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. I'd now like to turn the conference over to Mr. David Kinney, Director of Investor Relations. Sir, you may begin.

Thank you, operator. Hello and welcome to LyondellBasell first quarter 2021 teleconference. I'm joined today by Bhav Patel, our Chief Executive Officer; and Michael McMurray, our Chief Financial Officer. 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. Today, we will be discussing our business results while making reference to some forward-looking statements and non-GAAP financial measures.

Thank you, Dave and good day to all of you participating around the world. We appreciate you joining us today as we discuss our first quarter results. Before we get into the discussion of our results, I would like to take a moment to recognize the tremendous progress that has been made in fighting the COVID-19 pandemic and how much hard work still needs to be done around the world to reduce the effects of this disease. While financial markets are focused on the economic upside being enabled by increased vaccination and the eventual reopening, today our employees, customers, suppliers and the communities where we operate in India in particular as well as Brazil and even parts of Europe are still suffering from terribly high case rates and fatalities. We are working closely with governments around the world to do our part to advance immunity for our employees and their communities and to hasten and end to the devastation brought on by this virus. Our thoughts remain with those most affected by this pandemic.

Thank you, Bhav and good morning everyone. Please turn to Slide 10 and let me begin by highlighting our track record of strong cash conversion. Over the last 12 months, LyondellBasell converted almost 80% of her EBITDA into $3.4 billion of cash from operating activities. In the first quarter of 2021, our business has delivered over 40% more free operating cash flow relative to the same period last year. We expect continued improvement of our LCM performance as we progressed through each quarter of 2021. Let's turn to Slide 11 and review further details of our cash generation and deployment during the first quarter. As Bhav mentioned, our goal for this year is to accomplish meaningful deleveraging to further strengthen our investment grade balance sheet. In the first quarter, while paying dividends of $352 million and investing a similar amount in capital expenditures, we reduced the balance on our term loan by $500 million to close the first quarter with cash and liquid investments of $1.8 billion. After the quarter closed, we repaid an additional $500 million on the term loan in April. We expect that robust cash generation should enable continued progress on deleveraging throughout the year. Before I continue with a more detailed discussion of our segment results, let me provide a brief update on our 2021 modeling guidance. We continue to be on track to invest approximately $2 billion in capital expenditures during 2021. Target equally towards profit generating growth projects and sustaining maintenance. Due to extremely strong demand for propylene oxide, we have shifted a turnaround at one of our PO/TBA units in Bayport, Texas from the second quarter to the third quarter of this year and reduced the scope and associated downtime for the maintenance. With this change, we expect no major planned maintenance downtime…

Thank you, Michael. Let me summarize our view of current conditions and the outlook for our businesses with Slide 19. We began this year with low inventories and increasing demand from a recovering global economy. During our fourth quarter earnings call in January, we thought that strong February order books, increasing seasonal demand, and tight industry supply would support strong margins for at least the first half of 2021. Since January, our industry lost several weeks of supply due to Texas weather events during February and deferred maintenance from 2020 is resulting in high levels of planned downtime across the industry, particularly in the second quarter. North American inventories were depleted during the downtime and European inventories have been pressured by unusually strong first quarter demand. While our company normally maintains over one month of polyolefins sales inventory, our European PE and PP businesses ended March at levels well below those targets, most notably with less than two weeks of low density polyethylene inventory. Logistics constraints are exacerbating the situation due to shortages of shipping containers on critical routes and escalating freight rates that are limiting opportunities for regional arbitrage. China remains structurally short of polyethylene. And U.S. exports to China have vanished as North American suppliers seek to replenish inventories and address order backlogs from domestic customers. Backlogs for finished goods are rising as the recovering global economy continues to be supported by government stimulus and pent-up demand emerges with increased vaccination rates. In summary, we believe that tight global markets are likely to persist well into the second half of this year and continued improvements in mobility and associated economic activity could sustain strong volumes and margins into 2022. Please turn to Slide 20 and let's review LyondellBasell’s profitability over the course of the first complete business cycle…

Our first question comes from Jeff Zekauskas from JPMorgan. Sir, your line is open.

