EX-99.1 2 dex991.htm SLIDES Slides
1
Purchase of Remaining Share of 
the Houston Refinery
August 17, 2006
Dan Smith
President & Chief Executive Officer
Exhibit 99.1

2
The
statements
in
this
presentation
relating
to
matters
that
are
not
historical
facts
are
forward-looking
statements.
These
forward-looking
statements
are
based
upon
the
current
beliefs
and
expectations
of
management,
and
are
subject
to
significant
risks
and
uncertainties.
Actual
results
could
differ
materially
based
on
factors
including,
but
not
limited
to,
availability,
cost
and
price
volatility
of
raw
materials
and
utilities;
supply/demand
balances;
industry
production
capacities
and
operating
rates;
uncertainties
associated
with
the
U.S.
and
worldwide
economies;-legal,
tax
and
environmental
proceedings;-cyclical
nature
of
the
chemical
and
refining
industries;
operating
interruptions;
current
and
potential
governmental
regulatory
actions;
terrorist
acts;
international-political
unrest;
competitive
products
and
pricing;
risks
of
doing
business
outside
of
the
U.S.;
access
to
capital
markets;
technological
developments;-Lyondell’s
ability
to
implement
its
business-strategies,
including
whether
the
expected
benefits
of
Lyondell’s
acquisition
of
CITGO’s
interests
in
LCR
are
achieved
to
the
extent
and
in
the
time
period
anticipated;
and
other
risk
factors.
Additional
factors
that
could
cause
results
to
differ-materially
from
those
described-in
the
forward-looking
statements
can
be
found
in
the
Lyondell,
Equistar
and
Millennium
Annual
Reports
on
Form
10-K
for
the
year
ended
December
31,
2005,
Quarterly
Reports
on
Form
10-Q
for
the
quarter
ended
March
31,
2006,
and
Quarterly
Reports
on
Form
10-Q
for
the
quarter
ended
June
30,
2006.
Reconciliations
of
non-GAAP
financial
measures
to
GAAP
financial
measures
are
provided
at
the
end
of
this
presentation.
Safe Harbor Language

3
Houston Refinery Acquisition Agenda
Transaction Summary
Impact Of Acquisition And Supply Contract
Refining And Crude Oil Fundamentals
Houston Refinery Specific Opportunities

4
The Houston Refinery Transaction
Acquire CITGO’s 41.25% Share of Houston Refinery
Transaction -
~$2.0 B
CITGO share of bank debt -
$183MM
Market Based Crude Supply Contract
Cancel existing contract
New 230 MB/D of Venezuelan heavy crude contract
5 year
Lyondell To Market Refined Products

5
Long-Term Bank Financing Is In Place
Finance At The Lyondell Level
No debt at Houston Refinery
Transaction Financing
7-year term loan for $2.65 B from JPMorgan
Pricing:  Libor + 200 bp
$800
MM
5-year
revolver
-
Lyondell
and
Houston
Refinery

6
The Transaction Offers Significant Value
Unlocks Value Of Existing CSA Contract
Transaction Multiple Favorable To:
Refining trading multiples
Lyondell trading multiple
Significant Earnings and Cash Flow Accretion
Diversifies cash flows across cycle
Strong Industry Fundamentals
Attractive margins
Heavy, sour crude refineries differentially advantaged
Refining cycle longevity
Houston Refinery Is Well Positioned
Houston Ship Channel location
Recent investment improves future results
Investment cycle near completion
Lyondell and Houston Refinery Are Synergistic

7
Attributes Of Houston Refinery
268 MB/D Crude Capacity
100% extra heavy crude capability
Full Conversion Refinery
Approximately a 2-1-1 refinery yield
120 MB/D Gasoline
95 MB/D Distillate
25 MB/D Jet Fuel
Houston Ship Channel Location
Major pipeline access
Private dock and Gulf of Mexico access
Recent Capital Investments
Substantial modernization of most key refining units
Tier II Gasoline & ULS Diesel –
2006
Fluid
Unit
Upgrade
and
NO
X
Compliance
–
Early
2007

8
Impact Of The Acquisition
And Supply Contract
8/17/2006

9
The Transaction is Accretive
(1
st
Half 2006 pro forma, annualized)
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$/Share
$605
$165
$215
$225
Contribution
to LYO Net
Income, MM$
New
New
New
CSA
Contract
100%
41.25%
58.75%
58.75%
Ownership
Contribution To Lyondell EPS

10
Transaction Completed At Favorable Multiple
$2.12 B
$2.12 B
Transaction Price
2
Combined
58.75%
Share
41.25%
Share
($MM except as noted)
2.4x
3.8x
EBITDA Multiple
$1338
$786
$ 552
Annualized EBITDA-Pro forma
1
$774
$455
$ 319
Annualized EBITDA-Historical
1
1
Based on YTD 2006 actual results and pro forma
EBITDA  annualized
2 
Includes assumption of 41.25% of existing LCR
debt

