Edgar Filing: LyondellBasell Industries N.V.

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-34726

LYONDELLBASELL INDUSTRIES N.V.

(Exact name of registrant as specified in its charter)

The Netherlands

98-0646235

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

Stationsplein 45

3013 AK Rotterdam

The Netherlands

(Address of principal executive offices)

31 10 275 5500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	þ	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No ¨

The registrant had 574,623,896 ordinary shares, €0.04 par value, outstanding at April 27, 2012 (excluding 3,678,709 treasury shares).

LYONDELLBASELL INDUSTRIES N.V.

TABLE OF CONTENTS


	Page
Part I – Financial Information		1
Item 1. Financial Statements		1
Consolidated Statements of Income		1
Consolidated Statements of Comprehensive Income		2
Consolidated Balance Sheets		3
Consolidated Statements of Cash Flows		5
Consolidated Statement of Stockholders’ Equity		6
Notes to the Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		37
Item 3. Quantitative and Qualitative Disclosures About Market Risk		53
Item 4. Controls and Procedures		53

Part II – Other Information		54
Item 1. Legal Proceedings		54
Item 1A. Risk Factors		54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		54
Item 6. Exhibits		55
Signature		56

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended March 31,
Millions of dollars, except earnings per share	2012			2011
Sales and other operating revenues:
Trade	$	11,592		$	11,960
Related parties		287			292

		11,879			12,252
Operating costs and expenses:
Cost of sales		10,670			10,943
Selling, general and administrative expenses		224			211
Research and development expenses		39			33

		10,933			11,187

Operating income		946			1,065
Interest expense		(99	)		(163	)
Interest income		4			8
Other expense, net		(1	)		(43	)

Income before equity investments, reorganization items and income taxes		850			867

Income from equity investments		46			58
Reorganization items		5			(2	)

Income before income taxes		901			923
Provision for income taxes		302			263

Net income		599			660
Net loss attributable to non-controlling interests		1			3

Net income attributable to the Company	$	600		$	663

Earnings per share:
Net income—
Basic	$	1.04		$	1.16

Diluted	$	1.04		$	1.15

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three months ended March 31,
Millions of dollars	2012			2011
Net income	$	599		$	660
Other comprehensive income, net of tax –
Defined benefit pension plan:
Prior service cost arising during period		1			2
Amortization of prior service cost included in net income		6			—
Income taxes on defined benefit plans		(2	)		—

Defined benefit pension plan, net		5			2

Foreign currency translations adjustment:
Unrealized net change arising during the period		203			376
Income taxes on foreign currency translation adjustments		1			1

Foreign currency translations, net of tax		204			377

Total other comprehensive income		209			379

Comprehensive income		808			1,039
Comprehensive income attributable to non-controlling interest		1			3

Comprehensive income attributable to the Company	$	809		$	1,042

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED BALANCE SHEETS


Millions, except shares and par value data	March 31, 2012		December 31, 2011
ASSETS
Current Assets:
Cash and cash equivalents	$	1,670	$	1,065
Restricted cash		9		53
Accounts receivable:
Trade, net		3,973		3,582
Related parties		236		196
Inventories		5,208		5,499
Prepaid expenses and other current assets		1,002		1,040

Total current assets		12,098		11,435
Property, plant and equipment, net		7,426		7,333
Investments and long-term receivables:
Investment in PO joint ventures		415		412
Equity investments		1,605		1,559
Related party receivables		4		4
Other investments and long-term receivables		72		68
Goodwill		595		585
Intangible assets, net		1,149		1,177
Other assets		245		266

Total assets	$	23,609	$	22,839

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED BALANCE SHEETS


Millions, except shares and par value data	March 31, 2012			December 31, 2011
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	—		$	4
Short-term debt		42			48
Accounts payable:
Trade		2,638			2,562
Related parties		907			852
Accrued liabilities		1,049			1,242
Deferred income taxes		310			310

Total current liabilities		4,946			5,018
Long-term debt		3,984			3,980
Other liabilities		2,281			2,277
Deferred income taxes		1,035			917
Commitments and contingencies
Stockholders’ equity:
Ordinary shares, €0.04 par value, 1,275 million shares authorized, 574,467,256 and 573,390,514 shares outstanding, respectively		31			31
Additional paid-in capital		10,319			10,272
Retained earnings		1,298			841
Accumulated other comprehensive loss		(218	)		(427	)
Treasury stock, at cost, 3,835,350 and 4,051,013 ordinary shares, respectively		(120	)		(124	)

Total Company share of stockholders’ equity		11,310			10,593
Non-controlling interests		53			54

Total equity		11,363			10,647

Total liabilities and equity	$	23,609		$	22,839

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended March 31,
Millions of dollars	2012			2011
Cash flows from operating activities:
Net income	$	599		$	660
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		237			215
Asset impairments		22			5
Amortization of debt-related costs		6			8
Equity investments—
Equity income		(46	)		(58	)
Distribution of earnings, net of tax		14			96
Deferred income taxes		153			81
Reorganization items		(5	)		2
Gain on sale of assets		(4	)		—
Unrealized foreign currency exchange loss		10			3
Changes in assets and liabilities that provided (used) cash:
Accounts receivable		(374	)		(897	)
Inventories		346			(799	)
Accounts payable		80			1,264
Contributions to pension plans		(10	)		(155	)
Income tax refunds		244			2
Prepaid expenses and other current assets		(274	)		(86	)
Other, net		(77	)		(120	)

Net cash provided by operating activities		921			221

Cash flows from investing activities:
Expenditures for property, plant and equipment		(228	)		(221	)
Proceeds from disposal of assets		4			5
Restricted cash		44			—
Other		(5	)		—

Net cash used in investing activities		(185	)		(216	)

Cash flows from financing activities:
Shares issued upon exercise of warrants		1			37
Dividends paid		(143	)		—
Proceeds from short-term debt		10			—
Repayments of short-term debt		(19	)		—
Repayments of long-term debt		(2	)		—
Other, net		5			(9	)

Net cash provided by (used in) financing activities		(148	)		28

Effect of exchange rate changes on cash		17			128

Increase in cash and cash equivalents		605			161
Cash and cash equivalents at beginning of period		1,065			4,222

Cash and cash equivalents at end of period	$	1,670		$	4,383

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY


						Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity			Non- Controlling Interests
	Ordinary Shares
Millions of dollars	Issued		Treasury
Balance, January 1, 2012	$	31	$	(124	)	$	10,272	$	841		$	(427	)	$	10,593		$	54
Net income (loss)		—		—			—		600			—			600			(1	)
Other comprehensive income		—		—			—		—			209			209			—
Warrants exercised		—		—			37		—			—			37			—
Shares purchased		—		(11	)		—		—			—			(11	)		—
Share-based compensation		—		15			10		—			—			25			—
Cash dividends ($0.25 per share)		—		—			—		(143	)		—			(143	)		—

Balance, March 31, 2012	$	31	$	(120	)	$	10,319	$	1,298		$	(218	)	$	11,310		$	53

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS


	Page
1. Basis of Presentation		8

2. Accounting and Reporting Changes		8

3. Accounts Receivable		9

4. Inventories		9

5. Property, Plant and Equipment, Goodwill, Intangibles and Other Assets		10

6. Investment in PO Joint Ventures		11

7. Equity Investments		11

8. Debt		12

9. Financial Instruments		13

10. Fair Value Measurement		18

11. Pension and Other Post-retirement Benefits		22

12. Income Taxes		22

13. Commitments and Contingencies		23

14. Stockholders’ Equity and Non-Controlling Interests		25

15. Per Share Data		26

16. Segment and Related Information		28

17. Subsequent Events		30

18. Supplemental Guarantor Information		30

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

1. Basis of Presentation

LyondellBasell Industries N.V., together with its consolidated subsidiaries (collectively “LyondellBasell N.V.”), is a worldwide manufacturer of chemicals and polymers, a refiner of crude oil, a significant producer of gasoline blending components and a developer and licensor of technologies for production of polymers and other chemicals. When we use the terms “Company,” “we,” “us,” “our” or similar words, unless the context otherwise requires, we are referring to LyondellBasell N.V.

The accompanying consolidated financial statements are unaudited and have been prepared from the books and records of LyondellBasell N.V. in accordance with the instructions to Form 10-Q and Rule 10-1 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements. In our opinion, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results for the entire year. These consolidated financial statements should be read in conjunction with the LyondellBasell N.V. consolidated financial statements and notes thereto included in the LyondellBasell Industries N.V. Annual Report on Form 10-K for the year ended December 31, 2011.

