利安德巴塞爾 (LYB) 2012 Q1 法說會逐字稿

Hello and welcome to the LyondellBasell teleconference. At the request of LyondellBasell, this conference is being recorded for instant replay purposes. Following today's presentation, we will conduct a question-and-answer session. (Operator Instructions).

I would like now to turn the conference over to Mr. Doug Pike, Vice President of Investor Relations. Sir, you may begin.

Thank you, Debbie. Hello and welcome to LyondellBasell's first-quarter 2012 teleconference. I'm joined today by Jim Gallogly, our CEO; Karyn Ovelman, our CFO; and Sergey Vasnetsov, our Senior Vice President of Strategic Planning and Transactions.

Before we begin the business discussion, I would like to point out that a slide presentation accompanies today's call and is available on our website, www.LyondellBasell.com.

I would also like for you to note that statements made in this call relating to matters that are not historical facts are forward-looking statements and these forward-looking statements are based upon assumptions of management which are believed to be reasonable at the time made and are subject to significant risks and uncertainties. Actual results could differ materially from those forward-looking statements.

For more detailed information about the factors that could cause our actual results to differ materially, please refer to the cautionary statements in the presentation slides and our financial reports, which are available at LyondellBasell.com investor relations.

Reconciliations of non-GAAP financial measures to GAAP financial measures together with any other applicable disclosures including the earnings release are currently available on our website at LyondellBasell.com.

Finally, I would like to point out that a recording of this call will be available by telephone beginning at 3 p.m. Eastern time today until 11 p.m. Eastern Time on May 30 by calling 866-489-3828 in the United States and 203-369-1672 outside of the United States. The pass code for both numbers is 2121.

During today's call we will focus on first-quarter 2012 performance, the current environment, and the near-term outlook. With that being said, I would like to turn the call over to Jim.

Thank you for joining our earnings call. As Doug mentioned, a set of presentation slides accompany this call and are available on our website.

Let's begin by taking a look at page 4 and reviewing a few financial highlights.

The first quarter reflects a strong rebound following a slow fourth quarter. Net income was $599 million and EBITDA was $1.24 billion. The recovery was led by improved margins in the O&P Americas and Refining & Oxyfuels segments but all segments recorded gains. Earnings per share increased to $1 (Sic- See Press Release).

Karyn and I will discuss the quarter in detail but I thought I would quickly summarize a few highlights and trends from the quarter.

In North America, we benefited from increased ethylene margins. European polyolefin volumes returned to third-quarter levels following the fourth-quarter slowdown. Intermediate & Derivative results returned to a more difficult level following the completion of fourth-quarter maintenance.

Refining spreads improved as the quarter progressed while oxyfuel margins were unseasonably strong throughout the quarter.

As a result of our 2011 performance, we were honored by Hart's Energy as Refining and Energy Company of the Year.

Operations at the Berre Refinery were suspended on January 4 and we refinanced the majority of the remaining balance on our 2017 and 2018 bonds at an average interest rate of 5.25%.

Overall it was a good quarter. Our personal safety performance was no exception. On slide number 5, we have updated our safety data. I am proud to say that we have started the year well. There were some minor injuries primarily related to Channelview turnaround work but our first quarter statistics improved versus 2011, a tribute to both our employees and contractors. Our safety record is very near best in class.

Now I would like to turn the call over to Karyn to discuss some key elements of our financial performance.

Thanks, Jim. Please turn to slide number 6, which charts our first-quarter and last 12 months segment EBITDA. The $1.24 billion of EBITDA reflects a strong beginning to 2012 particularly when one considers that the first quarter is typically a seasonally slow period.

From a segment perspective, O&P Americas continued to be our strongest segment generating approximately $600 million of EBITDA. The majority of this was in olefins where the benefits of ethane cracking were particularly strong. It is also important to note that these results were generated while we conducted significant maintenance at our Channelview site.

O&P EAI produced approximately $100 million of EBITDA, consistent with past quarters that differentiated polyolefin products and our joint ventures performed well. The improvement versus the fourth quarter was driven by improved olefin and polyolefin volumes and margins.

Following fourth-quarter turnarounds, Intermediates & Derivatives segment's results returned to strong historic levels with EBITDA of approximately $280 million.

The Refining & Oxyfuels segment generated over $190 million of EBITDA in what is historically a seasonally slow quarter. Oxyfuel results were particularly strong.

The Technology segment continued to benefit from steady catalyst sales leading to EBITDA of approximately $55 million. The bar chart on the right depicts the last 12 months EBITDA by segment. Over the period, total EBITDA was approximately $5.1 billion. Approximately 45% was generated from O&P Americas while the Intermediate & Derivatives as Refining & Oxyfuel segments each generated approximately $1 billion.

If you would turn to slide 7, we have plotted the key component of our cash flow. During the first quarter, cash balances increased by approximately $600 million, closing the quarter near $1.67 billion. Typically the first quarter is characterized by relatively weak cash flow as several annual payments including property taxes, customer rebates, insurance premium payments, and employee bonuses are made during the quarter. This year was somewhat of an exception as strong earnings and the receipt of approximately $250 million in tax refunds more than offset these items. CapEx spending was slightly less than our planned rate.

