TPC Group Inc. slide presentation

Forward-Looking Statements & Non-GAAP Financial Measures

This

presentation

may

contain

“forward-looking

statements”

within

the

meaning

the

securities

laws.

These

statements

include

assumptions,

expectations,

predictions,

intentions

beliefs

about

future

events,

particularly statements that may relate to future operating results, existing and expected competition, market

factors

that

may

impact

financial

performance,

and

plans

strategic

alternatives

future

expansion activities and capital expenditures. Although TPC Group believes that such statements are

based on reasonable assumptions, no assurance can be given that such statements will prove to have

been

correct.

number

factors

could

cause

actual

results

vary

materially

from

those

expressed

implied in any forward-looking statements, including risks and uncertainties such as volatility in the

petrochemicals industry, limitations on the Company’s access to capital, the effects of competition, leverage

and debt service, general economic conditions, litigation and governmental investigations, and

extensive

environmental,

health

and

safety

laws

and

regulations.

information

about

the

risks

and

uncertainties relating to TPC Group and the forward-looking statements are found in the Company’s SEC

filings, including the Transition Report on Form 10-K, which are available free of charge on the SEC’s

website at http://www.sec.gov

. TPC Group expressly disclaims any obligation to update any forward-

looking statements contained herein to reflect events or circumstances that may arise after the date of this

presentation.

This presentation may also include non-GAAP financial information. A reconciliation of non-GAAP financial

measures to the most directly comparable GAAP financial measures, as well as additional detail regarding

the utility of such non-GAAP financial information, is included in the Appendix.

Commitment to Technology, Development

•

Opening of new multi-million dollar TPC Technical Center in Houston

•

Exploring new opportunities for proprietary product and process

technologies

–

Highly reactive PIB (patented)

–

Multiple processing technologies (e.g. TPC Group Oxo-D

process)

–

Catalyst development and testing

•

Recent appointment of Senior Vice President -

Corporate Development

Past

avg.)

Present

(June

LTM)

Future

EBITDA ($MM)

$75

$158

2x-3x

EBITDA margin %

4.3%

6.8%

2x-3x

Total Assets

$819

$1,083

Shareholder Equity

$278

$305

TPC Group Transformation

Tactically-driven

“Me-to”

player

Narrow product slate

Toll-processing business

model

Strategically-driven

Market Leader

Broadened product slate

Services & Processing business

model

Driving a performance-based

culture

Operational excellence focus

Multiple revenue streams

Diverse business models

Full margin capture

Strong performance culture

ownership mentality

results driven

Fully utilized asset base

Past

Present

Future

Unique, Valuable Infrastructure

Crude C4: non-core “by-product”

processed for a range of critical

“building blocks”

for diverse market use

Logistics & Infrastructure

TPC

Logistics

Operations

TPC Purity

Products

Propylene

Producers

Ethylene/Mixed

Producers

Propylene

Derivative

Raffinates

and Fuels

35%

Butadiene

37%

Polyisobutylene

Butene-1

DIB and HPIB

Unique, Valuable Infrastructure

Houston

Baytown

Port Neches

Facility

Capacity:

Footprint:

Key

Attributes:

2.4B

lbs/yr

Mixed

240M

lbs/yr

PIB

lb/yr

Nonene

50M

lbs/yr

Tetramer

1.8B lbs/yr Mixed C4

257 Acres

133 Acres

154 Acres

Estimated replacement cost >$1.9B + value of idled assets

•

Extensive

pipeline

network

•

Substantial

storage

facilities

•

World-class

docking

and

rail

facilities

•

Terminaling

services

Market cap (6/30/11):

$626 million

Total cash:

$66 million

Net debt:

$282 million

Fully diluted shares:

16.2 million

Operating revenues:

$2,334 million

Net income:

$58 million

Earnings per fully diluted share:

$3.56

Adjusted EBITDA:

$158 million

ROIC

14%

Trailing 12m

(as of 6/30/11)

As of 6/30/11

EBITDA is a non-GAAP measure. See appendix for reconciliation of EBITDA to net income.