2. Accounting and Reporting Changes

Recently Adopted Guidance

Comprehensive Income—In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-05, related to ASC Topic 220, Comprehensive Income: Presentation of Comprehensive Income. This standard eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. Under ASC 220, an entity can elect to present either i) one continuous statement of comprehensive income or ii) in two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format used before, and the second statement would include components of other comprehensive income (OCI). The ASU does not change the items that must be reported in OCI. We have included the Consolidated Statements of Comprehensive Income in this interim report on Form 10-Q for the three months ended March 31, 2012 and 2011.

Fair Value Measurement—In May, 2011 the FASB issued new guidance related to ASC Topic 820, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The new guidance results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and International Financial Reporting Standards (“IFRS”) and changes some fair value measurement principles and disclosure requirements. This guidance aligns the fair value measurement of instruments classified within an entity’s shareholders’ equity with the guidance for liabilities. As a result, entities are required to measure the fair value of their own equity instruments from the perspective of a market participant that holds the equity instruments as assets. This guidance also enhances disclosure requirements for recurring Level 3 fair value measurements to include quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements. New disclosures on the use of a nonfinancial asset

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

measured or disclosed at fair value are required if its use differs from its highest and best use. In addition, entities must report the level in the fair value hierarchy of assets and liabilities not recorded at fair value but where fair value is disclosed. The ASU is effective for interim and annual periods beginning on or after December 15, 2011. The adoption of this amendment in 2012 did not have a material effect on the presentation of our consolidated financial statements.

Accounting Guidance Issued But Not Adopted as of March 31, 2012

Disclosures about Offsetting Assets and Liabilities—On December 16, 2011, the FASB issued ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The standard requires disclosures to provide information to help reconcile differences in the offsetting requirements under U.S. GAAP and IFRS. The differences in the offsetting requirements account for a significant difference in the amounts presented in statements of financial position prepared in accordance with U.S. GAAP and IFRS. The new disclosure requirements mandate that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position (balance sheet), as well as instruments similar to a master netting arrangement. In addition, the standard requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements. The ASU is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The adoption of this amendment is not expected to have a material impact on the presentation of our Consolidated Balance Sheet.

3. Accounts Receivable

Our allowance for doubtful accounts receivable, which is reflected in the Consolidated Balance Sheets as a reduction of accounts receivable, totaled $20 million and $16 million at March 31, 2012 and December 31, 2011, respectively.

4. Inventories

Inventories consisted of the following components:


	March 31,		December 31,
Millions of dollars	2012		2011
Finished goods	$	3,306	$	3,544
Work-in-process		271		267
Raw materials and supplies		1,631		1,688

Total inventories	$	5,208	$	5,499

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. Property, Plant and Equipment, Goodwill and Intangible Assets

The components of property, plant and equipment, at cost, and the related accumulated depreciation were as follows:


	March 31,			December 31,
Millions of dollars	2012			2011
Land	$	306		$	301
Manufacturing facilities and equipment		7,624			7,358
Construction in progress		827			785

Total property, plant and equipment		8,757			8,444
Less accumulated depreciation		(1,331	)		(1,111	)

Property, plant and equipment, net	$	7,426		$	7,333

During the first quarter of 2012, we recognized impairments totaling $22 million, primarily related to damage to our LDPE plant in Wesseling, Germany resulting from an explosion in a reactor bay.

On January 4, 2012 we ceased operations at our Berre refinery. No impairment charge was taken during the period as the refinery was fully impaired in 2008 and all subsequent capital expenditures were impaired in the period in which they were incurred.

Depreciation and amortization expense is summarized as follows:


	Three Months Ended
	March 31,		March 31,
Millions of dollars	2012		2011
Property, plant and equipment	$	194	$	167
Investment in PO joint ventures		7		7
Emission allowances		17		18
Various contracts		10		22
Technology, patent and license costs		5		—
Software costs		4		1

Total depreciation and amortization	$	237	$	215

Asset Retirement Obligations—The liabilities recognized for all asset retirement obligations were $120 million and $123 million at March 31, 2012 and December 31, 2011, respectively.

Goodwill—Goodwill increased from $585 million at December 31, 2011 to $595 million at March 31, 2012. The $10 million change in goodwill is a result of foreign exchange translation.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

6. Investment in PO Joint Ventures

Changes in our investment in the U.S. and European PO joint ventures for 2012 and 2011 are summarized below:


	U.S. PO Joint			European PO			Total PO
Millions of dollars	Venture			Joint Venture			Joint Ventures
Investments in PO joint ventures—January 1, 2012	$	274		$	138		$	412
Cash contributions		1			5			6
Depreciation and amortization		(5	)		(2	)		(7	)
Effect of exchange rate changes		—			4			4

Investments in PO joint ventures—March 31, 2012	$	270		$	145		$	415


Investments in PO joint ventures—January 1, 2011	$	291		$	146		$	437
Cash contributions		—			5			5
Depreciation and amortization		(5	)		(2	)		(7	)
Effect of exchange rate changes		—			9			9

Investments in PO joint ventures—March 31, 2011	$	286		$	158		$	444

7. Equity Investments

The changes in equity investments were as follows:


	Three Months Ended
	March 31,			March 31,
Millions of dollars	2012			2011
Beginning balance	$	1,559		$	1,587
Income from equity investments		46			58
Dividends received, gross		(14	)		(103	)
Currency exchange effects		18			44
Other		(4	)		—

Ending balance	$	1,605		$	1,586

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Summarized income statement information and our share for the periods for which the respective Equity investments were accounted for under the equity method is set forth below:


	Three months ended
	March 31, 2012						March 31, 2011
				Company						Company
Millions of dollars	100%			Share			100%			Share
Revenues	$	2,457		$	908		$	3,587		$	1,239
Cost of sales		(2,189	)		(821	)		(3,170	)		(1,109	)

Gross profit		268			87			417			130
Net operating expenses		(74	)		(21	)		(98	)		(32	)

Operating income		194			66			319			98
Interest expense		(57	)		(16	)		(58	)		(16	)
Foreign currency translation		5			4			(39	)		(10	)
Income from equity investments		7			2			10			3

Income before income taxes		149			56			232			75
Provision for income taxes		34			10			53			17

Net income	$	115		$	46		$	179		$	58

8. Debt

Long-term loans, notes and other long-term debt due to banks and other unrelated parties consisted of the following:


	March 31,		December 31,
Millions of dollars	2012		2011
Senior Notes due 2017, $2,250 million, 8.0%	$	619	$	619
Senior Notes due 2017, € 375 million, 8.0%		138		134
Senior Notes due 2018, $3,240 million, 11.0%		1,922		1,922
Senior Notes due 2021, $1,000 million, 6.0%		1,000		1,000
Guaranteed Notes, due 2027, $300 million, 8.1%		300		300
Other		5		9

Total		3,984		3,984
Less current maturities		—		(4	)

Long-term debt	$	3,984	$	3,980

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Short-term loans, notes and other short-term debt due to banks and other unrelated parties consisted of the following:


	March 31,		December 31,
Millions of dollars	2012		2011
$2,000 million Senior Secured Asset-Based Revolving Credit Facility	$	—	$	—
€450 million European Receivables Securitization Facility		—		—
Financial payables to equity investees		10		10
Other		32		38

Total short-term debt	$	42	$	48

On April 9, 2012, LyondellBasell N.V. issued $2,000 million aggregate principal amount of 5% senior notes due 2019 and $1,000 million aggregate principal amount of 5.75% senior notes due 2024, each at an issue price of 100%. These notes were issued in a private placement to qualified institutional buyers and to certain non-U.S. persons in offshore transactions.

Pursuant to a cash tender offer, in April 2012 we repaid $2,606 million of debt, comprising $742 million, or approximately 98%, of our 8% senior notes outstanding and $1,864 million, or 97%, of our 11% senior notes outstanding. In connection with the tender offer, we paid premiums totaling $287 million. We also obtained consents from the note holders to eliminate substantially all of the covenants in the indentures governing the 8% and 11% notes.

Amortization of debt issuance costs in the three months ended March 31, 2012 and 2011 resulted in amortization expense of $6 million and $8 million, respectively, which is included in interest expense in the Consolidated Statements of Income.

At March 31, 2012 and 2011, our weighted average interest rates on outstanding short-term debt were 2.9% and 3.8%, respectively.

