Why Calumet Stock Topped the Market Today
Key Points
Specifically, they will notably improve its balance sheet.
If Calumet can keep earning exemptions, it stands to do very well going forward.
Oil products specialist Calumet (NASDAQ: CLMT) had some very positive, fundamentals-boosting news to report on Tuesday, and investors were there for it. They eagerly snapped up shares of the company, sending Calumet stock up 3% in a trading session that saw the bellwether S&P 500 index slump by 0.7%.
Exemptions granted
Calumet announced that the U.S. Environmental Protection Agency (EPA) notified it on Monday that the company had received full exemptions on two of its refinery petitions. These cover the operations of those facilities in the 2025 compliance year.
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The EPA mandates oil refiners in this country to blend certain minimum amounts of renewable fuels as part of their operations -- or purchase credits called renewable identification numbers (RINs) if they are unable to do so on their own. Yet under the agency's small refinery exemption rules, companies such as Calumet can be freed from these requirements for certain periods.
So whenever the company isn't on the hook to either produce those fuels or buy credits to compensate, its financials benefit, at times, strongly. The exempted period is one of those times, as Calumet said it'll be able to remove 71 million RINs from its balance sheet, leaving a total of 129 million RINs valued at around $309 million in total.
Lobbying for more
There might be more where that came from. Calumet added that it is in talks with the EPA over partial exemptions granted from 2022 to 2024. These are also under judicial review, so they might not stand legally.
Regardless, since this is a clear win for the company, it's little wonder its stock rose on the news. Even if those legacy partial exemptions aren't knocked down in some way, I think Calumet will earn new ones in the future -- although we have to keep in mind that exemptions are always subject to regulatory and/or legal developments.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.