CALUMET SPECIALTY PRODUCTS PARTNERS, LP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

The historical consolidated financial statements included in this Annual Report
reflect all of the assets, liabilities and results of operations of Calumet
Specialty Products Partners, L.P. and its consolidated subsidiaries ("Calumet,"
the "Company," "we," "our," or "us"). The following discussion analyzes the
financial condition and results of operations of the Company for the years ended
December 31, 2021 and 2020. Unitholders should read the following discussion and
analysis of the financial condition and results of operations of the Company in
conjunction with the historical consolidated financial statements and notes
included elsewhere in this Annual Report.

Overview

We manufacture, formulate and market a diversified slate of specialty products
to customers across a broad range of consumer-facing and industrial markets. We
also own what we believe will be one of North America's leading renewable diesel
manufacturing facilities, which is expected to be commissioned in the fourth
quarter of 2022. We are headquartered in Indianapolis, Indiana and operate
twelve facilities through North America.

During 2021, we reorganized our business segments as a result of a change in how
the chief operating decision maker ("CODM") allocates resources, makes operating
decisions and assesses the performance of the business. As a result, as of
January 1, 2021, our operations are managed by the CODM using the following
reportable segments: Specialty Products and Solutions; Performance Brands;
Montana/Renewables; and Corporate. Segment information presented herein reflects
the impact of this reorganization for all periods presented. For additional
information, see Note 19 - "Segments and Related Information" under Part II,
Item 8 "Financial Statements and Supplementary Data." In our Specialty Products
and Solutions segment, we manufacture and market a wide variety of solvents,
waxes, customized lubricating oils, white oils, petrolatums, gels, esters, and
other products. Our specialty products are sold to domestic and international
customers who purchase them primarily as raw material components for
consumer-facing and industrial products. In our Performance Brands segment, we
blend, package and market high performance products through our Royal Purple,
Bel-Ray, and TruFuel brands. Our Montana/Renewables segment is comprised of two
businesses - renewable diesel and specialty asphalt. When our Great Falls
renewable diesel facility is operational, we will process a variety of
geographically advantaged renewable feedstocks into renewable hydrogen,
renewable natural gas, renewable propane, renewable naphtha, renewable
kerosene/aviation fuel, and renewable diesel that we expect to distribute into
renewable markets in the western half of North America. At our Montana specialty
asphalt facility, we continue to process Canadian crude oil into conventional
gasoline, diesel, jet fuel and specialty grades of asphalt, with production
sized to serve local markets. Our Corporate segment primarily consists of
general and administrative expenses not allocated to the Specialty Products and
Solutions, Performance Brands or Montana/Renewables segments.

2021 Update

Outlook and trends

The world continues to navigate the COVID-19 pandemic. Global economic
conditions have improved compared to the outset of the pandemic, driven by
increases in vaccination rates in the U.S. and across the world, which has
resulted in increased demand and higher prices for many industrial and consumer
goods products, as well as energy prices. Despite this, most industries have
continued to see supply chain disruptions during the fourth quarter of 2021, and
while this global dynamic is receiving elevated attention in all areas, it's
difficult to predict when all challenges will be fully resolved. These
challenges have impacted Calumet's businesses in various ways. Currently, our
businesses continue to see strong, growing demand for products across our
segments. Our Performance Brands segment has been most impacted by the global
supply chain disruption. As we navigate this environment in a time of rapidly
growing demand, our order backlog has grown. Our Specialty Products and
Solutions segment is experiencing record specialty unit margins and fuels
margins have increased for the fourth straight quarter as the industry reacts to
a global economic recovery and a shortage of hydrocarbon products in certain
markets. These fundamentals allowed for healthy unit margins in the fourth
quarter of 2021 compared to the fourth quarter of 2020, despite a significantly
higher price environment during this quarter. The following factors have
impacted our results of operations during 2021 or may impact our results of
operations in the future:

•We continue to see an increase in demand for our products as the domestic and
global economies recover from the COVID-19 pandemic. We continue to monitor the
impact of COVID-19 variants, any increase in cases and/or the reinstatement of
lockdowns and other restrictions, each of which could negatively impact the
recovery from the COVID-19 pandemic.

•Supply chains are improving, but we expect disruption to remain, which is
expected to continue to provide challenges to the availability and pricing of
feedstocks, additives, packaging materials and transportation.

•We continue to focus on improving operations. Our total feedstock runs were
75,818 barrels per day ("bpd") in 2021 compared to 84,829 bpd in 2020. This
decrease is primarily attributed to lower production volumes at our Shreveport
facility as a result of major turnaround activity and damages caused by Winter
Storm Uri.
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•Our Specialty Products and Solutions margins have remained strong but certain
of our end markets are susceptible to changes in Gross Domestic Product. As
markets and results improve, we expect to make small investments in this segment
that we believe are low-risk, high-return investments.

•It is not possible to predict what future Renewable Identification Numbers
("RINs") costs may be given prices are directly tied to unpredictable government
actions, but RINs continue to have the potential to remain a significant
non-cash expense in our results of operations. The approximate 40% increase in
the 2021 period-end market price of RINs in comparison to the 2020 period-end
market price of RINs unfavorably affected our financial results. Please read
Item 7 "Management's Discussion and Analysis - Renewable Fuel Standard Update"
below for additional information.

•We continue to evaluate opportunities to improve our capital structure and
better focus on the advancement of our core business through asset divestitures.
Also, we may pursue acquisitions of assets that management believes will be
financially accretive and consistent with our strategic goals.

We developed and executed a plan to manage health and safety risks and business
continuity to help protect our workforce and business during the COVID-19
pandemic. Comprehensive guidelines and requirements for the return to work of
personnel to their locations have been implemented and these will continue to be
monitored as we manage COVID-19. To reinforce cost control and preserve cash, we
expect to continue to diligently manage operating and capital costs. As markets
continue to improve, high-return low risk projects may be added
opportunistically. Furthermore, the Company's conversion of our Great Falls, MT
asset into a leading Renewable Diesel facility is on track.

Contingencies

For a summary of litigation and other contingencies, please read Note 7 -
"Commitments and Contingencies" under Part II, Item 8 "Financial Statements and
Supplementary Data - Notes to Consolidated Financial Statements." Based on
information available to us at the present time, we do not believe that any
liabilities beyond the amounts already accrued, which may result from these
contingencies, will have a material adverse effect on our liquidity, financial
condition or results of operations.

Financial results

We reported a net loss of $260.1 million in 2021, versus a net loss of $149.0
million in 2020. We reported Adjusted EBITDA (as defined in Item 7 "Management's
Discussion and Analysis - Non-GAAP Financial Measures") of $110.3 million in
2021, versus $217.3 million in 2020. We used cash from operating activities of
$44.0 million in 2021 versus generating cash from operating activities of $62.8
million in 2020, driven by a larger net loss and increases in the cash required
for working capital and turnaround costs.

Please read Item 7 "Management's Discussion and Analysis - Non-GAAP Financial
Measures" for a reconciliation of EBITDA, Adjusted EBITDA and Distributable Cash
Flow to Net income (loss), our most directly comparable financial performance
measure calculated and presented in accordance with U.S. generally accepted
accounting principles ("GAAP").

