LYO Lyondell Chemical

Full-Year 2005 Highlights HOUSTON, Jan. 26 /PRNewswire-FirstCall/ -- Lyondell Chemical Company (NYSE:LYO) today announced net income for the fourth quarter 2005 of $141 million, or 54 cents per share on a fully diluted basis. This compares with net income of $16 million, or 8 cents per share, for the fourth quarter 2004, and net income of $10 million, or 4 cents per share, for the third quarter 2005. For the full year 2005, Lyondell had net income of $531 million, or $2.04 per share, compared with 2004 net income of $54 million, or 29 cents per share. Table 1 - Lyondell Earnings Summary Millions of dollars except per share 4Q 4Q 3Q Full Year Full Year amounts 2005 2004 (A) 2005 2005 2004 (A) Sales and other operating revenues $5,000 $2,389 $4,790 $18,606 $5,946 Net income 141 16 10 531 54 Basic earnings per share 0.57 0.08 0.04 2.16 0.29 Diluted earnings per share (B) 0.54 0.08 0.04 2.04 0.29 Basic weighted average shares outstanding (millions) 246.7 200.5 246.5 245.9 183.2 Diluted weighted average shares outstanding (millions) (B) 260.3 207.7 260.4 260.0 186.0 (A) Results include the operations of Equistar and Millennium prospectively from December 1, 2004. Prior to December 1, 2004, Lyondell's 70.5% interest in Equistar was accounted for as an equity investment. (B) Includes the dilutive effect of the convertible debentures, stock options and warrants. Year-to-year profit improvements were driven by strong performance in the ethylene and propylene oxide segments coupled with the full-year ownership of Millennium Chemicals. This strength was partially offset by a decline in Lyondell-Citgo Refining's (LCR) results, which were impacted by maintenance early in the year and hurricane-related damage and outages in the fourth quarter. Results reflect the following: Millions of dollars 4Q 4Q 3Q Full Year Full Year (pre-tax) 2005 2004 2005 2005 2004 Debt refinancing and early payment $17 $12 $6 $45 $18 Mutual insurance consortia losses 12 12 30 56 12 Hurricane (estimated lost production) 75(A) --- 75-100(A) 150-175(A) --- Lake Charles TDI plant shutdown 24 --- 195 219 --- In-process Research & Development --- 64 --- --- 64 (A) Represents Lyondell's percentage of LCR's estimated lost production of $130 million. "Much as expected, overall business conditions followed the strengthening trend established in late 2004, resulting in strong earnings improvement," said Dan F. Smith, president and CEO of Lyondell Chemical Company. "Tight industry conditions were apparent in ethylene, propylene oxide and fuel components, all of which achieved very strong margins at various points during 2005. Despite the hurricanes and record-high raw material costs, our portfolio produced strong earnings and cash flow, enabling us to reduce debt by $1.36 billion during the year." OUTLOOK At this time, industry operations have largely recovered from the disruptions of the 2005 hurricane season, and ethylene industry pricing is adjusting to a more balanced global supply and demand situation. After some pullback in December and January, there are signs of demand improvement, and a return to positive price momentum in a number of product areas is expected as early as February. Propylene oxide (PO) and PO derivatives markets have remained solid, while MTBE margins are at typical seasonal levels. Titanium dioxide volumes also have been strong, and LCR has operated at full capacity. "We enter 2006 with both a positive global economic outlook and strong business conditions for the majority of our products. Ethylene, PO and PO derivatives, inorganic chemicals and LCR are all positioned for a strong year. However, 2006 represents a question mark for MTBE. On one hand, MTBE may benefit from continued tight refining conditions, while on the other U.S. refiners may choose to no longer use MTBE despite the obvious value that it brings to a structurally short gasoline pool," added Smith. "We have prepared ourselves for either outcome. "Operationally, our assets are running well; neither our ethylene facilities nor the LCR refinery have scheduled maintenance turnarounds, and our inventories are low. Financially, we are more than halfway to our debt reduction target, and our focus continues to be the application of excess cash toward debt reduction and the improvement of our balance sheet. In summary, our outlook for the year is very positive and we believe 2006 results will exceed 2005." LYONDELL BUSINESS RESULTS DISCUSSION BY REPORTING SEGMENT Lyondell operates in four segments: 1) Ethylene, co-products and derivatives; 2) Propylene oxide (PO) and related products; 3) Inorganic Chemicals; and 4) Refining, which includes Lyondell's 58.75 percent ownership of LCR, a joint venture with