Calumet, Inc. (CLMT) Q1 2020 Earnings Report, Transcript and Summary

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 the pandemic would reach our shores, we activated our crisis teams and crisis plan.This included establishing new protocols at our facilities to further protect the health and safety of our workers. Those staff members that have the ability, have been working remotely since we activated our contingency plans. Those who work directly within our refining and manufacturing facilities are following guidance coming from federal and local health authorities. And our corporate EH&S leadership is monitoring and adapting best practice developments in real-time.Fortunately, we have begun to observe the deceleration of new cases in many of our geographies and our business continuity planning includes protocols around getting back to work. We are actively assessing a host of scenarios in which we can begin returning as many of our employees back to work as makes sense, of course based on local circumstances.Outside of continuity planning and new safety measures, we also took swift action to fortify our business. We are actively managing our business to generate positive free cash flow and maintain healthy liquidity. This includes meaningful actions to control costs, strengthen our cash flows and maintain that liquidity.First, we curtailed our capital budget for the year, which we now expect to be in the range of $50 million to $60 million, down from our original guidance of $80 million to $90 million. And at this stage, our forecast is almost entirely focused on safety, environmental and sustaining CapEx.Next, we accelerated $20 million of SG&A reductions that were previously announced as part of our 2020 self-help initiatives. This included reducing our use of professional services, some corporate staff reductions and other facility fixed costs.Lastly, we identified and have begun implementing new actions that we believe will drive an additional $20 million to $30 million of run rate savings for us by year-end 2020. The ability to more effectively control costs comes from the resilient business model we have built following the divestitures of four non-core fuels-related assets over the last few years. It also comes from a culture built around commercial and operational excellence.So despite the uncertainty that the pandemic has introduced to the global economy, there are a run number of considerations that give us confidence in our ability to manage our business effectively as we move forward. First, as I said earlier, federal and state authorities have deemed our business essential to the national economic infrastructure and we have maintained our operations serving our customers and stakeholders.Second, our specialty product formulations go into a vast array of products and that end market diversity provides an inherently more stable performance, particularly when economic disruption is uneven across business sectors.And third, we increased our hedging activity earlier in the year to dampen the volatility of our fuels business. The hedge book contributes meaningfully to our plans to stabilize earnings.And finally, we see signs of a recovery which I will talk about further at the end.Ultimately though, new uncertainties have been introduced into our world but we are confident that the Calumet of today is much better positioned to weather this black swan event in the near term.So on to the quarter. Please turn to slide four where we provide a snapshot of our results and first quarter highlights. Calumet delivered another solid quarter of financial performance driven by focused execution against our specialty products strategy. During the first quarter, Calumet delivered $83.7 million of adjusted EBITDA excluding non-cash inventory adjustments. That consolidated result was comprised of $64.5 million in the adjusted EBITDA delivered by our core specialty segment and $39.2 million from the fuel segment, both of which were offset by $20 million of net costs in the corporate segment.These corporate segment results reflect a $15 million drop in SG&A versus last year's first quarter including $5 million in self-help actions. During the quarter, we elected to close our Farmingdale, New Jersey blending facility, further consolidating our footprint as we bring the production of our Bel-Ray brand of lubricating products into other blending and packaging facilities.Next, we were successful across a number of key points of emphasis of our strategy. On the balance sheet and financing side, we finished the quarter with over $326 million of available liquidity between our cash on hand and undrawn availability on our revolving credit facility. Our leverage metrics defined in our credit agreement as net debt to trailing 12-month adjusted EBITDA declined by half a turn on a year-over-year basis.Operationally, we delivered strong capacity utilization, particularly at our Great Falls refinery. Our fuels throughput results represented a 12% increase pro forma by portfolio divestitures. This strong throughput is reflective of the structural changes we have made to improve the competitiveness of our operations as well as the benefits of recent improvements at Shreveport in the fourth quarter.Regarding our portfolio, we continue to advance the review of strategic options for the Great Falls refinery, which we announced last quarter. We have good interest in Great Falls, given the high-quality of the asset and its consistent performance, even in the face of these current uncertain conditions.Another key highlight for the quarter was the margin performance in our core specialty business, which displayed solid growth across the quarter. 