Thank you Dorothy. Good morning everyone and thank you for joining us today for our first quarter earnings results call. With us on today's call are Steve Mawer, CEO, Keith Jennings, CFO, Bruce Fleming, EVP of Strategy and Growth and Scott Obermeier, EVP of Commercial.Before we proceed, allow me to remind everyone that during the course of this call, we may provide various forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Such statements are based on the beliefs of our management as well as assumptions made by them and in each case, based on information currently available to them. Although our management believes that the expectations reflected in such forward-looking statements are reasonable, neither the partnership, its general partner nor our management can provide any assurances that the expectations will prove to be correct. Please refer to the partnership's press release that was issued this morning as well as our latest filings with the Securities and Exchange Commission for a list of factors that may affect our actual results and could cause them to differ from our forward-looking statements made on this call.As a reminder, you may now download a PDF of the presentation slides that will accompany the remarks made on today's conference call as indicated in the press release we issued earlier today. You may access these slides in the Investor Relations section of the website at calumetspecialty.com.Also, a webcast replay of this call will be available on our site within a few hours and you can contact Alpha IR Group for Investor Relations support at 312-445-2870.With that, I will pass the call to Steve. Steve?

Well, good morning everyone and thank you for joining us. As you know, our company transitioned the CEO role over to me earlier this year. And while this is my first time speaking to our unitholders and analysts as our Chief Executive, I am not new to the Calumet team. I have served Calumet as a director on our Board for the last four years advising the company on a wide range of matters.Calumet accomplished a significant amount over the last few years. My predecessor, Tim Go, not only built a strong executive management team, but also stewarded a very substantial transformation of our business. This work significantly changed our business focus, strength of our asset base and helped us develop a culture of self-help and operations excellence, all of which fortifies the strong foundation that we have today. This foundation is going to be critical to help us both navigating the uncertain times in the short term and win in our markets over the long term.We are fortunate to have a strong team that I already know well and while the world around us has gone through some significant change over the last few months, our vision for Calumet has not changed. We remain focused on completing the last steps on our path to becoming a premier specialty products company while deleveraging our balance sheet and driving improved long term returns for our unitholders.So let's begin our presentation, starting on slide three. Before we get into the specifics of the quarter, I would like to update you on the swift and decisive actions we have taken to stay ahead of the ongoing COVID-19 pandemic. So our top priority has been and will continue to be the safety and health of our employees and our customers. When we realized that…

Thank you Steve. Slide six reflects our headline consolidated results for the first quarter. As you may garnered from our release, we have harmonized our adjusted EBITDA calculations to a single measure which excludes LCM and LIFO impacts.For the quarter, revenue and adjusted EBITDA were $692.5 million and $83.7 million, respectively. Revenue declined 19% versus the prior year. Specialty declined 7% and fuels 27%. This performance primarily reflected our actions to move away from less profitable volumes in the specialty segment. Impacts related to the divestiture of San Antonio refinery and softening demands towards the end of the quarter.Despite the declines in revenues, our adjusted EBITDA grew 40% year-over-year and 68% sequentially. Adjusted earnings per unit of $0.28 meaningfully versus the adjusted net loss of $0.07 in the prior year and $0.23 of adjusted net loss in the prior quarter. These results are not only representative of our strategic efforts to emphasize profitable growth through focusing on valuable volume, as Steve mentioned earlier, but diligence in controlling our operating costs.On slide seven, we provide a detailed bridge of our consolidated adjusted EBITDA results relative to the prior year. The primary driver in the year-over-year increase was the improved margin performance across both our businesses. Our specialty segment margins grew by $38 million and our fuels margins grew by $18.5 million, compared to the prior year. Specialty margins were driven by base oils and finished lubricants.Fuels margins were driven primarily by the improved WCS differential. This meaningful year-over-year margin tailwind in our businesses was partially offset by the $31.5 million of consolidated volume decrease. The $19 million year-over-year volume reduction in our fuels segment reflects the impact of our divestment of the San Antonio refinery as well as deterioration in the demand for gasoline and jet fuel towards the end of…