CITGO Petroleum Corp. Ethylene, Co-products and Derivatives Segment - The primary products of this segment are ethylene, ethylene co-products (propylene, butadiene and benzene), and derivatives of ethylene (polyethylene, ethylene oxygenates and vinyl acetate monomer or VAM). Lyondell acquired Millennium on November 30, 2004; Millennium's acetyls products are included in this segment. Table 2 - Ethylene, Co-Products & Derivatives Financial Overview (A) Millions of dollars 4Q 4Q 3Q Full Year Full Year 2005 2004(B) 2005 2005 2004(B) Sales and other operating revenues $3,380 $2,816 $2,988 $12,191 $9,316 Operating income 337 210 21 950 494 EBITDA (C) 438 290 116 1,334 809 (A) See Table 6 for additional segment information. (B) For periods prior to January 1, 2005, the Ethylene, Co-Products and Derivatives information represents the historical operating results of Equistar on a 100% basis. (C) See Table 9 for reconciliations of segment EBITDA to net income of Lyondell and Equistar, respectively. The following discussion addresses business results independent of ownership. 4Q05 v. 3Q05 - Ethylene and ethylene derivative product sales volumes were relatively unchanged versus the third quarter 2005. Average prices for the key products increased by 7 cents to 18 cents per pound, led by ethylene and polyethylene, which increased by 15 cents and 18 cents per pound, respectively. The company's cost-of-ethylene-production metric (COE) increased by approximately 1 cent per pound versus the third quarter. Essentially all of this increase is attributed to the higher price of natural- gas-based raw materials. Acetyls results declined as price increases did not fully offset higher natural gas and ethylene costs. 4Q05 v. 4Q04 - Ethylene and ethylene derivative sales volumes decreased by approximately 285 million pounds. The quarterly average price of ethylene and polyethylene increased by 17 cents to 18 cents per pound, while the average ethylene glycol price decreased approximately 3 cents per pound. The company's COE metric increased by approximately 7 cents per pound primarily due to increased costs for natural-gas-based raw materials. Increased co- product prices largely offset a $9-per-barrel increase in crude oil-based raw material costs. 2005 v. 2004 - Ethylene and ethylene derivative sales volumes decreased by 660 million pounds. The average annual price of ethylene and polyethylene increased by 9 cents and 13 cents per pound, respectively, while ethylene glycol increased by 3 cents per pound. The company's COE metric increased by approximately 4 cents per pound. The cost of natural-gas-based raw materials accounted for the majority of the increase. PO and Related Products Segment - The principal products of the PO and related products segment include PO, PO derivatives (propylene glycol, propylene glycol ethers, butanediol and butanediol derivatives), styrene, MTBE and toluene diisocyanate (TDI). Table 3 - PO & Related Products Financial Overview (A) Millions of dollars 4Q 4Q 3Q Full Year Full Year 2005 2004 2005 2005 2004 Sales and other operating revenues $1,645 $1,427 $1,843 $6,568 $4,984 Operating income (loss) (B) 35 (34) 65 316 48 EBITDA (B) (C) 104 39 321 757 313 (A) See Table 6 for additional segment information. (B) Operating income for the third quarter and full year 2005 included charges of $195 million related to shutdown of the Lake Charles, Louisiana, toluene diisocyanate plant, which are excluded from EBITDA. (C) See Table 9 for a reconciliation of segment EBITDA to net income of Lyondell. 4Q05 v. 3Q05 - Fourth-quarter 2005 operations were negatively impacted by a reduction of approximately $220 million in MTBE profitability as margins returned to typical seasonal levels during November and December after benefiting from extremely strong third-quarter margins. Average MTBE raw material margins declined by approximately 95 cents per gallon from the third quarter. PO and PO derivative product results were relatively unchanged as stronger volumes and prices were offset by increased raw material and natural gas costs. Styrene margins increased, improving results by approximately $15 million. TDI results were unchanged as improved business results were offset by costs of approximately $24 million related to shutdown of the Lake Charles TDI facility. 4Q05 v. 4Q04 - Versus the year-ago quarter, MTBE results improved by approximately $50 million, primarily due to strong October margins. PO and PO derivative results improved by approximately $20 million based on stronger margins. Combined styrene and TDI results were relatively unchanged as styrene results improved slightly and TDI results declined as a result of Lake Charles TDI shutdown costs. 