Thanks very much. If your peak EBITDA in 2015 was $8 billion, what do you think your peak EBITDA is now after you bring on your 2023 expansions?

So, good morning Jeff and for everyone, thanks for your patience with our longer prepared remarks, there's a lot going on. So, we wanted to provide color. So Jeff in terms of peak EBITDA, if you think about the kind of mid-cycle margins up to now we've added between $1 billion and $1.2 billion of EBITDA. In 2023, we’ll add another $500 million with our Sinopec PO-SM project and the PO-TBA project. So, I would say at mid-cycle margins we've added $1.5 billion to $1.7 billion of EBITDA. And if you - were to consider peak earnings then it would be something even more than that.

Our next question comes from P.J. Juvekar from Citi. Your line is open.

First of all, I like your brand names circular and recover, revive - recover, revive and renew. It was very nice.

Well, thank you.

My question is on regular polyethylene. You know you talked a lot about higher polyethylene demand and during COVID time on Slide 9. Can you discuss how much of the capacity - on the capacity side, how much of capacity possibly was delayed due to COVID? Because there are some numbers out there above 1 million to 2 million tons of capacity delayed. And then just any - I saw something in the - news headlines about phase 2 of Bora joint venture. Can you also talk a little bit about that? Thank you.

Sure, P.J. So, first of all in terms of capacity delays, I think in China we should assume that capacity will come on part of schedule for those projects that are already underway. I think for projects that haven't started in China, certainly the CTO and MTO projects are probably at risk. And we've learned recently that government is considering canceling those projects for the environment. In the U.S. because of COVID, the projects that are underway maybe were delayed a quarter or two especially Q2, Q3 last year. As there were slowdowns until we all figured out how to manage density in our sites and construction sites. So, maybe a couple of quarters for those projects that are underway. And if you think longer term, projects that CTO/MTO based in China could be at risk. Mike?

Oh in Bora, question about Bora phase 2. So we're still discussing with our partner on Bora phase 2. No definitive decisions yet. I would say that would be middle of the decade or beyond in terms of product hitting the market.

Our next question comes from Steve Byrne from Bank of America. Sir, your line is open.

Yes, thank you. I was curious to hear how your marketing of the polyethylene out of Lake Charles may have changed since it was solely run and managed by Sasol. And maybe more importantly, this broader share position you have in the U.S. market, are you picking up anything from your customer relationships where the industry might be trying to allocate more tons into this premium market to capture that premium versus spot pricing ex-U.S.?

Yes, so good morning Steve. On the Sasol marketing, so pre-pandemic our view was that we would plug that volume into our global network and sell in Europe and in China and also supplement in the U.S. So, that's still our plan. But in the near term, because of the supply disruptions really spot sales have been zero. We've been on allocation. So, exports are only those where we have contracts. We're not doing spot exports. We don't have enough volume today. And our inventories are below our typical levels. So, our focus in the near-term will be to meet domestic demand, which is - which we still don't know what level that demand is, because of the supply constraints. And then, we'll look to resume exports.

Our next question comes from Arun Viswanathan with RBC Capital Markets. Sir, your line is open.

Great, thanks for taking my question. Congrats on the good results here. Just want to get your thoughts on PE inventories and kind of the outlook for the next couple of quarters. Obviously as you noted, the storm reduced those inventories materially. And how do you see those evolving over the next couple of quarters? When do you expect that we'll be back at normal? And what does that imply for the next couple of price increases that have been announced? Thanks.

Yes thank you, Arun. First of all in inventory, I was actually just looking at that data this morning. The industry data and industry inventories both PE and PP are below typical levels that we've seen in the past. Again, I think following on from what I answered to Steve earlier, we still don't know what's the level of demand. My guess is the level of demand is higher than what we saw in February and March. And so, our first priority is to meet the demand of our customers and then find the opportunity to rebuild inventory. So, if you think about what's ahead, we still have reopening ahead in the U.S. We are reopening ahead in Europe, many parts of Asia, ex-China still reopening ahead so, stronger demand period. Typically, we see seasonal improvement so opportunity to rebuild inventory, we may not have that until later in Q3. Also recall that there's a lot of planned downtime in the industry because many producers deferred planned maintenance last year into this year. So, I think all of these reasons are why the setup looks to be for a very tight market for most of this year if not all.

