Transcript Debt Reduction Clear Focus on Execution

Goldman Sachs
Cyclical Conference
May 22nd
2002
Safe Harbor Language
Statements in this presentation relating to matters that are not
historical facts are forward-looking statements. These forwardlooking 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, Lyondell’s Quarterly Report on Form 10Q 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
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Occidental.
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
Page 3
Lyondell Operates in 3 Major Businesses
Lyondell Chemical Company - Intermediate Chemicals and Derivatives
– World’s 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
Page 4
Lyondell is a balanced portfolio
Lyondell
IC&D
stability & growth
LCR
cash generation
Equistar
commodity leverage
Page 5
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
Page 6
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 PO&D, Styrene
and MTBE

Established a global presence

Unified components of four companies
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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
Page 8
IC&D Provides Stability & Growth
Global PO Capacity Share
BASF
2%
Others
15%
Shell
4%
Others
18%
LYO
41%
Dow
36%
Shell /
BASF
15%
LYO /
Bayer
35%
Dow
32%
Bayer
2%
7.4 Billion Lbs
Source: SRl
1990
14 Billion Lbs
2005
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LCR Important Cash Generator
300
140
250
120
*
200
100
80
150
60
100
$MM
MB/day
Improved Reliability and Crude Deliveries Drive Performance
40
50
20
0
0
1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02
Processing Rate
* 4Q01: Scheduled maintenance turnaround
EBITDA
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Heavy feedstock advantage correlated to
ethylene cycle
Equistar Capability
Liquid Cracking Variable Cost
Advantage
NGL
37%
Ethane - Light Naphtha Cost of Ethylene Spread
8
Liquid
Prior 15 Yr Average
7
N. American Industry
(ex. Equistar)
Liquid
22%
¢/lb ethylene
63%
6
5
4
3
2
78%
Source: CMAI and Lyondell.
Source: ChemData,
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2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
NGL
1988
0
1987
1
Significant Cash Generation in Up-Cycle
Cycle EBITDA Potential
2500
Oxy's
29.5%
Share
41%
Equistar
($,MM)
2000
1500
1000
IC&D
500
LCR
0
2001
1995 Margins*
* 1995 ChemData/CMAI Margins for Ethylene, Polyethylene and Styrene applied to current infrastructure
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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
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No grass roots ethylene capacity additions ‘02-’05
Ethylene in North America
90
Annual Demand Growth Rate:
1995 - 99
4.3%
2000 - 01
(3.4%)
2002 - 05
5.9%
70
120%
110%
Supply
Demand
60
100%
50
90%
Operating Rate
Billion Lbs
80
130%
Operating Rate
40
80%
'95
'96
Source: CMAI / Lyondell
'97
'98
'99
'00
'01
'02
'03
'04
'05
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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

PO&D
– April 1 TDI increase announced of 15 cts/lb
– PO&D 1Q02 volumes increased 6% from 4Q01 level
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A balance of growth & cash generation
2001 Proportional EBITDA
$738 million
Pro Forma Proportional EBITDA
on 1995 Margins
$2,200 million
Equistar
LCR
IC&D
IC&D
Equistar
LCR
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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
Page 17