Specialty Products and Solutions segment Adjusted EBITDA was $104.6 million in
2021 compared to $151.0 million in the prior year. Compared to the prior year,
Specialty Products and Solutions 2021 segment Adjusted EBITDA was favorably
impacted by an increase in specialty products net unit margins as a result of
higher specialty product pricing and continued fuels market recovery, the impact
of which was more than offset by lower production volumes stemming largely from
a planned full plant turnaround at our Shreveport facility in the first quarter
of 2021 and impacts from Winter Storm Uri, $30.1 million in realized gains on
derivative instruments in the prior year comparative period that did not recur
in 2021 and higher non-cash RINs incurrence expense.

Montana/Renewables segment Adjusted EBITDA was $44.4 million in 2021 compared to
$71.4 million in 2020. Compared to the prior year, Montana/Renewables 2021
segment Adjusted EBITDA was unfavorably impacted by lower production volumes due
to planned maintenance, some of which was pulled forward to de-risk the
Renewable Diesel project, $19.5 million in realized gains on derivative
instruments in the prior year comparative period that did not recur in 2021 and
higher non-cash RINs incurrence expense. These impacts were partially offset by
the favorable impacts of an increase in net unit margins as a result of a wider
WCS-WTI crude spread and improved crack spreads for transportation fuels.
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Performance Brands segment Adjusted EBITDA was $33.8 million in 2021 compared to
$61.1 million in 2020. Compared to the prior year, Performance Brands segment
Adjusted EBITDA was unfavorably impacted by an $11.3 million decrease in gross
profit due to the natural lag in passing increasing costs through to customers
in these branded and consumer markets, increased operating costs due to supply
chain related production inefficiencies, and high costs associated with
replacing grease and additive supply that was unavailable due to force majeure.
Supply chain difficulties, including packaging availability, difficult logistics
markets, and additive and grease supply shortages continue to challenge our
ability to keep pace with strong demand. Despite these difficulties, we have
seen favorable improvements in pricing and demand for our TruFuel, Royal Purple,
and Bel-Ray brands. Unfortunately, much of the demand currently sits in our
backorder queue pending our industry's supply chains returning to normal.

Corporate segment Adjusted EBITDA was negative $72.5 million in 2021 versus negative $66.2 million in 2020 primarily due to higher labor and benefits expenses. This corresponds to the previously announced orientations of $70.0 million
for $80.0 million annual labor and benefits expenses.

Liquidity update

As of December 31, 2021, we had total liquidity of $334.1 million comprised of
$38.1 million of unrestricted cash and $296.0 million of availability under our
revolving credit facility. As of December 31, 2021, our revolving credit
facility had a $328.7 million borrowing base, $32.7 million in outstanding
standby letters of credit and no outstanding borrowings. We believe we will
continue to have sufficient liquidity from cash on hand, projected cash flow
from operations, borrowing capacity and other means by which to meet our
financial commitments, debt service obligations, contingencies, and anticipated
capital expenditures for at least the next 12 months. Please read Item 7
"Management's Discussion and Analysis - Liquidity and Capital Resources" and
Part I, Item 1A. "Risk Factors" for additional information.

Renewable Fuels Standard Update

Along with the broader refining industry, we remain subject to compliance costs
under the RFS unless or until we receive a small refinery exemption from the
EPA, which we have historically received. Under the regulation of the EPA, the
RFS provides annual requirements for the total volume of renewable
transportation fuels that are mandated to be blended into finished
transportation fuels. If a refiner does not meet its required annual Renewable
Volume Obligation, the refiner can purchase blending credits in the open market,
referred to as RINs.

For the year ended December 31, 2021, our non-cash RINs expense was $116.0
million, as compared to a non-cash RINs expense for the year ended December 31,
2020 of $110.8 million. Our annual gross RINs Obligation, which includes RINs
that are required to be secured through either our own blending or through the
purchase of RINs in the open market, is approximately 65 million RINs spread
across four compliance categories (D3, D4, D5 and D6). The gross RINs
obligations exclude our own renewables blending as well as the potential for
receiving any subsequent small refinery exemptions.

Expenses related to RFS compliance have the potential to remain a significant
expense for our two segments containing fuels products. If legal or regulatory
changes occur that have the effect of increasing our RINs Obligation or
eliminating or narrowing the availability of the small refinery exemption under
the RFS program, we could be required to purchase additional RINs in the open
market, which may materially increase our costs related to RFS compliance and
could have a material adverse effect on our results of operations and liquidity.

See Note 7 - "Commitments and Contingencies" under Part II, Item 8 "Financial
Statements - Notes to Consolidated Financial Statements" for further information
on the Company's RINs obligation.

Unrestricted Affiliates

See Note 20 – “Unrestricted Subsidiaries” under Part II, Item 8 “Financial Statements – Notes to Consolidated Financial Statements” for more information regarding certain financial information of our unrestricted subsidiaries.

Key Performance Measures

Our sales and results of operations are primarily impacted by demand for specialty products, demand for petroleum products, global fuel cracking differentials, the price of natural gas used as fuel in our operations, our ability to operate our facilities high utilization rate of production and our results from the derivatives business.

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Our primary raw materials are crude oil and other specialty feedstocks, and our
primary outputs are specialty consumer facing and industrial products, specialty
branded products, and fuel products. The prices of crude oil, specialty products
and fuel products are subject to fluctuations in response to changes in supply,
demand, market uncertainties and a variety of factors beyond our control. We
monitor these risks and from time-to-time enter into derivative instruments
designed to help mitigate the impact of commodity price fluctuations on our
business. The primary purpose of our commodity risk management activities is to
economically hedge our cash flow exposure to commodity price risk. We also may
hedge when market conditions exist that we believe to be out of the ordinary and
particularly supportive of our financial goals. We enter into derivative
contracts for future periods in quantities that do not exceed our projected
purchases of crude oil and natural gas and sales of fuel products. Please read
Note 10 - "Derivatives" under Part II, Item 8 "Financial Statements and
Supplementary Data - Notes to Consolidated Financial Statements."

Our management uses several financial and operational measures to analyze our performance. These measures include the following:

•sales volumes;

•segment gross margin;

•segment adjusted gross margin;

•Adjusted EBITDA segment; and

•Selling, general and administrative expenses.

Sales volumes. We view the volumes of Specialty Products and Solutions products,
Montana/Renewables products and Performance Brands products sold as an important
measure of our ability to effectively utilize our operating assets. Our ability
to meet the demands of our customers is driven by the volumes of feedstocks that
we run at our facilities. Higher volumes typically improve profitability both
through the spreading of fixed costs over greater volumes and the additional
gross profit achieved on the incremental volumes.

Segment gross profit. Specialty Products and Solutions, Montana/Renewables and
Performance Brands products' gross profit are important measures of
profitability of our segments. We define gross profit as sales less the cost of
crude oil and other feedstocks, LCM/LIFO adjustments, and other
production-related expenses, the most significant portion of which includes
labor, plant fuel, utilities, contract services, maintenance, transportation,
RINs, depreciation and amortization and processing materials. We use gross
profit as an indicator of our ability to manage margins in our business over the
long-term. The increase or decrease in selling prices typically lags behind the
rising or falling costs, respectively, of feedstocks throughout our business.
Other than plant fuel, RINs mark-to-market adjustments, and LCM/LIFO
adjustments, production related expenses generally remain stable across broad
ranges but can fluctuate depending on maintenance activities performed during a
specific period.

