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TREC
Your Specialty Chemical Partner
17th Annual B. Riley Investor Conference Los Angeles May 26, 2016
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Safe Harbor
Statements in this presenta-on that are not historical facts are forward looking statements as defined in the Private Securi-es Li-ga-on Reform Act of 1995. Forward looking statements are based upon Management’s belief, as well as, assump-ons made by and informa-on currently available to Management. Because such statements are based upon expecta-ons as to future economic performance and are not statements of fact, actual results may differ from those projected. These risks, as well as others, are discussed in greater detail in Trecora Resources’ filings with the Securi-es and Exchange Commission, including Trecora Resources’ Annual Report on Form 10-‐K for the year ended December 31, 2015, and the Company‘s subsequent Quarterly Reports on Form 10-‐Q.
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TREC Snapshot
Share Price % Change & Volume Ticker (NYSE: TREC)
Stock Price1 $10.61
52 Week High / Low1 $16.50 / $8.17
Market Cap1 $260 M
Avg. Daily Volume (3 month)1
45,500
Shares Outstanding 24.5 M
Float 19.6 M
Insider Ownership 23%
Long Term Debt2 79.2 M
Current RaOo2 3:1
1. All market sta/s/cs as of May 20, 2016 2. All balance sheet items as of March 31, 2016
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Volume TREC RUT Index
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Resource Upside Resource Upside
Business Overview
SHR High-‐Purity Light Hydrocarbons
C5
Silsbee, TX
TC Specialty
SyntheOc Waxes C2
Pasadena, TX
SHR/TC Custom
Processing
Silsbee, TX Pasadena, TX
Core Specialty Chemical Core Specialty Chemical AMAK
Zinc and Copper Mine
35% Owner
Najran Province, KSA
§ PotenOal IPO § Significant operaOonal
improvements underway § New gold mining license § New exploraOon licenses
~ 88% Revenues ~ 6% Revenues
~ 6% Revenues
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Key Value Drivers
Ø Expanding market demand driven by increased supply of Natural Gas Liquids Ø US chemical industry planning ~$150 billion in capital investment over 10 years Ø InternaOonally compeOOve in high growth emerging markets − Sales into Canada,
Middle East and Asia and expanding into other markets Ø Prepared for addi-onal pentane demand of 6-‐7 million gallons/year from
polyethylene producers (by 2020); and ~10 million gallons/year from new Canadian oil sands customer (beginning in mid-‐2017)
Ø Major capital projects completed/underway to expand chemical and custom processing capacity and enhance profitability
Ø Strong operaOng leverage in business model
Ø Improved profitability in 2015 (v. 2014) Ø 2015 gross profit $59.4m v. $45.7m; gross profit margin 24.5% v. 15.8% Ø 2015 adjusted EBITDA up 43.3% to $47.3m; adjusted EBITDA margin 19.6% v. 11.4%
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South Hampton Resources Specialty Petrochemical Segment
SHR is an independent, petrochemical manufacturer in southeast Texas, specializing in manufacturing high purity petrochemical hydrocarbons.
§ 2015 Revenues: $218.2 Million
§ Blue-‐Chip Customer Base § 218 Regular Employees
§ 180 Acres in Silsbee, TX
Leader in High Purity Petrochemical
Hydrocarbons with InternaOonal Exposure
Dominant Player InternaOonal Exposure Pipeline/Terminal Access
South Hampton Resources
Natural Gas ! Natural Gasoline! Rail/Truck !
70% Market Share
Only 1 CompeOtor
TX
All Priced in USD
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SHR Blue Chip Customers
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46.3 49.9 46.7 54.3
63.6 67.1
82.8 86.9
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2008 2009 2010 2011 2012 2013 2014 2015
in M
illions of g
allons
SHR Financial Overview
EBITDA
Total Volumes Sold
CAGR 8.2%
16.0 15.0
7.6
22.3 20.9
32.5 29.3
39.6
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10.0
20.0
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40.0
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2008 2009 2010 2011 2012 2013 2014 2015
in $ M
illions
CAGR 13.8%
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SHR Products & ApplicaOons
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Industry Growth Catalysts
Ø New polyethylene plants in North America Ø Adding 8.0 million metric tons/year of capacity by 2020 Ø 40% increase over current capacity Ø Cost advantage driving polyethylene exports
Ø Large oil sands mine customer doubled capacity mid-‐2015 Ø Ramping up volume despite lower oil prices Ø Variable produc-on costs low Ø Oil sands represent long-‐term reserves
Ø Second oil sands customer expected to come on line in 2017
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SHR Capital Project & Expansion Summary
Ø SHR D-‐Train Ø $30 million; completed 4Q-‐15 Ø Enables addi-onal 45 million gallons/year of pentane sales Ø 4-‐5 year payback
Ø SHR Advanced Reformer Ø $46 million; comple-on expected Q2-‐17 Ø Construc-on and opera-ng permits issued May 2016 Ø Convert ~30-‐40 million gallons/year of byproducts sold at cost/loss to higher value
aroma-cs; technology proven in trial at SHR Ø Add ~$13m/year in EBITDA; 3 year payback
Ø Custom Processing Ø Anellotech’s TCat-‐8 Pilot Plant now installed Ø Reactor installed to expand Gevo’s isobutanol-‐to-‐jet capacity to meet growing demand
Ø New Products Ø One successfully piloted in 1Q16; expect to begin produc-on in 3Q Ø Trial campaign on another in 2Q16 or 3Q16
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SHR Expansion Update
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SHR D-‐Train Benefits
Ø D-‐Train in service – shown 6,000 bpd of throughput (50% over design) Ø Installed to meet pentane demand from: Ø Canadian oil sands (new customer demand expected to be ~10m gallons/year by
2017) Ø New polyethylene capacity being built in US expected to increase demand by 6-‐7
million gallons/year by 2020 Ø General global growth including Asia
Ø Protects our 70% pentane US market share Ø By 2019/2020 expect to sell 25 to 30 million addiOonal gallons of C5’s Ø Above the 53 million gallons sold in 2015
Ø Three producOon trains provide significantly more flexibility and reliability
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Trecora Chemical Specialty Waxes Segment
Trecora Chemical is a producer of polyethylene wax and wax deriva-ves with produc-on capabili-es beyond 40 million pounds per year.
