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Solid Strategy, Confident Execution 14th Annual Smith Barney Chemical Conference December 2, 2003 Da

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Title: Solid Strategy, Confident Execution 14th Annual Smith Barney Chemical Conference December 2, 2003 Da


1
Solid Strategy, Confident Execution 14th Annual
Smith Barney Chemical Conference December 2,
2003 Dan F. Smith President and CEO

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 the cyclical
nature of the chemical and refining industries
availability, cost and volatility of raw
materials and utilities governmental regulatory
actions and political unrest global economic
conditions industry production capacity and
operating rates the supply/demand balance for
Lyondell's and its joint ventures' products
competitive products and pricing pressures
access to capital markets and technological
developments 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 Companys
Annual Report on Form 10-K for the year ended
December 31, 2002, filed in March 2003, and
Lyondells Quarterly Report on Form 10-Q, which
was filed in November 2003. Reconciliations of
GAAP financial measures to non-GAAP financial
measures are provided at the end of this
presentation.
3
Lyondell Has Built a Balanced Portfolio
Lyondell
Growth International Presence -- A leading
global producer of PO and derivatives -- Process
technology strength
ICD
Cash Generation -- Unique capability to refine
heavy crude oils -- Contractually stable
business strong cash flow generator
LCR
Commodity Leverage -- A leading North American
producer of ethylene, propylene and
polyethylene -- Low cost position based on
feedstock flexibility and scale
Equistar
4
Significant Integration Exists Among the
Operating Entities and With Our Partners
5
Leading Product Positions Create Significant
Earnings Leverage
Pre-Tax Leverage (?1/unit)
1
1
Product
Annual Capacity
Capacity Position
Intermediate Chemicals and Derivatives
2
st
Propylene Oxide
(
lbs)
3.9 billion
1
in North America
20MM
nd
2
in the world
st
Styrene Monomer (
lbs)
3.7 billion
1
in North America
14MM
rd
3
in the world
st
MTBE (bbl/day)
58,500
1
in North America
94MM
st
1
in the world
Equistar
nd
Ethylene (
lbs)
11.6 billion
2
in North America
116MM
th
5
in the world
3
nd
Propylene (
lbs)
5.0 billion
2
in North America
50MM
th
6
in the world
rd
Polyethylene (
lbs)
5.7 billion
3
in North America
57MM
th
4
in the world
1 Source LYO capacities as of Jan 2003, CMAI 2
Includes 1.5 billion pounds that represents
Bayers share under the PO Joint Venture and 385
million pounds or 100 of the capacity of Nihon
Oxirane 3 Does not include refinery-grade
material or production from the product
flexibility unit at Equistars Channelview
facility. 4 Based on 1/gal change
6
Lyondell and Equistar Products Serve a Broad Mix
of End Users
ETHYLENE
PROPYLENE OXIDE
7
There is a Growing Consensus that the Global
Economy is Emerging from a Difficult Period
Global GDP
(Percent change in real GDP)
Source Global Insights
8
The US Economy is Beginning to Benefit from
Economic Stimulus
9
A Brief Portfolio Review
  • ICD
  • Propylene Oxide (PO) and Derivatives
  • Styrene
  • MTBE
  • LCR
  • Gasoline
  • Heating oil
  • Jet fuel
  • Equistar
  • Ethylene
  • Polyethylene

10
The PO Industry Has Absorbed a Period of Capacity
Additions
Demand at 4.4
Source SRI / Lyondell
11
Global Styrene Supply/Demand Balances Are
Relatively Tight
Source CMAI 2003 World Styrene Analysis
12
MTBE is a Source of Premium Clean Octane to the
19-20 MMB/D Global Gasoline Market
2002 CAPACITY
600
2002 DEMAND
2004 Est. Demand
U.S. Dehydro
500
CA
Dehydro Non -US
2002 SUPPLY
400
2002 DEMAND
MB/D
300
U.S.
Imports
Refinery /Olefins
CA
U.S. Dehydro
200
Non- U.S.
U.S.
Refinery /Olefins
100
PO
PO
US Market Balance
Global Supply/Demand
Source Dewitt
13
Component Premiums Above Gasoline
MTBE
Alkylate
Source Platts
14
Steps Toward Increased ICD Cash Flow
MM/Yr
Potential Cash Improvement From 1st Half, 2003

600
500
400
300
200
100
1st Half
MTBE Resolution
Convert PO/SM Purchases on Production
Sell-out at 1995 PO / TDI / SM Margins
Complete PO-11 Capital Spend
1st Half EBITDA Annualized 200MM
1999 PO / TDI SM Margins
15
LCR Important Cash Generator -- Operating
Reliability and Crude Deliveries Drive Performance
MB/day
MM
2
1
Net Distribution To LYO, MM 33
(7) 16 76 20 24 59 17
2 22 49 7 67 68 55
1 4Q01 Scheduled maintenance turnaround 2 1Q03
Includes a 25MM write-off
16
Equistar is a Leading Ethylene Producer
Top 5 North America
66
Nova 8
  • 2 in North America
  • Competitive position based on feedstock
    flexibility

