trecora investor presentation 1014

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TREC “Natural Energy Resources You Can Trust” Your Specialty Chemical Partner October 2014

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Trecora investor presentation 1014

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Page 1: Trecora investor presentation 1014

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TREC

“Natural Energy Resources You Can Trust” Your Specialty Chemical Partner

October 2014

Page 2: Trecora investor presentation 1014

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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.

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TREC Snapshot

Share Price & Volume Ticker (NYSE: TREC)

Stock Price1 $11.98

52 Week High / Low1 $13.48 / $8.54

Market Cap1 $290 M

Avg. Daily Volume (3 month)1

50,726

Shares Outstanding 24.2 M

Float 19.1 M

Insider Ownership 20%

Total Debt1 10.0 M

Current Ratio2 3.3:1

1. All market statistics as of October 8, 2014 2. All balance sheet items as of June 30, 2014

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$0.00

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Volume

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k Pr

ice

Volume TREC Price

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Natural Gas Liquids: Key to U.S. Cost Advantage

Natural gas liquids, especially ethane, are primary feedstock for chemical-making in the U.S.

Due to vast new NGL supplies, U.S. ethane feedstock is selling at historically low prices

Huge NGL growth predicted; sustained opportunity for U.S. chemical industry

U.S. ranks slightly behind Middle East as the low cost producer

NGL production to double by 2020 Ethane supplies to quadruple by 2025

IHS Report: “America’s New Energy Future: The Unconventional Oil and Gas Revolution and the U.S. Economy – Volume 3: A Manufacturing Renaissance,” Sept. 2013

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US Chemical Industry Capital Investment: Incremental Due to Shale Gas

As a result of the natural gas boom in the US, the chemical industry has announced $100.2 billion in investment over the next 10 years.

Peak year for investment spending: 2016

Billions of 2012 Dollars

Source: ACC analysis

$0

$5

$10

$15

$20

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

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South Hampton Resources: Specialty Chemical Segment

South Hampton Resources – processing facility in Silsbee, Texas with ~175 employees; marketing and sales office in Sugar Land, Texas

75% market share in U.S. for pentanes for key industrial and commercial product manufacturers

Stable customer base of predominantly Fortune 500 players

Strong barriers to market entry o Only one competitor currently

o Limited highly specialized market

o High capital cost to entry

o Extended marketing effort required

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South Hampton Resources (“SHR”) is a specialty chemical manufacturer of pentanes, hexanes and blended products.

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

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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

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SHR Financial Overview

139.1

199.5 222.9

236.2

0

50.0

100.0

150.0

200.0

250.0

2010 2011 2012 2013

in $

mill

ions

Total Revenue

8.2

16.9

20.9

23.8

0

5

10

15

20

25

2010 2011 2012 2013

in $

mill

ions

Total Adj. EBITDA

46.7 54.3

65.6

85.7

0.0

20.0

40.0

60.0

80.0

100.0

2010 2011 2012 2013

in m

illio

ns o

f gal

lons

Total Volumes Sold

CAGR 19%

CAGR 43%

CAGR 22%

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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

oShale Gas has spawned capital investment by our customers

oOur goal is to keep the market satisfied

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SSI Chusei Acquisition: Specialty Waxes Segment

SSI Chusei – processing facility in Pasadena, Texas with ~75 employees; in-house marketing and sales office

Low cost abundant feedstock with ethylene derivative

Complementary customer base of predominantly Fortune 500 players

Unique proximity to feedstock supply (hydrogen, nitrogen, steam, ethylene)

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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%

Chusei Wax EBITDA Margins >20%

Custom Processing EBITDA Margins >30%

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SSI Chusei: Specialty Waxes Segment

SSI Chusei (“Chusei”) respected manufacturer of polyethylene waxes, polyols, resins and custom processed specialty waxes.

Chusei has 4% market share of highly-fragmented market with

great opportunity to capture additional market share

Strategic location (Pasadena, TX) provides for competitive advantages

Enjoy higher operating margins

Chusei provides specialty wax expertise and additional custom processing capabilities.