On the right side of this chart, you can see that over the last 12 months, our cash balances declined from $4.4 billion to $1.67 billion. Operations including working capital generated over $3.6 billion of cash while usage included approximately $1 billion for CapEx, $2 billion of debt repayment, and $3 billion in dividends.

Before I leave this chart, I would like to point out that our first-quarter financials do not reflect the premiums and other costs associated with our recent financing. The transactions were closed during the second quarter and will be reflected accordingly. By way of guidance I estimate the second quarter will include a charge of approximately $330 million representing tender premiums and the write-off of previous financing fees. Of course this is a nonrecurring item and approximately $35 million is non-cash.

Most importantly I want to highlight that going forward our cash interest expense will be [approximately $250 million] annually. The average interest rate on our remaining debt is slightly greater than 5.5%.

Let's move to slide 8 to look at a few balance sheet statistics. On the left, you can see that working capital was relatively unchanged during the quarter as inventory declined while receivables increased. The inventory reduction is related to both our Channelview turnaround and the sale of the Berre Refinery inventory.

On the right, we have included a few key statistics. As you can see, we closed the quarter with $4 billion of debt and net debt of $2.3 billion. During the past two quarters, we have significantly restructured our debt and improved the balance sheet. In fact, since our original financing in 2010, we have reduced debt by more than $3 billion, reduced the average interest rate by approximately 4.5%, and decreased annualized interest by more than $400 million.

Additionally, our credit rating has improved substantially. Notably, one of the agencies recently raised our corporate rating to investment grade.

Now I will turn things back to Jim for a further discussion of our business results.

Thanks, Karyn. Let's discuss segment performance beginning on slide number 9 with Olefins & Polyolefins Americas. First-quarter EBITDA was $598 million, an increase of $191 million versus the fourth quarter. Olefins EBITDA exceeded $500 million despite having significant downtime related to be Channelview turnaround.

During the quarter, maintenance activity reduced ethylene production by approximately 200 million pounds. The combination of fourth quarter product purchases and a first-quarter inventory draw enabled us to meet our customers' product needs.

I would like to discuss a few metrics to put the results in perspective. Relative to the fourth quarter, our average ethylene price increased by approximately $0.02 per pound while the cost of ethylene production metric decreased by approximately $0.10 per pound. The latter decrease was primarily related to the lower cost of ethane. Our average ethane costs declined by $0.28 per gallon in the Gulf and approximately $0.10 per gallon in the Midwest.

During the quarter, 82% of our ethylene was produced from natural gas liquids, with ethane accounting for 68% of the ethylene production.

Polyolefin results also strengthened versus the fourth quarter as EBITDA increased by approximately $60 million. Margins drove the increased performance. Versus the fourth quarter, the average polyethylene sales price increased by approximately $0.06 per pound, while the polypropylene price increased by $0.02 per pound. Volumes for both polymers were relatively unchanged.

During the quarter, we received a $10 million dividend from our Mexican joint venture. Overall, the first quarter was a good quarter for this segment and the underlying fundamentals have remained intact. Ethane prices have remained low while industry turnarounds have made ethylene availability tighter than normal.

Our Channelview olefins plant turnaround is complete and the plant is being restarted. During April, the turnaround impacted ethylene production by approximately 150 million pounds.

Let's turn to slide number 10 and review performance in the Olefins & Polyolefins Europe, Asia, and International segment.

First-quarter EBITDA was $103 million, a $41 million improvement over the fourth quarter. The improvement was generated in European olefins and commodity polyolefins. During the quarter, our differentiated products such as polypropylene compounds and Catalloy resins continued to perform well, generating results consistent with prior quarters.

Equity income associated with our joint ventures increased but due to the timing of payments, we received [$40 million fewer dividends].

Although profits in European Olefins & Polyolefins increased, they were still relatively weak as most of the improvement occurred during March. Product prices increased as the quarter progressed but raw material cost increases offset a significant portion of the benefit. Quarterly sales volumes improved, returning to third-quarter levels.

First-quarter results were negatively impacted by an explosion at one of our low-density polyethylene facilities at Wesseling, Germany. During the quarter, we recognized a $22 million charge for damage to the asset and estimate about a $10 million impact from lost sales.

Thus far, second-quarter trends have remained largely unchanged. Within Europe, the environment for Olefins & Polyolefins remains difficult. However, raw material costs have stabilized and we are benefiting from butadiene pricing. We anticipate that joint venture dividends will be consistent with historic averages, but it can be difficult to predict the timing of payments by quarter.

Now please turn to slide 11 for a discussion of the Intermediates & Derivatives segment. First-quarter EBITDA was $282 million, an increase of $109 million from the prior quarter, which included the impact of substantial maintenance activity. First-quarter results were on track with performance seen during the first three quarters of 2011.

Absent the impact of the fourth-quarter turnaround, propylene oxide and derivative results were largely unchanged. Volumes benefited from the absence of the turnaround activity and stronger trade sales.

