Douglas J. Pike - Head of Investor Relations James L. Gallogly - Chairman of Management Board, Chief Executive Officer and President Karyn F. Ovelmen - Chief Financial Officer and Executive Vice President.

Duffy Fischer - Barclays Capital, Research Division John J. Hirt - Citigroup Inc, Research Division Vincent Andrews - Morgan Stanley, Research Division David L. Begleiter - Deutsche Bank AG, Research Division Donald Carson - Susquehanna Financial Group, LLLP, Research Division Kevin W. McCarthy - BofA Merrill Lynch, Research Division Hassan I.

Ahmed - Alembic Global Advisors Nils-Bertil Wallin - CLSA Limited, Research Division Laurence Alexander - Jefferies LLC, Research Division Frank J. Mitsch - Wells Fargo Securities, LLC, Research Division Robert A. Koort - Goldman Sachs Group Inc., Research Division John Roberts - UBS Investment Bank, Research Division.

Hello, and welcome to the LyondellBasell teleconference. At the request of LyondellBasell, this conference is being recorded for instant replay purposes. [Operator Instructions] I'd now like to turn the conference over to Mr. Doug Pike, Vice President, Investor Relations. Sir, you may begin..

Well, thank you, Holly. Well, hello, and welcome to LyondellBasell's first quarter 2014 teleconference. And I'm joined today by Jim Gallogly, our CEO; Karyn Ovelmen, our CFO; and Sergey Vasnetsov, our Senior Vice President of Strategic Planning and Transactions.

But before we begin the business discussion, I'd like to point out that a slide presentation accompanies today's call and is available on our website at www.lyondellbasell.com. I'd also like for you to note that statements made in this call relating to matters that are not historical facts are forward-looking statements.

And these forward-looking statements are based upon assumptions of management, which are believed to be reasonable at the time made and are subject to significant risks and uncertainties, and actual results could differ materially from those forward-looking statements.

For more detailed information about the factors that could cause our actual results to differ materially, please refer to the cautionary statements in the presentation slides and our financial reports, which are available at lyondellbasell.com/investorrelations.

Now reconciliations of non-GAAP financial measures to GAAP financial measures, together with any other applicable disclosures, including the earnings release, are currently available on our website, at lyondellbasell.com. Now finally, I'd like to point out that a recording of this call will be available by telephone beginning at 2 p.m.

Eastern Time today until 11 p.m. Eastern Time on June 2 by calling (888) 566-0499 in the United States and (203) 369-3057 outside the United States. And the pass code for both numbers is 3675. Now during today's call, we'll focus on first quarter results, the current environment and the near-term outlook.

That being said, I'll turn the call over to Jim..

Thank you for joining our earnings call. As Doug mentioned, a set of presentation slides accompanies this call and is available on our website. Let's take a look at Slide #4 and review a few financial highlights. First quarter earnings per share were $1.72, with EBITDA of $1.67 billion.

This is the fifth consecutive quarter with EBITDA in excess of $1.5 billion. Strong results continued despite headwinds created by scheduled and unscheduled maintenance, weather-driven raw material cost volatility and shipping delays.

Cumulatively, these items impacted the quarter by approximately $300 million but were partially offset by first quarter price increases. We expect some of this impact to be recovered in the coming quarter. Overall, industry trends have remained relatively unchanged, although U.S.

natural gas prices have been somewhat elevated following a very cold winter. Oil prices have remained relatively steady and seasonal trends are following their normal course. Our company performed significant maintenance in our U.S. operations in the first quarter. Given strong U.S. margins, this negatively impacted results.

However, we also benefited from growth projects that are now online and advanced our new growth projects. I'll discuss these topics later in my remarks. Turning to Slide #5. You'll see that our safety statistics continue at the strong level that we have established over the past several years.

While our statistics are very good, I'm saddened to say that during April, a contractor working for a third-party company that manages railcar movements at our Wesseling, Germany, site died in a tragic incident. We are assisting that company in their investigation.

