SYNTROLEUM CORPORATION:

November 12, 2012/2:00 p.m. EST

SPEAKERS

Karen Power – Senior Vice President and Principal Financial Officer
Edward Roth – President and Chief Executive Officer

ANALYSTS

Shawn Severson – JMP Securities
Robert Wagner – Advanced Asset Management Advisors
Jerry McDonald – McDonald and McDonald
Raphael Fong – JMP Securities

PRESENTATION

Before we begin our remarks, I would like to remind everyone that during this call we will make certain forward-looking statements, as well as use historical information. Words such as believe, estimate, expect, intend, plan, anticipate, could or should are intended to identify forward-looking statements. Although Syntroleum believes that expectations reflected in these forward-looking statements are reasonable, these statements involve risks and uncertainties. Future results may differ materially from those projected in these forward-looking statements. You are encouraged to refer to our SEC filings, including our most recent annual report on Form 10-K for a full disclosure of these risks and uncertainties.

For the nine-months ended September 30, 2012, the company reported operating income of $10 million resulting from total revenues of $16.4 million and operating expenses of $6.4 million. Revenues are from engineering services and royalties from Dynamic Fuels. The company recognized $9 million of unearned revenue related to expired license agreements.

We report Dynamic Fuels on a three month lag, and the loss reflected in our statement is for the nine month period ended June 30, 2012. We reported a loss from Dynamic Fuels of $5.7 million during this nine month period. This compares to a loss of $12.3 million for the nine months ended June 30, 2011.

During the nine months ended June 30, 2012 the plant produced 26.5 million gallons of renewable fuels compared to production of 14 million gallons during the nine months ended June 30, 2011, an 89% increase. For the three months ended Sept 30, 2012, Syntroleum’s net loss was $1.0 million or $0.01 per share, compared to a net loss of $4.6 million or $0.05 per share for the three months ended September 30, 2011.

For the nine months ended September 30, 2012, Syntroleum had net income of $4 million or $0.04 per share compared to a net loss of $14.0 million or $0.16 per share for the corresponding period in 2011. As of September 30, 2012 Syntroleum’s available cash was $17.6 million.

On June 8, 2012, we received a NASDAQ notification letter relating to the $1 per share minimum bid price listing requirement. The initial 180 day compliance period expires on December 5, 2012. On October 30, 2012, we sent a request to NASDAQ and confirmed receipt requesting an additional 180 day compliance period to meet this requirement. Except for the $1 per share minimum bid price we meet the listing requirements for the NASDAQ capital market.

On December 6, the NASDAQ will review our status and determine if the additional compliance period will be granted. We expect the request to be granted, but if it is not we intend to trigger the NASDAQ internals appeal process. This should give us sufficient time to affect a reverse split, which has been approved by our shareholders, to get us into compliance.

Now I will turn the call over to Gary Roth.

In addition, the hydro compressor and solvent recycle pump were available 96% and 94%, respectively, during the quarter ended September 30, 2012. This compares to a 90% hydrogen compressor and 84% solvent recycle pump availability for the three months ended June 30.

We began a routine turnaround on October 25. During this time, Dynamic Fuels plans to change our catalyst material and perform routine periodic maintenance. In addition, we have completed installation of the feedstock pre-treatment upgrades, and commissioning will begin this week. Dynamic Fuels’ previous turnaround was completed in April 2012.

For the three months ended September 30, 2012, Dynamic Fuels had an operating loss of $0.71 per gallon and an operating cash loss of $0.59 per gallon, while it produced 10.6 million gallons. This compares to the three months ended June 30, 2012 where Dynamic Fuels had a net operating loss of $1 a gallon and an operating cash loss of $0.72 per gallon and produced 6.3 million gallons.

For the quarter ended September 30, 2012, the plant ran at 56% of designed capacity. We experienced a total of 51 days at full rates. We were down a total of 5 days due to Hurricane Isaac, 16 days due to transitions from shutdown and startup and 20 days due to mechanical issues related to the heat exchanger bundle and hydrogen compressor lubrication blocks.

For the quarter ended September 30, 2012 netback diesel prices were $4.73 per gallon compared to OPIS Gulf Coast SME market prices of $4.54 per gallon and OPIS full RIN values of $4.89 per gallon. We define full RIN value as ULSD Gulf Coast price plus 1.7 times RIN price.

Average blended revenue per gallon in the quarter ended September 30, 2012 was $3.95 per gallon compared to $3.78 a gallon in the quarter ended June 30, 2012, excluding military and jet fuel sales. We continue to expand our fleet customers. In addition to Norfolk Southern and Enterprise Rent-A-Car, we sold renewable diesel to two additional railroads, a large national retailer and a national chain of tractor-trailer travel ....

