利安德巴塞爾 (LYB) 2013 Q4 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 now like to turn the conference over to Mr. Doug Pike, Vice President, Investor Relations. Sir, you may begin.

Thank you, Shirley. Well, hello, and welcome to LyondellBasell's fourth-quarter 2013 teleconference. I am joined today by Jim Gallogly, our CEO; Karyn Ovelmen, 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 at 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. And actual results could differ materially from those forward-looking statements. And 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/investorrelations.

And reconciliations of non-GAAP financial measures to GAAP financial measures, together with any other applicable disclosures, including the earnings release are currently available at our website lyondellbasell.com.

And finally, I would like to point out that a recording of this call will be available by telephone beginning at 2 PM Eastern time today until 11 PM Eastern time on March 2 by calling 888-662-6658 in the United States and 402-220-6418 outside the United States. And the pass code for both numbers is 3674.

Now during today's call, we will focus on fourth-quarter and full-year 2013 performance, the current environment, and near-term outlook. With that being said, I will turn the call over to Jim.

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

Let's take a look at slide number 4 and review a few financial highlights. The fourth quarter of 2013 results set a record for the period with EBITDA of $1.54 billion and earnings per share of $2.11. Our EBITDA results exceeded the fourth quarter of 2012 by $278 million. Although we had record performance, the results were negatively impacted by typical seasonal trends which impacted the quarter by approximately $100 million. Net income and earnings per share benefited from a significantly lower tax rate related to the release of reserves against certain net operating losses.

Our annual results establish a new earnings record as well. For the year, our income from continuing operations was $3.9 billion or $6.76 per share. The charts on the bottom of the page provide a good perspective of the strength and consistency of our results.

Within our portfolio, the fundamental drivers of our performance were unchanged. The olefins and polyolefins America segment benefited from the revolution in natural gas and natural gas liquids as well as strong operations. Intermediates and derivatives benefited from similar attributes as well as our leading propylene oxide technologies. Our olefins and polyolefins EAI segment does not enjoy the benefits of the US shale boom, but a similar approach to operations and areas of differentiation have contributed to its solid performance.

2013 was a year of repositioning for our refining segment. Lighter crude dropped in favor during the year, and we took steps to be able to process these crudes more efficiently without giving up our heavy sour crude capabilities. Recently refining margins have improved.

During these calls, I don't often mention our technology segment, but over the years this differentiated business delivers exceptional results. Technology EBITDA as a percent of revenues in 2013 averaged 44%. Capital spending was modest and EBITDA grew by 18%. I'll say more about each segment later in the call.

Over our brief history, we have methodically moved the Company forward by maintaining our focus on original back-to-basic principles, cost containment, and capital discipline. We have accomplished should a great deal in just 3.5 years and 2013 was no exception. The next slides highlight a few of our 2013 accomplishments. If you turn to slide number 5 of the presentation, I will begin with environmental health and safety performance. Those of you that have followed us know our commitment to this area.

The trends on the charts speak for themselves. Our corporate results are consistent with top decile performance. Since 2009, our personal injury rate is down approximately 50%, and our environmental and process incident rates have declined by approximately two-thirds. For many reasons, we strive to bring each of these metrics to zero. Good performance protects our people, our assets, and the communities in which we operate. The results show a financial impact. Safe operations are also normally reliable operations. You see this to be true in our results.

On slide number 6, we outline some of our key accomplishments. In the interest of time, I will highlight just a few of the many achievements. First, profits reached a record level as we surpassed last year's record earnings. Our total annual shareholder return was 45%, significantly outperforming the S&P 500. Those of you that have followed us over the past several years know that we always emphasize cost control. I am proud that for the fifth consecutive year we offset inflation and maintained flat underlying costs. We expect to do the same in 2014.

In the finance area, our strong cash flow enabled us to reward our shareholders, invest in our future, and establish a strong investment grade balance sheet. Some highlights include increasing our quarterly interim dividend over the year by 50%; paying $1.1 billion in dividends; and repurchasing approximately $2 billion of our stock. Operationally, we have increased our advantage feedstock capabilities in both our US and European olefin operations. Almost 90% of our US ethylene production was sourced from NGLs and essentially 100% from advantage US source materials.

During the summer, 40% of our European ethylene was produced from advantage feedstocks. I am particularly proud that exclusive of our schedule turnarounds, our US ethylene plants operated at 99% of nameplate capacity, well above the industry average.

During 2013, you saw our first significant growth programs come online. The butadiene expansion in Europe and the restart of our methanol plant in the US. Our first major ethylene expansion will happen in the next months, well ahead of our competition and at a lower cost. At our refinery, we began consuming more US light crudes and heavy Canadian crudes. On the bottom of the page, we show EBITDA results by segment. We have experienced steady growth in EBITDA.