9. Financial Instruments

Cash Concentration—Our cash equivalents are placed in high-quality commercial paper, money market funds and time deposits with major international banks and financial institutions.

Market Risks—We are exposed to market risks, such as changes in commodity pricing, currency exchange rates and interest rates. To manage the volatility related to these exposures, we selectively enter into derivative transactions pursuant to our policies. Designation of the derivatives as fair-value or cash-flow hedges is performed on a specific exposure basis. Hedge accounting may or may not be elected with respect to certain short-term exposures. The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the fair value or cash flows of the underlying exposures being hedged.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Commodity Prices—We are exposed to commodity price volatility related to anticipated purchases of natural gas, crude oil and other raw materials and sales of our products. We selectively use commodity swap, option, and futures contracts with various terms to manage the volatility related to these risks. Such contracts are generally limited to durations of one year or less. Cash-flow hedge accounting may be elected for these derivative transactions. In cases, when the duration of a derivative is short, hedge accounting generally would not be elected. When hedge accounting is not elected, the changes in fair value of these instruments are recorded in earnings. When hedge accounting is elected, gains and losses on these instruments are deferred in accumulated other comprehensive income (“AOCI”), to the extent that the hedge remains effective, until the underlying transaction is recognized in earnings.

The following table summarizes the pretax effect of settled commodity futures contracts charged directly to income:


	Settled Commodity Contracts
	Three Months Ended March 31, 2012
Millions of dollars	Gain (Loss) Recognized in Income			Volumes Settled		Volume Unit
Futures:
Gasoline	$	12			55		million gallons
Heating oil		4			112		million gallons
Butane		(1	)		12		million gallons
Crude oil		(6	)		80		million gallons

	$	9


	Three Months Ended March 31, 2011
	Gain (Loss) Recognized in Income			Volumes Settled		Volume Unit
Futures:
Gasoline	$	1			119		million gallons
Heating oil		5			157		million gallons

	$	6

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The estimated fair value and notional amounts of our open commodity futures contracts are shown in the table below:


	Open Commodity Contracts
	March 31, 2012
				Notional Amounts
Millions of dollars	Fair Value			Value		Volumes		Volume Unit		Maturity Dates
Futures:
Gasoline	$	—		$	85		28		million gallons		April 2012 and October 2012 - February 2013
Heating oil		—			37		12		million gallons		April 2012
Butane		—			38		20		million gallons		October 2012 - February 2013

	$	—		$	160


	December 31, 2011
				Notional Amounts
	Fair Value			Value		Volumes		Volume Unit		Maturity Dates
Futures:
Gasoline	$	12		$	34		12		million gallons		January 2012 - February 2012
Heating oil		1			54		19		million gallons		January 2012
Butane		(1	)		22		12		million gallons		January 2012 - February 2012

	$	12		$	110

Foreign Currency Rates—We have significant operations in several countries of which functional currencies are primarily the U.S. dollar for U.S. operations and the Euro for operations in Europe. We enter into transactions denominated in other than our functional currency and the functional currencies of our subsidiaries. As a result, we are exposed to foreign currency risk on receivables and payables. We maintain risk management control policies intended to monitor foreign currency risk attributable to both the outstanding foreign currency balances and future commitments. The risk management control policies involve the centralization of foreign currency exposure management, the offsetting of exposures and the estimating of expected impacts of changes in foreign currency rates on our earnings. We enter into foreign currency spot, forward and swap contracts to reduce the effects of our net currency exchange exposures. At March 31, 2012, foreign currency spot, forward and swap contracts in the notional amount of $692 million, maturing in April and May 2012, were outstanding. The fair values, based on quoted market exchange rates, resulted in a net receivable of $3 million at March 31, 2012 and a net payable of $12 million at December 31, 2011.

For forward contracts that economically hedge recognized monetary assets and liabilities in foreign currencies, no hedge accounting is applied. Changes in the fair value of foreign currency forward contracts are reported in the Consolidated Statements of Income and offset the currency exchange results recognized on the assets and liabilities.

Foreign Currency Gain (Loss)—Other income, net, in the Consolidated Statements of Income reflected gains of $2 million and $10 million for the three months ended March 31, 2012 and 2011, respectively.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Warrants—As of March 31, 2012 and December 31, 2011, we had warrants outstanding to purchase 139,145 and 1,000,223 ordinary shares at an exercise price of $13.77 per ordinary share, respectively. The warrants have anti-dilution protection for in-kind stock dividends, stock splits, stock combinations and similar transactions and may be exercised at any time until the close of business on April 30, 2017. Upon an affiliate change of control, the holders of the warrants may put the warrants to LyondellBasell N.V. at a price equal to, as applicable, the in-the-money value of the warrants or the Black-Scholes value of the warrants.

We calculated the fair value of our warrants using the weighted average price of our stock for the last 20 trading days less the warrant exercise price. Accordingly, the warrants are classified as Level 2 in the valuation hierarchy.

The fair values of the warrants were determined to be $4 million and $19 million at March 31, 2012 and December 31, 2011, respectively.

Derivatives—The following table summarizes financial instruments outstanding as of March 31, 2012 and December 31, 2011 that are measured at fair value on a recurring basis.


		March 31, 2012				December 31, 2011
Millions of dollars	Balance Sheet Classification	Notional Amount		Fair Value		Notional Amount		Fair Value
March 31, 2012:
Assets at fair value –
Derivatives:
Commodities	Prepaid expenses and other current assets	$	95	$	—	$	88	$	13
Foreign currency	Prepaid expenses and other current assets		692		3		—		—

		$	787	$	3	$	88	$	13

Liabilities at fair value –
Derivatives:
Commodities	Accrued liabilities	$	65	$	—	$	22	$	1
Warrants	Accrued liabilities		2		4		14		19
Foreign currency	Accrued liabilities	$	—		—		726		12

		$	67	$	4	$	762	$	32

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the pretax effect of derivative instruments charged directly to income:


	Effect of Financial Instruments
	Three Months Ended March 31, 2012
Millions of dollars	Gain (Loss) Recognized in AOCI		Gain (Loss) Reclassified from AOCI to Income		Additional Gain (Loss) Recognized in Income			Income Statement Classification
Derivatives not designated as hedges:
Warrants	$	—	$	—	$	(10	)	Other income (expense), net
Commodities		—		—		9		Cost of sales
Foreign currency		—		—		23		Other income (expense), net

	$	—	$	—	$	22


	Three Months Ended March 31, 2011
Millions of dollars	Gain (Loss) Recognized in AOCI		Gain (Loss) Reclassified from AOCI to Income		Additional Gain (Loss) Recognized in Income			Income Statement Classification
Derivatives not designated as hedges:
Warrants	$	—	$	—	$	(59	)	Other income (expense), net
Commodities		—		—		6		Cost of sales
Foreign currency		—		—		(2	)	Other income (expense), net

	$	—	$	—	$	(55	)

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

10. Fair Value Measurement

The following table summarizes the bases used to determine the fair value of financial instruments outstanding as of March 31, 2012 and December 31, 2011 that are measured at fair value on a recurring basis.


			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Fair		Assets		Inputs		Inputs
Millions of dollars	Value		(Level 1)		(Level 2)		(Level 3)
March 31, 2012:
Assets at fair value –
Derivatives:
Commodities	$	—	$	—	$	—	$	—
Foreign currency		3		—		3		—

	$	3	$	—	$	3	$	—

Liabilities at fair value –
Derivatives:
Commodities	$	—	$	—	$	—	$	—
Warrants		4		—		4		—

	$	4	$	—	$	4	$	—

December 31, 2011:
Assets at fair value –
Derivatives:
Commodities	$	13	$	—	$	13	$	—

	$	13	$	—	$	13	$	—

Liabilities at fair value –
Derivatives:
Commodities	$	1	$	—	$	1	$	—
Warrants		19		—		19		—
Foreign currency		12		—		12		—

	$	32	$	—	$	32	$	—

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table is a reconciliation of the beginning and ending balances of Level 1 and Level 2 inputs for financial instruments measured at fair value on a recurring basis:


	Fair Value			Fair Value Measurement
	Measurement			Using
	Using Quoted			Significant
	prices in active			Other
	markets for			Observable
	identical assets			Inputs
Millions of dollars	(Level 1)			(Level 2)
Balance at January 1, 2012	$	—		$	19
Purchases, sales, issuances, and settlements		—			(25	)
Total gains or losses (realized/unrealized)		—			10

Balance at March 31, 2012	$	—		$	4


Balance at January 1, 2011	$	215		$	—
Purchases, sales, issuances, and settlements		(49	)		—
Total gains or losses (realized/unrealized)		59			—

Balance at March 31, 2011	$	225		$	—

The fair value of all non-derivative financial instruments included in current assets, including cash and cash equivalents, restricted cash and accounts receivable, and accounts payable, approximated the applicable carrying value due to the short maturity of those instruments.