11
Unlocks The Value Of The Refinery: 
Q2 Is A Good Example
$0
$50
$100
$150
$200
$250
$300
$350
CITGO’s
41.25%
$6.75 crude
differential
CSA less
Maya
Q2 2006
Operating
Income,
58.75%
$MM

12
On Average, CSA Contract Crude Cost Has
Exceeded Maya Crude By $6/bbl During 2005/06
$0
$2
$4
$6
$8
$10
$12
$14
2005 Q1
2005 Q2
2005 Q3
2005 Q4
2006 Q1
2006 Q2
Source:   Lyondell
CSA Price Less
Maya Crude
$1/bbl Equates to ~$85MM/yr

13
Underlying Performance Of The Houston Refinery
Meets or Exceeds Independent Refiners
$0
$2
$4
$6
$8
$10
$12
$14
$16
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
Valero
Tesoro
Houston Ref Actual
Houston Ref @ Maya Price
Source:  Published Financial Reports

14
Favorable Acquisition Price
(1)
Based on publicly reported information for Valero, Sunoco, Tesoro, Frontier,
Holly, Alon USA, Western Refining and Giant
(2)
Based on 2006 IBES Consensus estimates
Independent Refiners
(1)
EBITDA
(2)
Multiple
Crude Capacity,
$/bbl
Nelson Complexity,
$/bbl capacity
Replacement
Cost, %
     - Average
5.3 x
$18,300
$2,000
125%
     - Range
3.6 - 7.3
$9,400 - 31,500
$1,150 - 3,150
70 - 200%
•
Transaction EBITDA multiple is less than independent refiners’
trading multiples
•
Transaction capacity metrics are in-line but don’t fully reflect the profitability:
•
Crude Capacity -
$19,200/bbl
•
Nelson Complexity -
$1,600/bbl

15
Coverage Ratios Are Not Significantly Impacted
By The Transaction
Lyondell Ratios
Post Acquisition
Lyondell Ratios
Debt / EBITDA
2.3x
2.3x
EBITDA / Interest
5.1x
5.2x

16
Refining and Crude Oil Fundamentals

17
U.S. Gasoline Demand Has Grown Steadily Over
The Past 15 Years –
600 MB/D Since 2000
Source:
EIA
6,500
7,000
7,500
8,000
8,500
9,000
9,500

18
0
0.5
1
1.5
2
2004 Gasoline Supply
U.S. Refineries (83%)
Imports (10%)
MTBE & NGLs (4.5%)
Ethanol
(2.5%)
Since 1990, Only 60% of U.S. Gasoline Growth
Was Met By U.S. Refineries
(MM B/D)
U.S.
Refineries
Imports
MTBE &
NGLs
Ethanol
Data Source: EIA , Lyondell

19
Global Refining Is Essentially Sold Out At
90 Percent Utilization
Data Source: Chemical Data, BP, EIA
0%
5%
10%
15%
20%
25%
30%
35%
0
5
10
15
20
25
30
35
(¢/gal)
Profitability
U.S. Refinery
Spare Capacity

20
65
75
85
95
105
2001
2003
2005
2007
2009
2011
50
60
70
80
90
100
Global Refining Is Forecast To Remain At High
Operating Rates While U.S. Operates At Capacity
Sources:
IEA, BP, Morgan Stanley
Global Refining Supply/Demand
U.S. Operating Rate
Global Operating
Rate
Demand

21
A Ten-Year Forecast Of Global Supply/Demand
Growth Indicates A Continued Tight Balance
Source:  Wood Mackenzie
0%
20%
40%
60%
80%
100%
High
Medium
Low
Wood Mackenzie’s View of Global Refining Supply/Demand
Probability-Adjusted
Supply Analysis
2005-15 Supply/Demand
Growth
Crude
Demand
Growth
Expansions
Announced
Refining
Additions
Grassroots
Grassroots
Expansions
0
2
4
6
8
10
12
14
16
18
20

22
Regional Investment Focus Is Similar To Chemicals –
North America Is Likely To Remain A Significant Importer
Most Likely Regional Refining Capacity Additions 2005-2015
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Asia Pacific, ME &
Africa
North & South
America
Europe
Expansions
Grassroots
Source:  Wood Mackenzie

23
Both Crude Reserves And Refining Capabilities
Favor Heavy Sour Crude Refiners
19%
65%
16%
Source: Oil & Gas Journal
35%
53%
12%
Sweet
Sweet
Lt / Med Sour
Lt / Med Sour
Heavy Sour
Heavy Sour
Global Crude Reserves
Refining Capacity