Let's turn to slide number 7 and look at some of the metrics that drove our performance. Across the top of the page we have plotted our key volumes. I want to focus your attention on our ethylene production. Over the past several years, our cracker operations have been strong, and we have been able to operate in both regions above industry average rates. Our US data represents production after operation of our flex unit which converts ethylene into propylene. This flexibility added substantial value during the latter half of 2013. Taking into account this ethylene consumption and our planned turnaround downtime, our US crackers operated near nameplate capacity. In Europe, we operated our crackers at 88% of nameplate capacity, approximately 10% higher than the industry average.

In the charts on the bottom of the page, you will see a summary of product margins and spreads. The index charts represent our internal data while the others represent industry benchmarks. The charts on the left highlight the strength of the US ethylene chain. On the right-hand side we have plotted MTBE and refining industry spreads. Following an exceptionally strong 2012, MTBE continues to deliver solid spreads. And refining the Maya 2-1-1 spread doesn't tell the whole story as RIN costs, our first quarter turnaround and lower byproduct values from coke and LPG's pressured 2013 results. Overall, these charts provide a good perspective of the margin and volume factors that have contributed to our success. Importantly, solid operations and advantage positions have resulted in consistent results and characteristic of most commodity businesses.

I would like to turn the call over to Karyn at this point to discuss our financial performance.

Thanks, Jim. Please turn to slide number 8, which charts our fourth-quarter and full-year segment EBITDA. As Jim said, our results have been strong and steady. The fourth quarter generally reflected the trends and conditions that prevailed throughout 2013. In the interest of time I won't repeat the key drivers, but rather will use a few minutes to discuss some of the unique items that impacted results.

Seasonality generally plays a role in our fourth-quarter results. This year was no exception and versus the third quarter we estimate the seasonality impact in the range of $100 million with the primary influences being in oxyfuels and polyolefins. Our O&P EAI segment was positively impacted by a $25 million insurance settlement related to the 2012 [Wesseling] polymer reactor explosion.

In I&D, we decided to exit our Japanese PO joint venture. The accounting related to the exit negatively impacted segment EBITDA by $26 million. In addition to the EBITDA impacts, our net income benefited from the tax impact related to the release of valuation allowances primarily associated with our French tax losses. The release of approximately $350 million of valuation allowances represent the bulk of the net income improvement. Together, these items reduce the full year effective tax rate to 23%.

Slides 9 and 10 provide a picture of our cash generation and use. During 2013, we generated $4.8 billion of cash from operations while utilizing $3.1 billion to pay dividends and repurchase shares. We also took advantage of favorable interest rates and borrowed $1.5 billion at an average coupon rate of 4.6%.

On slide 10, we plotted a few key aspects of our cash story. Cross management is a strong theme within LyondellBasell with a goal of maintaining costs and local currencies flat to down. Over a five-year period, our actions offset an estimated $215 million of inflation. Since 2008, our headcount was reduced from 17,000 to approximately 13,300.

In the upper right of the page, you can see our capital spending history. During 2013, we increased our capital spending to $1.6 billion with roughly 50% of this spending in our growth program. We anticipate similar cash fixed costs and capital spending during 2014. On the bottom of the page, we have given you a profile of the annual free cash flow and the cumulative uses of the cash during the past three years. Of the more than $12.5 billion of after-tax cash flow, approximately two-thirds was in dividends and share repurchases, with one third reinvested in assets.

Since this is the beginning of a new year, I expect that some of you may have 2014 modeling questions. Regarding capital, we are planning to spend approximately $1.6 billion during 2014. Approximately half of this is targeted toward our growth program. We currently expect cash interest expense to be approximately $325 million based on $5.8 billion of total debt at an average interest rate of approximately 5.6%.

Additionally, there should be an estimated $5 million per quarter of non-cash amortization. Annual book depreciation and amortization should be slightly higher than the $1 billion incurred during 2013. We plan to make regular pension contributions that total approximately $185 million and estimate an expense of approximately $40 million. We currently expect a 2014 effective tax rate of approximately 29%. Cash tax rate is expected to be approximately the same.

In the fourth quarter, we repurchased 8.5 million shares bringing the total number of shares repurchased in 2013 to over 27 million. We did not recommence share repurchases in December 2013. Our prior practice has been to repurchase shares under a 10b5-1 plan. We tend to be pretty conservative in entering into such plans and did not do so in December. Currently, we do not believe that we are constrained in repurchasing shares and we intend to commence repurchasing shares when permissible after this earnings release.

As you may recall, we are authorized to purchase up to 10% of our shares before the end of May 2014, and we have ample cash to effectively execute on that authorization. Of course, various facts, circumstances, and market conditions can influence our execution; however, we continue to remain committed to returning cash to shareholders in the most efficient manner including via share buybacks. There has been no change to our capital deployment approach or our financial policies in this regard.