There were no financial instruments measured on a recurring basis using Level 3 inputs during the three months ended March 31, 2012 and 2011.

The carrying value and the estimated fair value of our non-derivative financial instruments are shown in the table below:


	March 31, 2012				December 31, 2011
	Carrying		Fair		Carrying		Fair
Millions of dollars	Value		Value		Value		Value
Short and long-term debt, including current maturities	$	4,021	$	4,392	$	4,026	$	4,294

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the bases used to measure certain liabilities at fair value which are recorded at historical cost or amortized cost in the Consolidated Balance Sheet:


			Fair Value Measurement
					Quoted prices		Significant
	Carrying		Fair		in active		other		Significant
	Value		Value		markets for		observable		unobservable
	March 31,		March 31,		identical assets		inputs		inputs
Millions of dollars	2012		2012		(Level 1)		(Level 2)		(Level 3)
Short-term debt:
Financial payables to equity investees	$	10	$	10	$	—	$	—	$	10
Other		32		32		—		11		21
Long-term debt:
Senior Notes due 2017, $2,250 million, 8.0%		619		693		—		693		—
Senior Notes due 2017, € 375 million, 8.0%		138		154		—		154		—
Senior Notes due 2018, $3,240 million, 11.0%		1,922		2,114		—		2,114		—
Senior Notes due 2021, $1,000 million, 6.0%		1,000		1,050		—		1,050		—
Guaranteed Notes, due 2027, $300 million, 8.1%		300		339		—		339		—

Short term and long-term debt, including current maturities	$	4,021	$	4,392	$	—	$	4,361	$	31

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)


			Fair Value Measurement
					Quoted prices		Significant
	Carrying				in active		other		Significant
	Value		Fair Value		markets for		observable		unobservable
	December 31,		December 31,		identical assets		inputs		inputs
Millions of dollars	2011		2011		(Level 1)		(Level 2)		(Level 3)
Short-term debt:
Financial payables to equity investees	$	10	$	10	$	—	$	—	$	10
Other		38		38		—		10		28
Long-term debt:
Senior Notes due 2017, $2,250 million, 8.0%		619		672		—		672		—
Senior Notes due 2017, € 375 million, 8.0%		134		143		—		143		—
Senior Notes due 2018, $3,240 million, 11.0%		1,922		2,066		—		2,066		—
Senior Notes due 2021, $1,000 million, 6.0%		1,000		1,035		—		1,035		—
Guaranteed Notes, due 2027, $300 million, 8.1%		300		327		—		327		—
Other		3		3		—		—		3

Short term and long-term debt, including current maturities	$	4,026	$	4,294	$	—	$	4,253	$	41

For assets and liabilities classified as Level 1, the fair value is measured using quoted prices in active markets. The total fair value is either the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs.

For assets and liabilities classified as Level 2, fair value is based on the price a market participant would pay for the security, adjusted for the terms specific to that asset and liability. Broker quotes were obtained from well established and recognized vendors of market data for debt and commodity valuations.

The fair values of Level 3 instruments are determined using pricing data similar to that used in Level 2 financial instruments described above, and reflect adjustments for less liquid markets or longer contractual terms. For these Level 3 financial instruments, pricing data obtained from third party pricing sources is adjusted for the liquidity of the underlying over the contractual terms to develop an estimated price that market participants would use. Our valuation of these instruments considers specific contractual terms, present value concepts and other internal assumptions related to (i) contract maturities that extend beyond the periods in which quoted market prices are available; (ii) the uniqueness of the contract terms; and (iii) our creditworthiness or that of our counterparties (adjusted for collateral related to our asset positions). Based on our calculations, we expect that a significant portion of other debts will react in a generally proportionate manner to changes in the benchmark interest rate. Accordingly, these financial instruments are fair valued at par and are classified as Level 3.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Pension and Other Post-retirement Benefits

Net periodic pension benefits included the following cost components for the three months ended March 31:


	2012						2011
Millions of dollars	U.S.			Non-U.S.			U.S.			Non-U.S.
Service cost	$	12		$	11		$	11		$	9
Interest cost		20			12			23			12
Expected return on plan assets		(30	)		(6	)		(26	)		(7	)
Curtailments and settlements loss		—			—			—			2
Amortization		5			1			—			—

Net periodic pension benefit costs	$	7		$	18		$	8		$	16

Net periodic other post-retirement benefits included the following cost components for the three months ended March 31:


	2012				2011
Millions of dollars	U.S.		Non-U.S.		U.S.		Non-U.S.
Service cost	$	1	$	1	$	4	$	2
Interest cost		3		—		4		—
Amortization		1		—		—		—

Net periodic benefit costs	$	5	$	1	$	8	$	2

The Company contributed $10 million to its pension plans during the three months ended March 31, 2012, which consisted of $8 million and $2 million to its U.S. and non-U.S. pension plans, respectively.

12. Income Taxes

Our effective income tax rate of 33.5% for the first quarter 2012 resulted in a tax provision of $302 million on pre-tax income of $901 million. Our effective income tax rate for the first quarter 2011 was 28.5% resulting in tax expense of $263 million on pre-tax income of $923 million. The first quarter 2012 effective income tax rate is higher than the first quarter 2011 effective income tax rate primarily due to an increase in earnings in higher tax jurisdictions and taxable foreign currency gains.

The first quarter 2012 effective income tax rate was lower than the U.S. statutory 35% rate primarily due to the effect of pre-tax income in countries with lower statutory tax rates and favorable permanent adjustments related to equity earnings, notional royalties, release of valuation allowance, and the U.S. domestic production activity deduction, which were partially offset by unfavorable permanent adjustments related to the increase in uncertain tax reserves. The first quarter 2011 effective income tax rate was lower than the statutory 35% rate primarily due to the effect of pre-tax income in countries with lower statutory tax rates and tax deductible foreign currency losses which were partially offset by the non-deductible accrual of expense related to stock warrants.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13. Commitments and Contingencies

Commitments—We have various purchase commitments for materials, supplies and services related to the ordinary conduct of business, generally for quantities required for our businesses and at prevailing market prices. These commitments are designed to assure sources of supply and are not expected to be in excess of normal requirements. Our capital expenditure commitments at March 31, 2012 were in the normal course of business.

Financial Assurance Instruments—We have obtained letters of credit, performance and surety bonds and have issued financial and performance guarantees to support trade payables, potential liabilities and other obligations. Management does not expect that any claims against or draws on these instruments would have a material adverse effect on our consolidated financial statements. We have not experienced any unmanageable difficulty in obtaining the required financial assurance instruments for our current operations.

Environmental Remediation—Our accrued liability for future environmental remediation costs at current and former plant sites and other remediation sites totaled $132 million and $120 million as of March 31, 2012 and December 31, 2011, respectively. At March 31, 2012, the accrued liabilities for individual sites range from less than $1 million to $23 million. The remediation expenditures are expected to occur over a number of years, and not to be concentrated in any single year. In our opinion, it is reasonably possible that losses in excess of the liabilities recorded may have been incurred. However, we cannot estimate any amount or range of such possible additional losses. New information about sites, new technology or future developments such as involvement in investigations by regulatory agencies, could require us to reassess our potential exposure related to environmental matters.

The following table summarizes the activity in our accrued environmental liability included in “Accrued liabilities” and “Other liabilities”:


	Three Months Ended
Millions of dollars	March 31, 2012			March 31, 2011
Balance at beginning of period	$	120		$	107
Additional provisions		12			4
Amounts paid		(3	)		(3	)
Foreign exchange effects		3			5

Balance at end of period	$	132		$	113

Litigation and Other Matters

Access Indemnity Demand—On December 20, 2010, one of our subsidiaries received demand letters from affiliates of Access Industries, (collectively, “Access”) a more than five percent shareholder of the Company. We conducted an initial investigation of the facts underlying the demand letters and engaged in discussions with Access. We requested that Access withdraw its demands with prejudice and, and on January 17, 2011, Access declined to withdraw the demands, with or without prejudice.