2005 v. 2004 - Higher margins led to an approximate $325 million increase in MTBE results. PO and PO derivative product results improved by approximately $200 million, based on stronger margins as price increases more than offset a 9-cents-per-pound increase in raw material (propylene) prices. Styrene results were relatively unchanged. TDI performance fell by approximately $65 million due to lower margins and costs associated with the Lake Charles TDI shutdown. Inorganic Chemicals Segment - The principal product of the inorganic chemicals segment is titanium dioxide (TiO2). Lyondell acquired Millennium, including this business, on November 30, 2004. Table 4 - Inorganic Chemicals Financial Overview (A) Millions of dollars 4Q 4Q 3Q Full Year Full Year 2005 2004(B) 2005 2005 2004(B) Sales and other operating revenues $355 $97 $345 $1,360 $97 Operating income (loss) (C) (3) 6 (16) 18 6 EBITDA (C) (D) 26 15 3 128 15 (A) See Table 6 for additional segment information. (B) Includes the Inorganic Chemicals segment prospectively from December 1, 2004. (C) Operating income (loss) included impairment charges of $7 million and $3 million for the fourth and third quarters of 2005, respectively, and $15 million for 2005 that are excluded from EBITDA. (D) See Table 9 for a reconciliation of segment EBITDA to net income of Lyondell. The following discussion addresses the inorganics business independent of ownership. 4Q05 v. 3Q05 - Sales volumes were relatively unchanged at 162,000 metric tons while the average sales price increased by approximately $10 per metric ton. U.S. product prices increased by approximately $65 per metric ton, but were largely offset by dollar-based price declines outside the United States. Versus the third quarter, results were impacted by record high natural gas costs in the United States and the U.K. 4Q05 v. 4Q04 - Sales volumes were approximately 22,000 metric tons higher than the year-ago quarter while dollar-based prices were approximately $30 per metric ton higher. North and South American price increases were partially offset by lower European prices. Production costs increased due to higher raw material and natural gas costs coupled with plant reliability issues in the fourth quarter 2005. 2005 v. 2004 - Versus 2004, sales volumes declined by 47,000 metric tons, or 7 percent, in line with overall industry trends. Prices increased by approximately $180 per metric ton, but this was partially offset by higher raw material and natural gas costs. Finished product inventories were reduced significantly during 2005; however, due to high inventory-carrying values, sales from inventory did not significantly contribute to profits but did generate significant cash flow. Refining Segment - Lyondell owns a 58.75 percent interest in LCR, a major refiner of heavy crude oil. This position is accounted for on the equity method. Table 5 - Refining Financial Overview - 100% Basis (A) Millions of dollars 4Q 4Q 3Q Full Year Full Year 2005 2004 2005 2005 2004 Sales and other operating revenues $1,440 $1,564 $2,202 $6,741 $5,603 Operating income (loss) (23) 165 100 232 516 EBITDA (B) 7 193 130 348 645 (A) The Refining segment information presented above represents the historical operating results of LCR on a 100% basis. See Table 6 for additional segment information. (B) See Table 9 for a reconciliation of segment EBITDA to net income of LCR. 4Q05 v. 3Q05 - Results declined significantly due to fluid catalytic cracking unit downtime and subsequent refinery crude rate reductions related to Hurricane Rita. Total crude consumption averaged 169,000 barrels per day, a decline of 76,000 barrels per day versus the third quarter and 99,000 barrels per day less than operating capacity. Venezuelan contract (CSA) crude volumes averaged 146,000 barrels per day while spot crude averaged 23,000 barrels per day. Results were further negatively impacted by increased natural gas costs, the majority of which will be offset over time by adjustments in the CSA contract factors. 4Q05 v. 4Q04 - Business drivers and the analysis of results are similar to the comparison to third-quarter 2005 results presented in the previous paragraph. 