Our weighted average feedstock costs for the three months ended September 30 was $0.47 per pound and for the quarter ended June 30 was $0.51 per pound. For the three months ended September 30, 2012 100% of our feedstock was procured from third-party suppliers compared to 92% for the quarter ended June 2012.

For 2012, the advanced biofuel mandate consists of two billion RINs comprised of 1.5 billion D4 RINs, or approximately one billion gallons of biomass diesel and 500 million D5 advanced biofuel RINs. D4 RINs can be used to substitute for D5 RINs; however, D5 RINs cannot be used for D4 RINS.

Per the EPA, through September 2012, approximately 90% of the one billion gallon 2012 biomass-based diesel mandate had been produced. Obligated parties can carry over 20% of their current year annual requirements from the prior year. EPA data indicate approximately 170 million gallons of 2011 D4 production are expected to be carried over into 2012. Taking the carryover gallons into account, approximately 108% of the 2012 mandate was fulfilled through the first nine months of this year.

When we look at the combined advanced biofuel mandate, the results are similar. Through September, the advanced biofuel mandate was 84% fulfilled, and when 2011 carryover volumes were taken into account 99% of the mandate had been fulfilled. As a result, RIN prices, which averaged $1.28 for the first nine months of 2012, have averaged $0.55 from October through November 7; a 57% decrease. At one point, RIN prices fell 58% from $1 on September 17 to a low of $0.42 on October 10, a period of 17 days.

Current RIN prices have stabilized in the $0.50 per RIN rate. During the first nine months of 2012, Gulf Coast petroleum diesel prices averaged $3.06 a gallon, and it averaged $3.11 per gallon from October through November 7.

With respect to feedstock prices, yellow grease and edible corn oil, our target feedstocks, averaged $0.40 per pound for the first nine months of 2012 and $0.35 per pound October to-date. These feedstock currently average $0.31 per pound on the market. During the same time period, September 17 to October 10, when RIN prices fell 58%, our target feedstocks remained relatively flat falling only 4% from $0.4025 per pound to $0.385 per pound. In summary, ULSD and RIN values fell 23% from the first nine months of 2012 to October through November time period, while feedstock prices fell 12%.

On September 14, the EPA finalized the 2013 mandate for biomass diesel at 1.28 billion gallons, a 28% increase over 2012. While current RIN prices make industry operating conditions difficult, we expect that the higher mandate in the new year to improve the economics of the industry, or the mandated gallons will not be made. However, one of the lessons learned in 2012 where production is expected to exceed mandated levels we may see a pattern of higher levels of RIN prices in production in the first nine months of the year and lower RIN prices in production will last three months of the year.

In addition, now that the election is over, Dynamic Fuels is cautiously optimistic that Congress will reinstate the dollar per gallon blenders’ tax credit for 2013 retroactive to 2012. Given how fast RIN prices came to decline, we believe the dollar can provide a buffer for biofuel prices. Retroactive reinstatement would mean that Dynamic Fuels will receive approximately $23 million for gallons produced in 2012.

We continue to progress our renewable phase change material project in conjunction with the Department of Energy. We have completed gathering summer performance data with Oak Ridge National Laboratories, which show a 20% to 40% reduction in peak cooling loads, averaging 33% reduction. We saw an overall average energy savings of 12.7% with the use of phase change material. We have demonstrated the production of phase change material encapsulating pellets and sheet form, both utilizing standard commercial injection molding equipment. We have supplied our intended commercial offerings to three potential end users for testing.

Thank you for your attendance today. We will now open the call up for questions.

So we are progressing those in our normal course of business. We think the economics continue to look very good. The fuels are very much like our fuels, the Dynamic Fuels, which has had great market acceptance. So that just carries on in our normal course of business.

Then the other question would be on over-promise. Nobody wants you to pinpoint an exact amount, but what percentage do you think this new pre-treatment will increase our production rate?

So we changed out the heat exchanger. We have told you that because of contaminants in the production we have had to make some metallurgical change. We have changed one more out in this run time. We did have problems with the compressor block, the lubricating block. In the manual we were advised there was 40,000 hours between run times. It turns out that that block is going to have to be in annualized maintenance. Once we replaced it the plant has run well.

The other centrifuges, we believe will bring us up to full rates and maintain those full rates. We have one other item, we have advised that we have to buy, and that’s the solvent recycle pump. It has been procured. We expect a June, July delivery for that pump and that’s the last major item that we see to effect the design on the plant.