Specifically, Access affiliates Nell Limited (“Nell”) and BI S.á.r.l. (“BI”) have demanded that LyondellBasell Industries Holdings B.V. (“LBIH”), a wholly owned subsidiary of the Company, indemnify them and their shareholders, members, affiliates, officers, directors, employees and other related parties for all losses, including attorney’s fees and expenses, arising out of a pending lawsuit styled Edward S. Weisfelner, as Litigation Trustee of the LB Litigation Trust v. Leonard Blavatnik, et al., Adversary Proceeding No. 09-1375 (REG), in the United States Bankruptcy Court, Southern District of New York.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In the Weisfelner lawsuit, the plaintiffs seek to recover damages from numerous parties, including Nell, Access and their affiliates. The damages sought from Nell, Access and their affiliates include, among other things, the return of all amounts earned by them related to their acquisition of shares of Lyondell Chemical prior to its acquisition by Basell AF S.C.A. in December 2007, distributions by Basell AF S.C.A. to its shareholders before it acquired Lyondell Chemical, and management and transaction fees and expenses. The trial that was scheduled for October 2011 has been postponed.

Nell and BI have also demanded that LBIH pay $50 million in management fees for each of 2009 and 2010 and that LBIH pay other unspecified amounts relating to advice purportedly given, prior to the Predecessor company’s chapter 11 filing, in connection with financing and other strategic transactions.

Nell and BI assert that LBIH’s responsibility for indemnity and the claimed fees and expenses arise out of a management agreement entered into on December 11, 2007, between Nell and Basell AF S.C.A. They assert that LBIH, as a former subsidiary of Basell AF S.C.A., is jointly and severally liable for Basell AF S.C.A.’s obligations under the agreement, notwithstanding that LBIH was not a signatory to the agreement and the liabilities of Basell AF S.C.A., which was a signatory, were discharged in the LyondellBasell bankruptcy proceedings.

On June 26, 2009, Nell filed a proof of claim in Bankruptcy Court against LyondellBasell AF (successor to Basell AF S.C.A.) seeking “no less than” $723 thousand for amounts allegedly owed under the 2007 management agreement. On April 27, 2011, Lyondell Chemical filed an objection to Nell’s claim and, together with LyondellBasell N.V. (successor to LyondellBasell AF) and LBIH, brought a declaratory judgment action in the Bankruptcy Court for a determination that Nell and BI’s demands are not valid. By a Joint Stipulated Order dated June 13, 2011, the declaratory judgment action is stayed pending the outcome of the Weisfelner lawsuit.

We do not believe that the management agreement is in effect or that the Company, LBIH, or any other Company-affiliated entity owes any obligations under the management agreement. We intend to defend vigorously our position in any proceedings and against any claims or demands that may be asserted.

We cannot at this time estimate the reasonably possible loss or range of loss that Nell, Access, or their affiliates may incur as a result of the lawsuit, and therefore we cannot at this time estimate the reasonably possible loss or range of loss that Nell, Access, or their affiliates may seek from LBIH by way of indemnity.

Indemnification—We are parties to various indemnification arrangements, including arrangements entered into in connection with acquisitions, divestitures and the formation of joint ventures. Pursuant to these arrangements, we provide indemnification to and/or receive indemnification from other parties in connection with liabilities that may arise in connection with the transactions and in connection with activities prior to completion of the transactions. These indemnification arrangements typically include provisions pertaining to third party claims relating to environmental and tax matters and various types of litigation. As of March 31, 2012, we had not accrued any significant amounts for our indemnification obligations, and we are not aware of other circumstances that would likely lead to significant future indemnification obligations. We cannot determine with certainty the potential amount of future payments under the indemnification arrangements until events arise that would trigger a liability under the arrangements.

In addition, certain third parties entered into agreements with the Predecessor, LyondellBasell AF, to indemnify LyondellBasell AF for a significant portion of the potential obligations that could arise with respect to costs relating to contamination at various sites in Europe. These indemnity obligations are currently in dispute.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As part of our technology licensing contracts, we give indemnifications to our licensees for liabilities arising from possible patent infringement claims with respect to proprietary licensed technology. Such indemnifications have a stated maximum amount and generally cover a period of five to ten years.

Other—We previously identified an agreement related to a former project in Kazakhstan under which a payment was made that raises compliance concerns under the U.S. Foreign Corrupt Practices Act (the “FCPA”). We have engaged outside counsel to investigate these activities, under the oversight of the Audit Committee of the Supervisory Board, and to evaluate internal controls and compliance policies and procedures. In this respect, we may not have conducted business in compliance with the FCPA and may not have had policies and procedures in place adequate to ensure compliance. We made a voluntary disclosure of these matters to the U.S. Department of Justice and are cooperating fully with that agency. We cannot predict the ultimate outcome of these matters at this time since our investigations are ongoing. Therefore, we cannot reasonably estimate a range of liability for any potential penalty resulting from these matters. Violations of these laws could result in criminal and civil liabilities and other forms of relief that could be material to us.

General—In our opinion, the matters discussed in this note are not expected to have a material adverse effect on the financial position or liquidity of LyondellBasell N.V. However, the adverse resolution in any reporting period of one or more of these matters could have a material impact on our results of operations for that period, which may be mitigated by contribution or indemnification obligations of others, or by any insurance coverage that may be available.

14. Stockholders’ Equity and Non-Controlling Interests

Dividend distribution—We may pay unlimited restricted payments, including dividend distributions, pursuant to certain terms in our 8% senior notes and 11% senior notes as well as our U.S. ABL Facility as long as specific leverage and liquidity ratios are maintained. Under the terms of the indentures governing the senior 8% and 11% notes, we can pay unlimited restricted payments if we maintain a two-to-one leverage ratio before any restricted payments may be made and after the effect of any such payments. Under the U.S. ABL Facility we can pay unlimited restricted payments if we maintain availability of at least thirty percent of the facility both before and after any restricted payments.

On April 4, 2012, we executed amendments to indentures governing the 8% senior notes and 11% senior notes to eliminate essentially all restrictive covenants, including the limitations on restricted payments.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Ordinary shares—The changes in the outstanding amounts of ordinary shares issued were as follows:


	Three Months Ended
	March 31,			March 31,
	2012			2011
Ordinary shares outstanding:
Balance at beginning of period		573,390,514			565,676,222
Share-based compensation		478,719			10,508
Warrants exercised		598,023			2,327,326

Balance at end of period		574,467,256			568,014,056


Ordinary shares held as treasury shares:
Balance at beginning of period		4,051,013			1,122,651
Warrants exercised		263,056			20,453
Share-based compensation		(478,719	)		(9,963	)

Balance at end of period		3,835,350			1,133,141

Ordinary shares issued at end of period		578,302,606			569,147,197

Non-controlling Interests—Losses attributable to non-controlling interests consisted of the following components:


	Three Months Ended March 31,
Millions of dollars	2012			2011
Non-controlling interests’ comprehensive income (loss):
Net income (loss) attributable to non-controlling interests	$	(1	)	$	2
Fixed operating fees paid to Lyondell Chemical by the PO/SM II partners		—			(5	)

Comprehensive loss attributable to non-controlling interests	$	(1	)	$	(3	)

15. Per Share Data

Basic earnings per share are based upon the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per share includes the effect of certain stock option awards. We have unvested restricted stock and restricted stock units that are considered participating securities for earnings per share.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Earnings per share data and dividends declared per share of common stock were as follows:


	Three Months Ended
	March 31,			March 31,
Millions of dollars	2012			2011
Basic:
Net income	$	599		$	660
Net loss attributable to non-controlling interests		1			3

Net income attributable to the Company		600			663
Net income attributable to participating securities		(3	)		(4	)

Net income attributable to common stockholders	$	597		$	659


Diluted:
Net income	$	599		$	660
Net loss attributable to non-controlling interests		1			3

Net income attributable to the Company		600			663
Net income attributable to participating securities		(3	)		(4	)

Net income attributable to common stockholders	$	597		$	659


Millions of shares
Basic weighted average common stock outstanding		572			566
Effect of dilutive securities:
Stock options		3			3

Potential dilutive shares		575			569


Earnings per share:
Basic	$	1.04		$	1.16

Diluted	$	1.04		$	1.15


Millions of shares
Anti-dilutive warrants		—			9.2

Participating securities		3.7			3.6

Dividends declared per share of common stock	$	0.25		$	—

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16. Segment and Related Information