A Financial Platform for Growth

With a Business Model Based on Stable Core Margins

Feedstock

Supplies

TPC Processing

& Logistics

Services

Crude C4s from

Suppliers

Purchased Raw

Materials

Isobutylene

(IBL)

Propylene

Mixed

End Products

Margin Structure

Butadiene (BD)

Stable: processing

margin & service fees

Butylenes:

•

Butene-1

(B-1)

•

Fuel Components

Contained Isobutylene

Stable: prices &

costs tied to

gasoline

High Purity

Isobutylene &

Derivatives

Stable: indexed

pricing based on

butane

(“formula pricing”)

Stable: costs tied to

gasoline

Propylene

Derivatives

Stable: indexed, pricing

based on propylene

(“formula pricing”)

Attractive, Stable Margin Model—Illustrative Example

Butadiene (45%)

Supplier Price

Monthly Contract Price

$ (1.00/lb)

Extraction Fee

$ 0.04

Energy Fee

85%

Selling Price

Monthly Contract Price

$ 1.00/lb

Service Fee

$ 0.05

TPCG Value

Extraction Fee

$ 0.04

Energy Fee

85%

Service Fee

$ 0.05

Butylene (55%)

Supplier Price

% of Unleaded Regular Gasoline

Selling Price

% + of Unleaded Regular Gasoline

TPCG Value

+ of Unleaded Regular Gasoline

Performance Products

Supplier Price

% of Butane

Selling Price

% + of Butane

TPCG Value

+ of Butane

Key Takeaway:

Relatively stable unit margins

Cash flow generation throughout the cycle

Key Variable Sensitivities

Key Variable

Key Indicators

Directional

Significance

Operating leverage

•

Cracker rates

•

Cracker feedslates

•

Enabled by significant,

underutilized capacity

Fuel values

•

Unleaded gasoline

•

Gasoline-to-butane

spread

•

Margins positively

correlated to fuel values

BD price level

•

End-market demand

•

Continued tightness in

supply

•

Driven by timing between

crude purchase and finished

BD sale

•

One-time impact: profits

retained once prices

stabilize

•

Core margin unaffected by

BD price changes

Inherently Stable “Core”

Margins

•

Autos, fuel demand

Excellent Long-term Market Fundamentals

Global Mobility

Rising Living

Standards

Environmental

Regulations

Tires:

Performance

Fuel economy

Fuels & Lubricants:

Engine life

Engine performance

Industrial Products:

Surfactants

Adhesives

Demand Drivers

TPC Products

Representative

Macro Trends

Source: Lanxess

Source: Michelin

People Entering Middle Class

200

400

600

800

1000

1200

1400

1600

100

200

300

400

500

600

700

800

900

Cars per 1K people

200

400

600

800

1000

1200

1400

1600

1800

Brazil

India

China

BRIC

2000

2010e

(m people)

~800 Million people

Emissions reductions

2020e

Key Products in Structurally Short Supply

Causing shift from heavier (e.g. Naptha) to lighter (e.g. Ethane)

Ethylene Cracker Feedstocks

NA Ethylene Industry

now Globally

Competitive

Ethylene Production

now generates less Co-

Products, particularly

Butadiene

Structural shift in cracker feed stocks causing

critical product shortages in face of rising demand

% Ethane in Cracker Feedslate

B/E Ratio

Pounds of Butadiene for every 100 lbs of ethylene

Source: Hodson Report

Low-cost Ethane from NGLs resulting from Shale Drilling

7.8%

7.7%

6.7%

6.5%

6.2%

2007

2008

2009

2010

2011 ytd

Plentiful Natural Gas Liquids Create Feedstock Advantage

‘wet-gas’

plays are favored by drillers

NGL

prices

are

de-coupling

from

crude

oil

Forecast

NGL Market Dynamics:

•

U.S. chemical producers will

maximize favorable NGL’s

•

NGL stream is yielding higher

ethane, butane and propane

•

Butane: a key feedstock for

TPC’s products

Source: Platts, OPIS

22.2

23.6

26.3

28.1

32.7

34.1

36.1

2008

2009

2015

2020

2025

2030

2035

U.S. Natural Gas Plant Liquids

Production

(Million MMcf)