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Chusei Financial Overview

Total Revenue Total EBITDA

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

2011 2012 2013

in $

mill

ions

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

2011 2012 2013

in $

mill

ions

CAGR 10%

CAGR 17%

Additional information and financials, including the pro forma, will be included in the to be filed 8-K.

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Chusei Products & Applications

Products: Polyethylene Waxes

Oxidized Waxes

Polypropylene Waxes

Wax Blends

Applications: Flow Modifiers

Nucleating Agents

Anti-blocking Agents

Mold Release Agents

Heat Resistance

Release Agents

Improved Slip

Characteristics

Improved Rub Resistance

Matting Effects

Scratch Resistance

End Products: PVC

Toner

Hot Melt Adhesives

Emulsions

Rubber Compounding

Coating

Blender

Asphalt Roads

Process Aids

Molds

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Chusei Capacity & Utilization

Current permitted capacity of 40,000,000 LBS/Y.

Additional plant organization and expansion

anticipated

Building to meet the needs of the market

oCapitalizing on the ethylene resurgence in the U.S

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Custom Processing – Business Models

South Hampton Resources – Build and run dedicated equipment, long term contracts

Trecora Chemical – Flexible equipment – campaign then switch to new product for next customer. Customers may be long term with recurring campaigns or shorter term.

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Custom Processing Overview

Large 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

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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

Page 21: Trecora investor presentation 1014

Strategy & Execution

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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

Position for Future Growth “D” Train permit issued for additional 4,000 barrels/day

o Phased startup early 2015, full operation by Q4 2015 Strategic acquisitions to add new products / diversify customer base – done via Trecora

Chemical Add additional custom process capacity at Chusei (Trecora Chemical)

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Investment Highlights U. S. shale gas expansion will produce

a) Plentiful, low priced, feedstock supply b) Expansion of domestic customer base

Robust sales pipeline and stable customer base

High-margin, growth oriented business o Capacity expansion o Margin expansion o Market share expansion

Proven, experienced management team that have demonstrated their ability to execute

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AMAK Mine Basics

Mining lease are 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

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AMAK Mining Particulars Year-to-Date

Description 12/31/2013Running time, hours 7,637.3 Mill throughput, DMT 699,316 Processing rate, DMT/hour 91.6 Raw ore grade

Copper 1.48%Zinc 3.19%

Concentrate quantity, DMTCopper 35,140 Zinc 33,460

Concentrate gradeCopper 25.20%Zinc 49.80%

RecoveryCopper 85.70%Zinc 74.60%

Shipments, wmtCopper 39,760 Zinc 42,254

Cash Cost (~$/tonne ore) 60$

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Management Team Nicholas N. Carter - President, CEO and Director: Over 30 years of petrochemical operating

experience with South Hampton -involved with TREC for the last seven years. Has a BBA degree in Accounting from Lamar University.

Simon Upfill-Brown – President, South Hampton Resources and Director: Has over 20 years in the Chemical Industry. Has a BS in Mathematical Statistics and Chemistry and an MBA from Stanford Graduate School of Business.

Peter Loggenberg, PhD – President, SSI Chusei: Over 25 years of experience in the chemical industry – with over 15 years at C-level. Has a B.Sc. in Chemistry and Mathematics, B.Sc. (Hons) in Chemistry, M.Sc. in Physical Chemistry and a PhD in Chemistry (Catalysis).

Connie Cook – CFO, Secretary, Treasurer : Has served South Hampton for over 20 years, with a BBA degree in Accounting Lamar University and is a CPA.

Ron Franklin – VP Manufacturing: Has a BS in Electrical Engineering and a Masters in Engineering Management with 30+ years of petrochemical experience.

Mark Williamson – VP Marketing: Has a BBA degree in Marketing and has been with South Hampton over 25 years.

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Q&A

Thank you

Please visit our websites:

www.trecora.com

www.southhamptonr.com

www.ssichusei.com

www.amak.com.sa