2005 v. 2004 - LCR results declined significantly from record 2004 earnings. Reduced crude oil consumption related to second-quarter maintenance and Hurricane Rita were the primary drivers of the shortfall. These events led to a 48,000 barrel-per-day decline in total crude consumption in 2005 versus 2004. Increased natural gas prices and lower aromatic margins also pressured results, but were more than offset by an $8-per-barrel increase in spot crude margins. Cash Distributions and Debt Reduction LCR to Lyondell Chemical Company - During the fourth quarter 2005, Lyondell Chemical Company made a net contribution to LCR of $12 million. During 2005, net distributions received were $175 million versus $341 million in 2004. Equistar to Lyondell Chemical Company and Millennium - During the fourth quarter 2005, Lyondell Chemical Company received $176 million of distributions from Equistar, and for the full year 2005 distributions to Lyondell Chemical Company were $511 million. Millennium received $74 million from Equistar during the fourth quarter and $214 million during 2005. During 2004, Equistar distributions to its owners totaled $315 million. Millennium to Lyondell Chemical Company - There were no dividends paid by Millennium to Lyondell Chemical Company during 2005. Debt reduction - During the fourth quarter 2005, Lyondell paid $422 million toward debt reduction, of which $22 million was Millennium debt. For the full year 2005, Lyondell paid $1.36 billion toward debt reduction, including $259 million of Millennium debt. CONFERENCE CALL Lyondell will host a conference call today, Jan. 26, 2006, at 11:30 a.m. Eastern Time (ET). Participating on the call will be: Dan F. Smith, President and CEO; Morris Gelb, Executive Vice President and COO; T. Kevin DeNicola, Senior Vice President and CFO; and Doug Pike, Vice President of Investor Relations. The dial-in numbers are 888-391-2385 (U.S. - toll free) and 517-645-6239 (international). The passcode for each is Lyondell. The call will be broadcast live on the Investor Relations page of the company's web site, http://www.lyondell.com/earnings . A replay of the call will be available from 1:30 p.m. ET Jan. 26 to 6 p.m. ET on Feb. 3. The dial-in numbers are 866-490-2543 (U.S.) and 203-369-1699 (international). The passcode for each is 5549. Web replay will be available at 2:30 p.m. ET Jan. 26 on the Investor Relations page of the company's web site, http://www.lyondell.com/earnings . Reconciliations of non-GAAP financial measures to GAAP financial measures, together with any other applicable disclosures, including this earnings release, will be available at 11:30 a.m. ET Jan. 26 at http://www.lyondell.com/earnings . ABOUT LYONDELL Lyondell Chemical Company, headquartered in Houston, Texas, is North America's third-largest independent, publicly traded chemical company. Lyondell is a major global manufacturer of basic chemicals and derivatives including ethylene, propylene, titanium dioxide, styrene, polyethylene, propylene oxide and acetyls. It also is a significant producer of gasoline blending components. The company has a 58.75 percent interest in Lyondell- Citgo Refining LP, a refiner of heavy, high-sulfur crude oil. As a result of Lyondell's November 30, 2004 acquisition of Millennium Chemicals Inc., Millennium and Equistar Chemicals, LP are wholly owned subsidiaries of Lyondell. Lyondell is a global company operating on five continents and employs approximately 10,000 people worldwide. FORWARD-LOOKING STATEMENTS The statements in this release and the related teleconference 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; cyclical nature of the chemical and refining industries; operating interruptions; uncertainties associated with the U.S. and worldwide economies; current and potential governmental regulatory actions; terrorist acts; international political unrest; competitive products and pricing; risks of doing business outside of the U.S.; legal, tax and environmental proceedings; access to capital markets; technological developments; 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, 2004, the Lyondell, Equistar and Millennium Quarterly Reports on Form 10-Q for the quarter ended September 30, 2005, and the Lyondell, Equistar and Millennium Annual Reports on Form 10-K for the year ended December 31, 2005, which will be filed with the SEC in March 2006. Table 6 - Selected Unaudited Segment Financial Information (A) For the For the three months twelve months ended ended December 31, September 30, December 31, (Millions of dollars) 2005 2004 2005 2005 2004 Sales and other operating revenues (B) Ethylene, Co-Products & Derivatives $3,380 $2,816 $2,988 $12,191 $9,316 PO & Related Products 1,645 1,427 1,843 6,568 4,984 Inorganic Chemicals 355 97 345 1,360 97 Refining 1,440 1,564 2,202 6,741 5,603 Operating income (loss) Ethylene, Co-Products & Derivatives $337 $210 $21 $950 $494 PO & Related Products (C) 35 (34) 65 316 48 Inorganic Chemicals (D) (3) 6 (16) 18 6 Refining (23) 165 100 232 516 Depreciation and amortization Ethylene, Co-Products & Derivatives $102 $79 $95 $388 $313 PO & Related Products 58 63 59 235 249 Inorganic Chemicals 22 8 26 98 8 Refining 30 28 30 116 115 EBITDA (E) Ethylene, Co-Products & Derivatives $438 $290 $116 $1,334 $809 PO & Related Products (C) 104 39 321 757 