Our next question comes from Kevin McCarthy from Vertical Research Partners. Sir, your line is open.

Good morning. Bhav, the spread between polypropylene resin and propylene monomer has widened quite a bit since October. I think $0.21 per pound or so. Perhaps you have a slightly different number. But my question is, what is, the trajectory that you would foresee for that spread moving through the back half of the year? How sustainable is it given the inventory levels that you mentioned and your view of supply demand?

So, Kevin on polypropylene you know more of it goes into durable goods than does polyethylene. And I'm sure all of our listeners have heard about the shortage of chips that have limited automobile production. I think that's going to cause more demand as some of those constraints relieve themselves and there's more chips available. And generally speaking auto sales are up. Inventories are low. Fleet sales have been low. Rental car fleets have been depleted last year. So, all of that has to be replenished. So, my sense is that polypropylene market will continue to be strong. And if I were to look at inventories the data that I saw this morning from an industry perspective in the U.S. PP inventories are actually lower than PE inventories. And this data that I'm citing is 60 days in the rear. So, my guess is that trend will continue to decline as we see data from March and April.

Our next question comes from Vincent Andrews from Morgan Stanley. Your line is open.

Thank you and hi, everyone. Bhav may be on polyethylene. You know there's a pretty FX spread now or arm spread between the U.S. and in Asia. I think it's the highest level ever. And you know usually those get our doubt. What do you think is going to happen? Do you think the Asian price is going to need to move up a lot more than the U.S. price is going to need to move down or how do you envision this playing out over the coming quarters?

Yes. So, Vincent first of all I think we have to differentiate between the polypropylene price and polypropylene spreads. The polypropylene price could continue to come down on an absolute basis as propylene comes down - polypropylene. But the spreads are widening. We've announced another spread increase, markets are very tight. So, my sense is that global prices will likely come up and as propylene comes down some or has come down in the last month, you could see polypropylene absolute price moderate where I think spreads will continue to widen because the market is very tight.

Our next question comes from John McNulty from BMO Capital Markets. Sir, your line is open.

This is for John. Congrats on another strong quarter. So, following on your comments, you made it around cash deployment. Cash flows are obviously very strong this year and they will likely continue so as the new products come on line. You noted that you plan to pay down some more debt this year. So, what's the target leverage for you and how should we think about further allocation of capital like how should we think about buybacks and do you think this is the right setup given the high margins to maybe expand your organic CapEx beyond the $2 billion mark? Thanks.

Yes. So, let me start and then I'll ask Michael to add as well. Deleveraging continues to be our top priority. We want to get our debt to EBITDA metrics down below to an absolute debt in the $12 billion sort of range. And I think we're well-positioned to hit those kinds of numbers by year end. Based on what we see, a good trajectory of our earnings. Buybacks could certainly enter the picture after we reach these targets that we have, could be as soon as next year, early next year of that buybacks could be part of the picture. It’s unlikely that will add to organic growth. We have our PO/TBA project that we're executing. We want to make sure we complete that. And beyond that, we don't have plans to start a new large organic project in the next 12 to 24 months. Michael, anything else to add on capital allocation?

Yes. I mean maybe just a couple of comments, Bhav. I mean just a reminder, you know, last year we generated very strong cash flow $3.4 billion from ops almost 90% conversion. We more than covered capital and our dividend. And that was I think pretty impressive. As Bhav said, we expect very strong cash flow generation this year. And we do expect to make meaningful progress in debt reduction. We've taken out a $1 billion of debt year-to-date. And I think kind of looking towards the end of the year, I think $3 billion to $4 billion in total debt reduction for the year is within reach.

Our next question comes from Mike Sison from Wells Fargo. Your line is open.

Good morning. Nice start to the year. Bhav, in terms of your PE and TE effective operating rate right chart on Slide 9, there’s a little dip there in 2022 and 2023. Is that considered mid-cycle in your outlook? And, if so, would you still be able to generate some EBITDA growth in LP in Americas and in 2022?