Segment Adjusted gross profit. Specialty Products and Solutions,
Montana/Renewables and Performance Brands products' segment Adjusted gross
profit measures are useful as they exclude transactions not related to our core
cash operating activities and provide metrics to analyze the profitability of
the core cash operations of our segments. We define segment Adjusted gross
profit as segment gross profit excluding the impact of (a) LCM inventory
adjustments; (b) the impact of liquidation of inventory layers calculated using
the LIFO method; (c) RINs mark-to-market adjustments; and (d) depreciation and
amortization.

Segment Adjusted EBITDA. We believe that Specialty Products and Solutions,
Montana/Renewables and Performance Brands segment Adjusted EBITDA measures are
useful as they exclude transactions not related to our core cash operating
activities and provide metrics to analyze our ability to pay interest to our
noteholders. Adjusted EBITDA allows us to meaningfully analyze the trends and
performance of our core cash operations as well as to make decisions regarding
the allocation of resources to segments. Corporate Adjusted EBITDA primarily
reflects general and administrative costs.
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Operating results

Production Volume. The following table sets forth information about our
continuing operations. Facility production volume differs from sales volume due
to changes in inventories and the sale of purchased blendstocks such as ethanol
and specialty blendstocks, as well as the resale of crude oil.

                                              Year Ended December 31,
                                             2021                   2020
                                                      (In bpd)
Total sales volume (1)                    79,281                   86,727
Total feedstock runs (2)                  75,818                   84,829
Facility production: (3)
Specialty Products and Solutions:
Lubricating oils                           9,867                   10,143
Solvents                                   6,833                    6,819
Waxes                                      1,335                    1,318
Fuels, asphalt and other by-products      27,869                   35,052

Total Specialty Products and Solutions    45,904                   53,332

Montana/Renewables:

Gasoline                                   4,907                    5,369
Diesel                                     9,711                   10,389
Jet fuel                                     901                      647
Asphalt, heavy fuel oils and other        10,379                   10,337
Total Montana/Renewables                  25,898                   26,742

Performance Brands                         1,304                    1,381

Total facility production (3)             73,106                   81,455




(1)Total sales volume includes sales from the production at our facilities and
certain third-party facilities pursuant to supply and/or processing agreements,
sales of inventories and the resale of crude oil to third-party customers. Total
sales volume includes the sale of purchased blendstocks.

(2)Total feedstock runs represent the barrels per day of crude oil and other
feedstocks processed at our facilities and at certain third-party facilities
pursuant to supply and/or processing agreements.

(3) The difference between the total production of the installation and the total number of cycles of raw materials results mainly from the time lag between the input of raw materials and the production of finished products and the loss of volume.

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The following table reflects our consolidated results of operations and includes
the non-GAAP financial measures EBITDA, Adjusted EBITDA and Distributable Cash
Flow. For a reconciliation of EBITDA, Adjusted EBITDA and Distributable Cash
Flow to Net income (loss), our most directly comparable financial performance
measure calculated and presented in accordance with GAAP, please read
"Non-GAAP Financial Measures."

                                                  Year Ended December 31,
                                                    2021               2020
                                                       (In millions)
Sales                                       $     3,148.0           $ 2,268.2
Cost of sales                                     3,005.1             2,169.1
Gross profit                                        142.9                99.1
Operating costs and expenses:
Selling                                              52.8                47.8
General and administrative                          151.1                91.1

Taxes other than income taxes                        12.5                 

9.8

Loss on impairment and disposal of assets             4.1                 6.8
Gain on sale of business, net                        (0.2)               (1.0)
Other operating expense                               8.2                16.5
Operating loss                                      (85.6)              (71.9)
Other income (expense):
Interest expense                                   (149.5)             (125.9)

Gain (loss) on derivative instruments               (23.3)               52.4

Other expense                                        (0.2)               (2.5)
Total other expense                                (173.0)              (76.0)
Net loss before income taxes                       (258.6)             (147.9)
Income tax expense                                    1.5                 1.1

Net loss                                    $      (260.1)          $  (149.0)
EBITDA                                      $        (1.4)          $    83.1
Adjusted EBITDA                             $       110.3           $   217.3
Distributable Cash Flow                     $      (120.1)          $    41.1



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Non-GAAP Financial Measures

We include in this Annual Report the non-GAAP financial measures EBITDA,
Adjusted EBITDA and Distributable Cash Flow. We provide reconciliations of
EBITDA, Adjusted EBITDA and Distributable Cash Flow to Net income (loss), our
most directly comparable financial performance measure calculated and presented
in accordance with GAAP.

EBITDA, Adjusted EBITDA and Distributable Cash Flow are used as supplemental
financial measures by our management and by external users of our financial
statements, such as investors, commercial banks, research analysts and others,
to assess:

•the financial performance of our assets without regard to financing methods, capital structure or historical cost basis;

•the ability of our assets to generate sufficient cash to pay interest costs and support our indebtedness;

• our operating performance and return on capital relative to those of other companies in our industry, regardless of funding or capital structure; and

•the viability of acquisition and investment projects and the overall rates of return of alternative investment opportunities.

We believe that these non-GAAP measures are useful to analysts and investors as
they exclude transactions not related to our core cash operating activities and
provide metrics to analyze our ability to pay interest to our noteholders.
However, the indentures governing our senior notes contain covenants that, among
other things, restrict our ability to pay distributions. We believe that
excluding these transactions allows investors to meaningfully analyze trends and
performance of our core cash operations.

We define EBITDA for any period as net income (net loss) plus interest expense (including amortization of debt issuance costs), income taxes, and depreciation and amortization .

During the first quarter of 2021, the CODM changed the definition and
calculation of Adjusted EBITDA, which we use for evaluating performance,
allocating resources and managing the business. The revised definition and
calculation of Adjusted EBITDA now excludes RINs mark-to-market adjustments (see
item (j) below), which were previously included. We believe this revised
definition and calculation better reflects the performance of our Company's
business segments including cash flows and core operating activities. Adjusted
EBITDA has been revised for all periods presented to reflect this change.

We define Adjusted EBITDA for any period as EBITDA adjusted for (a) impairment;
(b) unrealized gains and losses from mark-to-market accounting for hedging
activities; (c) realized gains and losses under derivative instruments excluded
from the determination of net income (loss); (d) non-cash equity-based
compensation expense and other non-cash items (excluding items such as accruals
of cash expenses in a future period or amortization of a prepaid cash expense)
that were deducted in computing net income (loss); (e) debt refinancing fees,
extinguishment costs, premiums and penalties; (f) any net gain or loss realized
in connection with an asset sale that was deducted in computing net income
(loss); (g) amortization of turnaround costs; (h) LCM inventory adjustments; (i)
the impact of liquidation of inventory layers calculated using the LIFO method;
(j) RINs mark-to-market adjustments; and (k) all extraordinary, unusual or
non-recurring items of gain or loss, or revenue or expense.

We define Distributable Cash Flow for any period as Adjusted EBITDA less
replacement and environmental capital expenditures, turnaround costs, cash
interest expense (consolidated interest expense less non-cash interest expense),
gain (loss) from unconsolidated affiliates, net of cash distributions and income
tax expense (benefit).

We define adjusted EBITDA margin as adjusted EBITDA divided by sales.

