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Trec
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TREC
“Natural Energy Resources You Can Trust”
Your Specialty Chemical Partner
January 2015
2. 2
Safe Harbor
Statements in this presentation that are not historical facts are forward looking
statements as defined in the Private Securities Litigation Reform Act of 1995. Forward
looking statements are based upon Management's belief, as well as, assumptions
made by and information currently available to Management. Because such
statements are based upon expectations 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
Securities and Exchange Commission, including Trecora Resources' Annual Reports on
Form 10-K for the year ended December 31, 2013, and the Company‘s subsequent
Quarterly Reports on Form 10-Q.
3. 3
TREC Snapshot
Share Price & Volume
Ticker (NYSE: TREC)
Stock Price1 $14.08
52 Week High / Low1 $15.61 / $9.72
Market Cap1 $341 M
Avg. Daily Volume
(3 month)1
68,119
Shares Outstanding 24.0 M
Float 19.2 M
Insider Ownership 24%
Total Debt2 9.2 M
Current Ratio2 2.9:1
1. All market statistics as of January 15, 2015
2. All balance sheet items as of September 30, 2014
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
Volume
StockPrice
Volume TREC Price
4. 4
Resource UpsideResource Upside
Trecora Focus
SHR
High-Purity Light
Hydrocarbons
C5
Silsbee, TX
TC
Specialty Olefin
Waxes
C2
Pasadena, TX
SHR/TC
Custom
Processing
Silsbee, TX
Pasadena, TX
Core Specialty ChemicalCore Specialty Chemical
AMAK
Zinc and Copper
Mine
35% Owner
Najran Province, KSA
• Valued at $138 mm (2011)
• IPO Scheduled Late 2016
• Significant operational
improvements underway
with newly installed
management team
90% Revenues 5% Revenues
5% Revenues
5. 5
South Hampton Resources:
Specialty Chemical Segment
SHR is an independent, petrochemical
manufacturer in southeast Texas, specializing in
manufacturing high purity petrochemical
hydrocarbons.
TTM Revenues: $252.3 Million (as of 3Q14)
TTM Adj. EBITDA: $26.1 Million (as of 3Q14)
190 Employees
80 Acres in Silsbee, TX
Leader in High Purity
Petrochemical
Hydrocarbons with
International Exposure
Dominant Player International Exposure Pipeline/Terminal Access
South Hampton
Resources
Natural Gas
Natural Gasoline
Rail/Truck
75%Market Share
TX
6. 6
SHR Products & Applications
Product:
Normal Pentane
Application:
Blowing Agent
Condensing
Agent
End Products:
Expandable
Polystyrene
(EPS) Cup Grade
/ Polyurethane
Insulation Foams
Polyethylene
(PE)
Product:
Isopentane
Application:
Expanding Agent
Condensing
Agent
Catalyst Carrier
End Products:
Foam Packaging
Polyethylene
(PE)
Catalyst used in
production of
Polyethylene
(PE) and
Polypropylene
(PP)
Product:
Normal Pentane
/ Isopentane
Blends (Pentane
Blends)
Application:
Agent used in
Blowing /
Expanding
End Products:
EPS Block and
Shape Foams,
Polyurethane
Insulation
Foams,
Extraction
Solvent
Product:
Normal Hexane
Application:
Carrier or
Diluents
Catalyst Carrier
End Products:
Polyethylene
(PE),
Polypropylene
(PP) and
Synthetic Rubber
(SR)
Catalyst used in
production of
PE, PP and SR
Product:
Other
Applications /
Processes
Application:
Geothermal,
Adhesives,
Elastomers,
Agricultural,
ROSE Units, and
Specialty Fuels
Product:
Isohexane
Application:
Carrier or
Diluents
Catalyst Carrier
End Products:
PE, PP, and SR
Catalyst used in
production of PE
and SR
9. 9
Trecora Chemical:
Specialty Waxes Segment
Trecora Chemical (fka SSI ChuseI) is a producer
of polyethylene wax and wax derivatives with
production capabilities beyond 40 million
pounds per year.
2013 Sales: $23.1 Million
2013 EBITDA: $6.6 Million
75 Employees
22 Acres in Pasadena, TX
Advantaged Business
Development,
Transportation and
Feedstock Supply
Chemical Complex Port of Houston Feedstock Supply
Trecora Chemical
Nitrogen
Hydrogen
Ethylene
Steam
10. 10
TC Financial Overview
Total Revenue Total EBITDA
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
2011 2012 2013
in$millions
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
2011 2012 2013
in$millions
CAGR
10%
CAGR
17%
Additional information and financials, including pro forma, were filed in Form 8-
K/A on December 10, 2014.
11. 11
TC Capacity & Utilization
Current permitted wax capacity of 40 million lbs./yr
Additional plant optimization and expansion
anticipated
Building to meet the needs of the market
oCapitalizing on the ethylene resurgence in the U.S
12. 12
Custom Processing – Business Models
SHR – Build and run dedicated equipment, long term contracts
TC – Flexible equipment – campaign then switch to new
product for next customer. Customers may be long term with
recurring campaigns or shorter term.
13. 13
Custom Processing Overview
Many chemical manufacturers seek toll processing
relationships to drive costs down, reduce internal assets and
focus more on core R&D/engineering processes.