We operate in five segments:

•

Olefins and Polyolefins—Americas, primarily manufacturing and marketing of olefins, including ethylene and its co-products, primarily propylene, butadiene, and aromatics, which include benzene and toluene; polyolefins, including polyethylene, comprising high density polyethylene (“HDPE”), low density polyethylene (“LDPE”) and linear low density polyethylene (“LLDPE”), and polypropylene; and Catalloy process resins;

•

Olefins and Polyolefins—Europe, Asia, International (“O&P–EAI”), primarily manufacturing and marketing of olefins, including ethylene and its co-products, primarily propylene and butadiene; polyolefins, including polyethylene, comprising HDPE, LDPE, and polypropylene; polypropylene-based compounds, materials and alloys (“PP Compounds”), Catalloy process resins and polybutene-1 polymers;

•

Intermediates and Derivatives (“I&D”), primarily manufacturing and marketing of propylene oxide (“PO”); PO co-products, including styrene and the TBA intermediates tertiary butyl alcohol (“TBA”), isobutylene and tertiary butyl hydroperoxide; PO derivatives, including propylene glycol, propylene glycol ethers and butanediol; ethylene derivatives, including ethylene glycol, ethylene oxide (“EO”), and other EO derivatives; acetyls, including vinyl acetate monomer, acetic acid and methanol;

•

Refining and Oxyfuels, primarily manufacturing and marketing of refined petroleum products, including gasoline, ultra-low sulfur diesel, jet fuel, lubricants (“lube oils”), alkylate, and oxygenated fuels, or oxyfuels, such as methyl tertiary butyl ether (“MTBE”) and ethyl tertiary butyl ether (“ETBE”); and

•

Technology, primarily licensing of polyolefin process technologies and supply of polyolefin catalysts and advanced catalysts.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Summarized financial information concerning reportable segments is shown in the following table for the periods presented:


Millions of dollars	Olefins and Polyolefins— Americas		Olefins and Polyolefins— Europe, Asia & International		Intermediates & Derivatives		Refining and Oxyfuels		Technology		Other			Total
Three Months Ended March 31, 2012
Sales and other operating revenues:
Customers	$	2,403	$	3,748	$	1,630	$	4,001	$	89	$	8		$	11,879
Intersegment		946		118		69		260		30		(1,423	)		—

		3,349		3,866		1,699		4,261		119		(1,415	)		11,879
Operating income		519		5		245		140		38		(1	)		946
Income from equity investments		6		40		—		—		—		—			46


Millions of dollars	Olefins and Polyolefins— Americas		Olefins and Polyolefins— Europe, Asia & International		Intermediates & Derivatives		Refining and Oxyfuels		Technology		Other			Total
Three Months Ended March 31, 2011
Sales and other operating revenues:
Customers	$	2,435	$	3,853	$	1,671	$	4,172	$	109	$	12		$	12,252
Intersegment		1,137		91		21		548		30		(1,827	)		—

		3,572		3,944		1,692		4,720		139		(1,815	)		12,252
Operating income		421		179		234		164		66		1			1,065
Income from equity investments		3		51		4		—		—		—			58

Sales and other operating revenues and operating income (loss) in the “Other” column above include elimination of intersegment transactions.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In the first quarter of 2012, operating results for the Refining and Oxyfuels segment include a $42 million benefit related to the liquidation of LIFO inventory quantities associated with the Berre refinery. Inventory levels at the Berre refinery decreased during the first quarter 2012 following the suspension of operations on January 4, 2012. In addition, a $41 charge related to the interim liquidation of LIFO inventory, which is expected to be sustained through the end of the year, is included in the first quarter 2012 operating results of the O&P- Americas segment. Inventory levels, which were increased in the fourth quarter 2011 in preparation for a turnaround at our Channelview, Texas facility, decreased during the first quarter 2012 following the commencement of the turnaround. Also in the first quarter 2012, operating results for the O&P-EAI segment included a charge of $22 million for impairment of assets at our Wesseling, Germany site.

17. Subsequent Events

LyondellBasell N.V. has evaluated subsequent events through the date the financial statements were issued. Subsequent events have been disclosed throughout the document.

18. Supplemental Guarantor Information

LyondellBasell N.V. and Lyondell Chemical have cross guaranteed the others’ publicly traded debt securities. Subject to certain exceptions, each of our existing and future wholly owned U.S. restricted subsidiaries other than any such subsidiary that is a subsidiary of a non-U.S. subsidiary (the “Subsidiary Guarantors” and, together with LyondellBasell N.V., the “Guarantors”) has also guaranteed the Senior Notes. Each Subsidiary Guarantor is 100% owned by LyondellBasell N.V. and the guarantees are all joint and several, full and unconditional.

There are no significant restrictions that would impede the Guarantors from obtaining funds by dividend or loan from their subsidiaries. Subsidiaries are generally prohibited from entering into arrangements that would limit their ability to make dividends to or enter into loans with the Guarantors.

As a result of these guarantee arrangements, we are required to present the following condensed consolidating financial information. In this note, LCC refers to Lyondell Chemical Company without its subsidiaries.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

BALANCE SHEET

As of March 31, 2012


												Consolidated
	LyondellBasell						Non-					LyondellBasell
Millions of dollars	N.V.		LCC		Guarantors		Guarantors		Eliminations			N.V.
Cash and cash equivalents	$	—	$	938	$	41	$	691	$	—		$	1,670
Restricted cash		—		—		1		8		—			9
Accounts receivable		—		358		1,354		2,497		—			4,209
Accounts receivable—affiliates		—		308		2,167		1,113		(3,588	)		—
Inventories		—		547		2,694		1,967		—			5,208
Notes receivable—affiliates, current		25		7		3,772		575		(4,379	)		—
Other current assets		—		184		256		687		(125	)		1,002
Property, plant and equipment, net		—		361		3,190		3,875		—			7,426
Investments in subsidiaries		14,557		13,284		3,088		—		(30,929	)		—
Other investments and long-term receivables		—		—		—		2,096		—			2,096
Notes receivable—affiliates, non-current		1,000		667		535		2,099		(4,301	)		—
Other assets, net		17		638		1,054		726		(446	)		1,989

Total assets	$	15,599	$	17,292	$	18,152	$	16,334	$	(43,768	)	$	23,609


Current maturities of long-term debt	$	—	$	—	$	—	$	—	$	—		$	—
Short-term debt		—		—		12		30		—			42
Notes payable—affiliates, current		576		3,795		—		12		(4,383	)		—
Accounts payable		11		224		1,028		2,282		—			3,545
Accounts payable—affiliates		1		2,915		174		493		(3,583	)		—
Other current liabilities		65		193		612		732		(243	)		1,359
Long-term debt		1,000		2,679		5		300		—			3,984
Notes payable—affiliates, non-current		2,635		2,781		9,616		—		(15,032	)		—
Other liabilities		—		500		604		1,177		—			2,281
Deferred income taxes		1		—		788		467		(221	)		1,035
Company share of stockholders’ equity		11,310		4,205		5,313		10,788		(20,306	)		11,310
Non-controlling interests		—		—		—		53		—			53

Total liabilities and stockholders’ equity	$	15,599	$	17,292	$	18,152	$	16,334	$	(43,768	)	$	23,609

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

BALANCE SHEET

As of December 31, 2011


												Consolidated
	LyondellBasell						Non-					LyondellBasell
Millions of dollars	N.V.		LCC		Guarantors		Guarantors		Eliminations			N.V.
Cash and cash equivalents	$	—	$	394	$	50	$	621	$	—		$	1,065
Restricted cash		—		—		—		53		—			53
Accounts receivable		—		340		1,240		2,198		—			3,778
Accounts receivable—affiliates		13		736		2,297		1,028		(4,074	)		—
Inventories		—		597		2,862		2,040		—			5,499
Notes receivable—affiliates, current		86		2		3,640		509		(4,237	)		—
Other current assets		1		550		94		616		(221	)		1,040
Property, plant and equipment, net		—		363		3,111		3,859		—			7,333
Investments in subsidiaries		13,643		12,558		3,065		—		(29,266	)		—
Other investments and long-term receivables		—		—		—		2,043		—			2,043
Notes receivable—affiliates, non-current		1,000		660		535		2,100		(4,295	)		—
Other assets, net		26		639		1,076		738		(451	)		2,028