313 Inorganic Chemicals (D) 26 15 3 128 15 Refining 7 193 130 348 645 Capital expenditures Ethylene, Co-Products & Derivatives $52 $32 $34 $155 $101 PO & Related Products 8 13 6 36 49 Inorganic Chemicals 21 5 13 53 5 Refining 55 29 38 176 71 (A) The EC&D data for periods prior to January 1, 2005 represents Equistar results on a 100% basis. Prior to December 1, 2004, Equistar was accounted for as an equity investment. See Table 14 for additional Equistar financial information. See Table 8 for a reconciliation of segment information for the year ended December 31, 2005 to consolidated Lyondell financial information. See Table 10 for PO and Related Products data for the year ended December 31, 2005. The Refining information presented above represents the historical operating results of LCR on a 100% basis. See Table 20 for additional LCR financial information. The Inorganic Chemicals segment is presented prospectively from December 1, 2004. (B) Sales include sales to affiliates and intersegment sales. (C) Operating income for the third quarter and full year 2005 included charges of $195 million related to shutdown of the Lake Charles, Louisiana, toluene diisocyanate plant, which are excluded from EBITDA. (D) Inorganic Chemicals operating income (loss) included impairment charges of $7 million and $3 million for the fourth and third quarters of 2005, respectively, and $15 million for 2005 that are excluded from EBITDA. (E) See Table 9 for reconciliation of segment EBITDA to net income. Table 7 - Selected Segment Sales Volumes (A) (B) For the For the three months ended twelve months ended December 31, September 30, December 31, 2005 2004 2005 2005 2004 Ethylene, Co-Products and Derivatives (in millions) Ethylene and derivatives (pounds) 2,799 2,881 2,834 11,389 11,194 Polyethylene included above (pounds) 1,258 1,460 1,409 5,345 5,703 Co-products, nonaromatic (pounds) 1,953 2,029 1,899 7,749 7,942 Aromatics (gallons) 103 105 100 412 377 PO and Related Products (in millions) PO and derivatives (pounds) 831 885 790 3,236 3,330 Co-products: Styrene monomer (pounds) 905 997 953 3,885 3,720 MTBE and other TBA derivatives (gallons) 300 289 298 1,178 1,114 Inorganic Chemicals (thousand metric tons) TiO2 162 45 160 618 45 Refined products (thousand barrels per day) Gasoline 66 119 125 104 118 Diesel and heating oil 63 92 85 80 95 Jet fuel 8 17 16 13 17 Aromatics 8 7 7 8 8 Other refined products 90 105 92 86 96 Total refined products volumes 235 340 325 291 334 Refinery Runs Crude processing rates (thousand barrels per day) Crude Supply Agreement 146 235 212 185 237 Other crude oil 23 26 33 32 28 Total crude oil 169 261 245 217 265 (A) The EC&D data for periods prior to January 1, 2005 represent Equistar results on a 100% basis. Prior to December 1, 2004, Equistar was accounted for as an equity investment. The Refining information presented above represents the historical operating results of LCR on a 100% basis. The Inorganic Chemicals segment is presented prospectively from December 1, 2004. (B) Sales volumes include sales to affiliates and intersegment sales. Table 8 - Reconciliation of Segment Information to Consolidated Lyondell Financial Information Sales and other Operating Depreciation operating income and Capital (Millions of dollars) revenues (loss) amortization expenditures For the three months ended December 31, 2005: Segment Data Ethylene, Co-Products & Derivatives $3,380 $337 $102 $52 PO & Related Products 1,645 35 58 8 Inorganic Chemicals 355 (3) 22 21 Other (A) (380) (6) 2 3 Total $5,000 $363 $184 $84 For the twelve months ended December 31, 2005: Segment Data Ethylene, Co-Products & Derivatives $12,191 $950 $388 $155 PO & Related Products 6,568 316 235 36 Inorganic Chemicals 1,360 18 98 53 Other (A) (1,513) (16) 8 5 Total $18,606 $1,268 $729 $249 For the three months ended September 30, 2005: Segment Data Ethylene, Co-Products & Derivatives $2,988 $21 $95 $34 PO & Related Products 1,843 65 59 6 Inorganic Chemicals 345 (16) 26 13 Other (A) (386) (5) 2 --- Total $4,790 $65 $182 $53 (A) Includes elimination of intersegment transactions and items not allocated to segments. Table 9 - Reconciliation of Segment EBITDA to Net Income For the For the three months twelve months ended ended December 31, September 30, December 31, (Millions of dollars) 2005 2004 2005 2005 2004 LYONDELL Segment EBITDA: Ethylene, Co-Products & Derivatives (A) $438 $145 $116 $1,334 $145 PO & Related Products 104 39 321 757 313 Inorganic Chemicals (B) 26 15 3 128 15 Other (3) (3) (1) (5) (3) Add: Income from equity investment in Equistar --- 48 --- --- 141 Income (loss) from equity investment in LCR (16) 95 53 123 303 Deduct: Depreciation and amortization (184) (103) (182) (729) (289) Interest