Contractual take or pay basis with high gross and operating
margins
Customers supply and maintain title to their feedstock.
Process feedstock into products based upon customer
specifications
15. 15
Strategic Objectives: Trecora Resources
Create Near-Term Growth
Maximize utilization of current capacity
Expand Toll Processing customer base
Develop international business
Improve Profitability
Improve margins
Control costs
Integrate Trecora Chemical
Provide superior service
Produce consistent product
Position for Future Growth
“D” Train expansion for additional 4,000 barrels/day is underway
o Phased startup early 2015, full operation by Q4 2015
Strategic acquisitions to add new products / diversify customer base – done via TC
Additional custom process capacity at TC operational by Q4 2015.
16. 16
Enhancing the Revenue Mix
FOCUSING ON THE CORE SPECIALTY CHEMICAL BUSINESS
Trecora has diversified its revenue mix with a focus on growing
its core specialty chemical business while expanding operating
margins.
Historical Trecora EBITDA Margins >10%
TC Wax EBITDA Margins >20%
Custom Processing EBITDA Margins >30%
17. 17
2014 Financial Highlights
Revenue
3Q: up 26% to $76.9 million
YTD: up 27% to $215.6 million
Operating Income
3Q: up 35% to $8.8 million
YTD: up 41% to $20.6 million
Cash Provided by Operations
YTD: $18.3 million
Cash and equivalents as of 9/30/14: $13.9 million
18. 18
AMAK Mine Basics
Mining lease of approximately 44 square kilometers in Saudi Arabia
TREC has 35.25% ownership in AMAK
In operation and profitable since July 2012
New aligned management team is in place
Talc circuit being expanded, operable in 4th quarter- Quality, recovery improvement
Precious metals circuit being modified, operational late 2014- Gold and silver
recovery, improvement
IPO currently scheduled for late 2016 - Opportunity to monetize, determine value
19. 19
Value Proposition
Undervalued Specialty Chemical Company with Mining Upside
o TREC is undervalued relative to its peers at current valuation multiples
• Pro forma the Chusei acquisition ($27.3 Million Proforma ytd 9/30/14 Adjusted EBITDA); and
• Factoring in 35% equity ownership value for AMAK (Base $138 Million Equity Valuation Pre-IPO)
Manufacturer that Benefits in a Lower Commodity Pricing Environment
o With oil prices in a decline, feedstock costs are depressed and provide for greater margins
Niche, Mission Critical Processing Components for the Chemical Industry
o Highly specialized processing components of a growing chemical manufacturing industry
Internationally Competitive in High Growth Emerging Markets
o Record sales into Canada, Middle East and Asia and expanding into other markets
Aligned, Proven Management Team that has Executed on its Core Strategy
o Nick Carter – 25+ years in a leadership position; South Hampton Resources since 1977
o Simon Upfill-Brown – President of South Hampton Resources
o Peter Loggenberg, PhD – President of Trecora Chemical
22. 22
Appendix
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES(1)
(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a
substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements
prepared in accordance with GAAP.
09/30/14
(in thousands except ratio
Current assets 56,888$
Current liabilities 19,669
Working capital 37,219$
(current assets less current liabilities)
Current ratio 2.9
(current assets divided by current liabilities)
9/30/2014
Net income
$ 13,488
Effects of AMAK
687
Interest
1,805
Taxes
6,247
Depreciation
5,114
Adjusted EBITDA
$ 27,341
23. 23
SHR Penhex Capacity & Utilization
Capacity doubled in 2008 into two independent process units 6,000 B/D
feed total
Debottlenecked during 2013 and 2014 to current committed capacity of
7,000 B/D feed total
Capacity to be increased by 60% to 11,000 B/D feed total by YE 2015 with
addition of a third process train (approximately $30mm project)
Expected to periodically utilize capacity during 2014
Building to meet the needs of the market
o Shale gas has spawned capital investment by our customers
o Our goal is to keep the market satisfied
25. 25
TC: Specialty Waxes Segment
TC is a respected manufacturer of polyethylene waxes, polyols, resins and
custom processed specialty waxes.
TC has 4% market share of highly-fragmented market with great
opportunity to capture additional market share
Strategic location (Pasadena) provides for competitive advantages
Enjoy higher operating margins
TC provides specialty wax expertise and additional custom processing capabilities.
26. 26
Custom Processing Facilities
Dedicated Custom Processing
(Silsbee, TX)
• White Oils capacity 2,000
barrels/day
• Aromatic Oil capacity 500
barrels/ day
• Bio-jet demonstration unit
10,000 gallons/month
• Para-xylene demonstration unit
started up in September 2013
Multi-Purpose Custom
Processing
(Pasadena, TX)
• Fixed Bed Reactors
• Ceramic Line Vessels
• SS Vessels
• Steam Boilers
• Short-Path Distillation Unit
(WFE)
• Sandvik Pastillation Belts
• Buflovak Drum Flakers
27. 27
SHR is a specialty chemical manufacturer of pentanes, hexanes and blended
products.
SHR is known in the industry for high purity, consistent product and
unmatched customer service.
25%
25%13%
11%
26% Isopentane
Normal Pentane
Normal Hexane
Isohexane
Other/Byproducts
Approximate % of Revenue
SHR provides crucial processing components to the manufacturing sector.
South Hampton Resources:
Specialty Chemical Segment