24
Refining Margins and Heavy/Light Spreads Reflect
The Situation
Refining Spreads
Source:  Platts
0
5
10
15
20
WTI 2-1-1 Spread
WTI - Maya Spread
2002
2003
2004
2005
June '06 YTD

25
Already Strong Gulf Coast Coking Margins
Have Increased
$0
$5
$10
$15
$20
$25
$30
Jan
Feb
Mar
Apr
May
June July
Aug
Sept
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
June
2005
2006
USGC Cash 
(1)
Refining Margin
(1)
Muse Stancil Gulf Coast Coking Cash Margin

26
The Forward Curve Indicates Continued Strength And The
WTI Spread Alone Supports The Refinery Economics
WTI 2-1-1 Crack Spread
$0
$5
$10
$15
$20
$25
$30
Source:  Morgan Stanley

27
Not Likely That Refining Margins Will Revert To
Early 2000 Values In The Next 5 Years
Environmental Laws
Sulfur
NOx / VOC emissions
Permitting
Capital Cost Increases
Construction Schedules
Demand In Developing Economies
Nature Of New Crude Supply Vs. Existing Refining Capacity
Heavy, sour vs. light, sweet

28
Houston Refinery Specific Opportunities

29
Lyondell Is Not A Newcomer To The Fuels Markets
Lyondell
Houston
Refinery
Crude = 268 MB/D
Gasoline Comp = 20 MB/D
Olefins Feed = 360 MB/D
Butanes = 60 MB/D
Purchases
Sales
Gasoline Comp = 115 MB/D
Fuel Oils = 7 MB/D
Gasoline = 125 MB/D
Diesel = 95 MB/D
Jet Fuel = 25 MB/D
$8.1 B/year (ex LCR)
$3.2 B/year (ex LCR)

30
Multiple Upgrades Make The Houston Refinery
One Of The Most Modern In The U.S.
2004 / 2005
2005 / 2006
2006
2001 / 2005
2001
2005 / 2006
2001 / 2005
1976 / 1997
1956 / 2006
1972
1969 / 1997
1953
1961 / 1997
1961 / 1997
970 LTPD
304
34
98
97
182
268
3
9
1
2
1
3
3
Sulfur
Hydrotreating
(1)
Reforming
Coking
Catalytic Cracker
Vacuum
Crude
Last Modified
Year Built
Capacity
(MBPD)
Number of
Units
Refinery
Units
Note:
(1)
New SCANfining unit to add 70MBPSD capacity by the end of 2006.

31
Houston Refinery Operations Have Demonstrated
Strong Performance And Steady Improvement
65
70
75
80
85
90
2000
2001
2002
2003
2004
2005
2006
LCR
Industry Avg
()
Notes:
(1)
Utilization is defined as the capacity used (or utilized) divided by the total capacity, expressed
as a percent. 2001, 2003 and 2005 figures are LCR calculations of Solomon Data.
(2)
2001 was a major turnaround year. 2005 was impacted by a major turnaround, coker upset,
third party force majeure and Hurricane Rita related issues.
0.00
0.50
1.00
1.50
2.00
2.50
3.00
1998
1999
2000
2001
2002
2003
2004
2005
2006
YTD
Recordable Injuries
NPRA Gulf Coast Average
Recordable Injury Rate
Solomon Utilization
(1)(2)
Base
Support
&
Environmental
Capital,
$/yr
0
50
100
150
200
250
2001 to '04
2005 to '06
2007 to '10
(est.)
100
105
110
115
Crude
FCCU
Cokers
Maximum Sustained Monthly Rates

32
Recent Capital Expenditures And Synergies With
Lyondell Expected To Add Significant Value
Recent Capital Programs Are Expected To Add ~$100 MM/yr
Fluid unit upgrade
Heavy pyrolysis gasoline hydrotreating
Ultra low sulfur diesel
Tier 2 gasoline
Over Time, Synergies With Lyondell Can Add $50+ MM/yr
Product optimization / DIB blending
Capital optimization
Raw materials
Logistics
Purchasing

33
The Transaction Offers Significant Value
Unlocks Value Of Existing CSA Contract
Transaction Multiple Favorable To:
Refining trading multiples
Lyondell trading multiple
Significant Earnings and Cash Flow Accretion
Diversifies cash flows across cycle
Strong Industry Fundamentals
Attractive margins
Heavy, sour crude refineries differentially advantaged
Refining cycle longevity
Houston Refinery Is Well Positioned
Houston Ship Channel location
Recent investment improves future results
Investment cycle near completion
Lyondell and Houston Refinery Are Synergistic