Our Wesseling site had achieved 3 million man hours without any injuries just prior to this incident, truly a world-class record. But obviously, we have more work to do. As you have often heard me say, safety is our top priority, so this type of event is very troubling to us.

I'd like to now turn the call over to Karyn to discuss our financial performance..

Please turn to Slide #6, which charts first quarter segment EBITDA. As Jim said, overall, our results have been strong and steady. Within the segments, the O&P-Americas results were below the typical run rate of the past years. This is primarily attributed to maintenance and weather impacts. Jim will cover these items in more detail.

In addition to these factors, there was an impact from our La Porte turnaround preparation, where during the quarter, we made outside purchases of close to 300 million pounds of ethylene, which negatively impacted results. In O&P-EAI, results exceeded recent quarters.

We attribute this to an environmental indemnity settlement, improved margins and normal seasonal recovery following the fourth quarter holidays. In Intermediates & Derivatives, results followed recent trends. Oxyfuel results began the quarter with typical low winter margins, which improved as the quarter progressed.

Methanol contributed strong results, while styrene and ethylene glycol weakened. Refining posted a quarter similar to the fourth quarter. Combined, these 2 quarters make up almost all of the last 12 months' earnings for this segment. The Technology segment continued to enjoy consistent strong earnings. Slide #7.

Slide 7 provides a picture of our cash generation and use. During the first quarter, we generated $1.1 billion from our operations and issued $1 billion in 30-year bonds at 4.875% interest. Our cash balance declined slightly with cash use of $1.5 billion in share repurchases and dividends.

During the past 12 months, we generated $4.8 billion in cash from operations, while raising $2.5 billion in cash from bond issuances. Almost $4.4 billion were used for share repurchases and dividends and another $1.5 billion invested in capital expenditures. On Slide 8, we summarize a few key aspects of our cash story.

In the chart on the upper left, you can see the relatively steady cash generation from operations over the past 2 years, continuing into the first quarter. On the right, we have plotted the past 3-plus years of share repurchases and dividends, averaging approximately $2.8 billion per year.

If you annualize the pace of first quarter share repurchases and dividends, it could be in the range of $6 billion for the year 2014. During the quarter, we repurchased approximately 15 million shares, bringing the total purchase since last May, when we initiated the program, to approximately 42 million shares at the end of the first quarter.

You have seen from recent press releases our shareholders approved a second share repurchase program at our annual meeting and the Supervisory Board approved a $0.10 per share increase of the quarterly interim dividend to $0.70 per share. Now I'll turn things back to Jim for a further discussion of our business results..

Thanks, Karyn. Let's discuss segment performance, beginning on Slides 9 and 10 with Olefins & Polyolefins - Americas. First quarter EBITDA was $736 million, $147 million less than the fourth quarter.

Operationally, first quarter results were negatively impacted by a number of maintenance items, including unscheduled maintenance at our Channelview crackers. This required us to temporarily reduce production by an estimated 160 million pounds.

Late in the quarter, we began the La Porte ethylene plant turnaround, which impacted production by approximately 40 million pounds. As Karyn mentioned, in preparation for the turnaround, we purchased approximately 300 million pounds of ethylene. During the quarter, we also conducted a significant turnaround at our Matagorda polyethylene site.

Collectively, these events generated most of the variance between the 2 quarters. Weather also had an impact, both through delayed shipments and increased cost of feedstock in natural gas. Slide #9 provides a perspective on natural gas and NGL costs. January and February experienced cost pressure, but the beginning of spring brought some relief.

The chart on the right side of the page indicates that the benchmark cost of ethylene production metric has returned to a level similar to the fourth quarter. However, natural gas costs have remained somewhat elevated, increasing utility costs. Despite all of this volatility, ethylene margins remained relatively steady.

Our average ethylene price increased by approximately $0.02 per pound. The cost of ethylene production increased similarly, in part due to increased natural gas and NGL costs. During the quarter, ethane accounted for 75% of our ethylene production and NGLs represented 87%.

