May 7, 2021
Operator
Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2021 Calumet Specialty Products Partners, L.P. Earnings Conference Call.
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Brad McMurray of Investor Relations.
Thank you. Please go ahead.
Brad McMurray
Thanks, Elise. Good morning, everyone, and thank you for joining us on the call to discuss our first quarter results.
I'm joined today by Steve Mawer, CEO; Todd Borgmann, CFO; Bruce Fleming, EVP, Montana Renewables and Corporate Development; Scott Obermeier, EVP, Specialty Products & Solutions; and Marc L., EVP, Performance Brands.
Steve Mawer
Good morning, everyone, and thanks, Brad. It's good to have you on our team.
Like pretty much everyone in similar lines of businesses and geographies, our first quarter results are dominated by a single onetime event, the impact of winter storm Uri and resulting production losses. Our first quarter adjusted EBITDA was negative $5.4 million.
Despite these challenges, our Performance Brands and our Specialty Products & Solutions segments maintained or improved unit margins despite the dramatic increase in crude prices during this quarter. This clearly continues to demonstrate our ability to minimize the impact of price volatility and continues the excellent work demonstrated by our team during 2020.
In late February, our Shreveport refinery was successfully and safely completing its largest turnaround in the decade. As we prepared for the restart, Uri bore down on Northwest Louisiana.
A 10-day hard freeze created a humanitarian disaster for the Shreveport area with loss of municipal water, roads unpassable for most of that time, food shortages and power outages. I'll go into that detail to demonstrate the level of challenge presented to our teams at affected locations in Louisiana and Texas.
We're really proud and appreciative of our colleagues. They work long, long hours to fix hard freeze damage while contending with personal weather-driven challenges and in many cases, also helping their communities during this time of significant need.
Nevertheless, the combined impact of repair costs and volume loss affected our first quarter by an excess of $30 million. A hard freeze on an entirely cold plant presents additional challenges and results in additional damage and additional diagnosis time.
Todd Borgmann
Thanks, Steve. Moving to Slide 4, I'll discuss our summary financial performance then we'll dive into the segments a bit further.
As Steve mentioned, we lost $5.4 million in adjusted EBITDA during the quarter as we battled winter storm Uri. Our Specialty Products & Solutions segment bore the brunt of the storm, resulting in $2 million adjusted EBITDA loss.
Performance Brands generated $16 million for the quarter, and Montana Renewables lost $2 million of adjusted EBITDA. Additionally, costs from our Corporate segment were just over $17 million for the quarter, down from $20 million in the same period a year ago.
This is the first quarterly earnings call where we've been able to report Specialty Products & Solutions, Performance Brands and Mountain Renewables as separate segments and we released an 8-K last week providing full year 2019 and 2020 results recast by segment.
Steve Mawer
Thanks, Todd. So let's turn to Slide 9 with our summary and outlook.
As you can see and Todd talked about, we made significant progress on the Montana Renewables project, both in terms of speed to market and further verification of its exceptional position as a leading RD conversion project. At the very highest level, the best derisking of any investment is to have an asset that performs well through any and all cycles, and we believe that the Montana project certainly does that.
The project competes either as a stand-alone renewables project or as a dual conventional renewable train where the conventional site can provide an additional count to cyclical high cash flow risk minimum. Over the short term, we further derisked by high speed to market at low capital investment.
Over the medium term, we derisk through our modular approach to implementation, which makes the execution easier and cheaper and spread out the investment on ramp over time. Finally, our existing metallurgy means that the transition to multi-feed processing appears to be immediately practical, if not inevitable, and that's at low cost and in pretty short order.
Operator
Your first question comes from the line of Gregg Brody with Bank of America.
Gregg Brody
Hopefully, you can hear me okay.
Steve Mawer
We can.
Gregg Brody
Maybe I could just start just a follow-up on the renewables project. You've laid out a path for -- it looks like by April of next year, after the catalyst change, you'll have 5,000 of capacity and 10,000 by the second half.
How -- will refinery have to go offline before the April '22 catalyst change to prepare for that first phase?
Bruce Fleming
Gregg, it's Bruce. The answer is no.
April is a scheduled refinery-wide turnaround, that's what makes it the right time to get into the hydrocracker for the catalyst switch and final separation of the oil moving activities on the site, but there's no pre-shut down.
Gregg Brody
Got it. And this quarter, the Montana refinery look to be a bit weaker than a year ago.
I see you mentioned the Canadian diffs being a driver. Maybe you can walk us a little bit through what you expect out of that business going for the rest of this year and where we could see some improvements in margin?
Bruce Fleming
Yes. So Gregg, one of the reasons we put the Rockies crack spread environment into the slide deck is to highlight that this is within -- easily within the range of normal market volatility.
The refinery ran full through this quarter, and it's simply external price environment. There's no trends to that.
The chart we put in shows a $40 crack spread environment generally in the Rockies. And I can tell you, if you extended that chart back for 13 years, you get the same $40, no trend line.
So that's the external condition, but you're going to see a lot of volatility to it. And I think that's all that we are experiencing.
Gregg Brody
Do you think it's fair that -- is this refinery experiencing recovery that others are experiencing right now? I see that cracks up, but I just would have thought that quarter would have been a little better in that particular business.
You mentioned volatility, but I guess, is that abating -- what are you seeing through the first month of the year?
Bruce Fleming
Yes. Yes.