34
(Millions of dollars)
LCR six months ended June 30, 2006 historical basis:
Net Income
294
$      
Interest
23
Depreciation and amortization
62
Taxes¹
8
LCR six months ended June 30, 2006 EBITDA
387
LCR
annualized
EBITDA
(six
months
ended
June
30,
2006
EBITDA
X
2)
774
$      
LCR six months ended June 30, 2006 annualized pro forma basis:
LCR six months ended June 30, 2006 EBITDA
387
$      
Pro forma adjustment to crude costs
282
LCR Pro forma six months ended June 30, 2006 EBITDA
669
LCR
Pro
forma
annualized
EBITDA
(six
months
ended
June
30,
2006
EBITDA
X
2)
1,338
$   
1
As a partnership, LCR is not subject to federal income taxes.  Amount includes 2006 effect of Texas state income tax.
LYONDELL-CITGO Refining LP
Annualized Historical and Pro Forma EBITDA
Reconciliation of Historical Six Months Net Income to

35
(Millions of dollars)
Transaction Price
Pro forma purchase price
1,899
$   
CITGO share of long-term debt ($444 million x 41.25%)
183
CITGO owner loans
40
Transaction price including debt repaid
2,122
$   
Combined
Citgo
Lyondell
Amounts
41.25%
58.75%
LCR
annualized
EBITDA
-
Historical
(six
months
ended
June
30,
2006
X
2)
774
$      
319
$      
455
$      
LCR
annualized
EBITDA
-
Pro
forma
(six
months
ended
June
30,
2006
X
2)
1,338
552
$      
786
$      
Lyondell
Incremental
EBITDA
($1,338
less
$455)
883
EBITDA Multiples:
Transaction price including debt repaid
2,122
$   
divided by: Citgo
41.25% LCR annualized EBITDA -
Pro forma
552
Citgo
share EBITDA multiple
3.8
Transaction price including debt repaid
2,122
$   
divided by: Lyondell incremental EBITDA
883
Multiple
of
transaction
price
as
a
ratio
to
Lyondell
Incremental EBITDA
2.4
LYONDELL-CITGO Refining LP
Annualized EBITDA Multiples
Reconciliation of Historical and Pro forma EBITDA to

36
Historical
Pro Forma
(Millions
of
dollars)
Ratios
Ratios
Debt/EBITDA calculation:
Debt
$5,836
$8,345
divided by: Annualized EBITDA (six months ended June 30, 2006 EBITDA X 2)
2,568
3,662
Ratio of Debt to EBITDA
1
2.3
2.3
EBITDA/Interest calculation:
Annualized EBITDA (six months ended June 30, 2006 EBITDA X 2)
$2,568
$3,662
divided by: Interest expense, net (six months ended June 30, 2006  X 2,
Historical $253 X 2 = $506, Pro forma $353 X 2 = $706)
506
706
Ratio of EBITDA to Interest
1
5.1
5.2
Reconciliation of historical and pro forma
EBITDA to historical and pro forma Net Income:
Historical
Pro Forma
EBITDA six months ended June 30, 2006
$1,284
$1,831
Less:
Depreciation and amortization
(362)
(454)
Interest expense, net
(253)
(353)
Provision for income taxes
(276)
(386)
Distributions from equity investments
(122)
-
Subtotal
(1,013)
(1,193)
Add:
Income from equity investments
179
2
Net Income six months ended June 30, 2006
$450
$640
1
Coverage ratios above are based on EBITDA as presented and not on Adjusted EBITDA per Lyondell's Credit Agreement.        
LYONDELL CHEMICAL COMPANY
Reconciliation of Historical and Pro forma Information to
Annualized Coverage Ratios

37
Contributions to Lyondell EPS
Six Months
(Millions
of
dollars)
Ended
Annualized
June 30,
Annualized
After Tax
Percent
Annualized
Diluted
2006
Amount
Amount
Interest
Contribution
Shares
EPS
( X 2)
( X .65)
LCR net income
$294
$588
$382
58.75%
$225
259.7
$0.86
Pro forma benefit of market based crude oil contract
282
564
367
58.75%
215
259.7
0.83
Acquire CITGO share:
LCR net income
294
588
382
41.25%
158
259.7
Incremental impact of crude at market
282
564
367
41.25%
151
259.7
309
259.7
1.19
Additional pro forma depreciation as a result of the acquisition
(30)
(60)
(39)
100.00%
(39)
165
0.64
Additional pro forma interest as a result of the acquisition
(77)
(154)
(100)
100.00%
(100)
Elimination of accretion of Lyondell's equity investment
in
LCR
up
to
its
underlying
equity
in
LCR's
net
assets
(4)
(8)
(5)
100.00%
(5)
(144)
259.7
(0.55)
Total Contribution to Lyondell Net Income
$605
$2.33