expense, net (141) (124) (149) (603) (449) (Provision for) benefit from income taxes (59) (3) 54 (219) (23) Intercompany profit elimination --- (15) --- --- (15) Purchased in process R&D --- (64) --- --- (64) Charges related to toluene diisocyanate plant and other assets (7) (2) (198) (210) (2) Debt prepayment premiums and charges (17) (12) (7) (45) (18) Lyondell net income $141 $16 $10 $531 $54 Equistar EBITDA (C) $290 $809 Deduct: Depreciation and amortization (79) (313) Interest expense, net (55) (220) Equistar net income $156 $276 Refining EBITDA (D) $7 $193 $130 $348 $645 Deduct: Depreciation and amortization (30) (28) (30) (116) (115) Interest expense, net (12) (6) (9) (38) (30) LCR net income (loss) $(35) $159 $91 $194 $500 (A) The EC&D segment information reflects the consolidation of Millennium and Equistar prospectively from December 1, 2004. For periods prior to December 1, 2004, Equistar was accounted for as an equity investment. See Tables 14 and 17 for additional Equistar and Millennium financial information, respectively. (B) The Inorganic Chemicals segment information reflects the consolidation of Millennium prospectively from December 1, 2004. (C) The Equistar information presented represents the historical operating results of Equistar on a 100% basis. (D) The Refining information presented represents the historical operating results of LCR on a 100% basis. See Table 20 for additional LCR financial information. Table 10 - Lyondell Unaudited Income Statement Information (A) For the For the three months twelve months ended ended (Millions of dollars, except December 31, September 30, December 31, per share data) 2005 2004 2005 2005 2004 Sales and other operating revenues $5,000 $2,389 $4,790 $18,606 $5,946 Cost of sales 4,469 2,166 4,353 16,485 5,468 Charges related to toluene diisocyanate plant 24 --- 195 219 --- Selling, general and administrative expenses 121 138 154 543 287 Research and development expenses 23 17 23 91 41 Purchased in-process research and development --- 64 --- --- 64 Operating income 363 4 65 1,268 86 Income from equity investment in Equistar --- 48 --- --- 141 Income (loss) from equity investment in LCR (16) 95 53 123 303 Income from other equity investments (1) 4 2 1 7 Interest expense, net (141) (124) (149) (603) (449) Other expense, net (5) (8) (15) (39) (11) Income (loss) before income taxes 200 19 (44) 750 77 Provision for (benefit from) income taxes 59 3 (54) 219 23 Net income $141 $16 $10 $531 $54 Basic earnings per share: $0.57 $0.08 $0.04 $2.16 $0.29 Diluted earnings per share: $0.54 $0.08 $0.04 $2.04 $0.29 Weighted average shares (in millions): Basic 246.7 200.5 246.5 245.9 183.2 Diluted 260.3 207.7 260.4 260.0 186.0 (A) Results of operations include the operations of Equistar and Millennium prospectively from December 1, 2004. Prior to December 1, 2004, Equistar was accounted for as an equity investment. Table 11 - Lyondell Unaudited Cash Flow Information (A) For the twelve months ended December 31, (Millions of dollars) 2005 2004 Net income $531 $54 Adjustments: Depreciation and amortization 729 289 Charges related to toluene diisocyanate plant 195 --- Income from equity investments (124) (451) Distributions of earnings from affiliates 123 424 Deferred income taxes 143 19 Purchased in-process research and development --- 64 Debt prepayment charges and premiums 45 18 Changes in assets and liabilities: Accounts receivable (156) 24 Inventories (94) (137) Accounts payable 292 (11) Other, net (92) 61 Cash provided by operating activities 1,592 354 Expenditures for property, plant and equipment (249) (70) Distributions from affiliates in excess of earnings 183 95 Contributions and advances to affiliates (148) (53) Cash received in acquisition of Millennium --- 367 Cash received in acquisition of Equistar --- 85 Other 3 --- Cash provided by (used in) investing activities (211) 424 Repayment of long-term debt (1,510) (319) Issuance of long-term debt 100 4 Dividends paid (222) (127) Proceeds from stock option exercises 48 25 Other 6 1 Cash used in financing activities (1,578) (416) Effect of exchange rate changes on cash (14) 4 Increase (decrease) in cash and cash equivalents $(211) $366 (A) Equistar and Millennium became wholly owned subsidiaries as of December 1, 2004. Prior to December 1, 2004, Lyondell's investment in Equistar was accounted for on an equity basis. Table 12 - Lyondell Unaudited Balance Sheet Information December 31, December 31, (Millions of dollars) 2005 2004 Cash and cash equivalents $593 $804 Accounts receivable, net 1,677 1,587 Inventories 1,657 1,619 Prepaid expenses and other current assets 176 171 Deferred tax assets 131 276 Total current assets 4,234 4,457 Property, plant and equipment, net 