The definition of Adjusted EBITDA presented in this Annual Report is similar to
the calculation of "Consolidated Cash Flow" contained in the indentures
governing our senior notes. We are required to report Consolidated Cash Flow to
the holders of our senior notes and Adjusted EBITDA to the lenders under our
revolving credit facility, and these measures are used by them to determine our
compliance with certain covenants governing those debt instruments. Please read
"Liquidity and Capital Resources - Debt and Credit Facilities" for additional
details regarding the covenants governing our debt instruments.
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EBITDA, Adjusted EBITDA and Distributable Cash Flow should not be considered
alternatives to Net income (loss) or Operating income (loss) or any other
measure of financial performance presented in accordance with GAAP. In
evaluating our performance as measured by EBITDA, Adjusted EBITDA and
Distributable Cash Flow, management recognizes and considers the limitations of
these measurements. EBITDA and Adjusted EBITDA do not reflect our liabilities
for the payment of income taxes, interest expense or other obligations such as
capital expenditures. Accordingly, EBITDA, Adjusted EBITDA and Distributable
Cash Flow are only three of several measurements that management utilizes.
Moreover, our EBITDA, Adjusted EBITDA and Distributable Cash Flow may not be
comparable to similarly titled measures of another company because all companies
may not calculate EBITDA, Adjusted EBITDA and Distributable Cash Flow in the
same manner.

The following tables provide a reconciliation of net earnings (loss), our most directly comparable GAAP financial performance measure, to EBITDA, adjusted EBITDA and distributable cash flow, for each of the periods indicated.

                                                                      Year Ended December 31,
                                                                      2021                 2020
                                                                           (In millions)
Reconciliation of Net loss to EBITDA, Adjusted EBITDA and Distributable Cash
Flow:
Net loss                                                        $      (260.1)         $   (149.0)
Add:
Interest expense                                                        149.5               125.9
Depreciation and amortization                                           107.7               105.1
Income tax expense                                                        1.5                 1.1
EBITDA                                                          $        (1.4)         $     83.1
Add:
LCM / LIFO (gain) loss                                          $       (50.3)         $     28.5
Unrealized (gain) loss on derivative instruments                         24.4                (2.8)

Amortization of turnaround costs                                         17.0                14.6
Loss on impairment and disposal of assets                                 4.1                 6.8
RINs mark-to-market loss                                                 57.7                75.8

Gain on sale of business, net                                            (0.2)               (1.0)
Other non-recurring expenses                                              8.3                 2.4
Equity based compensation and other items                                50.7                 9.9
Adjusted EBITDA                                                 $       110.3          $    217.3
Less:
Replacement and environmental capital expenditures (1)          $        29.0          $     31.8
Cash interest expense (2)                                               138.9               119.9
Turnaround costs                                                         61.0                23.4

Income tax expense                                                        1.5                 1.1
Distributable Cash Flow                                         $      (120.1)         $     41.1




(1)Replacement capital expenditures are defined as those capital expenditures
which do not increase operating capacity or reduce operating costs and exclude
turnaround costs. Environmental capital expenditures include asset additions to
meet or exceed environmental and operating regulations.

(2)Represents consolidated interest expense less non-cash interest expense.

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Year ended December 31, 2021compared to the year ended December 31, 2020

Sales. Sales increased $879.8 millioni.e. 38.8%, at $3,148.0 million in 2021 from $2,268.2 million in 2020. Sales of each of our major product categories during these periods were as follows:

                                                                                        Year Ended December 31,
                                                                          2021                       2020                  % Change
                                                                            (In millions, except barrel and per barrel data)
Sales by segment:
Specialty Products and Solutions:
Lubricating oils                                               $            658.7               $      473.5                      39.1  %
Solvents                                                                    303.7                      236.2                      28.6  %
Waxes                                                                       151.7                      129.1                      17.5  %
Fuels, asphalt and other by-products (1)                                    997.3                      690.1                      44.5  %

Total Specialty Products and Solutions                         $          2,111.4               $    1,528.9                      38.1  %
Total Specialty Products and Solutions sales volume (in                18,394,000                 20,803,000                     (11.6) %

barrels)

Average Specialty Products and Solutions sales price per       $           114.79               $      73.49                      56.2  %
barrel

Montana/Renewables:
Gasoline                                                       $            188.3               $      135.9                      38.6  %
Diesel                                                                      324.9                      204.1                      59.2  %
Jet fuel                                                                     27.5                       14.6                      88.4  %
Asphalt, heavy fuel oils and other (2)                                      243.0                      150.6                      61.4  %

Total Montana/Renewables                                       $            783.7               $      505.2                      55.1  %
Total Montana/Renewables sales volume (in barrels)                     10,038,000                 10,435,000                      (3.8) %
Average Montana/Renewables sales price per barrel              $            78.07               $      48.41                      61.3  %

Total Performance Brands (3)                                   $            252.9               $      234.1                       8.0  %
Total Performance Brands sales volume (in barrels)                        505,000                    504,000                       0.2  %
Average Performance Brands sales price per barrel              $           500.79               $     464.48                       7.8  %

Total sales                                                    $          3,148.0               $    2,268.2                      38.8  %
Total sales volume (in barrels)                                        28,937,000                 31,742,000                      (8.8) %




(1)Represents (a) by-products, including fuels and asphalt, produced in
connection with the production of specialty products at the Princeton and Cotton
Valley refineries and Dickinson and Karns City facilities, (b) polyol ester
synthetic lubricants produced at the Missouri facility, and (c) fuels products
produced at the Shreveport refinery.

(2) Represents asphalt, heavy fuel oils and other products produced in connection with the production of fuels at the plant Great Falls Refinery.

(3) Represents specialty packaged and synthetic products at our Royal PurpleBel Ray and Pipe packaging facilities.

The components of the $582.5 million the increase in sales of the Specialty Products and Solutions segment in 2021, compared to 2020, was as follows:

                                                                   Dollar Change
                                                                   (In millions)
Sales price                                                       $        759.6
Volume                                                                    (177.1)

Increase in total sales of the specialized products and solutions segment $582.5


Specialty Products and Solutions segment sales increased period over period,
primarily due to the significantly higher price environment in the current year
period. The favorable price impact was partially offset by a decrease in sales
volumes as a result of the planned turnaround at our Shreveport facility in the
first quarter of 2021, unplanned downtime resulting from the polar vortex and
supply chain disruptions.
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The components of the $278.5 million increase in Montana/Renewables segment sales in 2021, compared to 2020, were as follows:

                                                    Dollar Change
                                                    (In millions)
Sales price                                        $        297.7

Volume                                                      (19.2)

Total Montana/Increase in sales of the renewable energy segment $278.5


Montana/Renewables segment sales increased primarily due to increased sales
prices as a result of the significantly higher price environment in the current
year, in-line with the overall improvement in market conditions. The favorable
price impact was partially offset by a decrease in sales volumes as a result of
the planned turnaround at our Great Falls facility in the fourth quarter of
2021.

The components of the $18.8 million The increase in sales of the Performance Brands segment in 2021, compared to 2020, was as follows:

                                                    Dollar Change
                                                    (In millions)
Sales price                                        $         18.1

Volume                                                        0.7

Performance Brands segment total sales increase by $18.8

Performance Brands segment sales increased due to higher volumes and pricing, both of which were driven by continued growth in our TruFuel business, Royal Purpleand the Bel-Ray brands.

