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TREC  

Your  Specialty  Chemical  Partner  

17th  Annual  B.  Riley  Investor  Conference  Los  Angeles  May  26,  2016  

2  

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.  

3  

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  

 -­‐        

 20,000    

 40,000    

 60,000    

 80,000    

 100,000    

 120,000    

 140,000    

 160,000    

 180,000    

 200,000    

-­‐30.0%  

-­‐20.0%  

-­‐10.0%  

0.0%  

10.0%  

20.0%  

30.0%  

40.0%  

Volume  

%  Cha

nge  

 Volume     TREC   RUT  Index  

4  

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  

5  

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%  

   

6  

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  

7  

SHR  Blue  Chip  Customers  

8  

46.3   49.9   46.7  54.3  

63.6   67.1  

82.8   86.9  

0.0  

20.0  

40.0  

60.0  

80.0  

100.0  

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  

0.0  

10.0  

20.0  

30.0  

40.0  

50.0  

2008   2009   2010   2011   2012   2013   2014   2015  

in  $  M

illions  

CAGR 13.8%

9  

SHR  Products  &  ApplicaOons  

10  

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  

11  

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  

12  

SHR  Expansion  Update  

13  

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  

 

14  

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  !  

15  

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  

16  

TC  HydrogenaOon/DisOllaOon  Project  

17  

TC  Plant  Purchase  from  BASF  

18  

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  

19  

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  

20  

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  

 

21  

 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    

22  

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    

23  

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  

24  

Q&A  

Thank  You    

Please  visit  our  websites:    

www.trecora.com  

www.southhamptonr.com  

www.TrecChem.com  

www.amak.com.sa