Within polyolefins, polyethylene prices increased by $0.03 per pound, while sales volumes remained relatively unchanged. Preturnaround planning mitigated impacts on our polyethylene sales. Polypropylene results were relatively unchanged. Overall, the quarter for O&P-Americas was not on our normal pace. But the reasons for this were primarily transitory.

The weather-related margin pressure that we experienced during January and February was relieved during March and the quarter finished on a strong note. During the second quarter, our focus will be on the successful completion of the La Porte turnaround and expansion. The downtime related to this will impact ethylene production.

However, the impact on sales and EBITDA should be mitigated by the first quarter inventory build. Let's turn to Slide #11 and review performance in the Olefins & Polyolefins - Europe, Asia and International segment. First quarter EBITDA was $356 million, $241 million greater than the fourth quarter.

Results include a $52 million benefit from an environmental indemnity settlement with previous owners. As we had expected, results also benefited from a seasonal recovery following the year-end holidays. Olefin results improved by approximately $65 million.

Margins improved by several cents per pound due to a combination of lower naphtha raw material costs, use of advantaged feedstocks and moderately higher coproduct prices. Our ethylene plants operated at approximately 93% of capacity, which was significantly above reported industry rates.

Approximately 35% of our ethylene production was sourced from raw materials with advantaged economics versus naphtha. Combined polyolefin results also improved, reflecting both increased European margins and volumes.

Combined polypropylene compounds and polybutene-1 results increased by approximately $30 million, reflecting the typical seasonal recovery. Joint venture equity income was a strong $54 million, but no dividends were paid this quarter. Business conditions during April have been relatively consistent with those experienced during the first quarter.

Now please turn to Slide #12 for a discussion of our Intermediates & Derivatives segment. First quarter EBITDA was $375 million, almost $20 million higher than the fourth quarter. Propylene oxide and derivative results improved due to seasonal volume recovery versus the fourth quarter.

Intermediate chemical performance declined, primarily due to weaker styrene and ethylene glycol results. Margins were pressured by the increased benzene and ethylene costs. This weakness was partially offset by increased acetyl results. Acetyls benefited from increased methanol, acidic acid and VAM volumes and margins.

The Channelview methanol plant operated for the full quarter at approximately 85% of nameplate capacity. Oxyfuel results benefited from seasonally improved spreads, but this was partially offset by lower volumes. The temporary closure of the Houston Ship Channel delayed some vessel movements, impacting results by approximately $10 million.

April business conditions have been generally similar to conditions experienced late in the first quarter. In conjunction with the La Porte olefins turnaround, our acetyl operation at the site will be down for 2 to 3 weeks. Sales will be met through inventory. Let's move to Slide #13 for a discussion of the Refining segment.

First quarter EBITDA was $129 million, relatively unchanged from the fourth quarter. During the first quarter, the Maya 2-1-1 spread averaged $28.26 per barrel and crude throughput averaged 247,000 barrels per day. The spread at the refinery increased following a trend similar to the Maya 2-1-1 benchmark.

Crude oil throughput increased versus the fourth quarter, contributing approximately $5 million to first quarter results. However, our product mix and yield were negatively impacted by coker maintenance. Additionally, increased natural gas and RIN costs negatively impact the results by a combined $20 million.

April benchmark spreads have averaged approximately $29 per barrel, in line with the March spread. We took a 1-week outage on one of our crude units during April. RIN and natural gas costs have been reasonably consistent with March costs. Our Technology segment continued to perform well, with the catalyst business slightly ahead of 2013 results.

Segment results improved as a result of our past restructuring efforts and reduced R&D costs. The next 5 slides provide an update on our growth program. You may recall that we're scheduled to bring online a new project almost every 6 months during the end of 2015. The benefit is already visible in our earnings.

For example, the Channelview methanol plant started on schedule during December and contributed approximately $50 million to first quarter EBITDA. During late March, we initiated production at our Matagorda polyethylene facility, which now has an additional 200 million pounds per year in capacity due to the debottleneck.