ChevronPhillips 10
40
ExxonMobil 13
Exxon 7
Union Carbide 7
Equistar 15
Nova 8
Dow 9
Dow/Carbide 20
Shell 9
Source CMAI
17
North American Supply/Demand Balance Is On Track
To Improve Significantly
Source CMAI / Equistar (September/2003)
18
We Believe that Global Ethylene Supply/Demand is
on a Path to a Tight Balance
CMAI base case
Sensitivity
Source CMAI
19
The Emergence of a Middle Class Increases Local
Demand for Plastics
PE Consumption/capita, lbs
China PE Demand Domestic vs. Export
US
Singapore
Korea
Taiwan
WE
Malaysia
Japan
Thailand
China India
Indonesia
2000 GDP/Capita
Sources CMAI 2001 Nexant Chemsystems
20
The Most Recent CMAI US Demand Forecast Departs
from the Historic Trend Line
Quarterly Ethylene Demand (Bl. Lbs)
Source SRI, CMAI, NPRA, US Govn.
21
Liquid Cracking Provides an Advantage vs. Ethane
Raw Materials
Equistar Capability
NGL
37
Liquid
63
N. American Industry
(ex. Equistar)
Liquid
22
2003 YTD
NGL
78
Source CMAI and Lyondell
22
Growing Global Demand will Increasingly be
Supplied by Gas Based Raw Materials
Global Ethylene Supply by Feed Type
Global Propylene Growth
Ethylene Supply Heavy vs Light (billion pounds
/ year)
Current (2003)
Propylene (Blb/yrs)
Additions (2008)
Source CMAI
23
The Chemical Product Chains All Offer Upside in a
Recovery
Relative Raw Material Margin Range, 1994-2002 100
Period Average
HDPE
PG
Styrene
  • PG U.S. Industrial Grade Propylene Glycol minus
    0.63 x Chem Grade Propylene, both as reported by
    Chem Data
  • Styrene US Net Industry Average Styrene Price
    minus 0.28 x North America ethylene Net
    Transaction Price, minus 0.105 x North America
    Contract Benzene, all as reported by CMAI
  • HDPE North America HDPE Domestic Market
    Contract Injection Molding price - Ethylene
    product cash cost (Weighted Average Feed) as
  • reported by CMAI

24
Enterprise Earnings Capability Far Exceeds Recent
Trough Results
Cycle EBITDA Potential
Peak
Recession/ Trough
Pre- Recession
1.40 / share
6.30 / share
2002 Proportional Interest, Dividends Capital
1
1
1
1 Chem Data/CMAI industry margins conditions for
ICD and Equistar products (ex. MTBE) applied to
current capacities and ownership, LCR 2002
EBITDA, includes PO-11 capacity. Note Assumes
current capital structure 175MM shares.
25
Our Financial Strategy is Focused and Unchanged
  • Maintain Sufficient Liquidity
  • Repay Debt

26
We Have Maintained Significant Liquidity
9/30/2003
12/31/2002


Equistar
Lyondell
Equistar
Lyondell
128MM
393MM
27MM
330MM
Cash ST Investments
325MM
350MM
450MM
350MM
Revolver 1
453MM
743MM
477MM
680MM
Total Liquidity
1 represents the undrawn balances and has not
been reduced by amounts committed against letters
of credit (12/30/02 LYO-49MM, Equ-16MM)
(9/30/03 LYO-53MM, Equ-17MM)
27
We Have Actively Managed Our Maturity Profile
Debt Maturities(1),(2)
Pre-Payable Debt(3)
  • Lyondell 350MM Revolving Credit Facility
    expires in 2005 (not included) does not include
    100MM Receivables Purchase Program
  • Equistar Does not include 250MM Inventory
    Revolving Credit Facility or 450MM Receivables
    Purchase Program includes 98MM GE Railcar
    Lease, which expires during fourth quarter 2004.
  • Debt with make-whole provisions are shown at
    maturity, including the 900MM Senior Secured
    Notes Series A due 2007 (Lyondell), the 700MM
    Senior Notes due 2008 (Equistar) and the 600MM
    Senior Unsecured Notes due 2009 (Equistar).

28
De-leveraging Will Benefit All Stakeholders
  • Impact of Lyondell debt reduction at constant
    capitalization1
  • Debt Reduction
  • 2B
  • Debt to capitalization 35
  • Avoided interest expense 200MM/Yr
  • Earnings improvement 75/share
  • Share price improvement at
  • constant capitalization 11.50/share

1 Capitalization debt book value of equity
minority interest Based on 175 MM shares
outstanding
29
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