19.7% adjusted EBITDA margin in our core specialty business increased 310 basis points versus last year's first quarter. And specialty segment adjusted gross profit was $41.32 per barrel, a figure that grew over 16% versus the prior year's quarter.These strong margin results reflects much of the commercial efforts we have undertaken in recent years that had the effect on improving the unit profitability in our core business, primarily through sales mix in enrichment.On to slide five. I would like to take a moment to touch on some of the things that are giving us confidence in Calumet's ability to navigate this period of uncertainty. The resilience in our business is supported by the fact that we have a highly diversified core specialty business with a portfolio of products that touch an extremely wide range of end markets and industries.So as this slide highlights, this includes roughly 3,400 products, shipped to 2,700 customers across 12,000 locations in more than 90 countries. Many of the industries and businesses that we sell our formulations to have also been deemed essential to the nation's economic infrastructure which has a stabilizing effect on demand for our products.Over the last two years, we have revamped our crude supply strategy to focus on developing the right mix of niche producer relationships, while maintaining supply optionality. Understanding supply quality back to the wellhead is important for a specialty producer, both in terms of maximizing margin and product quality and this has yielded us material benefits. At the same time, we have enough connection to the broader markets to be able to capitalize on the discounts and pricing anomalies that we saw in March and on into the second quarter.On the fuels refining side, our Great Falls refinery continues to benefit from healthy local economics as the Rockies region remains one of the best markets for fuels margins. Also of note is that Great Falls produces a particularly high-quality asphalt, which continues to attract demand from far beyond its local market and commands good pricing across the country. This asphalt production and the ability to sell is a natural hedge to our economics when other fuels products see deteriorating margins.And finally, we stress test a host of scenarios in order to guide how we respond operationally and commercially to events that negatively impact demand. And as of right now, the current environment we are observing remains within our stress testing and contingencies. So presently, we remain confident in our ability to not only weather the pandemic but participate in any subsequent rebound.So with that, I will now turn the call over to Keith who will give a more detailed look of our financial results for the quarter. Keith?

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 the quarter. The $12.5 million in volume reduction in our specialty business captures primarily the impact from our mix rationalization efforts.We had an $8.1 million headwind of higher operating costs which was primarily a function of the year-over-year impact from increased RINs prices. This more than offset operating and transportation cost improvements which were marginally lower compared to the prior year.Finally, our SG&A results showed $7.1 million year-over-year benefit as we took actions to accelerate our SG&A reductions and better align our corporate operating costs with our reduced portfolio post the San Antonio divestiture. A fraction of the benefits were captured this year. The majority of the cost savings will be captured across the rest of the year. The $83.7 million of adjusted EBITDA for the first quarter is a solid reflection of the quality and stability of our business and the efforts we have made to continually improve our financial performance.Slide eight highlights our core specialty segment operating results for the quarter. Our first quarter EBITDA result of $64.5 million reflects growth of 10% compared to the prior year and 50.7% sequentially. Specialty adjusted EBITDA margins of 19.7% were strong results on an absolute and relative basis. For the quarter, margins grew by 310 basis points compared to the results from the first quarter last year and 510 basis points of margin growth relative to the seasonally weaker fourth quarter.First quarter gross profit per barrel results of $41.30 per barrel marked a milestone improvement, growing by 15.6% year-over-year and by 33.5% compared to Q4. This improved profitability across our core specialty business was driven by a number of factors including continued realization of our sales mix rationalization efforts, margin capture from declining raw material cost, fixed cost leverage from