Acetyls volumes and results also improved following fourth-quarter maintenance and PO coke products, TBA derivatives benefited from strong margins but styrene margins declined. Ethylene and oxide and glycol results were relatively unchanged.

Underlying business trends are largely unchanged from the first quarter as we head into the second quarter.

Let's move to slide number 12 for a discussion of the Refining & Oxyfuels segment. First-quarter EBITDA was $192 million. Throughout the quarter, oxyfuel spreads were strong and as the quarter progressed, the Maya 2-1-1 benchmark spread improved from a December low point.

Houston Refinery quarterly EBITDA improved by approximately $30 million. Margins improved as the quarter progressed and the Maya 2-1-1 benchmark spread averaged approximately $20 per barrel. The refinery operated near full capacity consuming approximately 259,000 barrels of crude daily.

Although quarterly results improved, they lagged the benchmark. The following factors contribute to this shortfall. January results were negatively impacted by the residual effect of late 2011 crude price volatility. Efficiencies between the refinery and Channelview were impacted by the olefins turnaround. This impacted results by approximately $20 million.

And although the Maya 2-1-1 benchmark serves as a good indicator of trends, it does not reflect the pricing of byproducts such as coke, which did not increase in concert with first-quarter crude oil prices.

As I previously mentioned, our Berre refinery ceased operations during early January. During the quarter, we continued to incur fixed costs and some utility spending as we secured and mothballed the asset. This resulted in an EBITDA loss of approximately $35 million.

However, we also sold the existing product inventories at a gain, a portion of which is related to our use of LIFO inventory accounting. Consequently, EBITDA was near breakeven and we generated positive cash flow.

First-quarter oxyfuel results were unseasonably strong, improving by approximately $80 million versus the fourth quarter. Margins accounted for the majority of the improvement. Relatively good demand for octane coupled with high gasoline prices and low natural gas-based material costs generated strong margins.

As you can see on slide number 12 during April, Refining & Oxyfuel margins have been very strong. However, margins declined as the month progressed and although we expect them to remain quite good, they may not maintain April levels throughout the quarter.

Specific to our operations, the Channelview turnaround impact should be limited to the first quarter but coke pricing has remained depressed relative to crude. The Houston Refinery has operated near full rate and is expected to do so throughout the quarter.

You should anticipate that the Berre Refinery will continue to incur fixed costs during the second quarter.

Let's step back from the details and summarize the business environment on slides number 13 and 14. Most importantly on slide number 13, you can see the pace and magnitude of the industry margin recovery across the first quarter and into April. Clearly our O&P Americas and refining segments are in a good position.

As I mentioned, we are also seeing positive trends in oxyfuels and good butadiene pricing. In our other businesses, trends have been largely unchanged from the first quarter.

Before you finish our prepared comments, I want to mention that our growth projects are moving forward consistent with the spending and timing outlined at our Investor Day presentations. We will do our best to bring these additional volumes online as soon as possible given the excellent margin environment we expect to see in the future for US olefins, methanol, and European butadiene.

We are now pleased to take questions, Debbie.

(Operator Instructions). Duffy Fisher, Barclays.

Good morning. I know it's not your preferred method of talking about the business, but a lot of people seem pretty cautious about stepping into a stock like yours with all the crackers coming up over the next several months and the draw that is going to put on the ethane side of things and potentially the amount of ethylene that it puts into the market.

Can you kind of give your best guess-timate how this summer looks as far as the spread between ethane and ethylene and just that interplay with all the crackers coming back up in the near term?

Well, a number of crackers are already coming up. There are several down. As I mentioned, OP 2 came up earlier in our Company a day or two ahead of schedule. Okay 1 is starting up as we speak. If you look at ethylene pricing today, things are about where they have. It is Gulf Coast $0.50 plus or minus a gallon and EP at Conways in the teens. So that's looking pretty good. Volumes have been holding up. The economy has been pretty good in the United States.

As a company we don't export much as you know, Duffy, so we're not as dependent on the China markets. So things still look very good. Remember, we have had incredible margins in this business recently, so we expect them to be good. The question is how good.

Fair enough. And then you mentioned a $20 million number for the synergy that was kind of foregone between Channelview and the refinery. Was that just for that aspect or was that also including the purchases that you were still under water a little bit for January within the refining business as well?

Duffy, this is Doug. That $20 million is related to the turnaround only. If you recall, we have the alkene unit and also an MTBE unit over at the Channelview site that are -- the process refinery and process materials. That's where that impact was that is in that quarter and that's a completely separate thing from any purchasing.

Okay, great. Thank you, guys.

The other thing that you were mentioning there, Duffy, we did have some residual effects of some of the WTI and Brent pricing flow into the first quarter that we had experienced at the end of fourth quarter. That's separate.

Bob Koort, Goldman Sachs.

Thank you, good morning. Jim, can you talk a little bit about the residence time of a gallon of ethane going through your system production into ethylene, then down into derivatives and then ultimately being sold and put on a cost of goods line?