Gross Profit. Gross profit increased $43.8 million, or 44.2%, to $142.9 million
in 2021 from $99.1 million in 2020. Gross profit for our business segments were
as follows:

                                                                                   Year Ended December 31,
                                                                    2021                     2020                  % Change
                                                                        (Dollars in millions, except per barrel data)
Gross profit by segment:
Specialty Products and Solutions:

Gross profit                                               $            62.6            $      18.7                       234.8  %
Percentage of sales                                                      3.0    %               1.2  %                      1.8  %

Specialty Products and Solutions gross profit per barrel   $            3.40            $      0.90                       277.8  %
Montana/Renewables:

Gross profit                                               $            12.0            $       0.8                     1,400.0  %
Percentage of sales                                                      1.5    %               0.2  %                      1.3  %
Montana/Renewables gross profit per barrel                 $            1.20            $      0.08                     1,400.0  %

Performance Brands:
Gross profit                                               $            68.3            $      79.6                       (14.2) %
Percentage of sales                                                     27.0    %              34.0  %                     (7.0) %
Performance Brands gross profit per barrel                 $          135.25            $    157.94                       (14.4) %

Total gross profit                                         $           142.9            $      99.1                        44.2  %
Percentage of sales                                                      4.5    %               4.4  %                      0.1  %






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The components of the $43.9 million increase in the gross margin of the Specialty Products and Solutions segment in 2021, compared to 2020, are as follows:

                                     Dollar Change
                                     (In millions)
2020 reported gross profit          $         18.7
Sales price                                  759.6
RINs                                          (3.2)
Operating costs                              (52.5)
LCM / LIFO inventory adjustments              58.7
Volume                                       (42.7)
Cost of materials                           (676.0)
2021 reported gross profit          $         62.6


The increase in Specialty Products and Solutions segment gross profit for the
year ended December 31, 2021, as compared to the same period in 2020, was
primarily due to stronger net unit margins as a result of strong specialty
market demand. These factors were partially offset by the unfavorable volumes
impact resulting from the planned turnaround at our Shreveport facility in the
first quarter of 2021 and unplanned downtime resulting from the polar vortex and
logistics disruptions. Higher operating costs were due to expenses for
freeze-related repairs and higher utility costs.

The components of the $11.2 million increase in Montana/The gross margin of the renewable energy sector in 2021, compared to 2020, was as follows:

                                     Dollar Change
                                     (In millions)
2020 reported gross profit          $          0.8
Sales price                                  297.7
RINs                                          (5.8)
Operating costs                              (16.3)

Volume                                        (5.3)
LCM / LIFO inventory adjustments              14.7
Cost of materials                           (273.8)

2021 reported gross profit          $         12.0


The increase in Montana/Renewables segment gross profit for the year ended
December 31, 2021, as compared to the same period in 2020, was primarily due to
stronger net unit margins. These factors were partially offset by an increase in
operating costs driven by higher utility costs.

The components of the $11.3 million decrease in the gross margin of the Performance Brands segment in 2021, compared to 2020, are as follows:

                                     Dollar Change
                                     (In millions)
2020 reported gross profit          $         79.6
Sales price                                   18.1
Operating costs                                1.6
LCM / LIFO inventory adjustments               5.3
Volume                                         0.4
Cost of materials                            (36.7)
2021 reported gross profit          $         68.3


The decrease in Performance Brands segment gross profit for the year ended
December 31, 2021, as compared to the same period in 2020, was primarily driven
by higher material and feedstock costs and supply chain challenges that resulted
in a growing order backlog. The impact of these items were partially offset by
higher volumes and sales prices as a result of our continued growth in the
business for our TruFuel, Royal Purple, and Bel-Ray brands.
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General and administrative. General and administrative expenses increased $60.0
million, or 65.9%, to $151.1 million in 2021 from $91.1 million in 2020. The
increase was due primarily to a $45.2 million increase in equity-based
compensation related expenses, which was primarily the result of an increase in
the Company's unit price, and a $9.0 million increase in labor and benefits
expenses in the current year in comparison to the prior year.

Interest expense. Interest expense increased $23.6 million, or 18.7%, to $149.5
million in 2021 from $125.9 million in 2020. The increase was primarily due to
higher financing costs related to our Supply and Offtake Agreements in the
current year in comparison to the prior year.

Gain on derivative instruments. There was a $23.3 million loss on derivative
instruments in 2021, compared to a $52.4 million gain in the same period in
2020. We had a $49.6 million realized gain on derivative instruments in the
prior year comparative period compared to a $1.1 million realized gain in the
current year. This decrease was due to the settlement of our crack spread swaps
and WCS crude oil basis swaps positions during 2020; whereas we did not enter
into any new hedge contracts during 2021. In addition, the unrealized loss on
the inventory financing embedded derivative was $25.7 million in the current
year period, compared to an unrealized gain of $5.1 million in the prior year
comparative period.

Cash and capital resources

Our principal sources of cash have historically included cash flow from
operations, proceeds from public equity offerings, proceeds from notes
offerings, bank borrowings and other financial arrangements. Principal uses of
cash have included capital expenditures, acquisitions, distributions to our
limited partners and general partner and debt service. We may from time to time
seek to retire or purchase our outstanding debt through cash purchases and/or
exchanges for equity securities, in open market purchases, privately negotiated
transactions, tender offers or otherwise. Such repurchases or exchanges, if any,
will depend on prevailing market conditions, our liquidity requirements,
contractual restrictions and other factors. The amounts involved may be
material.

In general, we expect that our short-term liquidity needs, including debt
service, working capital, replacement and environmental capital expenditures and
capital expenditures related to internal growth projects, will be met primarily
through projected cash flow from operations, borrowings under our revolving
credit facility and asset sales.

At February 12, 2021we entered into a sale-leaseback transaction with
Stonebriar Commercial Finance LLC (“Stonebriar”), whereby we sold and leased certain of our fuel terminal assets to Shreveport Refinery. We received raw product from $70.0 million of the sale, the sale-leaseback having a term of seven years.

In 2021, we redeemed $150.0 million in aggregate principal amount of our 7.625%
Senior Notes due 2022 (the "2022 Notes") at a redemption price of par, plus
accrued and unpaid interest. In conjunction with the redemption, we incurred
debt extinguishment costs of $0.5 million.

On November 18, 2021, we entered into a Credit Agreement with Oaktree Fund
Administration, LLC (the "MRL Credit Facility"), which provided us a $300.0
million senior secured term loan facility. We drew $300.0 million under the MRL
Credit Facility to finance the transfer for value of various assets at our Great
Falls refinery to MRL, including the hydrocracker, a hydrogen plant, and several
products tanks. Borrowings under the MRL Credit Facility are obligations of our
unrestricted subsidiaries MRL and Montana Renewables Holdings solely, and are
non-recourse to the Company and its restricted subsidiaries.

On December 31, 2021, MRL entered into a Master Lease Agreement (the "Lease
Agreement") and an Interim Funding Agreement (the "Funding Agreement") with
Stonebriar Commercial Finance LLC ("Stonebriar") for $50.0 million related to
financing of certain equipment for the construction of a new renewable hydrogen
plant. As of December 31, 2021, no amounts have been funded under the Master
Lease. However, we expect amounts to be funded under the Master Lease in the
first quarter of 2022.

In 2020, we entered into a transaction whereby we exchanged approximately $200.0 million aggregate principal amount of our outstanding 2022 notes for $200.0 million aggregate principal amount of the newly issued 2024 Secured Notes (the “Exchange Transaction”).