With that, 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 11 with olefins and polyolefins Americas. Fourth quarter EBITDA was $883 million, $42 million greater than the third quarter. For the full year, our segment EBITDA was $3.57 billion, an outstanding year. A few specifics will help put the quarterly results in perspective. Relative to the third quarter, our ethylene sales price was relatively unchanged, and the cost of ethylene production improved from the third quarter. Our operating rates remained strong during the quarter averaging 98%. 77% of our production was from ethane, a record level. The differential between ethylene and propylene prices allowed us to profitably operate our flex unit throughout the quarter. This added approximately $25 million to our results.

In polyolefins, our polyethylene spread expanded by approximately $0.02 per pound while the polypropylene spread remained flat. Polyethylene volumes increased slightly, but domestic sales decline during December. We moved a bit more product into the export market during this short period. Polypropylene experienced a seasonal sales decline of approximately 4%. For the full year, results surpassed 2012 by $605 million, primarily due to higher ethylene chain margins. Chain margins improved by approximately $0.10 per pound, approximately $0.04 per pound in ethylene and the balance in polyethylene. As you saw on an earlier slide, production and sales volumes were relatively unchanged.

Overall, 2013 was an excellent year. Strong industry fundamentals remain intact. Our crackers operated at almost 100% reliability. We increased ethylene production from ethane and total NGLs and captured value in polyolefins.

In January, ethylene margins have remained strong, but natural gas and NGL prices have increased. Heating and power demands from the extreme cold weather in the Midwest and Northeast have created localized spot shortages and extreme prices in some regional natural gas and propane markets. We anticipate that these conditions will quickly dissipate when temperatures moderate. The Midwest propane spike will have some impact on our costs. However, the impact will be partially offset by lower local ethane prices. We do not believe the overall impact will be significant.

Meanwhile, our US Gulf Coast ethane costs have increased with seasonal natural gas price increases, but inventories remain high and ethane supply continues to expand. We believe that this winter pressure will be relieved as temperatures rise. When you look past this winter-related volatility, industry conditions remain favorable for US petrochemicals. Natural gas and NGL supply is strong and ethane supply is increasing as Marcellus ethane reaches the Gulf Coast. As a reminder, we will begin the turnaround at our La Porte plant during late March and anticipate that it will last approximately 80 days. During the fourth quarter, we build ethylene inventory in preparation for the turnaround.

Let's turn to slide number 12 and review performance in the olefins and polyolefins Europe, Asia, and International segment. During the fourth quarter, EBITDA was $115 million. For the full year EBITDA was $839 million, a $291 million increase versus 2012. Within the business, typical seasonal factors drove a decline in results. Our cost of ethylene production metric increased reflecting increased naphtha and LPG cost. Polyolefin volumes declined by approximately 4% and 5% in polyethylene and polypropylene, respectively.

Our polypropylene compounding and polybutene-1 businesses declined by approximately $25 million. Equity income decreased by $7 million. For the full year, olefin results benefited from approximately $85 million associated with the summertime LPG cracking, increased feedstock flexibility, and increased volumes. We operated our crackers at 88%, approximately 10% higher than industry rates. Polypropylene compound and polybutene-1 results increased by approximately [$15 million] due to stronger volumes and margins. Equity income from our joint ventures increased by $53 million, primarily from Saudi polypropylene joint ventures.

2013 continue to be a difficult year for European olefins industry. However, our value oriented approach to markets, feedstock flexibility, and restructuring activities enabled us to improve performance. We will continue to press these initiatives in 2014 independent of industry conditions, which thus far have generally been consistent with 2013.

Now please turn to slide number 13 for a discussion of our intermediates and derivatives segment. Fourth quarter EBITDA was $354 million, a $73 million decline from the prior quarter. For the full year, the segment generated EBITDA of $1.49 billion, $129 million less than 2012 EBITDA. The majority of the quarterly decline was attributable to typical seasonal trends in oxyfuels. Results from propylene oxide in this derivatives increased slightly. Intermediate chemical products EBITDA was relatively unchanged. Stronger acetyls and EO and EG results offset a decline in styrene margins.

We had two important milestones within I&D in December. We closed on the sale of our interest in the NOC joint venture to Sumitomo. This divestiture supports our intention to focus on assets which bring long-term value to our Company. In that regard, we also successfully restarted our methanol unit at Channelview in the month. The methanol plant contributed approximately $15 million to fourth quarter EBITDA.

The full-year 2013 versus 2012 results reflects a similar trend to the fourth quarter analysis in most products. Following particularly strong 2012 oxyfuel margins, the market returned to margins more typical of the fundamental gasoline to oxyfuels blend premium. PO and the other PO derivatives experienced moderate margin decline reflecting delayed pass-through of increasing propylene prices and industry capacity additions in butanediol. Intermediate chemicals benefited from volume and margin increases and EO/ EG acetyls and styrene.

The new year began with relatively unchanged conditions in propylene oxide and derivatives. Although we believe that the methanol plant restart will contribute throughout the quarter, you should expect the rates will vary as we tune and optimize the operation. Styrene and ethylene glycol margins are somewhat weaker. Through January, oxyfuel raw material margins are relatively unchanged versus the fourth quarter.