We try to make that very quick. You know, we don't hold much inventory of either ethane or ethylene. The industry has gotten to the point -- it's really a very rapid process and then even into polyethylene, if you look at our days of sale on hands, it's always in the 20s kind of a number of days so things move through the system pretty rapidly.

How much capacity do you have to store and how fixated should we be on spot trends? That certainly gets most of the attention on Wall Street but I suspect most of your sales are on monthly contracts. So can you tell me how much or what you have been storing from a raw materials standpoint and then is there a reason to or not to fixate on these spot trends?

Well, you know, first let me comment on ethane storage. We do store some ethane but we try not to hold a lot of inventory. It just doesn't make a lot of sense, so that's not a big issue. We did hold a lot of ethylene inventory from the fourth quarter into the turnaround of Channelview because when you have your two largest units down like that, that's pretty significant. We wanted to make sure that we were in good shape.

So you saw that the inventories depleted here in the first quarter. That is as a result of the turnaround and the use of that ethylene we stored. Spot prices are somewhat important but it just kind of helps on trend on contract. So we don't -- it's important but the contract price is far more important.

Got it, thank you.

P.J. Juvekar, Citi.

You mentioned that you are restarting Channelview now. There seems to be plenty of real estate at Channelview. Any thoughts on the condo cracker that you have talked about at that site and do you have any partners lined up?

Well, a number of people have come to us when we indicated that we would be interested in a condo cracker and there are multiple parties have announced crackers. I don't expect most of those to build their own cracker. They are raising their hand to say we are available.

A number of them have contacted us. Channelview could be a site but we are still in early discussions with folks on that, so I don't want to signal anything at this point in time.

Just wanted to get your thoughts, Jim, on co-products, propylene and butadiene. Can you give us an update on your metathesis expansion?

And then the industry is now beginning to talk about BDH units or butane dehydro units. What do you think can be done in the tight butadiene situation? Thank you.

As you may recall, we announced butadiene expansion in Europe. We had the feedstock. That's one of the big questions is do you have the feedstock for that kind of an extraction unit? We did within our European system, so while we're not trying to grow Europe in general, a butadiene unit at our Wesseling facility made a lot of sense and has just really outstanding economics. That project remains on track. It was approved. It is in construction and so that looks very good.

The reason butadiene is so strong is because everybody is cracking lighter. As a result of that, the propylene molecule has been short. Butadiene has been short and you have heard people talk about PDH units, metathesis units. We also are looking at expanding our at metathesis unit at Channelview and continue to study that.

We will pay a lot of attention to the propylene molecule as we make our final investment decisions. There have been a fair number of announcements related to PDH units. As you know, people can overbuild pretty rapidly, so we will look at relative economics and make sure that still makes sense as we develop the engineering on that project.

Thank you.

Jeff Zekauskas, JPMC.

Good day. When you look at the amount of ethane capacity which is coming on in the United States, is it sufficiently visible that you can make an assessment of whether you think ethane prices on average might be lower in 2013 than in 2012? Or is it not so well defined?

Well, at this point in time there's over 1 million barrels a day showing up. That's more than last year against basically the same capacity. There has been a little bit of deep bottleneck. We have done a bit of that, be able to take a little more ethane.

But the nice thing about having retained our swing capacity, we will watch every day and see does it make sense to crack ethane? Does it make sense to crack a little more propane? We've gotten some very nice condensate pricing from some of the South Texas fields and the Eagle Ford that have been coming on. And we will make a daily call on all of that.

But at this point in time, things look reasonably balanced and we think that following year in 2016, ethane gets pretty long and should be very, very good for our industry. But coming into the second, third quarter, I think things are pretty balanced and then start to go long ethane.

Jeff, this is Doug. I might point out that we do have a presentation on our website where we spoke to the balances going forward and actually in six month increments over the next couple of years of how we see ethane demand and ethane supply developing out with the fractionators and pipelines.

Yes, one of the things I will add probably didn't focus on enough is propane is pretty helpful. The propane crack is pretty good right now. As you know, it was a pretty warm winter. Propane went long. Everybody is exporting as much of that as they can and still very readily available and so that's a pretty nice crack right now, which takes some pressure off of ethane.

And then secondly, can you tell me what your maintenance costs or turnaround costs were for your I&D business in the fourth quarter of 2011?

Yes, I think -- this is Doug again, Jeff. If I recall correctly in our call, in our fourth-quarter call, we said there was about a $75 million impact from the combined turnarounds of the propylene oxide and related units and the acetyls units in the I&D. So that was sort of the lost opportunity from those.

Thank you very much.

Don Carson, Susquehanna Financial.

Yes, Jim, a few questions on demand. Once all of these outages are behind us, I think CMAI is talking about current nameplates operating rates, about 83%. I am just wondering what you are seeing in terms of polyethylene demand domestically? Are buyers holding off in anticipation of lower prices?

I know you don't export much if any to Asia, but what are your thoughts on Chinese demand and the implications for them being able to take more Middle Eastern material and hence make Europe a little less oversupplied as well?

Well, when China came out of the Chinese New Year very early in the first quarter, people expected demand to pick up and I don't think we've seen that. I think demand has been slower than we expected in Asia at the present time and that has put pressure on European margins.