Total assets	$	14,769	$	16,839	$	17,970	$	15,805	$	(42,544	)	$	22,839


Current maturities of long-term debt	$	—	$	—	$	—	$	4	$	—		$	4
Short-term debt		—		—		11		37		—			48
Notes payable—affiliates, current		510		3,653		—		83		(4,246	)		—
Accounts payable		1		214		1,095		2,104		—			3,414
Accounts payable—affiliates		3		3,071		595		395		(4,064	)		—
Other current liabilities		27		254		729		763		(221	)		1,552
Long-term debt		1,000		2,675		5		300		—			3,980
Notes payable—affiliates, non-current		2,635		2,765		9,463		—		(14,863	)		—
Other liabilities		—		601		605		1,071		—			2,277
Deferred income taxes		—		—		764		486		(333	)		917
Company share of stockholders’ equity		10,593		3,606		4,703		10,508		(18,817	)		10,593
Non-controlling interests		—		—		—		54		—			54

Total liabilities and stockholders’ equity	$	14,769	$	16,839	$	17,970	$	15,805	$	(42,544	)	$	22,839

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

STATEMENT OF INCOME

Three Months Ended March 31, 2012


																Consolidated
	LyondellBasell									Non-						LyondellBasell
Millions of dollars	N.V.			LCC			Guarantors			Guarantors			Eliminations			N.V.
Sales and other operating revenues	$	—		$	1,247		$	6,422		$	5,114		$	(904	)	$	11,879
Cost of sales		—			944			5,719			4,911			(904	)		10,670
Selling, general and administrative expenses		4			84			17			119			—			224
Research and development expenses		—			5			7			27			—			39

Operating income (loss)		(4	)		214			679			57			—			946
Interest income (expense), net		(23	)		(104	)		16			15			1			(95	)
Other income (expense), net		(4	)		1			8			(5	)		(1	)		(1	)
Income from equity investments		650			471			136			46			(1,257	)		46
Reorganization items		—			—			5			—			—			5
Provision for income taxes		(19	)		(7	)		(257	)		(19	)		—			(302	)

Net income		600			575			587			94			(1,257	)		599
Less: net loss attributable to non-controlling interests		—			—			—			1			—			1

Net income attributable to the Company	$	600		$	575		$	587		$	95		$	(1,257	)	$	600

Comprehensive income attributable to the Company	$	809		$	577		$	589		$	301		$	(1,467	)	$	809

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

STATEMENT OF INCOME

Three Months Ended March 31, 2011


																Consolidated
	LyondellBasell									Non-						LyondellBasell
Millions of dollars	N.V.			LCC			Guarantors			Guarantors			Eliminations			N.V.
Sales and other operating revenues	$	—		$	1,208		$	6,079		$	5,972		$	(1,007	)	$	12,252
Cost of sales		—			1,114			5,319			5,517			(1,007	)		10,943
Selling, general and administrative expenses		3			77			18			113			—			211
Research and development expenses		—			—			7			26			—			33

Operating income (loss)		(3	)		17			735			316			—			1,065
Interest income (expense), net		8			(157	)		(5	)		(1	)		—			(155	)
Other income (expense), net		(54	)		(16	)		(6	)		33			—			(43	)
Income (loss) from equity investments		688			478			(80	)		58			(1,086	)		58
Reorganization items		—			(1	)		—			(1	)		—			(2	)
(Provision for) benefit from income taxes		24			57			(264	)		(80	)		—			(263	)

Net income		663			378			380			325			(1,086	)		660
Less: net loss attributable to non-controlling interests		—			—			—			3			—			3

Net income attributable to the Company	$	663		$	378		$	380		$	328		$	(1,086	)	$	663

Comprehensive income attributable to the Company	$	1,042		$	378		$	380		$	707		$	(1,465	)	$	1,042

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

STATEMENT OF CASH FLOWS

Three Months Ended March 31, 2012


																Consolidated
	LyondellBasell									Non-						LyondellBasell
Millions of dollars	N.V.			LCC			Guarantors			Guarantors			Eliminations			N.V.
Net cash provided by operating activities	$	14		$	411		$	259		$	237		$	—		$	921

Expenditures for property, plant and equipment		—			(10	)		(148	)		(70	)		—			(228	)
Proceeds from disposal of assets		—			—			4			—			—			4
Restricted cash		—			—			(1	)		45			—			44
Loans to affiliates		—			12			(126	)		(128	)		242			—
Other		—			—			—			(5	)		—			(5	)

Net cash provided by (used in) investing activities		—			2			(271	)		(158	)		242			(185	)

Proceeds from issuance of shares upon exercise of warrants		1			—			—			—			—			1
Dividends paid		(143	)		—			—			—			—			(143	)
Proceeds from short-term debt		—			—			—			10			—			10
Repayments of short-term debt		—			—			—			(19	)		—			(19	)
Repayments of long-term debt		—			—			—			(2	)		—			(2	)
Proceeds from (repayments of) notes payable to affiliates		128			129			—			(15	)		(242	)		—
Other, net		—			2			3			—			—			5

Net cash provided by (used in) financing activities		(14	)		131			3			(26	)		(242	)		(148	)

Effect of exchange rate changes on cash		—			—			—			17			—			17

Increase (decrease) in cash and cash equivalents		—			544			(9	)		70			—			605
Cash and cash equivalents at beginning of period		—			394			50			621			—			1,065

Cash and cash equivalents at end of period	$	—		$	938		$	41		$	691		$	—		$	1,670

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

STATEMENT OF CASH FLOWS

Three Months Ended March 31, 2011


																Consolidated
	LyondellBasell									Non-						LyondellBasell
Millions of dollars	N.V.			LCC			Guarantors			Guarantors			Eliminations			N.V.
Net cash provided by (used in) operating activities	$	(37	)	$	(326	)	$	385		$	199		$	—		$	221

Expenditures for property, plant and equipment		—			(2	)		(163	)		(56	)		—			(221	)
Proceeds from disposal of assets		—			—			—			5			—			5
Loans to affiliates		—			32			(176	)		—			144			—

Net cash provided by (used in) investing activities		—			30			(339	)		(51	)		144			(216	)

Proceeds from issuance of shares upon exercise of warrants		37			—			—			—			—			37
Proceeds from (repayments of) notes payable to affiliates		—			228			(63	)		(21	)		(144	)		—
Other, net		—			(9	)		—			—			—			(9	)

Net cash provided by (used in) financing activities		37			219			(63	)		(21	)		(144	)		28

Effect of exchange rate changes on cash		—			—			—			128			—			128

Increase (decrease) in cash and cash equivalents		—			(77	)		(17	)		255			—			161
Cash and cash equivalents at beginning of period		—			1,926			185			2,111			—			4,222

Cash and cash equivalents at end of period	$	—		$	1,849		$	168		$	2,366		$	—		$	4,383

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

This discussion and analysis should be read in conjunction with the information contained in our Consolidated Financial Statements and the accompanying notes elsewhere in this report. When we use the terms “we,” “us,” “our” or similar words in this discussion, unless the context otherwise requires, we are referring to LyondellBasell Industries N.V. and its consolidated subsidiaries.

In addition to comparisons of current operating results with the same period in the prior year, we have included trailing quarter comparisons of our first quarter 2012 operating results to our results in the fourth quarter 2011. Because many of our businesses are highly cyclical and also subject to some less significant seasonal effects, trailing quarter comparisons may offer important insight into current business direction.

References to industry benchmark prices or costs, including the weighted average cost of ethylene production, are generally to industry prices and costs reported by CMAI. However, references to industry benchmarks for refining and oxyfuels market margins are to industry prices reported by Platts, a reporting service of The McGraw-Hill Companies, and crude oil and natural gas benchmark price references are to Bloomberg.

OVERVIEW

Our performance is driven by global economic conditions generally and their impact on demand for our products. Additionally, raw material and energy prices significantly impact our operating results. Finally, industry-specific issues, such as our own production capacity and capacity within the chemicals and refining industries, can have material effects on our results of operations.

Our first quarter 2012 results of operations reflect the continued economic uncertainties caused by weakness in Europe and uncertainty surrounding the growth outlook for China. Notwithstanding these uncertainties, we saw improved conditions in the U.S. Our O&P-Americas and Refining & Oxyfuels segments continued to benefit from raw material cost advantages generated by the spread between global crude prices and the North American prices for natural gas and natural gas liquids. Our North American refining business began the first quarter 2012 with low margins that improved over the course of the quarter, which in part reflected our flexibility to purchase heavy crude oil at discounts to the price for Brent crude oil.