sales volume growth in solvents and waxes and cost reduction from crude sourcing optimization efforts, which drove margin performance across all product categories.Turning to slide nine, we bridge our first quarter specialty products adjusted EBITDA to the prior year. Specialty margin growth contributed $18.5 million in EBITDA growth and more than offset the $12.5 million headwind from lower volumes. Our operating costs across the business increased slightly year-over-year. These slightly higher operating expenses were offset by $1.3 million combined improvement from targeted cost reductions in transportation and SG&A expenses bringing our first quarter adjusted EBITDA total to $64.5 million. Improving the margin performance of our core specialty business have been a key focal point of our transformation strategy. The results of this focus has been apparent in our performance for the last few quarters.Slide 10 highlights our fuel segment's results for the quarter. Adjusted EBITDA results of $39.2 million increased compared to both historical periods, growing 51.4% and 36.6%, respectively compared to the prior year and the sequential quarters. Production volume averaged 64,700 barrels per day of throughput, which was a decline of 16% and 5.5% compared to the prior year and the sequential quarter, respectively.This decline in production volumes is largely a function of the divestment of our San Antonio refinery which was sold at the end of October in the prior quarter. However, it is worth noting that the negative volume impacts of removing San Antonio from the portfolio was partially offset by improved throughput at Shreveport after which fourth quarter turnaround activity combined with record quarterly throughput at Great Falls. This production volume increase at Shreveport and Great Falls reflects our investments to improve throughput and utilization across these assets.Though new to this quarter, by the divestiture of San Antonio, these are valuable improvements for our ongoing capabilities. Gross profit per barrel results of $4.63 per barrel for the first quarter reflected a meaningful margin expansion we delivered in the quarter improving 215% and 32.3% compared to the prior year and the sequential quarter, respectively.Our improved fuels adjusted EBITDA results was the beneficiary of widening crude differentials as the WCS/WTI differential widened by over $7 compared to the prior year. This combined with the improved throughput performance driving fixed cost leverage. Gross margin growth on a per barrel basis also benefited from the widening WCS differential and better product mix at the Shreveport refinery.On slide 11, we bridge the fuels adjusted EBITDA performance to the prior year. The most significant driver of our performance was the $38 million improvement in fuels product margins driven primarily by the wider WCS differential. This improved margin performance was partially offset by lower fuels volumes, driven largely by the development of the San Antonio refinery. The $4.4 million headwind of higher operating costs primarily reflects the increase in RINs costs compared to last year and slightly higher maintenance costs. These were partially offset by $2.5 million improvement in transportation expenses. And finally, continued improvement in SG&A for the segment runs our total adjusted EBITDA result of $39 million for the quarter. These were strong results for the business, given the fluctuation in crude prices, fall in demand for transportation fuels and the deterioration in fuel crack spreads we observed during the quarter.Slide 12. Here we reconcile our sources and uses of cash across the quarter. As those of you who been following our journey now, since 2016, we have emphasized cash flow performance to measure the results of our strategic initiatives and improvements across our business. We opened 2020 with $19 million of cash on hand. We generated $73.8 million from cash operating earnings which was offset by changes in net working capital which presented a headwind of $76.1 million, due mostly to the significant volatility in crude prices we saw across the quarter and its impact on our payrolls and inventory values.Capital expenditures for the quarter were $24.5 million and we used $10.2 million of cash for setting the working capital true-up on the San Antonio divestiture and acquiring Paralogics. In order to ensure we maintain a healthy balance of liquid capital on our balance sheet to deploy at our discretion, we incurred $122 million of net debt by accumulating cash, leaving our quarter-end cash balance at almost $104 million. After the close of the quarter, we received $31 million in funds on April 30 from five applications to the Small Business Administration Payroll Protection Program.Slide 13. This provides a snapshot of our key credit metrics, which continuously show improvement. Maintaining adequate liquidity is a key focal point for our company as we navigate the current environment. And at the quarter-end, we had roughly $326 million of liquidity between the approximately $104 million of cash on hand and the $222 million of available capacity on our revolving credit facility.Given the uncertainty