We expect to fund planned capital expenditures in 2022 of approximately $115
million to $135 million, excluding MRL capital expenditures, primarily with cash
on hand, and cash flows from operations. Future internal growth projects or
acquisitions may require expenditures in excess of our then-current cash flow
from operations and borrowing availability under our revolving credit facility
and may require us to issue debt or equity securities in public or private
offerings or incur additional borrowings under bank credit facilities to meet
those costs.
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The borrowing base on our revolving credit facility increased from approximately
$286.1 million as of December 31, 2020, to approximately $328.7 million at
December 31, 2021, resulting in a corresponding increase in our borrowing
availability from approximately $154.4 million at December 31, 2020, to
approximately $296.0 million at December 31, 2021. Total liquidity, consisting
of unrestricted cash and available funds under our revolving credit facility,
increased from $263.8 million at December 31, 2020 to $334.1 million at
December 31, 2021.

Cash flow from operating, investing and financing activities

We believe that we have sufficient liquid assets, cash flow from operations,
borrowing capacity and adequate access to capital markets to meet our financial
commitments, debt service obligations and anticipated capital expenditures for
at least the next 12 months. We continue to seek to lower our operating costs,
selling expenses and general and administrative expenses as a means to further
improve our cash flow from operations with the objective of having our cash flow
from operations support all of our capital expenditures and interest payments.
However, we are subject to business and operational risks that could materially
adversely affect our cash flows. A material decrease in our cash flow from
operations including a significant, sudden decrease in crude oil prices would
likely produce a corollary effect on our borrowing capacity under our revolving
credit facility and potentially our ability to comply with the covenants under
our revolving credit facility. A significant, sudden increase in crude oil
prices, if sustained, would likely result in increased working capital
requirements which would be funded by borrowings under our revolving credit
facility. In addition, our cash flow from operations may be impacted by the
timing of settlement of our derivative activities. Gains and losses from
derivative instruments that do not qualify as cash flow hedges are recorded in
unrealized gain (loss) on derivative instruments until settlement and will
impact operating cash flow in the period settled.

The following table summarizes our primary sources and uses of cash in each of
the most recent two years:

                                                                         Year Ended December 31,
                                                                        2021                  2020
                                                                              (In millions)
Net Cash provided by (used in) operating activities               $       (44.0)         $      62.8
Net Cash used in investing activities                                     (82.8)               (46.3)
Net Cash provided by financing activities                                 139.3                 73.8
Net increase in cash and cash equivalents                         $        

12.5 $90.3


Operating Activities. Operating activities used cash of $44.0 million in 2021
compared to providing cash of $62.8 million in 2020. The change was impacted by
an increase in net loss of $111.1 million and increases in the cash required for
working capital and turnaround costs.

Investing Activities. Investing activities used cash of $82.8 million in 2021
compared to a use of cash of $46.3 million in 2020. The change is related to
increases in cash expenditures for additions to property, plant and equipment in
the current year in comparison to the prior year. The cash expenditures for
additions to property, plant and equipment in the current year are mainly
related to our renewable diesel project.

Financing Activities. Financing activities provided cash of $139.3 million in
2021 compared to providing cash of $73.8 million in 2020. The change is
primarily due to $70.0 million of proceeds received from our Shreveport terminal
asset financing arrangement and $300.0 million of net proceeds received from the
MRL Credit Facility in the current year, partially offset by the redemption of
$150.0 million of our 2022 Notes and $108.0 million of lower borrowings on our
revolving credit facility in the current year compared to the prior year.

Capital expenditure

Our property, plant and equipment capital expenditure requirements consist of
capital improvement expenditures, replacement capital expenditures,
environmental capital expenditures and turnaround capital expenditures. Capital
improvement expenditures include the acquisition of assets to grow our business,
facility expansions, or capital initiatives that reduce operating costs.
Replacement capital expenditures replace worn out or obsolete equipment or
parts. Environmental capital expenditures include asset additions to meet or
exceed environmental and operating regulations. Turnaround capital expenditures
represent capitalized costs associated with our periodic major maintenance and
repairs.
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The following table sets forth our capital improvement expenditures, replacement
capital expenditures, environmental capital expenditures and turnaround capital
expenditures in each of the periods shown (including capitalized interest):

                                            Year Ended December 31,
                                               2021                 2020
                                                 (In millions)
Capital improvement expenditures     $        53.9                $ 12.2
Replacement capital expenditures              24.0                  24.7
Environmental capital expenditures             5.0                   7.1
Turnaround capital expenditures               61.0                  23.4

Total                                $       143.9                $ 67.4


2022 Capital Expenditure Forecast

Excluding MRL capital expenditures, we are forecasting total capital
expenditures of approximately $115 million to $135 million in 2022. Forecasted
capital expenditures related to our Montana Renewable Diesel project will be
funded, in part, by restricted cash on hand and cash flows from operations. In
addition to this, our forecasted capital expenditures include amounts for the
construction of a new renewable hydrogen plant, $50.0 million of which will be
financed through our Master Lease Agreement with Stonebriar. We anticipate that
capital expenditure requirements will be provided primarily through cash flow
from operations, cash on hand, available borrowings under our revolving credit
facility and by accessing capital markets as necessary. If future capital
expenditures require expenditures in excess of our then-current cash flow from
operations and borrowing availability under our revolving credit facility, we
may be required to issue debt or equity securities in public or private
offerings or incur additional borrowings under bank credit facilities to meet
those costs.

Debt and Credit Facilities

From December 31, 2021our main debt and credit instruments consisted of:

•$600.0 million senior secured revolving credit facility maturing in February
2023 (before giving effect to the Third Amendment to our revolving credit
facility (the "Credit Facility Amendment")), subject to borrowing base
limitations, with a maximum letter of credit sub-limit equal to $300.0 million,
which amount may be increased to 90% of revolver commitments in effect with the
consent of the Agent (as defined in the Credit Agreement) ("revolving credit
facility");

• a $303.5 million senior secured term loan facility (the “MRL Credit Facility”);

• $325.0 million of 7.75% senior notes due 2023;

• $200.0 million of 9.25% Senior Secured Notes due 2024; and

• $550.0 million of 11.00% senior notes due 2025.

We complied with all the covenants of our debt instruments in place at December 31, 2021and believe we have sufficient cash to conduct our business.

On January 20, 2022, we issued and sold $325.0 million in aggregate principal
amount of our 2027 Notes, in a private placement pursuant to Section 4(a)(2) of
the Securities Act of 1933 to eligible purchasers at par. We received net
proceeds of $319.1 million, after deducting the initial purchasers' discount and
offering expenses.

On January 12, 2022, we issued a notice of conditional redemption for $325.0
million in aggregate principal amount of the 2023 Notes at a redemption price of
par, plus accrued and unpaid interest to the redemption date of February 11,
2022, conditioned on the completion of an offering of at least $300.0 million
aggregate principal amount of senior debt securities on or before February 11,
2022. As the conditions precedent were met on January 20, 2022, we funded the
redemption of the 2023 Notes with the net proceeds from the offering of the 2027
Notes and the remainder from cash on hand. In conjunction with the redemption,
we incurred debt extinguishment costs of $2.5 million.

On January 20, 2022, we entered into the Credit Facility Amendment governing our
senior secured revolving credit facility, which among other changes, (a) extends
the term of the revolving credit facility for five years from the date of the
Credit Facility Amendment, (b) reduces aggregate commitments under the revolving
credit facility to $500.0 million, which includes a FILO tranche, and (c)
replaces LIBOR as a reference interest rate with a new reference interest rate
based on daily SOFR.
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Inventory financing

Please refer to Note 8 – “Inventory financing agreements” in Part II, point 8 “Financial statements and additional data” for additional information regarding our supply and off-take agreements.

