In efforts to produce a higher quality algal derived biofuel, a two-step hydrothermal liquefaction (HTL) treatment is employed. This two-step process aims to reduce nitrogen and oxygen content in the first step using a low temperature treatment, termed hydrothermal hydrolysis (HTH), to solubilize proteins and carbohydrates while concentrating the energy rich biopolymer algaenan. In the second step, the solid residue is separated from the aqueous fraction and subjected to a higher HTL temperature for a longer residence time to crack the algaenan biopolymer into oil. Two different residence time and temperature conditions (260 °C for 0.5 h and 200 °C for 24 h) were found to effectively reduce the N and O content from 10.1 ± 0.3 wt. %N and 30.5 ± 0.7 wt. %O in the starting algae to 3.2 ± 0.2 wt. %N and 17.2 ± 1.1 wt. %O at 260 °C for 0.5 h and to 4.5 ± 0.1 wt. %N and 17.1 ± 0.7 wt. %O at 200 °C for 24 h. These residues were treated at 360 °C for 72 h during the second step HTL treatment. Following the second step treatment, the oil fraction is collected and analyzed using advanced analytical techniques that show the oil is similar in molecular composition to a Type I crude oil and has a reduced heteroatom content (1.3 ± 0.0 wt. %N and 5.7 ± 0.8 wt. %O) when compared to oil generated through a single step HTL (3.5 wt. %N and 16.3 wt. %O).