6,530 7,215 Investments and long-term receivables: Investment in PO joint ventures 776 838 Investment in and receivable from LCR 186 229 Other investments and long-term receivables 114 123 Goodwill, net 2,245 2,175 Other assets, net 856 924 Total assets $14,941 $15,961 Current maturities of long-term debt $319 $308 Accounts payable 1,453 1,205 Accrued liabilities 797 782 Total current liabilities 2,569 2,295 Long-term debt 6,117 7,555 Other liabilities 1,722 1,780 Deferred income taxes 1,488 1,477 Minority interest 180 181 Stockholders' equity (247,050,234 and 243,684,998 shares outstanding at December 31, 2005 and 2004, respectively) 2,865 2,673 Total liabilities and stockholders' equity $14,941 $15,961 Table 13 - Lyondell Selected Equity Investment Activity For the three For the twelve months ended months ended December 31, December 31, (Millions of dollars) 2005 2005 Investment in LCR, beginning of period $(86) $(37) Lyondell's share of LCR net income (loss) (16) 123 Cash distributions from LCR (42) (303) Cash contributions to LCR 54 128 Other --- (1) Investment in LCR, end of period $(90) $(90) December 31, Investment in and receivable from LCR 2005 Investment in LCR $(90) LCR note receivable 229 LCR interest receivable 47 Total $186 Tables 13 through 22 represent additional financial information on a 100% basis for Equistar, Millennium and LCR. Table 14 - Equistar Unaudited Income Statement Information (A) For the For the three months twelve months ended ended December 31, September 30, December 31, (Millions of dollars) 2005 2004 2005 2005 2004 Sales and other operating revenues (B) $3,258 $2,816 $2,867 $11,686 $9,316 Cost of sales 2,847 2,524 2,776 10,487 8,587 Selling, general and administrative expenses 47 71 53 198 205 Research and development expenses 8 11 8 33 34 Gain on asset dispositions --- --- --- --- (4) Operating income 356 210 30 968 494 Interest expense, net (54) (55) (56) (218) (220) Other income (expense), net --- 1 (2) (2) 2 Net (loss) income (C) $302 $156 $(28) $748 $276 (A) Represents information for Equistar on a stand-alone basis and does not reflect purchase accounting adjustments. (B) Sales and other operating revenues include sales to affiliates. (C) As a partnership, Equistar is not subject to federal income taxes. Table 15 - Equistar Unaudited Balance Sheet Information (A) December 31, December 31, (Millions of dollars) 2005 2004 Cash and cash equivalents $215 $39 Accounts receivable, net 924 826 Inventories 657 582 Prepaid expenses and other current assets 53 43 Total current assets 1,849 1,490 Property, plant and equipment, net 3,063 3,167 Investments 58 60 Other assets, net 350 357 Total assets $5,320 $5,074 Current maturities of long-term debt $150 $1 Accounts payable 735 532 Accrued liabilities 275 273 Total current liabilities 1,160 806 Long-term debt 2,161 2,312 Other liabilities and deferred revenues 416 395 Partners' capital 1,583 1,561 Total liabilities and partners' capital $5,320 $5,074 (A) Represents information for Equistar on a stand-alone basis and does not reflect purchase accounting adjustments. Table 16 - Equistar Unaudited Cash Flow Information (A) For the twelve months ended December 31, (Millions of dollars) 2005 2004 Net income $748 $276 Adjustments: Depreciation and amortization 322 313 Deferred maintenance turnaround expenditures (51) (55) Gain on asset dispositions --- (4) Changes in assets and liabilities: Accounts receivable (B) (96) (216) Inventories (69) (174) Accounts payable 197 30 Other, net (4) 45 Cash provided by operating activities 1,047 215 Expenditures for property, plant and equipment (153) (101) Proceeds from sales of assets 3 41 Cash used in investing activities (150) (60) Repayment of long-term debt (1) --- Distributions to owners (725) (315) Other 5 --- Cash used in financing activities (721) (315) Increase (decrease) in cash and cash equivalents $176 $(160) (A) Represents information for Equistar on a stand-alone basis and does not reflect purchase accounting adjustments. (B) In consideration of discounts offered to certain customers for early payment for product, some receivable amounts were collected in December 2005 and 2004 that otherwise would have been expected to be collected in January 2006 and 2005 of the respective years. This included $84 million and $66 million from Occidental Chemical Corporation in December 2005 and 2004, respectively. Table 17 - Millennium Unaudited Income Statement Information (A) (C) For the For the three months twelve months ended ended December 31, September 30, December 31, (Millions of dollars) 2005 2005 2005 Sales and other operating revenues (B) $502 $489 $1,959 Cost of sales 478 448 1,715 Selling, general and administrative expenses 29 77 194 