Thanks Keith. I think it's important to help our investors understand where we are today given the challenges of the pandemic. We talked about the resilience of our business model and the diverse end markets and customer base that supports that.So on slide 14, we provided a summary view of what we have been observing as we entered the second quarter across a snapshot of end markets that we serve. We have listed 20 end markets here and our current perspective on how they are performing attempting to use GDP as a reference benchmark based on today's conditions.The reality is that these 20 markets likely have another 20-plus sub-segments within them based on the bespoke nature of many of our products. So again, this is just a high level overview and an attempt to inform investors on how we are looking at our business. We understand that this is forecast isn't exact and even the reference point of GDP contraction is very imprecise. However, we hope that this will give you a directional feel for our experience.As you can see on this graphic, as we attempt to align with economic activity, there are no real surprises. We have a mix of demand patterns aligned with what has been deemed essential versus what has been slowed or stopped. We expect the stronger performing markets will hold their demand but pricing may feel some pressure moving forward.We do have examples of strong growth whether it be agricultural ORCHEX spray oils that are used to protect health and safety of fruit and vegetable crops, Penreco petrolatums used in pharmaceuticals and personal care. Or TruFuel products used in landscape equipment and people who have been home a lot during the pandemic. So there has been good demand there.As sheltering policies are reduced, we expect…

[Operator Instructions]. Your first question comes from the line of Gregg Brody with Bank of America.

Good morning guys. Can you hear me okay?

We can hear you. Good morning Gregg.

Welcome to your first call as CEO. Just a few here for you. You touched on liquidity. So just the first question is, the PPP loans, is that secured on a first lien basis? What is that? And then, I think you said that $250 million is what you are targeting for liquidity. Do you expect any further adjustments in the borrowing base from here or downwards? Or do you think it's fully marked to the market?

So let me answer the first question. PPP loan is an unsecured loan. So it's through the Small Business Administration program under the Cares Act. In terms of the borrowing base, I think we are marked to a level that we should not fall significantly below going forward. And the reason for that is, as follows. We move most of crude supply through the supply and offtake agreement. What's in the borrowing base is primarily finished goods and accounts receivables for the specialty business. And so, as we see that there are still some crude moving through the ABL, but look at where crude is today, I think that structural markdown isn't going to be a big problem for us going forward. So I think that $70 million while it hurt, we are moving most of our crude going forward through the supply and offtake agreement.

Got it. And as we think about intra-quarter, I think you said you wanted to have $250 million of liquidity. Is that the swings in working capital that you see during months? How are you coming up with that number?

So the $250 million is really a measure of cash on hand and available liquidity through the ABL. That's how we measure that number. And so that number was developed through a lot of good work back in 2015, 2016 during our worst time as and oil producer. And so that's a stress number. I believe that we are in a stress event. So we are testing that theory and we are holding. So the way to think of the 4250 million in terms of how we ensure we are there is, a, we are holding cash on hand and we are maintaining about $100 million to make sure that we have full discretion over what needs to be paid and so forth. If you look at the availability under the ABL, we have a piece of the ABL that is tied to the Great Falls facility, a pledge of $100 million. So that piece is fairly fixed and that won't fluctuate with crude. And so the moving components then come down to the finished goods inventory, the little bit of crude we move through the ABL and the accounts receivable for the specialty products. So I think the $250 million is a good target. We are seeing that if we flex the size of business we have and the type of business we have and we have adjusted how we manage our resources so that we can be in a good stance and so that's how I think about it.

Got it. And you provided then the current end markets observation which is very helpful. I think if you were to try to weighted average that number which you have there for products, is it your belief that you will -- where do fall in sort of relative to GDP in terms of how you think your performance here?

We tend not to overly try to say where we will fall, right. I think the power of the slide was to show that we have diverse end markets. The power of the slide is to share with you some of the observations that we are seeing in the demand for our products. I can't tell you where we are going to come out this year. Like most companies, we are fighting what's in front of us. And so what you see on that slide primarily is really the demand patterns that we are observing in April and May for our products. And so how those end markets will behave overall is a far more complex thing and I wouldn't even garner to say how we will perform across the full year.

Maybe you would expect to benefit or do you expect to benefit from the drop in crude and your margins this quarter? When do you, how quickly will you adjust your pricing to eliminate that benefit?

So I think the drop in crude has delivered good margins in Q1 because it was quick and sharp and that our margin is behaving as expected. I will let Scott address how he is defending our margins in Q2.

Yes. Thanks, Gregg, for the question. Scott Obermeier here. Just to maybe build on what Keith was touching on, we certainly see some additional margin lift in march as the Crude dropped, especially some of our specialty products little bit closer to the barrel. And there is a lag effect, if you will, on some of the prices.Now the commercial team and the sales team were called everyday obviously to get the full value out of our specialty products, right. And we pay close to $0.10 of the pricing but just in general, Gregg, we are seeing some volume fall and we are seeing Q2 overall pricing fall as well. But we certainly don't expect to get back all the pricing down to the crude levels.

So I think your number is not $40 per barrel. Is getting back to $35 sort of a good way to think about it? Or do you think you are holding some of that?