Let's move to slide number 14 for a discussion of the refining segment. Fourth quarter EBITDA was $134 million. For the full year, the segment generated $182 million of EBITDA, a decline of $299 million versus 2012. Compared to the third quarter, refinery results improved by $126 million. During the fourth quarter, the Maya 2-1-1 spread averaged approximately $24 per barrel, and crude throughput averaged 239,000 barrels per day. Margins at the refinery reflect a greater improvement from the third quarter than indicated by the increase in the Maya 2-1-1 spread. We benefited from a larger increase in our crack spread, moderately improved byproduct credits, and $24 million lower rent cost. However, late in the quarter, we experienced operating issues in our cokers. This resulted in reduced throughput and sub-optimal yields during a part of December. The estimated impact was approximately $40 million.

2013 was a difficult year in refining. Crude throughput averaged 232,000 barrels per day or approximately 253,000 barrels per day excluding the impact of our first quarter turnaround. The Maya 2-1-1 benchmark declined approximately $2.00 per barrel to average $23 per barrel. As I mentioned, the crack spread does not fully explain the story as low byproduct values and $87 million of higher RIN costs provided significant headwinds.

Thus far in 2014, the Maya 2-1-1 spread has averaged approximately $28 per barrel. January and February operations will be impacted by the coker issues. However, we have made adjustments to operations, and we currently expect the impact on earnings to be less than $20 million. The cokers and refinery should return to full operations during the latter half of February.

Let's step back from the details and think about the business environment more broadly. Overall, the fourth quarter and 2013 were record periods. These trends continue into 2014. In fact, US oil and gas infrastructure continues to develop. Marcellus ethane will be coming to the Gulf Coast through the ATEX pipeline. The crude oil transportation network continues to expand with projects such as the Flanagan and Keystone South pipelines. These projects should enhance our future position.

The methanol plant is a nice addition to an already strong intermediates and derivatives segment. O&P EAI may not benefit from an improved economy or industry conditions, but internally, we have taken the right steps. And our portfolio is generating earnings and cash flow in a difficult environment. We generally continue to run safely and efficiently. Our expansion plans are moving forward rapidly. The timely start of our butadiene expansion and restart of our methanol plant demonstrates our ability to execute as we grow our Company. Our La Porte expansion is set for execution in the next months. As you can see on slide number 15, we have several more projects in the queue, essentially one project every six months. We continue to build momentum across the Company in 2014.

We are now pleased to take questions, Shirley.

(Operator Instructions). Robert Koort, Goldman Sachs.

Good morning. It is actually Brian Maguire on for Bob today. Quick question on the ethane cracking up to 77% was pretty impressive. Is that a level you think you will be able to maintain and is there any upside to that? Or do you think you have kind of maxed out the ability to switch to ethane at this point?

Well, at this point in time, that's a very nice result as you say it is about a 7% increase. I think we can sustain that going forward. Having said that, as you know we are going to be doing some furnace work at Channelview with a couple of new furnaces that will add to more ethane capability there a little later in the period. We will have the two new furnaces at La Porte very soon, and then at Corpus we are expecting to do even more -- doing coils in our furnaces there. And overall longer-term that number is going to continue to increase.

Okay, great. And I know you mentioned the first quarter impact from the refining downtime, but I was just wondering with the cold weather we have had down here in Houston, too, any impact to the operations of the crackers or any of the other plants from the cold weather, any other kind of unplanned outages we might be aware of?

Yes. In the Midwest we had some snowdrifts at Morris that kept the trains from moving. Slowed us down a little bit. If we can't move across the tracks, it is hard to move polyethylene. So that slowed us down a bit. We had of bobble at Clinton as a result of a power outage. Back up and running at full rates. And at La Porte we had a very, very slight bobble. Yes we have had some weather impacts, but fairly modest at this point in time.

Great. Thanks very much.

David Begleiter, Deutsche Bank.

Jim, a longer-term question. As you look through 2015 you have the [major] opening expansions being done, but what is beyond 2015 in terms of 2016, 2017? What types of projects are you thinking about looking forward to?

Yes. Well we have a very nice portfolio of projects that you saw on the slide. Every six months something new coming on. That is equivalent to about a new cracker or [methanol is on; butadiene is on]. We are working on our China PO TBA plant. In that period of time we haven't announced new things, but we have continued to work on those. We will announce those in later days as we develop those projects further. In the meantime, obviously we have a very, very nice growth portfolio, and I think we are executing well.

And, Jim, just on the refinery, you discuss the -- when do you expect to get some Canadian crudes down to the Gulf Coast and the impact from those cheaper crudes?

Yes. I think you will see in the summer more of that crude coming down. We have taken positions on some pipelines to increase our capacity. We expect that to really help the refinery, more from the middle of the year forward.

Thank you very much.

Jeff Zekauskas, [JPMC].