Research and development expenses 6 5 23 Asset impairments 7 3 15 Combination costs --- 2 2 Operating income (loss) (18) (46) 10 Interest expense, net (39) (24) (112) Other income (expense), net 3 (18) (19) Loss before equity investment, minority interest and income taxes (54) (88) (121) Income (loss) from equity investment in Equistar 89 (8) 221 Income (loss) before income taxes and minority interest 35 (96) 100 Provision for (benefit from) income taxes 36 (26) 67 Income (loss) before minority interest (1) (70) 33 Minority interest (1) (2) (5) Net income (loss) $(2) $(72) $28 (A) Represents information for Millennium on a stand-alone basis and does not reflect purchase accounting adjustments. (B) Sales and other operating revenues include sales to affiliates. (C) The fourth and third quarters and full year 2005 included $13 million, $39 million and $58 million, respectively, of charges representing revisions to Lyondell's previous estimates of expected future environmental remediation spending. Table 18 - Millennium Unaudited Balance Sheet Information (A) December 31, December 31, (Millions of dollars) 2005 2004 Cash and cash equivalents $279 $344 Accounts receivable, net 361 336 Inventories 429 414 Prepaid expenses and other current assets 79 61 Total current assets 1,148 1,155 Property, plant and equipment, net 647 707 Investments 464 457 Goodwill 104 104 Other assets, net 110 107 Total assets $2,473 $2,530 Current maturities of long-term debt $169 $7 Accounts payable 367 294 Accrued liabilities 156 153 Total current liabilities 692 454 Long-term debt 966 1,398 Other liabilities 644 536 Deferred income taxes 167 164 Minority interest 42 33 Stockholder's deficit (100,000,000 shares authorized; 66,135,816 shares outstanding) (38) (55) Total liabilities and stockholders' equity $2,473 $2,530 (A) Represents information for Millennium on a stand-alone basis and does not reflect purchase accounting adjustments. Table 19 - Millennium Unaudited Cash Flow Information (A) For the twelve months ended December 31, (Millions of dollars) 2005 Net income $28 Adjustments: Asset impairments 15 Depreciation and amortization 107 Debt prepayment charges and premiums 11 Deferred income taxes (3) Income from equity investment in Equistar (221) Distributions of earnings from Equistar 214 Changes in assets and liabilities: Accounts receivable (28) Inventories (20) Accounts payable 77 Other, net 93 Cash provided by operating activities 273 Expenditures for property, plant and equipment (60) Cash used in investing activities (60) Repayment of long-term debt (372) Issuance of long-term debt 100 Contribution from Lyondell 6 Distributions to minority interests (6) Other 2 Cash used in financing activities (270) Effect of exchange rate changes on cash (8) Decrease in cash and cash equivalents $(65) (A) Represents information for Millennium on a stand-alone basis and does not reflect purchase accounting adjustments. Table 20 - LCR Unaudited Income Statement Information For the For the three months twelve months ended ended December 31, September 30, December 31, (Millions of dollars) 2005 2004 2005 2005 2004 Sales and other operating revenues (A) $1,440 $1,564 $2,202 $6,741 $5,603 Cost of sales 1,446 1,385 2,091 6,458 5,028 Selling, general and administrative expenses 17 14 11 51 59 Operating income (loss) (23) 165 100 232 516 Interest expense, net (12) (6) (9) (38) (30) Other income --- --- --- --- 14 Net income (loss) (B) $(35) $159 $91 $194 $500 EBITDA (C) $7 $193 $130 $348 $645 (A) Sales and other operating revenues include sales to affiliates. (B) As a partnership, LCR is not subject to federal income taxes. (C) See Table 9 for reconciliation of LCR's net income to EBITDA. Table 21 - LCR Unaudited Balance Sheet Information December 31, December 31, (Millions of dollars) 2005 2004 Total current assets $418 $359 Property, plant and equipment, net 1,328 1,227 Other assets, net 86 61 Total assets $1,832 $1,647 Current maturities of long-term debt $5 $5 Other current liabilities 800 583 Long-term debt 439 443 Loans payable to partners 264 264 Other liabilities 113 112 Partners' capital 211 240 Total liabilities and partners' capital $1,832 $1,647 Table 22 - LCR Unaudited Cash Flow Information For the twelve months ended December 31, (Millions of dollars) 2005 2004 Cash flow from operations $439 $667 Capital expenditures 176 71 Depreciation and amortization 116 115 Chemicals Inc. DATASOURCE: Lyondell Chemical Company; Equistar Chemicals, LP; Millennium CONTACT: media, Susan Moore, +1-713-309-4645, or investors, Doug Pike, +1-713-309-7141, both of Lyondell Chemical Company Web site: http://www.lyondell.com/ http://www.lyondell.com/earnings

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