Source: EIA

0.00

50.00

100.00

150.00

200.00

250.00

NGL vs. Crude Oil

/ gal

$ / Barrel

Strategy Going Forward

Excellent Long-

Term Market

Fundamentals

Idled Assets

and Scalable

Infrastructure

Able to

Be Deployed

Key Products in

Structural Short

Supply

Cost-

Advantaged

Raw Materials

(NGLs) in

Plentiful

Supply

Solve long-term N.A. shortage of

butadiene utilizing idled

dehydro asset, proprietary

technology for on-purpose

production

Restart other idled dehydro

asset to provide lower-cost,

isobutylene feedstock for

Performance Products

Capitalize on cost-advantaged

NGL feedstocks to integrate

upstream and improve margins

Meet the Growing Demand for

On-Purpose Butadiene and Isobutylene

On-Purpose Butadiene Project

Restarting idled dehydro unit

Produce on-purpose butadiene from NGLs, capturing full margins

Ensure long-term security of supply of mission-critical product

Detailed engineering study to be completed by Q1 2012

Expected production of 600 million pounds of butadiene

Critical shortage of on-purpose BD facing relative to growing world

demand

Price decoupling between BD and crude oil = unique opportunity

100

150

200

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2009

2010

2011

U.S. Butadiene Price

Market

Opportunity

Project

Description

Status

On-Purpose Isobutylene Project

Received operating permit

Completed primary engineering study

Proceeding with detailed engineering and initial

construction/refurbishment

Restart other idled dehydro unit

Produce isobutylene from NGLs

Ensure feedstock security for growth

Expand margins through upstream integration

Critical feedstock for Performance Products and Fuels Products

businesses

Currently outsourcing majority of requirements, unable to

capitalize on NGL economics

Source: CDI

100

120

2007

2008

2009

2010

2011

2012

2013

2014

2015

Unleaded Premium minus i-Butane Spread

Market

Opportunity

Project

Description

Status

2011 Capex Guidance

(in millions)

2011 Base maintenance

$ 15

2011 New Lab

2011 Discretionary ROI

Engineering for Dehydro 1

2011 Capex Plan

$ 35

Potential Projects

Low Range

High Range

Dehydro 1 add’t spend

Dehydro 2 engineering

Total

$ 35

$ 50

Consistent through next few years

Improving infrastructure

Execute and replenish

Take advantage of NGL economics

SEC Disclosure Information

ADJUSTED

EBITDA

–

REVISION

PREVIOUSLY

REPORTED

AMOUNTS

6/30/2011

3/31/2011

12/31/2010

9/30/2010

6/30/2010

Adjusted EBITDA - as previously reported ($mm)

C4 Processing

15.7

23.8

26.1

Performance Products

9.2

14.6

17.2

Corporate

(5.9)

(5.3)

(7.8)

Total

19.0

33.1

35.5

Adjusted EBITDA - current definition ($mm)

C4 Processing

66.9

30.6

15.7

23.8

26.1

Performance Products

12.0

11.6

9.2

14.6

17.2

Corporate

(7.9)

(6.7)

(6.2)

(5.6)

(7.2)

Total

71.0

35.5

18.7

32.8

36.1

(Unaudited, in millions)

Quarter Ended

We calculate Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization (EBITDA), which is then adjusted to remove or add back certain

items. These items are identified below in the reconciliation of Adjusted EBITDA to Net Income (Loss) on Slide 39. Net Income (Loss) is the GAAP measure most

directly comparable to Adjusted EBITDA. As indicated in the table below, during the first quarter of 2011 we revised previously reported Adjusted EBITDA to no

longer remove the effect of non-cash stock-based compensation and unrealized gains and losses on derivative financial instruments, because they are recurring in

nature. Our calculation of Adjusted EBITDA may be different from the calculation used by other companies; therefore, it may not be comparable to other companies.