Short term liquidity

As of December 31, 2021, our principal sources of short-term liquidity were (i)
approximately $296.0 million of availability under our revolving credit
facility, (ii) inventory financing agreements related to our Great Falls and
Shreveport refineries and (iii) $38.1 million of unrestricted cash on hand.
Borrowings under our revolving credit facility can be used for, among other
things, working capital, capital expenditures, and other lawful partnership
purposes including acquisitions. For additional information regarding our
revolving credit facility, please read Note 9 "Long-Term Debt" in Part II, Item
8 "Financial Statements and Supplementary Data."

Long-term financing

In addition to our principal sources of short-term liquidity listed above,
subject to market conditions, we may meet our cash requirements (other than
distributions of Available Cash (as defined in our partnership agreement) to our
common unitholders) through the issuance of long-term notes or additional common
units.

From time to time, we issue long-term debt securities referred to as our senior
notes. All of our outstanding senior notes, other than the 2024 Secured Notes,
are unsecured obligations that rank equally with all of our other senior debt
obligations to the extent they are unsecured. As of December 31, 2021, we had
$303.5 million in secured loan facility, $325.0 million in 2023 Notes, $200.0
million in 2024 Secured Notes and $550.0 million in 2025 Notes outstanding. The
2024 Secured Notes and the related guarantees are secured by a first priority
lien (subject to certain exceptions) on all the fixed assets that secure our
obligations under the secured hedge agreements, as governed by the Collateral
Trust Agreement, which governs how secured hedging counterparties and holders of
the 2024 Secured Notes share collateral pledged as security for the payment
obligations owed by us to the secured hedging counterparties under their
respective master derivatives contracts and the holders of the 2024 Secured
Notes. In addition, as of December 31, 2021, we had $303.5 million of debt
outstanding for the MRL Credit Facility and $64.3 million of other debt
outstanding for the Shreveport terminal asset financing arrangement. The MRL
Credit Facility is secured by substantially all of the assets of MRL and a
pledge of 100% of the equity interest in MRL held by Montana Renewables
Holdings. Borrowings under the MRL Credit Facility are obligations of our
unrestricted subsidiaries MRL and Montana Renewables Holdings solely, and are
non-recourse to the Company and its restricted subsidiaries.

In January 2022, we issued and sold $325.0 million in aggregate principal amount
of the 2027 Notes, the proceeds of which were used, together with cash on hand,
to fund the redemption of the 2023 Notes.

To date, our debt balances have not adversely affected our operations, our
ability to repay or refinance our indebtedness. Based on our historical record,
we believe that our capital structure will continue to allow us to achieve our
business objectives.

For more information regarding our senior notes, please read Note 9 - "Long-Term
Debt" under Part II, Item 8 "Financial Statements and Supplementary Data" in
this Annual Report.

Derivative Master Agreements and Collateral Trust Agreement

Under our credit support arrangements, our payment obligations under all of our
master derivatives contracts for commodity hedging generally are secured by a
first priority lien on our and our subsidiaries' real property, plant and
equipment, fixtures, intellectual property, certain financial assets, certain
investment property, commercial tort claims, chattel paper, documents,
instruments and proceeds of the foregoing (including proceeds of hedge
arrangements). We had no additional letters of credit or cash margin posted with
any hedging counterparty as of December 31, 2021. Our master derivatives
contracts and Collateral Trust Agreement (as defined below) continue to impose a
number of covenant limitations on our operating and financing activities,
including limitations on liens on collateral, limitations on dispositions of
collateral and collateral maintenance and insurance requirements. For financial
reporting purposes, we do not offset the collateral provided to a counterparty
against the fair value of our obligation to that counterparty. Any outstanding
collateral is released to us upon settlement of the related derivative
instrument liability.

Our various hedging agreements contain language allowing our hedge
counterparties to request additional collateral if a specified credit support
threshold is exceeded. However, these credit support thresholds are set at
levels that would require a substantial increase in hedge exposure to require us
to post additional collateral. As a result, we do not expect further increases
in fuel products crack spreads or interest rates to significantly impact our
liquidity due to requirements to post additional collateral.
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Additionally, we have a collateral trust agreement (the "Collateral Trust
Agreement") which governs how secured hedging counterparties and holders of the
2024 Secured Notes share collateral pledged as security for the payment
obligations owed by us to the secured hedging counterparties under their
respective master derivatives contracts and the holders of the 2024 Secured
Notes. The Collateral Trust Agreement limits to $150.0 million the extent to
which forward purchase contracts for physical commodities are covered by, and
secured under, the Collateral Trust Agreement and the Parity Lien Security
Documents (as defined in the Collateral Trust Agreement). There is no such limit
on financially settled derivative instruments used for commodity hedging.
Subject to certain conditions set forth in the Collateral Trust Agreement, we
have the ability to add secured hedging counterparties from time to time.

Credit ratings

In January 2022, S&P reaffirmed a rating of B1 on our senior unsecured notes and
upgraded our Company outlook to stable. Also in January 2022, Moody's reaffirmed
a rating of Caa1 on our senior unsecured notes and a Company rating of B3, with
the stable outlook maintained. Our 2024 Secured Notes issued in 2020 are rated
B+ by S&P and B1 by Moody's.

Equity Transactions

In April 2016, the board of directors of our general partner has suspended the payment of our quarterly cash distribution. Our general partner’s board of directors will continue to assess our ability to restore the distribution.

Impacts of seasonality on liquidity

The fuel and fuel related products that we manufacture, including asphalt
products, are subject to seasonal demand and trends. Asphalt demand is generally
lower in the first and fourth quarters of the year, as compared to the second
and third quarters, due to the seasonality of the road construction and roofing
industries we supply. Demand for gasoline and diesel is generally higher during
the summer months than during the winter months due to seasonal increases in
highway traffic and agricultural activity. In addition, our natural gas costs
can be higher during the winter months, as demand for natural gas as a heating
fuel increases during the winter. As a result, our operating results for the
first and fourth calendar quarters may be lower than those for the second and
third calendar quarters of each year due to seasonality related to these and
other products that we produce and sell.

Critical accounting estimates

The preparation of our consolidated financial statements in accordance with GAAP
requires us to use estimates and make judgements and assumptions about future
events that affect the reported amounts of assets, liabilities, revenue,
expenses, and the related disclosures. Considerable judgement is often involved
in making these determinations. Critical estimates are those that require the
most difficult, subjective or complex judgements in the preparation of the
financial statements and the accompanying notes. We evaluate these estimates and
judgements on a regular basis. We believe our assumptions and estimates are
reasonable and appropriate. However, the use of different assumptions could
result in significantly different results and actual results could differ from
those estimates. The following discussion of accounting estimates is intended to
supplement the Summary of Significant Accounting Policies presented in Note 3 to
our consolidated financial statements in Part II, Item 8.

We consider an accounting estimate to be critical if:

•The accounting estimate requires us to make assumptions about highly uncertain items at the time the accounting estimate is made; and

•We reasonably could have used different estimates in the current period, or
changes in these estimates are reasonably likely to occur from period to period
as new information becomes available, and a change in these estimates would have
a material impact on our financial condition or results from operations.

Valuation of Good will

We assess goodwill for impairment annually and whenever events or changes in
circumstances indicate its carrying value may not be recoverable. The Company
tests goodwill either quantitatively or qualitatively for impairment. The
Company assessed goodwill for impairment qualitatively and quantitatively during
the years ended December 31, 2021 and 2020, respectively.