Yes. So, Mike, yes, I mean that's kind of mid cycle or better than mid cycle. That dip if you look at the operating rate, it's still above 90%. And generally when operating rates are greater than 90% typically the seasonal highs tend to be very tight. So, Q2, Q3 tend to be tight quarters in an annual average net above 90%. So, my sense is we're going to be somewhere mid-cycle or better in 2022 and 2023. And then after that as there's really not a whole lot of new capacity ex-China we should see the cycle play out. I wanted to also answer Vincent’s question about polyethylene. Vincent, I thought you asked about polypropylene building on the prior question. On polyethylene spreads, you know the market is still extremely tight. So, our sense is that the price increases that have been implemented could remain in place through Q3. There are more increases out there. Market remains tight. And again, as I've said several times we really don't know where the real level of demand is because we've been on allocation and we know our customers want more if we had it. So, if we had the product. So, I think that these spreads should stay well into Q3 for polyethylene.

Our next question comes from Duffy Fischer from Barclays. Your line is open.

Good morning. Bhav, you just kind of made a comment working off your slide 9 that the dip you see coming kind of takes us to mid-cycle and then obviously better than that going forward. So, kind of the next five to seven years all look like they're better than mid-cycle. So, can you walk us through what that would mean for reinvestment economics for a new cracker in the U.S.? And then maybe touch on globally, obviously, with your catalyst business, you get a first look at what everybody's thinking about doing globally. How many new announcements for new crackers should we expect this year?

Sure, Duffy. So first of all on a mid-cycle returns, yes, I think if you - first of all, if you look at that chart, it's actually probably better than mid-cycle other than maybe 2022. And again, if demand grows at 7% then I think you have a chance of actually having just a flat line and not much of a dip at all and we're headed in that direction it seems to me. So based on that and where CapEx has turned out recently on new projects. I still think it kind of leaves us that maybe low-double-digit kind of returns. And more importantly many companies who would think about investing are likely thinking about repairing their balance sheets from last year and paying down debt. So, I don't expect with this sort of a profile for there to be a rush in terms of new project announcements let’s say ex-China, but let's see how it develops, each company has its own considerations. But certainly for us, we don't have plans to take on additional organic growth in O&P in the near-term. In terms of your question about what are we seeing from catalyst activity and licensing activity, we are seeing slower activity in China compared to what we saw over the last two years especially in polyethylene. So and we participate in most if not all tenders - that occur for a new project. So, it seems the activity is slowing compared to 2018 and 2019.

Our next question comes from John Roberts from UBS. Sir, your line is open.

Yes hi, Bhav. Just to be in Slide 9 to debt here on the polyethylene outlook. Aren’t the Chinese now building plants in three years so that anything beyond 2023 may not be in the consultant’s forecast now for supply?

Yes so, John first of all, I think Slide 9 is really important when you think - so we can't beat it to death enough I suppose. So, I would say that we're already into 2021, right. So, the forecasts out through 2025 are probably pretty firm in terms of what could be built and what sort of supply we should expect from China. Post 2025, it remains to be seen. But I would say 3.5 years something like that is the build time.

Our next question comes from Bob Koort from Goldman Sachs. Your line is open.

Thank you very much. I guess we'll keep beating away and Bhav on - you mentioned that time duration. I thought maybe in the Bora project you guys worked on the construction to commercial ops is a little bit faster. So, was there something unique to that project? Or what insights did you get from working with those guys there about what it might suggest across the industry in China as you can appreciate for a lot of investors the lack of transparency there makes it sort of difficult to handicap what's actually going to happen?

Yes so, Bob on Bora remember, first of all, it was in the north which is a less congested area in terms of new projects up in Liaoning province. So - and we joined the project while it was already in construction and we restarted our discussions. And, of course, we signed the definitive agreements within a month or two of start-up. I still think Bob three to three and a half year is probably the right time to think about a project being approved to the time we have in production.

Our next question comes from David Begleiter from Deutsche Bank. Your line is open.

Thank you. Bhav just on oxyfuels refining, can you discuss the improvement you're looking at for Q2 and even in the back half of the year? And refining do you think we'll have positive EBITDA next year in this business?

