Trecora Resources (the “Company”) was incorporated in the State of
Delaware in 1967. The Company’s principal business activities are the manufacturing
of various specialty petrochemical products and synthetic waxes and the provision
of custom processing services. Unless the context requires otherwise, references
to “we,” “us,” “our,” and the “Company”
are intended to mean consolidated Trecora Resources and its subsidiaries.
This document includes the following abbreviations:
TREC – Trecora Resources
TOCCO – Texas Oil & Chemical Co. II, Inc. – Wholly owned subsidiary
of TREC and parent of SHR and TC
SHR – South Hampton Resources, Inc. – Petrochemical segment and
parent of GSPL
GSPL – Gulf State Pipe Line Co, Inc. – Pipeline support for the
petrochemical segment
TC – Trecora Chemical, Inc. – Specialty wax segment
AMAK – Al Masane Al Kobra Mining Company – Mining equity investment
– 33% ownership
PEVM – Pioche Ely Valley Mines, Inc. – Inactive mine - 55% ownership
Acquisition – October 1, 2014, purchase of TC
Our specialty petrochemical products segment is conducted through SHR, a Texas
corporation. SHR owns and operates a specialty petrochemical facility near Silsbee,
Texas which produces high purity hydrocarbons and other petroleum based products
including isopentane, normal pentane, isohexane and hexane. These products are
used in the production of polyethylene, packaging, polypropylene, expandable
polystyrene, poly-iso/urethane foams, crude oil from the Canadian tar sands,
and in the catalyst support industry. Our petrochemical products are typically
transported to customers by rail car, tank truck, iso-container, and by ship.
SHR owns all of the capital stock of GSPL, a Texas corporation, which owns and
operates pipelines that connect the SHR facility to a natural gas line, to SHR’s
truck and rail loading terminal and to a major petroleum products pipeline owned
by an unaffiliated third party. SHR also provides custom processing services.
Our specialty synthetic wax segment is conducted through TC, a Texas corporation,
located in Pasadena, Texas which produces specialty polyethylene and poly alpha
olefin waxes and provides custom processing services. The specialty polyethylene
waxes are used in markets from paints and inks to adhesives, coatings, and PVC
lubricants. The highly specialized synthetic poly alpha olefin waxes are used
in applications such as toner in printers and as additives for candles providing
rigidity and retention of fragrances. These waxes are sold in solid form as
pastilles or, for large adhesive companies, in bulk liquid form.
SHR’s specialty petrochemical facility is approximately 30 miles north
of Beaumont and 90 miles east of Houston. The facility consists of eight operating
units which, while interconnected, make distinct products through differing
processes: (i) a Penhex Unit; (ii) a Reformer Unit; (iii) a Cyclo-pentane Unit;
(iv) an Aromax® Unit; (v) an Aromatics Hydrogenation Unit; (vi) a White
Oil Fractionation Unit; (vii) a Hydrocarbon Processing Demonstration Unit and
(viii) a P-Xylene Unit. All of these units are currently in operation.
The Penhex Unit currently has the permitted capacity to process approximately
11,000 barrels per day of fresh feed with the Reformer Unit, the Aromax®
Unit, and the Cyclo-Pentane Unit further processing streams produced by the
Penhex Unit. The Aromatics Hydrogenation Unit has a capacity of approximately
400 barrels per day, and the White Oils Fractionation Unit has a capacity of
approximately 3,000 barrels per day. The Hydrocarbon Processing Demonstration
Unit has a capacity of approximately 300 gallons per day. The P-Xylene Unit
has a capacity of approximately 20,000 pounds per year. The facility generally
consists of equipment commonly found in most petrochemical facilities such as
fractionation towers and hydrogen treaters except the facility is adapted to
produce specialized products that are high purity and very consistent with precise
specifications that are utilized in the petrochemical industry as solvents,
additives, blowing agents and cooling agents. We produce eight distinct product
streams and market several combinations of blends as needed in various customer
applications. We do not produce motor fuel products or any other commodity type
products commonly sold directly to retail consumers or outlets.
The Reformer and Aromax® Units are operated as needed to support the Penhex
and Cyclo-pentane Units. Consequently, utilization rates of these units are
driven by production from the Penhex Unit. Operating utilization rates are affected
by product demand, raw material composition, mechanical integrity, and unforeseen
natural occurrences, such as weather events. The nature of the petrochemical
process demands periodic shut-downs for de-coking and other mechanical repairs.
The Aromatics Hydrogenation Unit, White Oils Fractionation Unit, Hydrocarbon
Processing Demonstration Unit and P-Xylene Unit are operated as independent
and completely segregated processes. These units are dedicated to the needs
of three different toll processing customers. The customers supply and maintain
title to the feedstock, we process the feedstock into products based upon customer
specifications, and the customers market the products.
In support of the petrochemical operation, we own approximately 100 storage
tanks with total capacity approaching 233,000 barrels, and 127 acres of land
at the plant site, 92 acres of which are developed. We also own a truck and
railroad loading terminal consisting of storage tanks, four rail spurs, and
truck and tank car loading facilities on approximately 55 acres of which 25
acres are developed.
We obtain our feedstock requirements from a sole supplier. The agreement is
primarily a logistics convenience. The supplier buys or contracts for material
and utilizes their tank and pipeline connections to transport into our pipeline.
The supplier’s revenue above feed cost is primarily related to the cost
and operation of the tank, pipelines, and equipment. A contract was signed in
August 2015 with a seven year term with subsequent one year renewals unless
cancelled by either party with 180 days’ notice. In 2015 a pipeline connection
to the supplier’s dock was added to give alternative means of receiving
feedstock. Prior to this addition, all feedstock came from Mont Belvieu, Texas.