We ceased operations at the Berre refinery in early January 2012, exiting an under-performing business. In April 2012, we also refinanced nearly $3 billion of our debt with new debt issuances of unsecured senior notes, significantly improving our debt structure. In addition, we expect to refinance our $2 billion U.S. ABL Facility with an unsecured revolving credit facility during the second quarter of 2012.

Results of operations for the periods discussed in these “Results of Operations” are presented in the table below.


	Three Months Ended March 31,
Millions of dollars	2012			2011
Sales and other operating revenues	$	11,879		$	12,252
Cost of sales		10,670			10,943
Selling, general and administrative expenses		224			211
Research and development expenses		39			33

Operating income		946			1,065
Interest expense		(99	)		(163	)
Interest income		4			8
Other income (expense), net		(1	)		(43	)
Income from equity investments		46			58
Reorganization items		5			(2	)
Provision for income taxes		302			263

Net income	$	599		$	660

RESULTS OF OPERATIONS

Revenues—Revenues decreased by $373 million, or 3%, in the first quarter 2012 compared to the first quarter 2011. The suspension of operations at the Berre refinery on January 4, 2012 resulted in a revenue decrease of 8%. Excluding the Berre refinery revenues, higher sales volumes, mainly at the Houston refinery and in oxyfuels, were responsible for a revenue increase of 2% in the first quarter 2012, while higher average sales prices for most products were responsible for a revenue increase of 3%, compared to the same period in 2011. Sales prices averaged higher in the first quarter 2012 for most products except for those in our O&P-EAI segment, which averaged lower compared to first quarter 2011.

Cost of Sales—The $273 million decrease in cost of sales for the first quarter 2012 primarily reflects the suspension of operations at the Berre refinery in early January 2012 and lower raw material costs for North American olefins. The lower price of NGL-based liquid raw materials used in North American olefins in the first quarter 2012 more than offset the higher price of heavy liquids-based raw materials. The higher prices of crude oil contributed to higher raw material costs, particularly at the Houston refinery and in the O&P-EAI segment. These higher costs partially offset the decreases in raw material costs at the Berre refinery and for North American olefins. Cost of sales in the first quarter 2012 also included charges totaling $22 million for impairment of assets, primarily related to damage to our LDPE plant in Wesseling, Germany resulting from an explosion in a reactor bay in January 2012.

SG&A Expenses—Selling, general and administrative (“SG&A”) expenses in the first quarter 2012 were higher by $13 million compared to the first quarter 2011. The increase reflects higher costs related to employee compensation and benefits.

Operating Income—The decrease in operating income in the first quarter 2012, compared to the first quarter 2011, reflects lower operating results for our O&P-EAI, Refining and Oxyfuels and Technology segments, partially offset by higher operating results for our O&P-Americas and I&D segments. Operating results for each of our business segments are reviewed further in the “Segment Analysis” section below.

Interest Expense—Interest expense was $64 million lower in the first quarter 2012 compared to the same period in 2011 primarily due to the repayment of debt. Since the beginning of the second quarter 2011, we repaid $1,407 million and €234 million ($324 million) of our 8% senior notes due 2017, $1,319 million of our 11% senior notes due 2018 and the remaining $5 million outstanding under our Senior Term Loan Facility. The reduction in interest expense resulting from these repayments was partially offset by interest expense on our 6% senior notes due 2021 that were issued in November 2011.

Other Expense, net—Other expense, net, in the first quarter 2012 included the negative effect of a $10 million charge related to the fair value adjustments of warrants to purchase our ordinary shares, partially offset by $7 million of income, related to the gain on sale of railcars and refunds on sales tax, and a $2 million gain on foreign exchange. In the first quarter 2011, Other expense, net, included the negative effect of $59 million for the fair value adjustment of the warrants, partially offset by $10 million of foreign exchange gains.

Income from Equity Investments—Income from equity investments decreased $12 million in the first quarter 2012, compared to the first quarter 2011, primarily due to lower operating results at two of our joint ventures in Saudi Arabia, SPC and Al Waha, our HMC Polymers joint venture in Thailand and our Polymirae joint venture in South Korea. These decreases were partially offset by higher operating results at our SEPC joint venture in Saudi Arabia. The lower operating results primarily reflected lower polypropylene margins resulting from increases in propane prices, planned maintenance turnaround activities at HMC and an unplanned outage at Al Waha resulting from a power failure. Higher first quarter 2012 operating results for our SEPC joint venture primarily reflected the effect of higher sales volumes compared to the first quarter 2011, which was negatively impacted by unplanned outages.

Income Tax—Our effective income tax rate of 33.5% for the first quarter of 2012 resulted in a tax provision of $302 million on pretax income of $901 million. Our effective income tax rate for the first quarter 2011 was 28.5% resulting in tax expense of $263 million on pre-tax income of $923 million. The first quarter 2012 effective income tax rate is higher than the first quarter 2011 effective tax rate primarily due to an increase in earnings in higher tax jurisdictions and taxable foreign currency gains.

The 2012 effective income tax rate was lower than the U.S. statutory 35% rate primarily due to the effect of pretax income in countries with lower statutory tax rates and favorable permanent adjustments related to equity earnings, notional royalties, release of valuation allowance, and the U.S. domestic production activity deduction, which were partially offset by unfavorable permanent adjustments related to the increase in uncertain tax reserves and taxable foreign currency gains. The 2011 effective income tax rate was lower than the statutory 35% rate primarily due to the effect of pretax income in countries with lower statutory tax rates and tax deductible foreign currency losses which were partially offset by the non-deductible accrual of expense related to stock warrants.

Net Income—The following table summarizes the major components contributing to net income:


	Three Months Ended March 31,
Millions of dollars	2012			2011
Operating income	$	946		$	1,065
Interest expense, net		(95	)		(155	)
Other income (expense), net		(1	)		(43	)
Income from equity investments		46			58
Reorganization items		5			(2	)
Provision for income taxes		302			263

Net income	$	599		$	660

Comprehensive Income—Comprehensive income decreased by $233 million compared to the first quarter 2011 primarily as a result of currency translation adjustments arising from the financial statements of our non-U.S. subsidiaries with functional currencies other than the U.S. dollar. The predominant local currency of our operations outside of the United States is the Euro. The decrease of the value of the U.S. dollar relative to the Euro in the first quarter of 2012 was lower than that experienced in the first quarter 2011 resulting in a lower gain as reflected in the Statements of Comprehensive Income.

First Quarter 2012 versus Fourth Quarter 2011—We had net income of $599 million in the first quarter 2012 compared to a net loss of $218 million in the fourth quarter 2011. Net income in the first quarter included pretax charges totaling $32 million related to the impairment of assets and the fair value adjustment of our outstanding warrants. The fourth quarter net loss reflected pretax charges totaling $614 million related to the early repayment of debt, reorganization items, the anticipated cost of the social plan related to the suspension of operations at the Berre refinery, corporate restructurings, environmental charges and fair value adjustment of our outstanding warrants. These fourth quarter charges were partially offset by a $15 million pretax settlement related to the 2008 crane collapse at our Houston refinery.

Apart from these items, net income in the first quarter primarily reflected an overall improvement in the operating results of our business segments and lower interest expense, compared to the fourth quarter. Our first quarter operating results reflected higher margins for ethylene and ethylene co-products in our O&P—Americas segment, and in our Refining and Oxyfuels segment, higher refining margins at the Houston refinery and unseasonably strong oxyfuels margins. First quarter operating results for our I&D and O&P-EAI segments reflected higher sales volumes across most products. These volume improvements reflected the completion of planned maintenance activities by the I&D segment and for the O&P—EAI segment, an improvement from the fourth quarter economic slowdown that particularly affected Europe. Our first quarter interest expense was significantly lower than the fourth quarter, which included premiums and other fees related to the $2,802 prepayment of debt. The effect of the improvement in our pretax income was partially offset by a $302 million provision for income taxes in the first quarter compared to a $92 million tax benefit in the fourth quarter. The $394 million increase in tax expense was primarily attributable to higher actual earnings.

Segment Analysis

Our operations are divided into five reportable segments: O&P—Americas; O&P—EAI; I&D; Refining and Oxyfuels; and Technology.


	Three Months Ended March 31,
Millions of dollars	2012		2011
Sales and other operating revenues:
O&P—Americas segment	$	3,349	$	3,572
O&P—EAI segment