Trecora Resources

Good day, and thank you for standing by. Welcome to the Tricora Resources Third Quarter 2021 Results Conference Call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Jeremy Heldman of the Equity Group. Please go ahead.

Thank you, operator. Good morning, everyone. Welcome to the Trocora Resources Third Quarter 2021 Earnings Conference Call. Presenting on our call today will be Pat Quarles, President and Chief Executive Officer, and Sami Ahmad, Chief Financial Officer. Christopher Groves, our Corporate Controller, will also be available for the question and answer session, which follows management's prepared remarks. Before we get started, I would like to review the safe harbor statement. 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 on management's beliefs and expectations only as of the date of this teleconference, November 4th, 2021. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks, as well as others, are discussed in greater detail in Chikora's filings with the SEC, including the company's most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued after the close of the financial markets yesterday afternoon. This webcast is accompanied by a slide presentation that is available in the investor section of the company's website, www.trecora.com. At this time, I'd like to turn the call over to Trecora's president and CEO, Pat Quarles.

Thank you, Jeremy, and good morning, everyone. As always, we appreciate your interest in Trecora and are happy that you can join our call this morning. We're pleased with our third quarter results. Overall, demand continues to be strong, and we expect it to remain so through the end through year end and into 2022. A consistent topic across the industry right now is the pervasive supply chain disruptions impacting companies. So I want to take a minute to discuss how they have impacted our company and the actions we have taken to mitigate them. The most acute impact has been on domestic trucking availability and costs. Turcora has long maintained its own trucking fleet, which delivers about two-thirds of our truck-based solvent customer demand. This capability allowed us to maintain our service levels to our customers in almost all instances during the quarter, as well as avoid much of the freight cost increases being felt across the industry. We were able to add additional trucks to our fleet in the quarter and will continue to grow this capability as we prepare for new contracted demand this year and into next year. Despite this advantage, we still experienced several impacts. Freight costs for the remaining third of our truck-based demand increased significantly. Delivery of feedstock for custom processing activities resulted in delays to realizing processing revenues. Exports of solvents were held back due to marine container and shipping availability. Similar to the second quarter of this year, we estimate these cost increases and delays reduce our adjusted EBITDA by about $1 million during the third quarter. There have been some positive impacts. We have had success throughout this year in increasing our wax prices. Our principal competitors in the market produce their products outside the U.S. The global supply chain constraints have limited their supply into the U.S., and we see this continuing to support further price increases in the fourth quarter and into 2022. For solvents, our third quarter volume benefited from the startup of a new pi ethylene plant in August. This is the first of three new PE plants starting up over the next year. We are contracted for most of that market growth. Overall, the increase in prime product demand in the quarter was driven by polystyrene and polyisofoams and synthetic rubber end uses. Oil sands was largely flat. As Sami will discuss, the dramatic increases we've seen for natural gasoline has impacted our fairly negotiated customer margins. Organic growth initiatives continue to be a focus as we target operational efficiencies and productivity improvements. We're also working to innovate with new products and expand our customer base. We estimate our organic growth initiatives will result in an incremental EBITDA benefit of more than $7 million this year. At the end of the third quarter, we had 10 projects focused on delivering new products or entering new markets, 16 projects focused on driving asset utilization, which do not require any significant capital investment, and five projects focused on improving productivity and reducing costs. Within the portfolio, we have a total of 31 active projects. Of these, 13 are in execution phase. We were asked last quarter to provide some more insight on the status of these projects. As you can see in slide nine of our earnings presentation today, nine of those projects are commercially executed and four are in final trials. During the third quarter, we had approximately $2.8 million of non-recurring expense associated with professional service and due diligence work related to a significant M&A opportunity. We ultimately determined not to pursue this opportunity because we concluded that it was unlikely to create shareholder value. For the first nine months of 2021, non-recurring expenses related to this opportunity were approximately $4 million. This work sits within the larger framework with our board of continually evaluating all avenues to create shareholder value and expect that work will continue. Now let me turn it over to Sammy to discuss our quarterly results in more detail.