This project was generally on schedule with costs in line with our estimates. As you can see from Slide #14, the next project in the queue is a major expansion at our La Porte ethylene plant. We currently anticipate that will start up mid-year with an EBITDA impact within the range that we previously discussed and plotted on the chart.

The next 3 slides provide a visual perspective on progress since last October. At that time, we were erecting a tower at the methanol plant. Today, it's online and contributing to our EBITDA. The Channelview expansion was a mere hole in the ground when we last discussed it. Today, you can see that the furnaces are really taking shape.

At La Porte, we were erecting furnaces. Today, the furnaces are up and the final steps of the expansion are underway. We have approximately 2,800 contractors on-site. We have been moving quickly because the sooner we can bring these projects onstream, the sooner we can increase earnings and cash flow.

Slide #18 updates the cost and status for both the active and previously discussed developing projects. As a quick review, the light blue denotes projects that have been completed. The medium blue represents projects that are currently underway. The projects highlighted in dark blue are projects that we are developing.

They're not yet under construction. The cost estimates and timing represent current estimates, while the potential pretax earnings column is based on 2013 industry benchmark data. Our 2013 margins would yield similar earnings.

If you compare this chart to past versions, you'll notice that the projects generally remain on schedule, but that we're experiencing increased costs on several projects. For example, the methanol project cost increased due to higher construction wages and hours worked as we strive to maintain a very aggressive startup schedule.

The polyethylene expansion project was completed on schedule and within our cost estimates. The La Porte ethylene expansion is in full swing with the turnaround completion targeted for June. We have experienced cost escalation on this project in terms of scope, labor efficiency and materials cost escalation.

Some of this is related to our aggressive schedule and working on a large-scale debottleneck within an operating plant. The Channelview ethylene expansion remains on track, both in terms of schedule and cost. This has been a less complicated project to execute as we're only adding 2 furnaces to the existing plants.

We received the final permits for the Corpus Christi ethylene expansion in mid-April. I first introduced this project to you over a year ago when the scope was still under definition. At that project stage, capital estimates were typically in the range of plus or minus 50%.

On this chart, our estimates have been updated to reflect a more defined scope and the recent realities of Gulf Coast construction cost. The timing remains on track with the forecast that we made over a year ago. Our polypropylene compounding projects have moved forward as planned. Last year, we added 2 new lines.

And during 2014 through 2016, we expect that we'll add another 4 lines. Spending will be in the order of $10 million and $15 million per year to make these additions. Let's next discuss 2 of the projects that are not yet in construction.

You might recall that we have been developing a new polyethylene process with the intent to build the first plant at one of our locations, and then add the technology to our licensing portfolio. Work has proceeded well over the past year.

Our Supervisory Board recently approved advancing the project to the next stage, during which we will finish engineering and purchase long-lead items. Permit applications were filed during the fourth quarter. The cost estimate and timing on the chart incorporate the final process design and the addition of site-specific infrastructure costs.

Previous estimates were conceptual and only included the polyethylene line itself. The Chinese PO/TBA joint venture has advanced at a slower pace due to the general slowdown in the Chinese economy. We now believe that completion will be in 2018.

Along with moving many projects forward, we also took the decision to cancel the olefins' NGL recovery project. While developing the details of the capital project, we simultaneously pursued commercial options that would eliminate the need for capital, while accelerating the timing of earnings.

We recently renegotiated a contract that met these criteria. Going forward, we will recover a greater portion of the economic benefit of our gas stream from the third party without making the capital investment. We are very disciplined with capital. And if we don't need to spend your money to get incremental benefits, we won't.

In summary, our project slate is very strong and is adding value today. Our projects are being completed on schedule. Project definitions and the construction cost environment are clearer today than a year ago. This has resulted in cost increases. But we expect the other projects will still have wonderful returns.

We think that the labor market in the Gulf Coast is in the early years of an up cycle. We're very happy that most of our projects are under construction now rather than later. During 2014, we will continue to build momentum across the company.

Market conditions, coupled with our internal focus on efficiency, enable us to pay a strong growing dividend while utilizing additional cash to acquire shares. We're now pleased to take questions, Holly..

