Goldman Sachs Cyclical Conference May 22nd 2002 - PowerPoint PPT Presentation

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Goldman Sachs Cyclical Conference May 22nd 2002

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Goldman Sachs. Cyclical Conference. May 22nd. 2002. Statements in this presentation ... These forward-looking statements are just predictions or expectations and are ... – PowerPoint PPT presentation

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Title: Goldman Sachs Cyclical Conference May 22nd 2002


1
Goldman SachsCyclical ConferenceMay 22nd2002


2
Safe Harbor Language
Statements in this presentation relating to
matters that are not historical facts are
forward-looking statements. These forward-looking
statements are just predictions or expectations
and are subject to risks and uncertainties.
Actual results could differ materially, based on
factors including but not limited to future
global economic conditions, further increases in
raw material and/or energy costs, access to
capital markets, industry production capacity and
operating rates, the supply/demand balance for
the products produced by the Company and its
joint ventures, competitive products and pricing
pressures, technological developments, changes in
governmental regulations and other risk factors.
For more detailed information about the factors
that could cause our actual results to differ
materially, please refer to Lyondell Chemical
Company's Annual Report on Form 10-K for the year
ended December 31, 2001, Lyondells Quarterly
Report on Form 10-Q for the quarter ended March
31, 2002, and the proxy statement that Lyondell
will file with the SEC with respect to its
special meeting of shareholders relating to the
transactions with Occidental.
Page 2
3
Investment Rationale
  • High quality assets with major market positions
  • Differential earnings leverage to cyclical
    improvement
  • Targeted 1 billion debt reduction at Lyondell
    further enhances earnings and strengthens capital
    structure

4
Lyondell Operates in 3 Major Businesses
  • Lyondell Chemical Company - Intermediate
    Chemicals and Derivatives
  • Worlds leading producer of PO and derivatives
  • 100 Ownership
  • Equistar - Petrochemicals and Polymers
  • A leading North American producer of ethylene,
    propylene and polyethylene
  • Low cost position based on feedstock flexibility
    and scale
  • 41 Ownership
  • LCR - Refining
  • Unique capability to refine heavy crude oils
  • Contractually stable business strong cash flow
    generator
  • 58.75 Ownership

5
Lyondell is a balanced portfolio
6
Our Beliefs in the Drivers of Success Remain
Constant
  • Sustainable Competitive Advantages
  • Technology
  • Market Position
  • Low Cost Production
  • Scale
  • Breadth and Depth of Product Offering
  • Global Reach
  • Capital Market Liquidity

7
Our actions have created a strong foundation
  • Assets under management increased four fold
    from 3 billion to more than 14 billion
  • Extended the breadth of our market offering from
    Olefins Polyolefins to POD, Styrene and MTBE
  • Established a global presence
  • Unified components of four companies

8
Solid results through prudent management
  • Major fixed cost reductions in all areas of
    company
  • More than 400 million of cash from working
    capital at Lyondell and Equistar in 2001
  • Disciplined capital expenditures
  • Safety world class performance

9
ICD Provides Stability Growth
Global PO Capacity Share


14 Billion Lbs
7.4 Billion Lbs
2005
1990
Source SRl
10
LCR Important Cash Generator
Improved Reliability and Crude Deliveries Drive
Performance

4Q01 Scheduled maintenance turnaround
11
Heavy feedstock advantage correlated to ethylene
cycle
Equistar Capability
Liquid Cracking Variable Cost Advantage
NGL
37
Ethane - Light Naphtha Cost of Ethylene Spread
8
Prior 15 Yr Average
Liquid
7
63
6
5
N. American Industry
4
/lb ethylene
(ex. Equistar)
Liquid
3
22
2
1
0
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
NGL
Source ChemData,
78
Source CMAI and Lyondell.
12
Significant Cash Generation in Up-Cycle
Cycle EBITDA Potential
1995 ChemData/CMAI Margins for Ethylene,
Polyethylene and Styrene applied to current
infrastructure
13
Benefits of de-leveraging
  • 1 billion debt reduction target at Lyondell
  • at constant Enterprise value
  • Debt to Enterprise Value ratio impact
  • Before 66
  • After 48
  • Debt reduction provides
  • 0.40/share after tax earnings increase from
    interest cost reduction
  • Potential 6.50/share benefit from debt reduction

Enterprise Value Lyondell net debt market
capitalization
14
No grass roots ethylene capacity additions 02-05
Ethylene in North America
Annual Demand Growth Rate 1995 - 99
4.3 2000 - 01 (3.4) 2002 - 05
5.9
Supply
Billion Lbs
Operating Rate
Demand
Operating Rate
Source CMAI / Lyondell
15
Trough conditions continue . . . but business
is improving
  • Ethylene
  • CMAI reports four month settlement up 4 cts/lb
  • 1Q02 Equistar Petrochemical volumes 6.5 higher
    than 4Q01
  • Propylene
  • April up 2 cts/lb
  • May/June ChemData projects 3 cts/lb over April
  • Polyolefins
  • ChemData estimates April up 5 cts/lb over January
  • Equistar 1Q02 Polymer volumes increased 3 from
    4Q01
  • Styrene
  • ChemData estimates April up 5 cts/lb over March
  • Lyondell 1Q02 volumes largely unchanged from 4Q01
  • POD
  • April 1 TDI increase announced of 15 cts/lb
  • POD 1Q02 volumes increased 6 from 4Q01 level

16
A balance of growth cash generation
2001 Proportional EBITDA 738 million
Pro Forma Proportional EBITDA on 1995
Margins 2,200 million
17
Investment Rationale
  • High quality assets with major market positions
  • Differential earnings leverage to cyclical
    improvement
  • Targeted 1 billion debt reduction at Lyondell
    further enhances earnings and strengthens capital
    structure
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