Can you describe what is going on in the Conway hub in that when we look at ethane propane mix, what we see is that it is selling for negative value? Is that what you buy it for? Do you buy it and then you return the propane to the seller? What exactly is going on there and how meaningful is to Lyondell?

Well I think you just answered the question perfectly. It's an upside down market there. As a result of some crop drying, propane had a big demand pull. Then we have the extremely cold weather. We had some plants down and pipeline issues in the area. And as a result, EP mix has been negative and people want the propane back. So it has been very favorable to our operations in the Midwest. I think that's a weather-related phenomena more than anything else, and that should dissipate. You can already see signs of things coming back in over the last few days, and I think it is a short-term phenomena.

As we said in our prepared remarks, we paid more for propane in a sense less for ethane. It should have very modest impact on the results overall.

Okay, and then as my follow-up (multiple speakers). Sorry.

Of course, that's Conway and down in Belvieu, it is a little bit different. Prices there have gone up as we mentioned as well.

I don't fully understand why your intermediates and derivatives business was so strong year over year exclusive of the charge which is in there. Where did the operating income growth come from year over year? Was it from one or two big things or was it from many small things?

I think I would say that it is kind of a mixed bag. Obviously, for the first time in a long time we have had some nice styrene margins which have helped. Propylene oxide is strengthening at the moment. That has been strong. Obviously, we operate two technologies, POSM, the possum units; and PO/TBA. The PO/TBA were heavily favored units earlier in the year, and now with the styrene margin coming up, we are moving additional volumes. We see that one of our competitors seems to be backing down some volumes. And as a result, some of our customers are coming and asking for more. So that has been a positive.

Butanediol has been down quite a bit. We have got methanol online now. That started contribute a little bit. And so, EO/EG margins have been good. Overall, it was just a combination of a variety of things. That is a steady business. We have run it well, and I think it contributes to our earnings in a nice fashion.

Okay, thank you very much.

P.J. Juvekar, Citi.

Good morning. Just a quick question on the long-term ethane. Clearly, everyone believes that ethane is going to be along on the Gulf Coast. One of your suppliers is thinking of exporting ethane. And so, what is your view on that? And realistically if that were to happen, when do you think, do you have any timeline in your mind when that could potentially happen?

Well, we know that a competitor or two is already talking about moving some ethane out of the United States into European operations. I still personally think that is going to be a very limited quantity. When you look at the economics of doing that, you know, the question is: is it a good for the short-term are the long-term? And if you are a producer -- and I used to be one of those -- you don't like to sign up with those kinds of contracts for a really, really long period of time. So, I still think there will be a bit of a development there, but I think it will be a small story, personally.

And then, secondly, your balance sheet is still under leveraged, very under leveraged when you look at your net cash position. You have done one bond deal. And so what is your willingness to borrow further? Either to (multiple speakers)

Yes. You know, we had a pretty successful launch of the investment grade space with the bonds that we did in 2013. And we will continue to look at our balance sheet. We do have some flexibility in our balance sheet, and we will continue to work with our board as we go forward. In terms of the cash position, there's -- if you look at our buyback program coupled with our dividends and our CapEx, there is a use of that cash here in the near term. So, we will continue to aggressively pursue those returns to shareholders. And again, we will continue to look at our balance sheet and evolve that as we go forward.

Thank you.

Vincent Andrews, Morgan Stanley.

Can I just ask -- in the press release it talked about you purchased some ethylene ahead of the La Porte turnaround. I presume that didn't impact your cost position in the quarter, but rather it will impact either the first or the second quarter. Is that correct?

Yes. Basically what happens is it hurts us a bit in the fourth quarter, and then some of that will come back to us more in the second quarter than in the first quarter, recognizing that we have got kind of an 80-day turnaround in front of us. So it is not so much a first quarter, but it is more of the second quarter impact as we sell that inventory back in.

Okay. And then you mentioned earlier the ATEX pipeline I think is what you work referring to. And obviously, it is a little hard to tell what is going on now given the polar vortex and all that. But as all that goes away and as all that incremental ethane supply comes, how are you thinking about the overall [S&D] balance in Belvieu as we move out of the first quarter into the second quarter and later in the year? And do you think there is potential for ethane to break natural gas parity either for a short period of time or for a more longer percent of time or how should we think about that?

Yes. I generally think of it as parity most of the time, but there will be times when it does fall under. We have seen that occasionally. It looks like ethane is going to be very, very long, and I think that is white you hear certain midstream people trying to push this concept of ethane exports. They would really like to see that happen to tighten up the balance. It is yet to be seen. I have said consistently that I would like to see a slightly higher natural gas price to encourage further drilling. That further drilling will bring with it natural gas liquids which helps the balance for the chemical players. So I think overall it is a bright future. The question is: is it just spectacular or something better than that?

Okay. Thanks very much.

Don Carson, Susquehanna Financial.

Jim, a question on Europe. You did about $230 million better this year. How much of that would have been from the butadiene expansion? How much from cost-cutting? What kind of the tailwind do you have as your cost cuts get larger next year?

