Resembling a few of the Congressional races from the recently completed election, in this Fool's opinion, the future of this specialty refiner remains too close to call.

Calumet Specialty Products Partners (NASDAQ:CLMT) endures a tight race between vastly improved operational metrics and a risky game of derivative roulette. Calumet enjoys a very loyal following, but still, I must call the race as I see it.

The good
After a series of difficult quarters, gross profit from the specialty products segment more than doubled to $66.1 million. Thanks to the completion of the long-awaited Shreveport refinery expansion in May and the Penreco acquisition in January, sales volume for the segment increased 25% despite challenges relating to Hurricanes Ike and Gustav.

The good news didn't stop there. The Shreveport expansion increased Calumet's capacity to process cheaper sour crude, which rendered refiners like Valero (NYSE:VLO) and Holly (NYSE:HOC) such attractive plays in recent years. While fuel-focused refiners like Tesoro (NYSE:TSO) are cutting production until market conditions improve, Calumet is keen to ramp-up production at Shreveport from the 65% capacity utilization logged in the latest quarter.

The bad
Continued uncertainty surrounding Calumet's ability to comply with the covenants of its debt obligations represented the big red flag that gave me pause last quarter. The tone of the company's latest discussion on the topic struck this Fool as somewhat less foreboding, indicating that improved operational conditions had "significantly enhanced" the company's ability to maintain compliance. Still, the conservative Fool may well decide that any stated risk of default in the midst of an historic global credit crisis is too large a red flag.

And the ugly
But wait, the flag grows larger. We're all familiar with the role that derivative instruments have played in our present financial crisis, even as they buoyed recent results from energy producers like Chesapeake Energy (NYSE:CHK) and Anadarko Petroleum (NYSE:APC). Faced with prevailing predictions of skyrocketing fuel prices, it appears Calumet entered into a large set of non-hedge, collared derivative instruments pricing crude oil substantially above its present range. The unrealized and realized losses on these were principally responsible for the net loss posted for the third quarter, and unless crude oil rebounds very swiftly, I fear this game of roulette could end quite badly for Calumet.

Further Foolishness:

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Fool contributor Christopher Barker wouldn't touch derivatives with a fully hedged pole. He can also be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns shares of Chesapeake Energy and Valero. Chesapeake Energy is an Inside Value selection. The Motley Fool has a disclosure policy.