As to companies you mentioned, Don, we do not export to China much out of the United States and so it has had limited impact on this business. You saw the impact that it had on Europe and continues to have.

It is to be seen. A lot of people are watching which way crude is going, which way naphtha is going. Here in the United States, demand has been pretty good. People again are watching as people have the turnarounds being completed, which way are margins going to go? So if you try to predict within a given week or two, you will probably miss it and a lot of times that's what people try to do.

But I think the US economy has been pretty good overall. China has been reasonably weak and Europe quite weak. So you see that reflected in the first question numbers. So we remain pretty optimistic going forward.

Just to follow up on Europe, can you update us on where you are on your restructuring plan, which I think you've identified about $200 of potential benefits there?

Yes, we are in pretty good shape on that. A lot of the work in Bob Patel's area in Olefins & Polyolefins is nearing completion. We continue to work on some of the other staff costs. I try not to go in too much detail because we have Works Councils there and we always have to have robust discussions with our employee groups in advance of announcing things in quarterly reports like this. But we remain very, very actively engaged in reducing costs, because frankly your profitability is problematic, as you can see in the first-quarter results.

Thank you.

Frank Mitsch, Wells Fargo Securities.

Good afternoon, gentlemen and Karyn. Just a couple of questions on the Refining & Oxyfuels side of the business. You had a good oxyfuels result in Q1. It sounds like you are expecting more of the same here in Q2. So I guess at this point if the quarter were to end, you are pretty much looking for a pickup relative to Q1 on that SBU.

You know, oxyfuel has performed very well, unseasonably strong results in the first quarter. We get some benefit out of low natural gas prices in that business, so spreads have been good. Demand has been good. People have wanted octane -- gasoline prices have been very high because of high crude prices. Usually the fourth and first quarters in oxyfuels are weaker and we did pretty well through those quarters and so that continues. It usually gets stronger going into the second quarter.

We've seen Maya 2-1-1 do pretty well into April. It fell off a little bit over the last few days but it is still pretty strong and so as I mentioned in the planned remarks, that coke prices, some of the byproduct prices are a bit depressed, but overall refining and oxyfuels should do well.

Okay, great. You mentioned that there were some fixed costs that were sticking with the Berre facility. Can you give -- can you size that for us? Is it bigger than a bread box?

Yes, going forward through the end of the year, we do expect to have continued fixed costs for the second quarter, order of magnitude somewhere around $30 million to $35 million. And then for the following five to six months, around $10 million for the quarters.

Great, thank you.

Mike Ritzenthaler, Piper Jaffray.

Hello, everyone. I would like to expand a little bit on the previous questions, so butadiene and other co-products in international olefins. I think we had [learned] that, been looking for perhaps a bigger earnings boost from the coal products. Can you provide us a little bit more background on prices you've been seeing in local markets, maybe sequentially, and the strength that we might be looking at three months from now?

Mike, this is Doug. I will take it first and then maybe Jim can pick up on a broader answer.

One of the things you want to think about across the first quarter is what you saw was rising prices across the quarter in most of these co-products. As you will recall, you finished fourth quarter pretty weak and then you moved up as you went across the quarter.

Also with Channelview site being down for a turnaround in March, that is one of our main co-product locations and producer of key co-products for us. So C4 recovery units were down. Metathesis and of course the fracker that OP-1 and OP-2 provide. So all those things have some impact on our side (inaudible) Jim mentioned before, we'll have to see how things come as people come back from turnarounds.

But you still had a lot of capacity off in April and you do in May as well.

Yes, butadiene prices have come down just a bit but from very high elevated levels and so we still feel very good about that business and co-product pricing. Again as people continue to crack light in the United States, it puts worldwide pressure -- butadiene propylene or world-traded commodities, so we expect that pricing to stay in good shape.

Okay, fair enough. Can you discuss a little bit more on the timing issue of the JV dividends that you highlighted in your prepared comments? Will the dividends just push forward into 2Q so it would be the $40 million seen and realized in 2Q versus 1Q?

Yes, on dividends, it is fairly lumpy. It's very hard to predict when the JV Boards are going to actually declare dividends. But the earnings have been nice and strong across those businesses and so we expect the dividends to come. We just can't tell you whether it's first quarter or second quarter and so we expect that the forecasts that we gave on that will remain true. The businesses have been reasonably strong still.

Mike, you might want to focus a little more on the equity earnings rather than the specific timing of dividends.

Got it, thank you.

Hassan Ahmed, Alembic Global.

Just wanted to expand a bit further on the dividend side of things. I know there was a bit of a power outage in Jubail as well as I understand it some PDH-related issues as far as Al-Waha goes. So was that factored into the timing of the dividends or the timing of the announcement?

And if you could just give us a sense of how much earnings were reduced because of those things?

Yes, first, you are correct that there was a power outage across all of Jubail and it did slow things down for a couple of weeks. That is not that material in our overall program. The significant dividends that we see are from the other two joint ventures, not Al-Waha. In Al-Waha, we are still paying down debt.