Yes, so on oxyfuels we've already seen improvement as gasoline prices have come up and we've seen the blend premium come back a bit. So, it's recovered more than our base refining business has. We're getting closer to breakeven. David, my hope is that in Q3 we get to breakeven, in Q4 we're positive in the refining business. Now, that depends on the pace of reopening. I can tell you here in Houston the traffic is back in the evening when I drive home. It’s I-10 coming out of Houston is full going both ways. So, I think more and more we're going to see the summer driving season could be very strong with a lot of pent-up demand for vacations and people wanting to get away. So, I think the refining business should see breakeven soon and positive profitability certainly by Q4.

Our next question comes from Matthew Blair from Tudor, Pickering & Holt. Your line is open.

Great thanks. Good morning, Bhav. You know so many things going right here. Let me ask about the one area that's lagging of course and that's refining due these historic RIN obligations. Is there anything you can do to mitigate your exposure maybe by buying extra RINs forward or potentially looking at like a renewable diesel project?

Yes, Matthew, you're right. The RINs have been quite a burden for us this year in our refining business. We're probably spending something like 3x more than we did last year on RINs. In the near term, I don't see anything else we can do. At some point the government will reset the mandate on RINs and then we could see the price moderate. But in the near term, we're doing all we can in terms of these renewable diesel sort of projects but that would be much more longer term and at the moment, we're not pursuing those sorts of projects in our refining business. So, we're just trying to run hard, run at maximum rates, and anticipate the recovery and miles driven.

And our last question comes from Frank Mitsch from Fermium Research. Sir, your line is open.

Mr. Kinney. Good job saving the best for last. Very, very much appreciate it. Bhav, I was very struck by the comment that the market is going to be tight through the end of the year. Because I think just like two months ago the thought process was it would be tight through the end of the third quarter. So apparently, you've gained a little bit more visibility and feel that it's going to be tight through the end of the year? So that's obviously - that's pretty positive. And you're going to be operating full out in the second quarter which begs the question. Where were you guys in the first quarter on your O&P businesses in terms of operating rates? And as we look at the second quarter, where do you think the industry is going to be operating at in the O&P segments?

Yes, So Frank on the operating rates I mean in Q1, we lost about 30 days of production on average in our Texas asset. One of our crackers was down for almost 90 days. So now, we’re back-up and running fully. I suspect that - our competitors do have some planned downtime, maintenance that they had planned last year that was diverted into this year. So likely, our operating rate - on a plan basis is higher than most in Q2. Your earlier question about our confidence about the outlook I think, Frank, as time goes on. I just see the number of shortages on consumable items, on automobiles, lumber, steel. There's sort of like furniture, if you want to buy furniture, there's like a six-month delay from the time you ordered to the time you receive. And then reopening is still in front of us. I think there are so many factors that provide a very strong setup for how demand will develop for really all of our products in the company. So, that makes me more optimistic. About the fact that we'll have tighter markets for longer as we go through the year. So, thanks for your questions.

I do have a few closing remarks if I may. First of all, really good questions as always in Slide 9 we’ll continue to be part of our discussion as we go forward. I want to emphasize a couple of things. First of all, Q2 we're going to run full rates, no planned downtime. As I mentioned, there's a lot of backlog. We have reopening still in front of us. That should benefit our refining and oxyfuels business and continue to underpin demand strength in the other businesses that have been doing well. I think it's very important to note that with the larger asset base that we have, we've added $1 billion to $1.2 billion more of EBITDA as we sit here today at mid-cycle kind of margins. Now, clearly today we’re well above mid-cycle margins in some of our businesses. So, I think that’s a bit differential for LyondellBasell that in 2021 more assets deployed in a much, much stronger market. And I’m really pleased that we can see a path to perhaps reaching our leverage targets by year-end both on a gross debt basis and on the debt to EBITDA metrics. So, that as I mentioned earlier brings buybacks kind of back into the equation as we think about capital allocation as we go into 2022. So, we look forward to giving you an update in July on our Q2 results. In the meantime, have a great and safe weekend. Thank you.

Thank you all for participating in today's conference. You may disconnect your lines and enjoy the rest of your day.