Yes, well, butadiene has helped us some. Obviously, the butadiene spread has been less than people expected this year compared to the prior year. I mean in past couple of years butadiene carried the spread in European cracking. It is not doing that today. Having said that, we set minimum contract prices to ensure a nice return on our project, and so we are exercising those minimum prices. And we have had a nice contribution.

But I tell you that Bob and his team have done a very, very nice job of simply running reasonably well and then pushing value constantly, reducing cost, and just trying to improve that spread. So, Don, I will tell you it is just a lot of hard work to make that kind of money in the European environment. And I think if you benchmark us, you'll see us to be kind of the leading return player in that space. And we intend to keep working our costs and keep working our efficiencies. And we are a European-committed player, and we are going to make some money there.

And as a follow-up on the refinery, I know you have talked in the past that you had to get your operations -- some improvement there before you would look at strategic alternatives. But with somewhat improved operations, a better industry environment, and this pending opportunity to bring in low-cost Canadian crude, is now the time to revisit the strategic options for the refinery?

I have not seen any refineries being sold for significant prices in the last days, and our goal continues to be: let's make that asset perform better. While the fourth quarter earnings were significantly improved, we always look at what could it have been, and frankly, I am a bit disappointed. We had an operating -- operational issue at our cokers. I mentioned that; I mentioned the impact of that. We could have done better. And we will see a little bit of that here in the next couple of months. Spreads are improving. I think the refining segment could be a bit of a surprise for people compared to -- well, definitely better than what it was last year. But we are going to keep working that extremely hard. I think one of the stories that is missed is we have also taken out a lot of capital and a lot of costs in that refinery. It is a different unit than it used to be. But again, we have got to operate a little bit better. When the spreads are there, we have got to run impeccably and we didn't do that in the fourth quarter. And so, I am a bit disappointed in the result.

Thank you.

Nils Wallin, CLSA.

Good morning. On refining, but from a little different perspective. Year-over-year crack spreads were down a little bit. RINs were up and yet -- and then you take out your additional costs, you were actually up on an operating basis in terms of EBITDA. Could you walk us through what really helped you in that segment? Were you able to buy some distressed cargoes?

We always worked the cargoes, but I will say that in 2011, we had an incredible trading year. I would say that in 2013, it was about average. I don't think there is a big story there. We have worked our operational efficiencies, our costs. We had a turnaround in the first quarter. We were able to take some lighter crudes in because we reconfigured our crude unit and the cut points, but I think it is just in the early part of the year between RINs and coproducts being incredibly -- RINs being high and coproducts being incredibly depressed, we just were struggling to have any kind of margin. RINs are down now in the fourth quarter. There's been a little bit of benefit in coproducts, and I think the environment is improving. And our job is to go capture more of it in 2014.

Got it. And then a follow-up. On your slides you show a nice spread of polyethylene over ethylene margins. That -- we know of course that some of your competitors have had issues and continue to have issues. Does that spread, where it is now, sustainable or do you think it could ease once any of those operational issues get resolved?

Well, there were some instances where competitors had some significant issues in 2013 and particularly in the high density side. Margins expanded pretty nicely there. I tell you in December, the US volumes were a little light in my view. But we have seen nice demand pull again in January. Markets seem to be coming back, and we are pressing for price increases. So our job is to go capture value in not only the olefin side, but also polyethylene and polypropylene side.

Thanks very much.

Hassan Ahmed, Alembic Global.

Morning, Jim. On the call, you obviously mentioned that you made $15 million on the methanol side of things. You know, if I do a back of the envelope, I would imagine that equates to roughly around 50,000 tons. Would that be fair?

Yes. I think so.

So, keeping in mind, call it, [quarterly] capacity of 200,000 tons, there could be significant upside from the methanol facility in 2014.

Yes. We had historically said at previous year's volumes, kind of last 12 months volumes, we were quoting a number around $200 million of EBITDA a year. Margins have expanded since then. We will just see where they end up, but we have got to run it hard. And we have been through a few little [teethings] things, but the unit seems to be very capable. And we will see if we don't have of the bottleneck or two once we get it fully lined out.

Very good. Now changing gears of it, obviously there was a special dividend in 2011, another in 2012. And obviously, this was during up period when you had certain share buyback restrictions. Just wanted sort of your thought process about share buybacks versus special dividends and the like going forward?

Yes, so we had some restrictions as it related to buybacks which were relieved and, therefore, we have the authorization now to do the 10% in terms of the buybacks over that 18 months period. As you know, we have executed on that. So, we are currently focused on really trying to make the most efficient use of that regular dividend. We have continued to grow that over a few years. Started with $0.10 back in May 2011. Today it is at $0.60 with that most recent 20% increase. So, we are focused on the regular dividend and coupling that with the buyback right now. So that is where the focus is. That is not to say that special dividends are not an option, but those -- the ones that we did over the last few years were really indicative of the fact that we couldn't exercise on buybacks in an efficient way.