It depends on the mix, Gregg. We are seeing good continued volumes in our products that are closer to the branded side. So engineered fuels, TruFuel, those things have been very sticky. And remember that, on our base oils and solvents business, we are backward integrated to crude. So while crude moves, it may affect the margins different for different players in this industry, we may come out differently. So it comes down to the mix.

Got it. I jumped away from the question on liquidity. I believe you have another $50 million of securities which you have raised. Am I incorrect in that assumption, would you actually consider potentially raising more liquidity?

So I think when it comes to liquidity, we think we have ample. We are defending what have and working well with it. We do have that $50 of secured in the indentures and another $50 million under the general liens basket under the indentures. That's probably $100 million. I think we think about that more along the lines of probably a tool to defend against the coming maturity in 2022. So if capital markets do not reopen, we have to think about that going current and complexities of that or how we think to refinance that. So that's an arrow in the quiver that I don't we need to pull here for liquidity because I think we are running business operationally well, but we also have to keep some of our opportunities and levers for other things related to the capital structure.

I am going to ask this question only because I did this last time. I am going to jump back into queue and let others ask questions because last time I did that, it wasn't solved. So should I jump into queue or should I keep the call?

Gregg, you can go ahead.

Yes. It's a busy day today. So lot of burning. So just on the asset sales. You said you think things are progressing there. Can you help us understand those dynamics? Like who were or the types of buyers? You said the margins are much better in Montana in that market. Can you just try to give us some, following facts has been very difficult for us the couple of weeks? Maybe give us sense of where that is today? And what's driving the better market?

Hi Gregg. This is Bruce. I think that was about three questions. I will try to take all of them on. The process in on track. Nobody has withdrawn. And what's been interesting to us is, as people get in and understand the dynamics of these markets, they get really excited about this asset. The PADD 4 to good market, you control government stance on that. You control state level stats in Montana. And in Great Falls, we have got an island in the middle of sea of storms under the current market conditions.We ran a record throughput. We ran 27,000 barrels a day in the first quarter. We run 28,000 right now as I speak to you which will be another record. And this demonstrates the value of the position and the strategic buyers who are going to see that value.So the second part of your question was, where does that come from? I would guide you to the EIA stats. They are pretty useful. You will see that PADD 4 did not get knocked down as far as the national average is. And the second think you will see if you look for it is that that's a 3-2-1 crack spread market. The market demand is just about balance between diesel and gasoline and all the headlines are talking about the collapse in gasoline. But you need to take a look at diesel. It didn't fall. And it didn't fall in the intra-mountain region.We built a diesel machine. It's basically the newest refinery in the country. We built a 30,000 barrels a day train there four years ago. And we make two barrels of diesel for every barrel of gasoline. So PADD 4 is insulated from the national dynamics and Great Falls is insulated from PADD 4. It's a really compelling story. And then finally, as both Steve and Keith referred to earlier, we have gone ahead and secured that two times in the year by hedging it. So we are super excited about our position out there.

Got it. And then the diffs have come down a little bit or tightened a bit, WCS. I would think that would probably continue. But I am curious what you think about that?

Well, I have been watching that diff for most of my career and it's volatile but it's parked on $17 a barrel trend line and it doesn't move. It's not going up. It's not going down. And everybody says it's about to change and here is all the reasons. And nobody is going right yet. So we certainly like the Canadian crude position.Another thing to keep in mind is that we are inside any circle of a portion of curtailment. We are the first stop, literally the first stop on the pipeline. So we don't see any issues with crude supply. Pricing sorts itself out with some short term volatility but as I said, we hedge that the end of the year.

Very good. That is it for me. Thank you for the time.

Thank you.

[Operator Instructions]. And there are no further questions at this time.

Okay. Thank you. So this is Steve Mawer. So I would like to close by, again, thanking our employees for the truly impressive job they did in the first quarter. We all know how much personal uncertainty, family challenges, lifestyle changes and simple fear we have all had to deal with in these last months. So for our employees to be able cope with all of that and yet perform their jobs at the highest level is humbling to see. In the first quarter, our safety performance was among our best ever and well below industry averages. If nothing else, it shows how the team didn't miss a beat to get to the next level as that key date point. At the same time, as a new full time member of the team myself, watching this crisis unfold, I was deeply impressed how we responded. Trucks kept running. Inventories were managed. Funds set new records. And we capitalized on the volatility in the markets. So if you want to understand the resilience of our business, look no further than our team and what accomplished in the first quarter. Thank you for your time.

Thank you. Ladies and gentlemen, that does conclude today's conference call. We thank you for your participation and ask that you please disconnect your line.