In assessing the qualitative factors to determine whether it is more likely than
not that the fair value of a reporting unit is less than its carrying amount, we
assess relevant events and circumstances that may impact the fair value and the
carrying amount of the reporting unit. The identification of relevant events and
circumstances and how these may impact a reporting unit's fair value or carrying
amount involve significant judgment and assumptions. The judgment and
assumptions include the identification of macroeconomic conditions, industry and
market considerations, cost factors, overall financial performance and Company
specific events and the assessment on whether each relevant factor will impact
the impairment test positively or negatively and the magnitude of any such
impact.

In the first step of the quantitative assessment, our assets and liabilities,
including existing goodwill and other intangible assets, are assigned to the
identified reporting units to determine the carrying value of the reporting
units. If the carrying value of a reporting unit is in excess of its fair value,
an impairment may exist, and we must perform an impairment analysis, in which
the implied fair value of the goodwill is compared to its carrying value to
determine the impairment charge, if any.

When performing the quantitative assessment, as required in the impairment test,
the fair value of the reporting unit is determined using the income approach.
The income approach focuses on the income-producing capability of an asset,
measuring the current value of the asset by calculating the present value of its
future economic benefits such as cash earnings, cost savings, corporate tax
structure and product offerings. Value indications are developed by discounting
expected cash flows to their present value at a rate of return that incorporates
the risk-free rate for the use of funds, the expected rate of inflation, and
risks associated with the reporting unit. If the carrying value of a reporting
unit is in excess of its fair value, an impairment would be recognized in an
amount equal to the excess that the carrying value exceeded the estimated fair
value, limited to the carrying value of goodwill.

The inputs used to estimate the fair value of the Company’s reporting units are considered Level 3 inputs in the fair value hierarchy and include the following:

•The Company's financial projections for its reporting units are based on its
analysis of various supply and demand factors which include, among other things,
industry-wide capacity, planned utilization rates, end-user demand, crack
spreads, capital expenditures and economic conditions. Such estimates are
consistent with those used in the Company's planning and capital investment
reviews and include recent historical prices and published forward prices.

•The discount rate used to measure the present value of the projected future
cash flows is based on a variety of factors, including market and economic
conditions, operational risk, regulatory risk and political risk. This discount
rate is also compared to recent observable market transactions, if possible.

For Level 3 measurements, significant increases or decreases in long-term growth rates or discount rates, singly or in combination, could result in a significantly lower or higher fair value measurement.

Fair values calculated for the purpose of testing our goodwill for impairment
are estimated using the expected present value of future cash flows method and
comparative market prices when appropriate. Significant judgment is involved in
performing these fair value estimates since the results are based on forecasted
assumptions.

Meaningful factors that would significantly impact our financial projections are
changes in customer demand levels or loss of significant portions of our
business. We believe that the assumptions and estimates used in the assessment
of our goodwill as of October 1, 2021 were reasonable.

Valuation of finished long-lived assets

Property, plant and equipment and intangible assets with finite lives are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. If the estimated
undiscounted future cash flows related to the asset are less than the carrying
value, we recognize a loss equal to the difference between the carrying value
and the estimated fair value, usually determined by the estimated discounted
future cash flows of the asset. When a decision has been made to dispose of
property, plant and equipment prior to the end of the previously estimated
useful life, depreciation estimates are revised to reflect the use of the asset
over the shortened estimated useful life.

Estimated undiscounted future cash flows are used for the purpose of testing our
finite long-lived assets for impairment. Fair values calculated for the purpose
of measuring impairments on finite long-lived assets are estimated using the
expected present value of future cash flows method and comparative market prices
when appropriate. Significant judgment is involved in estimating undiscounted
future cash flows and performing these fair value estimates since the results
are based on forecasted assumptions.

We base our estimated undiscounted future cash flows and fair value estimates on projected financial information that we believe to be reasonable. However, actual results may differ from these projections.

Obligation to evaluate renewable identification numbers (“RIN”)

We account for our current period RINs obligation by multiplying the quantity of
RINs shortage (based on actual results) by the period end RINs spot price, which
is recorded as a RINs obligation in the consolidated balance sheets. This
liability is revalued at the end of each subsequent accounting period, which
produces non-cash mark-to-market adjustments that are reflected in cost of sales
in the consolidated statements of operations (with the exception of RINs for
compliance year 2019 related to the San Antonio refinery, which amount is
reflected in other operating expense in the consolidated statements of
operations). RINs generated by blending renewable fuels may be sold or held to
offset future RINs Obligations. Any gains or losses from RINs sales are recorded
in cost of sales in the consolidated statements of operations. The liabilities
associated with our RINs obligation are considered recurring fair value
measurements.

Certain inputs used to estimate the fair value of our RINs Obligation are
considered Level 2 inputs of the fair value hierarchy, as the inputs include
RINs spot prices obtained from an independent pricing service. However, certain
vintage RINs are very thinly traded, and the period end spot prices might not be
an accurate reflection of the actual amount that we could purchase RINs in the
open market in the quantities that would be required to satisfy our RINs volume
obligation.

The RFS allows small refineries to apply at any time for a Small Refinery
Exemption ("SRE") from the renewable blending requirements, and we have applied
in respect of compliance years 2019 and 2020. However, the EPA has not taken
final action on our 2019 and 2020 SRE petitions (or on other SRE petitions for
compliance years 2019, 2020 and 2021 submitted by other small refineries). In
December 2021, EPA issued a proposal to deny all currently pending petitions
from small refineries seeking SREs, including for program years 2019 and 2020,
based on an across the board determination that no refinery suffers
disproportionate economic hardship from the RFS program. Please read Note 7 -
"Commitments and Contingencies" for further information on our RINs obligation.

We believe that our small refineries ("the refineries") qualify for SREs on the
merits and has asked EPA to approve our petitions. In the event our petitions
are denied, management believes that we have viable legal arguments to challenge
a denial, including that denial would be inconsistent with the Clean Air Act,
the Administrative Procedure Act. EPA's regulations, the Department of Energy's
analysis and/or the factual record, and we would exercise our legal rights to
challenge the denial. If we are ultimately forced to litigate and are
successful, a court would likely direct EPA to issue a new decision on the
refineries' SRE petitions. However, as with any legal action, a challenge to an
EPA decision denying the refineries' SRE petitions may ultimately be
unsuccessful. This would present a number of uncertainties and complexities
caused primarily by the passage of time since we first submitted the SRE
petitions, including for example the potential expiration and/or unavailability
or limited availability in the market of vintage 2019 and 2020 RINs, the
specifics of other potential forthcoming EPA actions, the results of other
parties' potential litigation avenues and outcomes, and post-litigation
uncertainties around the timing and magnitude of any resolution.

Based on current information we believe the most likely outcome is either
obtaining the refineries' SREs or reaching an alternative resolution. If we are
ultimately successful in obtaining the refineries' SREs, the value of the
liability would be zero. If we are ultimately unsuccessful in obtaining the
refineries' SREs, the timing, amount and form our actual liability may depend
upon the resolution obtained, potentially as part of subsequent litigation. For
example, if resolution for the 2019 and 2020 compliance years used the market
price of RINs on the day the EPA was obligated to rule on the refineries' 2019
SRE petitions, the value of the liability would be approximately $50.7 million.

Recent accounting pronouncements

For a summary of recently issued and adopted accounting standards applicable to us, please see Note 3 “Summary of Significant Accounting Policies” in Part II, Item 8 “Financial Statements and Supplementary Data”.

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