I think if you pull the price series that you guys use in your model, you're going to find it's ticked up sharply just in the last 6 weeks. That's a portion of normal seasonal component and a portion of the commodities complex lifting.
We do have the WCS diff moving favorably toward us, but still below WCS differential average, historically.
Gregg Brody
Got it. And then coming back to Specialty Products & Solutions where I think we saw the majority of the $30 million impact this quarter.
Has that -- is there any residual this quarter? Or is it all behind us?
Todd Borgmann
The plant is up and running, Gregg. This is Todd.
Thanks for the question. The plants are up and running now, have been running fairly well this quarter.
We did have a little bit of inventory rebuilding and supply chain building in April. So probably a little bit of delay early in the quarter getting all those sales out to the customers and recognized.
But the good news is, we are up and running fully. And as of May here, should be recognizing full quarters.
Gregg Brody
Got it. So this quarter, we'll have some impact, but sounds like you've got to...
Todd Borgmann
Yes, we'll see how much we can make up. We're producing as hard as we can and strong demand out there, have quite a backlog of orders.
So we're not expecting just to get inventories replenished. We're going to keep oil moving out the door as fast as we can.
But it'll take a couple of months to work through that whole process.
Gregg Brody
Okay. And I've got one more here before I hop back in the queue.
So obviously, the Supreme Court argument started last week with respect to the small refinery exemption case that we're waiting anxiously to get results from. In the event that -- obviously, if this premium quarter reverses it, that's great for you.
But if they don't, if they maintain the ruling, how does that play out with respect to your options for -- from that point in terms of having to pay it? And can you talk about how you would have to fund it, if it did, if they really won against you?
Todd Borgmann
Well, Gregg, I think there's like -- there's multiple questions in there with kind of hypothetical building on hypothetical. So I think the...
Gregg Brody
Just to make it simple because, I mean, the simple question is, if you have this liability, if the ruling move against you, how do you deal with that liability? Is there cash that you need to post sooner than later?
Are there appeals there? I recognize, in case -- I'm just trying to understand how to think about that liability.
Bruce Fleming
Gregg, it's Bruce. Remember, RINs are not money, RINs are a quantity of demonstrated blending.
And none of these are due yet. The EPA has extended all of the timelines.
So there's a long road and there is a nest of court activity besides the narrow one around HollyFrontier that's in front of the Supreme Court. So I think it's not bimodal as you posit it.
I guess it's a ticket. And we see a couple of ways through, but I might direct you to the fact that the renewable diesel project more than covers the issue that you're bringing up.
Gregg Brody
And I appreciate that. I'm just wondering if there is a cash need in between the time that comes online and...
Bruce Fleming
Gregg, we don't believe that's the case. I think whatever the Supreme Court rules, it's just the beginning.
Even though the Supreme Court would appear to be the final voice, it's just the beginning of the process both ways.
Operator
Your next question comes from the line of Neil Mehta with Goldman Sachs.
Neil Mehta
First question is just on gross margins at the specialty products business. They seemed pretty durable in the first quarter despite the rising crude price environment.
Can you just talk to us about how do you think about those gross margin sustainability if oil prices continue to grind higher?
Scott Obermeier
Neil, Scott Obermeier. Thanks for the question.
I would probably make a few comments and -- to your question. The first would be, as you know, Neil, we've talked a little bit about it the past year or 2.
We've been really focused commercially on improving our skills and our mindset on extracting the full value and implementing pricing and various commercial excellence activities. And so I think that the team has come a long way the past couple of years.
I think that's shown in our results, Neil. And we've been thrust tested, if you will, last year, as crude spiked up in the Q1.
And so we feel that the business is resilient. Demand is strong, and we've got the right execution in place to handle, frankly, any type of feedstock volatility or market volatility at this time.
Steve Mawer
Yes, Neil, this is Steve, if I could add. I mean so we've written the market from minus $40 to plus $65 on crude with reasonable success so far.
Demand remains good. I think -- so I think we're comfortable with our macro ability, like Scott said, to manage it.
And then there's always going to be some mix effect at the margin. And I think we think between Q1 and Q4, the mix effect was kind of neutral.
There were some positives to mix and negatives to the mix, but I really think that kind of the macro works and then occasionally, there's some mix noise around it.
Neil Mehta
I appreciated your comments around Shreveport and, hopefully, your team was able to stay safe and make it through the strong. In your -- and as we think about the 1Q EBITDA at Specialties, it was obviously softer than expected, largely because of volumes.
Can you talk about what the lost opportunity profit was from the downtime if you have that number?
Todd Borgmann
Yes. I think -- this is Todd.
We said the freeze costs us $30 million. Turnaround probably cost us $10 million on top of that and mostly in lost opportunities.
So we haven't broken it out specifically. We have internally between lost opportunity and actual specific volume charges.
But I think it'd be fair to say $25 million, $30 million of that is -- well, I shouldn't say that. It's lost volume.
There's another $10 million on top of that, that's roughly lost opportunity.
Neil Mehta
So $35 million to $40 million, that's a pretax number?
Todd Borgmann
Correct. EBITDA.
Operator
And at this time, there are no further questions. I would now like to turn the call back over to Brad McMurray for any closing remarks.
Brad McMurray
Thank you, everybody, for your time. Have a good weekend.
Goodbye.
Operator
That does conclude today's conference. We thank you for participating.
You may now disconnect.