§ 2015 Revenues: $23.7 Million
§ 78 Employees
§ 22 Acres in Pasadena, TX
Advantaged Business Development,
TransportaOon and Feedstock Supply
Chemical Complex Port of Houston Feedstock Supply
Trecora Chemical
Nitrogen ! Hydrogen ! Ethylene ! Steam !
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Trecora Chemical Progress
Ø Record Quarterly Wax Sales Volumes in Q1-‐16
Ø Wax Markets Ø Hot Melt Adhesives – major customer now buying on a regular basis Ø PVC Lubricants – tes-ng plant produced highest quality wax recently introduced Ø Coa-ngs (Road marking) – new customer started purchasing
Ø Custom Processing Ø Successful trials for two new customers Ø Finalized long term agreement with former spot customer
Ø TC HydrogenaOon/DisOllaOon Unit Ø $20 million; comple-on expected January 2017 Ø Doubles poten-al custom processing revenue Ø Add ~$6m/year in EBITDA; 3-‐4 year payback
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TC HydrogenaOon/DisOllaOon Project
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TC Plant Purchase from BASF
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Key Alributes of New Facility
Ø Planning first produc-on campaign in May/June 2016
Ø 6.5 acres surrounded by exis-ng TC facili-es Ø Produc-on equipment that expands TC’s high melt point separa-on and
forming capabili-es
Ø 25 tanks – some high pressure which can be used as reactors
Ø Various small vessels and condensers
Ø Micronizing and crystalliza-on equipment
Ø Rail and truck loading spots Ø Hot oil heater and two boilers Ø Waste water and electricity -e-‐ins already shared with TC
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Custom Processing Overview
Ø Many chemical manufacturers seek toll processing relaOonships to develop new products, drive costs down, and reduce internal assets Ø Anellotech partners for an innova-ve development project at SHR to produce
renewable chemicals from non-‐food biomass Ø Customers supply and maintain Otle to their feedstock
Ø Process feedstock into products based upon customer specificaOons
Ø Adding capabiliOes that are in short supply in the region
Ø Contractual take or pay basis with high gross and operaOng margins; high leverage once above break-‐even
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Financial Highlights – 1st Quarter 2016
Ø First quarter gross margin of 22.5%, up sequen-ally from 19.6% in the fourth quarter of 2015, down from 27.4% first quarter of 2015
Ø Opera-ng income of $6.1 million, up sequen-ally from $5.8 million in the fourth quarter of 2015, down from $9.7 million first quarter of 2015
Ø Adjusted EBITDA of $9.2 million, up sequen-ally from $8.6 million in the fourth quarter of 2015, down from $12.7 million first quarter of 2015
Ø Diluted EPS of $0.29, up sequen-ally from $0.05 in the fourth quarter of 2015, up from $0.23 in the first quarter of 2015
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1st Quarter 2016 Profitability Dynamics +/-‐
⇒ Prime product sales volume increased 4.0%
⇒ Feedstock costs con-nued to decline
⇒ Deferred revenue decreased by $2.1 million sequen-ally
⇐ Byproduct volume increased; prices fell well below feedstock costs
⇐ Increased sales to oil sands customer, at lower margins
⇐ Pricing pressure in petrochemical spot market
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AMAK Mine Developments
Ø First quarter results impacted by: Ø Seplement of contract with former operator of facility Ø Reduc-on of previously accrued opera-ng expenses ~$16.2 million
Ø Expect restart of copper and zinc mine in 4Q16 Ø Refurbishment and upgrades remain on schedule Ø Ore reserve update to be completed by January 2017
Ø ExploraOon at 10 km2 Guyan gold mining license well underway Ø Drilling is just over 20% complete – core analysis progressing Ø Will result in detailed mine plan in 3Q16 Ø Processing historic gold dumps at Guyan to start in 4Q16
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Investment Summary
Ø Undervalued specialty chemical company addressing expanding markets Ø Adjusted EBITDA of $47.3 million in 2015 Ø Inves-ng to expand produc-on capacity and profit poten-al; enabling 30 million
gallons/year of addi-onal pentane sales
Ø Niche, mission criOcal components for the chemical industry Ø US chemical industry planning ~$150 billion in capital investment over 10 years
Ø Enhanced profitability with expansion into higher margin businesses Trecora Chemical and Custom Processing
Ø InternaOonally compeOOve in high growth emerging markets Ø Sales into Canada, Middle East and Asia and expanding into other markets
Ø Aligned, proven management team that has executed on its core strategy
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Q&A
Thank You
Please visit our websites:
www.trecora.com
www.southhamptonr.com
www.TrecChem.com
www.amak.com.sa