[Operator Instructions] And our first question comes from Duffy Fischer with Barclays..

First one, kind of a couple announcements by either competitor or supplier that have some impact on you. The first would be Enterprise's export of ethane and the 240,000 barrels a day number that they put out kind of coming online late in '16. One, just want to get your take on the plausibility of that actually coming up on time.

And then how should we think about maybe an over-under for how much ethane will be exported out of the U.S. in, say, '17 and '18? And then the second question is around this morning's announcement by Westlake that they're going to pursue an MLP. And just want to get your take on -- obviously, it's company-by-company fit.

But is there a fit with an MLP for Lyondell going forward?.

Okay. The first question on the Enterprise ethane export terminal. That's a large project, 240,000 barrels per day. And to say that they'll start up in mid-2016, that's a very aggressive schedule. But I'm sure that they've considered what the construction timing would be.

I would first say that's a big vote of confidence in a strong oversupply of Gulf Coast ethane. They stated in the press release that the supply could exceed demand by 700,000 barrels per day by 2020. That's very, very strong. And that's after all of the new crackers are built. So they are very, very bullish.

That capacity, as you know, is equivalent to about 3 world-scale crackers and 20% of current supply. So it's a very big and an important announcement. We have been studying whether we could effectively use ethane in our cracking in Europe. And in fact, I had a review with our European team 2 short weeks ago. It just doesn't work for us.

When we look at propane, butane cracking, condensate cracking, and it just seems to be so much better for us. I know that INEOS has a project that's announced. But that's, what, 10,000 barrels ramping up to 20,000 barrels per day. I'm having a hard time understanding how that kind of volume could go to Europe. Some of it must be going to Asia.

And I wonder if some of that isn't going to be used to spike LNG in a couple of the countries, where they have some lean gas supplies. I know that they haven't contracted all of that volume yet. We're anxious to see further details as that's worked out with Enterprise, how much of that is actually going to move.

As you said, it's an aggressive schedule, and we'll see how that develops. But once again, I think the important note is they have a lot of confidence and a very long position in ethane. Otherwise, they wouldn't be making that type of investment. Second, on Westlake MLP, as we reported some time ago, we also studied an MLP.

Our tax position on our assets is different than some others. We did go through bankruptcy 4 years ago and had some asset write-downs. And so the tax implications may be different from us. We've looked at it. We continue to look at it. Obviously, the market has reacted very favorably to Westlake's announcement.

We'll take a look at all of that and continue our evaluation..

And Karyn, just a follow-up question for you.

On the 300 million pounds of inventory you built, is it rule of thumb fair to say that there's about a $0.25 margin in that so that was about a $75 million hit to Q1 earnings?.

Yes. More or less, it's probably a little bit higher than that. And then again, we would expect to see that returning in the second quarter..

Our next question comes from P.J. Juvekar with Citi..

This is John Hirt on for P.J. today. Curious, looking at your methanol facility now that it's up and running and, I guess, it ran at 85% in the first quarter, it would seem to be a logical MLP candidate, given that it's a standalone plant.

I think you've mentioned in the past that you've got some debottlenecking opportunities there and you just put in about $100 million -- $180 million of fresh capital. So I'm just curious if that's an asset you'd be willing to put into an MLP structure..

John, that's a new item that we will look at. The asset hasn't been running very long. We just brought it up in December. We'll continue to advance -- ramp up the rates. We're going to do a little bit of unscheduled work in the third quarter on some heating tubes. But otherwise, that thing -- we think we can debottleneck it and get some extra capacity.

Margins are holding up reasonably well. And it's definitely adding to our earnings. We'll take a peek at the MLP for that asset as well..

Okay. And then your O&P - Europe, Asia and International business was up nicely year-over-year.

With propane swinging into favor in February and March and I think it's still in favor today, to what extent have you been able to take advantage of that? And can you just kind of talk about your feed slate mix in Europe today, given that you're now free from some of those unfavorable naphtha contracts?.