We have had periodic PDH unit issues in terms of hitting maximum rates, but the economics of that plant have improved over the last year and a half. We've gotten rates up in general, polypropylene plants running a lot better. We have our own plant manager in there, but you haven't seen dividends from Al-Waha. You have been seeing them from SEPC and SPC and while there is a bit of an outage, I don't think that was that material given our percentage interest.

And then of course Thailand is another venture where we have a nice feedstock advantage and you see good dividends. You will see bits and pieces sometimes from Indelpro like you saw $10 million in this quarter. Those will come periodically but a couple of big Saudi joint ventures, Thailand joint ventures are the one to really watch.

Much appreciated, thanks.

David Begleiter, Deutsche Bank.

Thank you. Jim, as your cash builds nicely through Q1, can you update us on your thoughts about another one-time special dividend towards year-end perhaps?

I will let Karyn talk about our dividend policy. We get that question an awful lot, and so I will let her discuss that.

Just in terms of a special dividend, it is a good way to return value to the shareholders if there is no other immediate or appropriate accretive opportunity to do so. Of course we would balance that with any potential other opportunities we have. And then also in terms of our goal of becoming investment-grade and maintenance of strong investment credit grade metrics.

But generally speaking, our cash balances today in absolute terms as well as a percentage of our market cap or EBITDA is lower and in many cases significantly lower than our peers. So there is no urgent cash deployment need in the very short term.

Jim, just on the Conway advantage, can you talk about the sustainability of that advantage as some other efforts underway to move some of the Conway EP down to the Gulf Coast?

Yes, there will be a pipeline built to move some of that product. We think that is a 2013 event. For now, though, ethane EP is very long there and we are seeing prices in the teens, so a very strong advantage. We have a couple billion pounds in that region and so it's very helpful.

Recognizing the stranded nature of that like always happens, there will be pipelines built and some of that will be remedied and we expect that to happen.

Now having said that, there still will be an ethane advantage there with the transportation differential and those crackers are still going to look good going into the future and as supply/demand tightens, we still feel very good about our Morris and Clinton assets and in fact are doing a little bit of debottlenecking to the extent we can to maximize that.

Thank you.

Laurence Alexander, Jefferies.

This is Rob Walker on for Laurence. I guess first, you mentioned in the quarter you were 68% ethane in the US. With Channelview back online, has that figure increased further? If so, how much?

Let me give you kind of a couple high-level comments on that. We can at this moment -- I would guess 80%, 82% may be system wide US reduction from NGLs. And by the time we get into September, that will probably be closer to 85%. In terms of ethane, high 60s, maybe 68% system wide ethane. And again in September following a little bit of work we are doing, that will probably be around low 70s. I think our target is about 72%. So I think those numbers give you a pretty good idea.

Okay, thanks. Then just trying to parse some of the commentary around the Houston Refinery and then the R&O segment. I guess can you clarify that in Q2 there are no substantial overhangs that will allow you to earn closer to or even above the industry margin benchmark?

I guess -- in the comments you get in Berre in terms of the $30 million to $35 million, is there any other inventory that you could still liquidate?

There is a little bit of inventory left at Berre. But it's fairly modest and that will be liquidated at the right time.

In terms of the overhang, the Channelview turnaround impact that Doug talked about, that's done. That was -- those units were started up a couple weeks ago and so that impact is gone. Having said that when you look at the Maya 2-1-1, one of the points I continue to make is by product pricing like coke has been depressed. And so you don't always realize the full Maya 2-1-1. It just depends on how coke products move in that business, too, so to speak.

And so the crude oil trading between the WTI, Brent, that caught us at the end of last year, that was more of a January event and so things look pretty good. We're still buying some distressed cargoes and we are running very well at the refinery, so hopefully we will post some good numbers.

Can I just clarify the last point? Theoretically the Houston asset might be roughly $100 million below what the benchmark would have suggested, the Maya 2-1-1 and your crack spread capture rate. The $20 million is from the synergies. Would the remainder if you had to divide that up between coke versus other trading activities?

Rob, this is Doug. I would say you had $20 million from the January -- trading activity and the hangover of the WTI, you had about $20 million from the turnarounds. Then the balance really are things like the coke side, also just timing of things.

One thing you've got to remember that this refinery is a very big facility, so the timing of purchases and sales can have an impact on results in any one quarter. So there's always going to be a little bit of variability from the benchmark here.

So sometimes that will be on the positive side. Sometimes it will be a little bit negative. I think there was a timing impact that impacted -- that had a first-quarter impact to us but we wouldn't really change our thoughts going forward and what we have guided you to for a metric and a formula to use for the benchmark with the exception of remember what Jim said is some of the coke products like coke -- the lower price being a depressed price right now.

I think an important takeaway, though, is that this refinery is running so much better than it did in prior years. We can exceed nameplate fairly regularly and we are much smarter about the way we buy crude and sell our clean products, so it's totally a different asset than it used to be.

Great, thank you very much.

Vincent Andrews, Morgan Stanley.