Very good.

I think it is fair to say that every time we have a Board meeting, Karyn, I, and the supervisory Board will discuss what is the optimum plan for the coming period. Share repurchases around the table, special dividends around the table, and obviously you have seen us expand a regular dividend very, very rapidly.

Super. Thank you so much.

Laurence Alexander, Jefferies.

Good morning. This is Rob Walker on for Laurence. I guess in the Americas and ONP your polyolefins results EBITDA looked to have grown more in dollar terms than your olefin profits. What drove the improved spreads and is it sustainable in 2014?

Yes. I think obviously we had mentioned before that there were certain competitors that had outages that helped. But there was a good steady demand. We exported fairly small quantities most of the year with a slight increase in December. With that demand, you know, we move prices in industry, and as a result of that you saw a nice expansion polyethylene. I think in previous years you saw less value than you should have expected in polyethylene. And I think going forward it still seems fairly snug. And we have the ability to export if that is a better option. So we continue to push value.

And curious to get your thoughts on oxyfuel profits in 2014 as related to -- versus 2013. Should they be up, down, or about flat?

Yes. Well, there's a few things that drive that. Obviously, 2012 was a banner year. Butane had just a very, very advantaged position for part of the year and there was an extreme demand pool. Gasoline got longer in 2013. We had less butane opportunity, but still it is a great business. Octane becomes more and more valuable as cars have to have higher and higher mileage. I think we will just watch and see how butane responds, but remember, we are both in the US and in Europe in production of oxyfuels. So, so far, so good. We will watch and see what happens, but 2012 was an unusually strong year. 2013 was more representative of what is normal I think.

All right. Thank you very much.

Frank Mitsch, Wells Fargo Securities.

Good morning, folks. Jim, I thought during your presentation you talk about advantage feedstocks in the US and I think you mentioned Europe as well. Can you expand upon the position in Europe?

Yes. What we said was during the summer months we ran about 40% advantage feedstocks. What happened is, particularly in France, we are right on the med; we were able to bring in some propane, a little bit of butane, this and that. Historically, we had only run kind of naphtha plus in our crackers there in part because we had a refinery that we operated, and we were using that as a feed prep unit. We don't have that issue. Wed close that refinery down. We have got a lot more optionality. We will chase those advantage feedstocks, and frankly, there were opportunities in the summer that were very strong and we took advantage of them.

One of the other things that will start to happen more in 2014, we renegotiated a very, very significant naphtha contract here towards the end of 2013. It kind of handcuffed us in a few of our other facilities where we had contracted from a very long-term historic basis. In the Basell heritage, you remember how that company was formed. We bought naphtha from some of the parent companies of the old days, and we were kind of locked in. We have built a lot more flexibility in going forward, and we'll see what we can do in 2014. We have got more flexibility, and if the markets open up, you will see us try to do more of that; improve our position.

That's very helpful. Karyn, just to fully clarify. So your average share count is down 4% for Q4 from when you started the buyback. Where was the ending share count and, just to clarify, the intention is absent anything unusual that you are going to complete the 10% authorization during -- by May?

Yes. So the ending share count, 549 million shares. But, yes, we have the authorization to complete the share back and approval by our Board to complete it within 12 months, which would be the May time frame. Obviously that is going to be contingent upon other market conditions, that type of thing, but we do expect to execute on that through the end of May.

Terrific. Thank you so much.

Kevin McCarthy, Bank of America Merrill Lynch.

Good morning. Jim, coming back to your Gulf Coast ethane mix at 77%. Can you speak to the composition of the other 23%? In particular, what would be your technical minimum on propane these days?

Well, with propane prices going up, we crack less propane. We have been bringing in a lot of condensate as well, and there's been a nice price differential in south Texas condensate. So we can kind of sub in and out on propane and condensates. A lot of that is related to Corpus Christi and Channelview, but overall, the whole feedstock slate has an advantage of some sort. Whether it is -- it is primarily ethane today, somewhat propane although at this moment propane is a little higher. And then the condensates make up the rest of the mix, and so I'd say hundred percent kind of advantage. Propane being a little bit less though at this moment.

Okay. And then, just like to follow up on an earlier question about your Mid-Con crackers in Morris and Clinton. Can you help us understand some of the mechanics of your feedstock procurement there? In other words, are you buying EP mix or purity ethane typically or both of those at times? And in the case where you might buy EP mix, when we see a large data price given the recent distortions in the market, is it really a negative price for you? Or is it the case that you have to return the propane back to the seller, and so mathematically it tends to work out to a positive price?

Yes we basically run an EP mix. But when we say that, we want a very, very lean EP mix. And that is generally what we get with limited amount of propane in it. That just seems to work better in our crackers, way we are configured, and that has been the advantage that we have had in that region. There's a couple of different pipelines working that area, and we have taken advantage of that. There's been some downtime, but we have had no feedstock issues lately. Sometimes we have to buyout some of the ethane, but I think the comment I made in the prepared remarks about all of this kind of being somewhat neutral to us is probably the best way to think about it. Propane has gone up, but we get some benefit on the ethane side. So overall it is pretty balanced.