Yes. Well, the first quarter we ran at about 35% of advantaged feedstocks. Typically, in the summer, we can ramp that up. We'll be looking to do that as opportunities present themselves. That segment had a very nice first quarter.

Margins were up on falling naphtha prices, and we ran our crackers at 93% capacity, which is outstanding, have been able to move the polymer volumes reasonably well. And of course, our businesses, such as polybutene-1, our compounded businesses performed very nicely as they always do from quarter-to-quarter.

So we're pretty proud of the results in Europe. We're definitely differentiating ourselves from our competitors there. And we expect to continue to do that in the future..

Next question is from Vincent Andrews with Morgan Stanley..

Jim, could you talk about -- in the past, you talked about maybe doing another round of kickbacks following this ramp, probably smaller in scale.

And I'm just wondering, given what you're noting on the cost side of things and we still have crackers ahead of us, do you think that another round of sort of debottlenecking or brownfield-type stuff is prohibitive from a cost perspective at this point?.

Vincent, I don't think it's cost-prohibitive. It depends on where you do it and how you do it. But as you said, we like to do the debottleneck kinds of things, where the capital is naturally cheaper.

One of the things I didn't mention in the base part of the call was that despite these cost increases in a couple of our olefins expansions, we're still bringing those on at something in the order of 2/3 of cost of other people's incremental production on a cents per annual pound basis.

So they're not only earlier, but they're also quite a bit cheaper. We always look at those cost increases that we're seeing right now could delay some other projects that people are looking at. Their cost would definitely go up based on what we're seeing in labor rates, productivity, other kinds of costs like that.

But we're going to be very sensitive as we do our economics and make sure that those additional capital projects do make sense. And as we put the engineering together, we will start announcing those..

Okay.

And just as a follow-up to the ethane export situation, could you just give a little bit more detail as to why your analysis said that exports for your facilities didn't work? Was it sort of the CapEx you would have to invest? Or is it sort of the relative opportunity with the other feedstocks? What were sort of the big bottlenecks for you?.

Yes. It was both of those things. It's -- we can run some of those crackers lighter than we do today. But generally, that's 20%, maybe 25% on some of those furnaces without a fair amount of modifications. They're slightly different than that. Some of its transportation issues because some of our crackers are inland.

But frankly, when we looked at propane, butane, some of the condensates, the economics really favored the slightly heavier feedstocks when you looked at all the transportation costs and everything else. It just didn't work very well for us. I was hoping it would..

The next question comes from David Begleiter with Deutsche Bank..

Jim, can you discuss the M&A pipeline? There's potentially a large transaction available on the plastics side. If greenfield doesn't make sense from a U.S.

perspective, do you look more towards M&A longer term to perhaps integrate downstream?.

Dave, I'm sorry, this is Doug. You weren't too clear on our side.

I think you were asking about the future for M&A?.

Yes.

The M&A pipeline, given potential assets on the plastics side, any interest -- can you discuss your interest in those?.

David, we're same place on M&A as we've always been, it has to be significantly accretive. Nothing has come on to the market that has been of interest to us lately. And as we previously said, we always evaluate all those opportunities as against buying our own shares. And so far, our own shares, in our view, is better value.

And obviously, we know the company well and like our prospects..

And just lastly, on the refinery, Jim, discuss the timing of the Canadian crude coming down into your operations and potential impact this year and next..

Yes. As we've mentioned, we're expecting additional volumes to come in, in the second half of the year. Flanagan South is slightly delayed. But we expect still that to be kind of a third quarter event and allow us to ramp up Canadian crudes at a nice discount, which should help our Refining earnings.

One of the things that's been happening is obviously the Maya 2-1-1 spread has been pretty decent, fourth quarter, first quarter and now into the second quarter. So with a little better operations, we should be able to have better earnings in that segment..

The next question is from Don Carson with Susquehanna Financial..

Yes, 2 questions.

On La Porte turnaround, what other impact will you have other than the inventory that you built? Did you have to buy some inventory? And so will that negatively affect margins as you go into Q2?.