Thanks very much. I just wanted to circle back on the ethane price commentary. If I has mischaracterized what you said, Jim, please correct me. But I believe you were sort of indicating that you weren't concerned about ethane prices going up in the back half of the year, which is consistent with what one of your peers said last week. So I just wanted to revisit that.

And then also, I do have that slide deck out from the presentation I believe that it was referred to earlier. If you could just sort of comment a little bit on what your expectations are on the demand side of things over the next let's say 12 or 18 months and maybe specifically what I am thinking about is just sort of the level of capacity creep that could take place in the industry that might not be announced or visible from some of your competitors and how if at all that factors into your thought process here?

Yes, well, I think the specific thing that I said, Vincent, is that ethane was around $0.50 right now plus or minus. Could it go up some in the third quarter? I think it could. How much is very, very difficult to predict.

We have a lot of variables at play here. As you know, rig count has dropped pretty significantly as a result of lower gas prices. You know we're above $2 an m now again. Really it needs to be much better than that to sustain a heavier rig count looking for natural gas.

Having said that, because liquid prices are much better, you still see pretty good rig counts in the fields that are wet. That is positive that they are still looking for that and [adding] the volumes.

We have had some studies done internally where we looked at supply/demand on NGLs and say they are reasonably balanced, I think was the words that I used into the second, third quarter maybe starting to go a little long in the fourth quarter and into next year we think, they should be long-term everything we see.

In terms of the demand side, the US economy has been better than other parts of the world. This is -- a lot of our product goes into the domestic market and so a lot depends on the economy but it has been a reasonably good. So we feel -- we still feel pretty good about our business going forward. Out into '13 and '14, we feel very good.

Ethane gets long. Propane has been helping us some and we think that there's not much new capacity being added in the early years and so it should be very good.

So just then is it fair to assume that you do not believe that there is any risk from -- I don't know, what would you call it -- sort of hidden capacity creep from your competitors in the next 12 or 18 months that is properly reflected in your forecast?

Well, hidden capacity increase on the ethane consumption side?

Yes, or is it just -- is the risk just not material? That could be the answer, too?

Well, I just got done explaining to someone we might go up 2% or 3% here or there in our capacity to crack ethane and other NGLs. And I think other people are trying to do that. Part of that depends on where they are in turnaround schedules and all because sometimes you need a turnaround to capture that capacity. You have to actually change hardware and you need to be down to accomplish that.

So I think everybody who could has been, but I do want to make a special point about propane because it's helping and propane has been pricing reasonably close to ethane and obviously you get some more coke products with that. So if other people are like us, they may be running some more furnaces on propane than they had in the past based on relative pricing.

Vincent, one other thing I would say is -- one other thing to think about with the turnaround activity, what we've seen this year is we are talking about ability to consume but we are also seeing ethane production records and ethane and propane inventories both rising over the past multiple months. So we will see how the balances work through.

Okay, thanks very much.

Andy Cash, UBS.

Yes, with the stock behaving the way it is today, I would imagine that you would like to buy back some stock here. But given the Dutch tax penalty, I was just curious -- maybe you could go through and explain to us what is the earliest date that you think you could buy back some stock without that penalty?

And after that penalty is waived, what would be the latitude let's say over a 12-month period of time, how much stock you could buy back if you decided -- could buy it back?

Yes, beginning in January of 2013, we could potentially review our options as it relates to share buybacks without that significant tax penalty. Beyond the tax implications, we would look at obviously any share buybacks in relations to any other accretive growth projects, cash needs, overall outlook on the market. It doesn't mean we will or have any intention at this point, but just that those tax issues would no longer preclude it.

However regardless of this, we would still need to keep in mind our current ownership structure and the potential concentration of ownership if our larger holders did not participate in that share buyback.

But going forward after January in 2013, those tax issues will no longer have that kind of onerous consequence for us.

Okay, as far as the magnitude, excluding the potential ownership, something that has to relate to the dividend, how much dividend you pay in and how much buyback it could be? Could you talk about that and explain that?

Andy, there are -- it is dependent on the dividends you have paid thus far and of course, we are not to that point in time yet. But it is a substantial amount. (multiple speakers) It's over a number of years.

Just a quick follow-up, given that your turnarounds are behind you now at Channelview, was the 1.5 billion pounds of polyethylene in the first quarter, was that a low watermark for polyethylene this year?

We will see how the year develops, for the sales you mean?

As far as the volume. I was surprised how strong it was. It was very strong.

Remember, Andy, we -- as Jim spoke about, we built inventory of ethylene products in the fourth quarter so we could meet the customer requirements. So I think as you are commenting on, demand was okay in the quarter and we were able to meet the demand through the actions that we took in anticipation of the turnaround. We'll see how the rest of the year develops out for us.

Okay, thank you very much.

Gregg Goodnight, UBS Financial.

Good morning. Congratulations on your safety performance. That's truly outstanding for a turnaround quarter.

Thanks, Gregg. That is something we work very hard at.

Could you comment, the timing of the tax refund, Karyn, is that a first-quarter or a second-quarter event?

We received the $250 million in the first quarter so that cash has been received.