Financial Historical Trends

Volume, in thousands

Op. Margin, in thousands

Gross Profit %

Crude C4 Processing

Volume, in thousands

Op. Margin, in thousands

Gross Profit %

Performance Products

12.3%

9.3%

16.8%

11.7%

13.8%

2007

2008

2009

2010

2011 YTD

as of

6/30/11

25.5%

17.2%

19.3%

22.4%

17.4%

2007

2008

2009

2010

2011 YTD

as of

6/30/11

2007

2008

2009

2010

2011 YTD

as of

6/30/11

2007

2008

2009

2010

2011 YTD

as of

6/30/11

2,990

2,367

2,440

2,360

1,272

2007

2008

2009

2010

2011 YTD

as of

6/30/11

620

734

526

614

338

2007

2008

2009

2010

2011 YTD

as of

6/30/11

Selected Market Data

6/30/2011

3/31/2011

12/31/2010

9/30/2010

6/30/2010

End of Qtr BD Contract Price ($/lb) (1)

1.53

1.04

0.86

0.93

0.92

Unleaded

Gasoline

Qtr

Avg

USGC

($/gal) (2)

3.07

2.61

2.18

2.00

2.11

US Ethylene Industry Capacity Utilization (%) (3)

89.1

92.5

88.0

92.3

87.6

US BD Production (mm lbs) (3)

795

833

813

838

820

(1) Source: CMAI

(2) Source: Platts

(3) Source: Hodson

Quarter Ended

Selected Financial Data

6/30/2011

3/31/2011

12/31/2010

9/30/2010

6/30/2010

Sales Volumes (mm lbs) (1)

859.8

750.7

738.2

748.7

802.7

Sales Revenue ($mm)

792.9

555.6

486.1

499.4

531.8

Adjusted EBITDA ($mm)

C4 Processing

66.9

30.6

15.7

23.8

26.2

Performance Products

12.0

11.6

9.2

14.6

17.2

Corporate

(7.9)

(6.7)

(6.2)

(5.6)

(7.3)

Adjusted EBITDA (2)

71.0

35.5

18.7

32.8

36.1

Adjusted EBITDA per pound

0.08

0.05

0.03

0.04

Operating Segment Adjusted EBITDA per pound (3)

0.09

0.06

0.03

0.05

Quarter Ended

(Unaudited)

(1) Does not include tolling volume.

(2) Adjusted EBITDA as set by current definition.

(3) Adjusted EBITDA for the C4 Processing and Performance Products operating segments - i.e. total Adjusted EBITDA less Corporate.

6/30/2011

3/31/2011

12/31/2010

9/30/2010

6/30/2010

Net income (loss)

34.3

11.4

(0.7)

12.8

14.4

Income tax expense (benefit)

17.7

5.7

(1.6)

6.9

7.9

Interest expense, net

8.6

8.4

11.1

3.2

4.0

Depreciation and amortization

10.4

10.0

9.9

9.8

Adjusted EBITDA

71.0

35.5

18.7

32.8

36.1

Quarter Ended

(Unaudited, in millions)

Reconciliation of Adjusted EBITDA to Net Income

(*) Adjusted EBITDA is presented and discussed herein because management believes it enhances understanding by investors and lenders of the Company’s financial performance.

Adjusted EBITDA is not a measure computed in accordance with GAAP. Accordingly it does not represent cash flow from operations, nor is it intended to be presented herein as a

substitute for operating income or net income as indicators of the Company’s operating performance. Adjusted EBITDA is the primary performance measurement used by senior

management and our Board of Directors to evaluate operating results of, and to allocate capital resources between, our business segments. We calculate Adjusted EBITDA as

earnings before interest, taxes, depreciation and amortization (EBITDA), which is then adjusted to remove or add back certain items. The items removed or added back have

historically consisted of items we consider to be non-recurring in nature and which we believe distort comparability between periods. There were no such items identified in the

Reconciliations of Adjusted EBITDA to Net Income for the periods presented above. Our calculation of Adjusted EBITDA may be different from calculations used by other companies;

therefore, it may not be comparable to other companies.