Calumet - Catalysts For A Higher Stock Price Are On The Horizon
By: Jon Costello
Calumet (CLMT) shares have been on a roller coaster ride in 2025. After hitting multi-year highs in January after the closing of a low-cost government loan, the stock lost more than half its value over the subsequent three months.
Today, CLMT shares trade around $13, a steep discount from my $30 estimate of their intrinsic value.
CLMT’s selloff early in the year was attributable to a collapse in renewable diesel margins at its Montana Renewables segment. While market conditions have been ugly, they can’t persist indefinitely, and I’m expecting two powerful catalysts to push margins higher over the coming months. CLMT shares should follow.
Positive Developments Fail to Support CLMT Shares
In my most recent article on CLMT, published on October 17, I expected CLMT shares to benefit from the conditional $1.44 billion loan guarantee granted by the Department of Energy’s Loan Programs Office. The loan guarantee had closed the previous day, on October 16.
The loan guarantee provides low-cost funding for Montana Renewables’ sustainable aviation fuel buildout. The loan carries an interest rate of approximately 4.8% and requires no interest or principal payments until CLMT’s sustainable aviation fuel buildout is complete.
CLMT shares performed well through the end of the year. By January 10, 2025, the DOE announced that CLMT’s loan had closed, pushing its shares higher. The DOE loan approval was one of the first indications of the incoming Trump administration’s support of biofuels, which was officially declared on January 20 in the President’s first executive order, titled “Unleashing American Energy.”
Unfortunately, the CLMT share price has gone downhill since then.
Sentiment on the stock turned negative on January 14, 2025, when CLMT announced a $65 million at-the-market (ATM) equity offering program in connection with a $100 million senior note offering it was making at the time. The notes were intended to redeem some of the company’s 11% senior notes that mature in 2026.
The ATM equity program raised the prospect of shareholder dilution and was panned by investors. According to management, the program was put in place as part of CLMT’s senior note offering to provide assurance to noteholders that the company could redeem its 2026 notes promptly. The day after the ATM announcement, CLMT shares traded down nearly 14%.
The shares continued to drift lower over subsequent weeks. On February 18, CLMT received $782 million in proceeds, the first of two tranches, which allowed Montana Renewables and CLMT, as its parent company, to simplify their capital structures by repaying high-cost project financing. The move reduced interest expense by approximately $80 million annually. The sustainable aviation fuel buildout facilitated by the funds will open the door to significant high-margin, high-return on capital production growth.
Then on February 28, CLMT announced the sale of its Royal Purple Industrial lubricant business for $110 million. The proceeds were used to redeem the company’s 2026 notes.
All these positive events were overshadowed by the ongoing weakness in renewable diesel margins. After all, CLMT’s plans for Montana Renewables are moot so long as margins are too low for producers to be profitable. Sustained flat-to-negative margins at Montana Renewables caused CLMT’s shares to fall to as low as $7.68 in early April, as investors discounted a prolonged continuation of ultralow renewable diesel margins.
Margins remain low today. CLMT shares are likely to trade at a discount until conditions improve.