that the COVID-19 pandemic has introduced to the global economy and to reinforce the pursuit our management's intent to deliver positive free cash flow in 2020, we revised our capital investment forecast for the year after deferring several growth oriented projects to a later date. Our capital investment forecast is now expected to range between $50 million to $60 million, down from our original forecast of $80 million to $90 million.We have also taken urgent actions on the cost side in order to maintain solid financial health including the acceleration of our SG&A reduction efforts and implementing actions to capture a further $20 million to $30 million of cost reductions, bringing our cost opportunities to $40 million to $50 million. Our leverage ratio of 4.4 times debt to trailing 12-month adjusted EBITDA decreased sequentially and year-over-year. Our 4.4 times leverage level represents a half a turn improvement from the 4.9 times that we saw in the year ago period.Our fixed charge coverage ratio improved to 2.1 times, up 0.1 turn from the two times ratio a year ago and has consistently been above two times dating back to last year, indicative of our efforts to improve our cash flows relative to our fixed cost. While our overall level of liquidity is down year-over-year, please keep in mind that our asset base has been shrunk significantly through multiple non-core divestitures. This included two fuel refineries that require higher levels of liquidity.Subsequent to the end of the quarter, we applied for and received $31 million of SBA loans as part of the Paycheck Protection Program. At April 30, our liquidity was roughly $240 million. This step-down in liquidity at the end of April, which is the traditional low point in our annual liquidity model reflected a borrowing base redetermination reduction of approximately $70 million, the April interest payments and significant crude settlements on April 20.Our stress testing of our required liquidity in an extreme event has us operating our business with a target minimum liquid level of $250 million. This pandemic is an extreme stress event and we believe our operating profile will be well supported by our available liquidity and cash flows.With that, I will turn the call back over to Steve. Steve?

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 varying degrees of recovery patterns, some will have fairly quick rebounds and others will take longer to return to a more normal state of demand. We will continue to actively monitor this new and involving landscape across our business and will respond as appropriate.We have a solid baseline of deemed from customers that been deemed essential. And our position as supply chain is to provide critical formulations and components necessary for them to continue making products and serving their respective customers. Consequentially, we feel cautiously optimistic about our base level of utilizations across most of our businesses.Turning to slide 16 where we have outlined our updated outlook for the rest of the year. In our core specialty business, we expect that our performance and growth will generally be in alignment with our end markets. While we expect to face headwinds in the second quarter, some of this downside volatility will be mitigated by the underlying diversity of our product mix and the wide collection of end markets that we serve. And finally, we will continue to diligently manage the commercial and operational side of the business with the purpose of maintaining cash flow positive throughout the remainder of the year.In our fuels business, we note that our performance will benefit from some of our hedging activities, which has allowed to lock-in WCS differentials at levels that are substantially better than what is currently implied by commodities strip pricing. Notably, the Rockies PADD 4 region continues to be a strong niche refining market with good economics and we plan to run our Great Falls refinery at high utilization rates. Finally, at Shreveport, the commercial execution of both the crude supply team and products marketing has given us the flexibility to run the facility at high rates.I will close our prepared remarks on slide 17 which gives us a brief look at Calumet's last 100 years. It's a timeline that really illustrates the pedigree we built in this business over the last century. We have spent the last four to five years getting back to our true roots as a specialty products company and there is a reason why we have been in this business for such a long time. Although our market face an element of uncertainty in the near term, Calumet's business has weathered storms like this in the past and overcome periods in our markets and our economies that were as uncertain as what we face today. We not only have the people, practices and business employees to weather the global pandemic, but we have 100 years of learning and tribal knowledge under our belt. We will emerge on the other side from a position of strength and ready to restart our specialty growth.With that, I would like to turn the call over to the operator to open up the line for Q&A. Operator?

[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.