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Why Shares of Calumet Specialty Products Partners Jumped 11% in June

By Tyler Crowe - Jul 5, 2016 at 9:16AM

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Calumet shed one of its unprofitable assets this past month, which is one small step towards a more profitable future.

Image source: Getty Images

What: Shares of Calumet Specialty Products Partners ( CLMT 6.99% ) rose 11.9% in June. While much of the gain wasn't attached to any real news event, the company did see some gains from the sale of its North Dakota refinery on June 28th.

CLMT Chart

CLMT data by YCharts

So what: In the case of this past month, there isn't really any way to explain the big price jump on June 7th. So instead let's focus on the one real business item that happened this month that will impact the company longer term. On June 28th, Calumet sold its 50% interest in its Dakota Prairie refinery for a cash consideration of $28.5 million. It also relieves Calumet of $66 million in debt obligations related to the facility. 

Based on the facility's performance, though, it would seem that simply walking away would have been a plus. The idea of the refinery was to supply diesel to the booming Bakken shale region, but that boom turned to bust pretty fast and the facility has consistently been running at well below capacity and losing money every day it operated. It was another sign that Calumet's ventures into more traditional oil refining weren't panning out. This sale will allow the company to refocus on its core competency: producing specialty petroleum products. This has been the most consistent part of the business.

Now what: While getting out from under this less than successful joint venture project, Calumet is still a long ways off from becoming a company worth considering as an investment. The company is still overloaded with debt and it will take several quarters of strong results to trim that balance sheet down to a more respectable level. Until that happens, there is little reason why investors should be too excited about shares of Calumet Specialty Products Partners.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Calumet Specialty Products Partners, L.P. Stock Quote
Calumet Specialty Products Partners, L.P.
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