Okay, the second question, the Clinton shutdown as I understand it, that is -- has been scheduled in May perhaps five to six weeks. Is there any chance of delaying that outage now that the margins are so spectacular on the very cheap Midwest ethane?

No, we don't have a six-week outage in Clinton.

Okay, I'm sorry, I picked that up from a consultant.

I know it has been reported before. We may have some downtime to do a little bit of work across the next couple of quarters, but nothing like of that magnitude -- just [planning].

Maybe a couple of weeks or something like that? What would the timing be?

We don't have a turnaround in that one scheduled as you are suggesting here. We have had a little bit of an outage, but no turnaround activity like that. We have been doing some furnace maintenance, but I am not sure where that is coming from.

Okay, thanks for clearing that up. That's all I had. Thank you.

(Operator Instructions). Charles Neivert, Dahlman Rose.

Good morning, guys, or good afternoon as the case may be. A quick question. On the turnaround at Channelview, what would you characterize the cost of sort of using inventory ethylene instead of -- because it's got a lot higher cost structure in it from whatever feedstocks you were using, considering especially the drop across from fourth quarter to 1Q in terms of the cost structure. Can that get quantified in the first quarter? How much did it affect -- cost you?

Charlie, I think the key thing to think about is basically because the turnaround work impacted production by a couple hundred million pounds, as we said, we really met our customer needs, so we had a couple hundred million pounds but had we been able to produce it, it would (inaudible).

Right, but I mean what you used out of the inventory to basically keep your supply more or less in line (multiple speakers)

As you recall from our fourth-quarter call we said we actually had purchased and built some inventory and so we purchased inventory here. So we were purchasing in the 50s, we were producing in the 20s.

Got it, okay. Thank you.

Kevin McCarthy, Bank of America Merrill Lynch.

Yes, Jim, you referenced a few times that the propane crack is becoming fairly competitive with the ethane crack. And so I'm wondering if propane continues to lengthen over the summer here such that that becomes an advantaged feed relative to ethane, what is the maximum amount of propane that your US asset base could handle in percentage terms? Does that figure change at all with your Channelview feedstock flexibility project once that's done?

We can go back to where we were. We can still crack very heavy at Channelview. We can still do the same thing down there at Corpus and so propane is very, very easy to take into our furnaces and so I don't think we will be very limited on that.

In fact another way of thinking about that is if we can do high 60s in ethane and we wanted to start pulling in propane, that number goes up if we need it to. Now I'm not trying to infer that propane will overcome ethane longer-term in terms of overall pricing. I am saying that it does kind of help put a cap on things and it does overall improve the relative pricing of ethane because of additional propane that's being cracked because of good economics.

But I don't see us going really long propane and a lot less ethane. I think ethane will stay favored.

Realistically I think probably ethane has to react.

Okay, so just to clarify, if I look at the 82% figure you mentioned for NGLs and 68% ethane, I guess you are running 14% as the sum of propane and butane. It sounds to me like that number may not necessarily move a lot higher but if the propane crack improves, you benefit through a looser ethane market essentially. Is that fair?

It could increase significantly if we wanted it to but we wouldn't probably because what I'm saying is ethane should stay the lower and the favorite crack -- but how would I say that differently? I'm trying to say that ethane --.

This goes to the argument that ethane gets short into the third quarter and fourth quarter and as a result, the price will spike like we saw following some outages at Belvieu last year related to a fire. I don't see that happening absent some unusual situation like that again because we are very long propane right now. It was a warm winter.

I think the key thing to remember Kevin, is there's really only one -- well, to places for ethane to go. One, it can stay in fuel up to a certain extent but at that point, it's only worth about $0.15 like we are seeing into the West right now.

The other alternative is to crack it, so you tend to think it's going to remain -- have to remain competitive to the propane side of it. As Jim was saying, propane is going to cap your ethane situation.

So as you think about it, what we have done is greatly opened up the feed [length] and there's always a lot of discussion about how much ethane is coming off of these wells, some 40-some% ethane, about 28% propane, so it really opened up the cracking slate. (inaudible) propane is competitive.

Okay, very good. Thank you very much.

I think Jim has a couple comments he would like to make to close.

Yes, let me just finish up. I believe we did have a very solid start to the year. First quarter is normally a weaker quarter but several of our businesses had excellent results.

US olefins had over a $500 million quarter despite Channelview, OP-1 and OP-2 being down a fair amount of that quarter. It's very rare when both of those are down but we still had that kind of olefin result.

Refining & Oxyfuel has also had a very good start to the year and I&D continues to perform well quarter after quarter. Obviously the fourth quarter we had some turnaround activity but if you look at a normalized I&D quarter, very, very solid.

We are finishing up our refinancing efforts and Standard & Poor's has given us an investment grade corporate rating and this is a major milestone for the Company, something that we have wanted to see for quite some time, a very solid balance sheet at this point in time.

We are in cyclical businesses. We're going to closely monitor European and Asia business conditions but overall, we feel very good about our relative competitive position.

Thanks for joining us. Thanks for your interest in LyondellBasell.

Thank you. This concludes today's presentation. You may disconnect at this time.