Transcript Debt Reduction Clear Focus on Execution

Banc of America
High Yield Bond & Leveraged Finance
Conference
May 21st
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
Page 2
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
Businesses are Integrated and Costs Optimized
Lyondell
Methanol Co.
Intermediate Chemicals & Derivatives
MTBE
Methanol
PO / TBA
Equistar
Propylene
PO / SM
Polypropylene
Ethylene
Polyethylene
EO / EG
LCR
Benzene
Toluene
Propylene
oxide
SM
TDI
Propylene
glycol / ethers
Butanediol /
derivatives
Markets
Antifreeze / deicers
Resins / solvents
Pharmaceutical
Coatings
Plastics
Polyurethanes
 Auto seating
 Furniture
 CASE
Consumer
products
 Grocery sacks
 Toys
 Packaging
Polyester
Antifreeze
Automotive
Page 5
Leading Positions in All Key Products
Product
IC&D
Propylene Oxide (lbs)
Styrene Monomer (lbs)
MTBE (bbl/day)
Equistar
Ethylene (lbs)
Propylene (lbs)
Polyethylene (lbs)
* Source: CMAI, LYO capacities as of 1/1/02
Annual Capacity*
3.9 billion
3.7 billion
58,500
11.6 billion
5.0 billion
5.7 billion
Capacity Position
1st in North America
1st in the world
1st in North America
3rd in the world
1st in North America
1st in the world
2nd in North America
3rd in the world
2nd in North America
6th in the world
3rd in North America
3rd in the world
Page 6
Lyondell is a balanced portfolio
Lyondell
IC&D
stability & growth
LCR
cash generation
Equistar
commodity leverage
Page 7
PO&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
Page 8
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
Page 9
Commodity Exposure Drives Earnings

Ethylene*
– 11.6 billion pounds
– 1 cts/lb margin improvement adds $116 million of
EBITDA

Polymers*
– 5.7 billion pounds
– 1 cts/lb margin improvement adds $57 million of
EBITDA

Styrene
– 3.7 billion pounds
– 1 cts/lb margin improvement adds $13 million of
EBITDA
* 100% Basis for Equistar
Page 10
Significant Cash Generation in Up-Cycle
Cycle EBITDA Potential
2500
Oxy's
29.5%
Share
41%
Equistar
($,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
Page 11
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
Page 12
A balance of growth & cash generation
supports common dividend policy
2001 Proportional EBITDA
$738 million
Pro Forma Proportional EBITDA
on 1995 Margins
$2,200 million
Equistar
LCR
IC&D
IC&D
Equistar
LCR
Page 13
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
Page 14
Solid results through prudent management

Major fixed cost reductions in all areas of company

Disciplined capital expenditures

More than $400 million of cash from working
capital at Lyondell & Equistar in 2001

Safety – world class performance

Proactive management of debt maturities and
liquidity
Page 15
Significant Liquidity
Cash Balance 3/31/2002
Lyondell
Equistar
$228MM
$15MM
Revolver 3/31/2002
$500MM
Total Liquidity
$728MM
1
$450MM
1
$465MM
1 – does not include amounts committed against letters of credit at March 31, 2002
Page 16
Minimal Near Term Debt Maturities
Debt Maturity Schedule
2,000
$MM
1,500
1,000
500
0
2002
2003 1
2004
Lyondell
2005
2006
2007
2008
2009
Equistar
1 – LYO Revolver Expires
Page 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
Page 18