Goldman Sachs Cyclical Conference May 22 nd 2002.

Goldman SachsCyclical Conference

May 22nd

2002

Statements in this presentation relating to matters that are not historical facts are forward-looking statements. These forward-looking statements are just predictions or expectations and are subject to risks and uncertainties. Actual results could differ materially, based on factors including but not limited to future global economic conditions, further increases in raw material and/or energy costs, access to capital markets, industry production capacity and operating rates, the supply/demand balance for the products produced by the Company and its joint ventures, competitive products and pricing pressures, technological developments, changes in governmental regulations and other risk factors. For more detailed information about the factors that could cause our actual results to differ materially, please refer to Lyondell Chemical Company's Annual Report on Form 10-K for the year ended December 31, 2001, Lyondell’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, and the proxy statement that Lyondell will file with the SEC with respect to its special meeting of shareholders relating to the transactions with Occidental.

Safe Harbor Language

High quality assets with major market

positions

Differential earnings leverage to cyclical

improvement

Targeted $1 billion debt reduction at Lyondell

further enhances earnings and strengthens

capital structure

Investment Rationale

Lyondell Chemical Company - Intermediate Chemicals and Derivatives

– World’s leading producer of PO and derivatives

– 100% Ownership

Equistar - Petrochemicals and Polymers

– A leading North American producer of ethylene, propylene and

polyethylene

– Low cost position based on feedstock flexibility and scale

– 41% Ownership

LCR - Refining

– Unique capability to refine heavy crude oils

– Contractually stable business; strong cash flow generator

– 58.75% Ownership

Lyondell Operates in 3 Major Businesses

Lyondell is a balanced portfolio

Lyondell

IC&D

LCR

Equistarcommodity leverage

stability & growth

cash generation

Our Beliefs in the Drivers of Success Remain Constant

Sustainable Competitive Advantages Technology Market Position

Low Cost Production Scale Breadth and Depth of Product Offering Global Reach Capital Market Liquidity

Our actions have created a strong foundation

Assets under management increased four

fold from $3 billion to more than $14 billion

Extended the breadth of our market offering

from Olefins & Polyolefins to PO&D, Styrene

and MTBE

Established a global presence

Unified components of four companies

Solid results through prudent management

Major fixed cost reductions in all areas Major fixed cost reductions in all areas

of companyof company

More than $400 million of cash from More than $400 million of cash from

working capital at Lyondell and working capital at Lyondell and

Equistar in 2001Equistar in 2001

Disciplined capital expendituresDisciplined capital expenditures

Safety – world class performanceSafety – world class performance

IC&D Provides Stability & Growth

Others15%

Dow36%

Shell4%

Bayer2%

LYO 41%

BASF2%

14 Billion Lbs14 Billion Lbs

2005

Others18% LYO /

Bayer 35%

Shell /BASF15%

Dow32%

1990

7.4 Billion Lbs7.4 Billion Lbs

Source: SRl

Global PO Capacity Share

LCR Important Cash Generator

0

50

100

150

200

250

300

1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02

MB

/da

y

0

20

40

60

80

100

120

140

$M

M

Processing Rate EBITDA

Improved Reliability and Crude Deliveries Drive Performance

*

* 4Q01: Scheduled maintenance turnaround

Equistar Capability

NGL

37%

Liquid

63%

N. American Industry

(ex. Equistar)

NGL

78%

Liquid

22%

Liquid Cracking Variable Cost Advantage

Heavy feedstock advantage correlated to ethylene cycle

Source: ChemData,

Ethane - Light Naphtha Cost of Ethylene Spread

0

1

2

3

45

6

7

8

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

¢/l

b e

thy

len

e

Source: CMAI and Lyondell.

Prior 15 Yr Average

Significant Cash Generation in Up-Cycle

Cycle EBITDA Potential

0

500

1000

1500

2000

2500

2001 1995 Margins*

($,M

M)

Oxy's29.5%Share

41%Equistar

IC&D

LCR

* 1995 ChemData/CMAI Margins for Ethylene, Polyethylene and Styrene applied to current infrastructure

Benefits of de-leveraging

$1 billion debt reduction target at Lyondellat constant Enterprise value*:

Debt to Enterprise Value ratio impact

Before: 66%

After: 48%

Debt reduction provides

$0.40/share after tax earnings increase from

interest cost reduction

Potential $6.50/share benefit from debt reduction

* Enterprise Value = Lyondell net debt + market capitalization

No grass roots ethylene capacity additions ‘02-’05

40

50

60

70

80

90

'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05

80%

90%

100%

110%

120%

130%

Demand

Supply

Operating Rate

Bil

lio

n L

bs

Source: CMAI / Lyondell

Op

erating

Rate

Annual Demand Growth Rate:1995 - 99 4.3%2000 - 01 (3.4%)2002 - 05 5.9%

Ethylene in North America

Trough conditions continue . . . but business is improving

Ethylene – CMAI reports four month settlement – up 4 cts/lb– 1Q02 Equistar Petrochemical volumes 6.5% higher than

4Q01 Propylene

– April – up 2 cts/lb– May/June – ChemData projects 3 cts/lb over April

Polyolefins– ChemData estimates April up 5 cts/lb over January– Equistar 1Q02 Polymer volumes increased 3% from 4Q01

Styrene– ChemData estimates April up 5 cts/lb over March– Lyondell 1Q02 volumes largely unchanged from 4Q01

PO&D– April 1 TDI increase announced of 15 cts/lb– PO&D 1Q02 volumes increased 6% from 4Q01 level

A balance of growth & cash generation

IC&D

Equistar

LCR

2001 Proportional EBITDA$738 million

Equistar

IC&D

LCR

Pro Forma Proportional EBITDA on 1995 Margins

$2,200 million

High quality assets with major market

positions

Differential earnings leverage to cyclical

improvement

Targeted $1 billion debt reduction at Lyondell

further enhances earnings and strengthens

capital structure

Investment Rationale

Goldman Sachs Cyclical Conference May 22 nd 2002.

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Transcript of Goldman Sachs Cyclical Conference May 22 nd 2002.