Fair enough. Thank you.

Mike Ritzenthaler, Piper Jaffray.

Good morning. I just wondered if you could expound a little bit on the potential for growth within the JV income line item particularly with your comments on Saudi Arabia.

Mike, I'm sorry I think you broke up a little bit there. Could you repeat that question?

Yes, sure. I was wondering about the JV income line and the potential for growth there in 2014 particularly, Jim (multiple speakers)

Okay, JV equity income in 2014 and how we see that. Yes, I think there's upside potential there. Our SEPC joint venture in Saudi Arabia has had nice returns for quite a while, but there is an opportunity for operational efficiency there. We did run better at our Al-Waha facility in 2013 than 2012. But even there, there's plenty of room for improved operations. We don't physically run those plants, but one of our goals is to go in and work with our partners in a more efficient way and get those -- get the reliability up. We have nice feedstock margins there and a decent percentage ownership. Our goal is to make those things contribute more to our profitability going forward. And of course, Thailand has got an advantage feedstock position. Ran reasonably well last year, but in a tough market. So we are going to continue to push JV income. I think there is upside there.

And then, just a quick follow-up on the technology segment. I know it doesn't get a lot of attention, but the growth has been pretty tremendous. And I was wondering if you could talk about the, I guess, the industry dynamics behind what is driving that growth and whether that is sustainable over the next couple of years?

It really gets down to our people building new plants. There's two pieces. On the technology side, we have got the process side and then the catalyst business. On the process side, we have been the industry leader in polypropylene for quite a while between Spherizone and Spheripol, truly the industry benchmarks. And if somebody is building a polypropylene plant, they will call us and many -- in fact I will just say in most instances, we get selected because we really have a beautiful technology with nice products. And so we get selected very, very regularly there.

We are expanding our polyethylene portfolio. We are working on a new technology there. We have always been one of the industry leaders in tubular, high-pressure tubular. And there's just one other competitors that goes toe to toe with us there, and I think we win the majority of those contests. We are looking at a low pressure new technology that I think we may build serial number 001 in the United States. We talked about that briefly. That may show up in the United States, and that should really help us in our licensing effort going forward.

On the catalyst side, it is primarily polypropylene catalysts. We have very large, long-term, highly supported customers. And it's good margin business, and we keep them happy and continue to make sure that they have industry leading products. So it is just a nice segment for us, good earnings, and something that we drive through technology enhancement primarily out of our Italy operation, Frankfurt operation, and then a little bit out of our US operation, Cincinnati.

Great. Thanks for taking my questions.

This will have to be just the one more question here.

John Roberts, UBS.

It sounds like there are no strategic options available on the refinery, but are there any tactical options there? Is it fully optimized or could you even put new capital in somehow to take advantage of all the changes going on in the crude market?

Yes, you know there's -- we do not have the hydro cracker at that operation. And what we do today is we contract the stream that normally would go there to a third party, and we share in the value of that. It always gets the question of what is the return on hydro cracker and that capital versus other opportunities we have. And so far our other opportunities have been so strong that we haven't chosen to do that. It remains an option for us to put more capital in, to complete the kit. But as I tell everybody let's run the kit we have perfectly, and then you can come talk to me about growing it. But until then I am kind of not too interested in hearing about it.

So the project would be above your cost of capital? It is just not higher than the other projects you have.

Well it is above the cost of capital, but we are putting our capital primarily in US olefins and higher growth projects, and those returns are stunning. The other thing we like to do is return excess cash to our shareholders and share repurchases and whether special dividends or regular dividends, so we think very shareholder-friendly in that regard. So we are just not looking to go spend money on capital opportunities that exist. We are very, very disciplined.

Thank you.

Let me change the format for just a second and ask you all a question. We have been a company since May 2010 when we entered the New York Stock Exchange and now an S&P 500 company. Did anybody on this call expect LyondellBasell to be where we are today? Obviously, we are tops in safety, tops in reliability, outstanding cost position, held our cost flat coming out of bankruptcy with $1 billion taken out. Held that flat now for multiple years. Great growth profile, strong investment grade balance sheet, strong shareholder return. I am pretty sure that nobody on this call expected that.

And the second thing I would like to say is having been -- had that performance during that period of time, recognizing the fabric of what this Company is, do any of you expect this Company to let up one bit going forward? I said on day one when I came in 2009, we are going to make this the best petrochemical company in the world. We are well on our way. Some may say we are getting so close to that that it is just a step or two away. But having said that, we are not satisfied. And we have had great results over that period of time, but there is a lot more to come in this Company. And we are energized to make that happen in 2014 forward.

Thank you for your interest in the Company. Thanks for your support.

Thank you. That does conclude today's conference. We thank you for your participation. At this time, you may disconnect your line.