Don, that primarily had a first quarter impact. We did have to buy about 300 million pounds of ethylene to cover. And as we are in the second quarter, we're now selling that or using it on our own operations. So that should have somewhat of a positive impact in the second quarter, whereas it was a negative in the first..

Okay. And then on your EU feedstock flexibility. I know earlier in the year, you renegotiated a long-standing naphtha supply arrangement that you had.

What was the benefit? Did this just give you more flexibility to use advantaged feedstocks? Or did you actually negotiate a reduction in the benchmark price for that naphtha contract?.

Yes, that was -- it wasn't just all naphtha, there were some other feedstocks, certain instances, we got slightly lower pricing. But the primary benefit of that is a lot more flexibility because we had basically take-or-pay requirements that would push us to process an awful lot of naphtha, when sometimes we would prefer to crack something different.

By lowering the volumes on that, we're now able to bring in some advantaged feeds when available. Some of that is seasonal, some of it is not seasonal and can be done year-round as, for instance, we just showed with first quarter with 35% advantaged feeds..

And what kind of benefit you think that's going to have on a full year basis going forward?.

Well, it really depends on what propane, butane and that is doing in the marketplace. Right now, it's fairly advantaged. But in the summertime, it's historically been even more advantaged. So we'll just have to see how that develops into the year..

Next question is from Kevin McCarthy with Bank of America Merrill Lynch..

Jim, I was wondering if you could comment on the sequential pattern of profitability at the refinery. It looks like your benchmark spread improved and your throughput ticked up a bit and the earnings were off $5 million.

What is going on there? Is it crude slate or the coker outage impact?.

It was more of the coker outage impact. It didn't let us process what we wanted to process and really hit the mix of products in the back end. So that was more of the story. And we had said last quarter that we still had some work going on, on that, and that's now been completed..

Very good. And then second, you'd indicated kind of weather-related impacts of about $300 million, partially offset by some price increases.

Can you give us a sense regarding how much of that pressure you might expect to recover in 2Q and beyond, if any?.

Yes. We'll get some of that back in the second quarter. But kind of to put that in perspective, a couple hundred million dollars was related to O&P-Americas, and then about another $100 million was related to increased natural gas, oxyfuels shipping delays, couldn't get some cargoes out.

And then the coker stuff at the refinery increased natural gas prices..

Yes. Kevin, this is Doug. I just want to clarify that, that $300 million that Jim stated was not just weather. That was also largely the maintenance, where we had the planning for La Porte. We had our La Porte polyethylene facility and its turnaround.

And then we had some weather-related maintenance and some other maintenance in some of the olefins plants. So that really encompasses the whole thing, not just the weather..

Yes. That's very important to make sure that, that's clear. I mentioned the La Porte turnaround cost is 40 million pounds of ethylene and a couple of Channelview crackers using another 160 million pounds. And then we talked about weather-related things as well. So all of that is in that total mix, that 200 million [ph]..

Our next question comes from Hassan Ahmed with Alembic Global..

Again wanted to revisit this whole European ethane export side of things. Obviously, from one side of it, there's fear that there may be tightness in the U.S. ethane market on the back of this. But let's say that all of this volume does eventually arrive in Europe.

I mean, obviously, there are going to be some fairly severe coproduct consequences as well, particularly on the propylene and butadiene side of things. So I would love to sort of hear your views around that..

Yes. If all of that could go to Europe, and my view is, if we're talking about the Enterprise deal, I think that's highly, highly improbable from what I understand the economics looks like and the ability of crackers to even take it..

I would imagine for companies -- you would have companies shutting down downstream units if they were to do that..

Yes. There'd have to be a lot of work to accomplish it. And I just don't know how that gets done. Frankly, when we do our economics, it's also much easier to shift polyethylene than ethane. And that's why you see all these cracker announcements versus these kind of projects. There must be more to that story than we're seeing.

And that's why we're anxious to hear more. But if your premise were basically right that, that all could go to Europe, it would have a significant impact on coproducts. It'd run up propylene prices, it'd run up butadiene prices, be significant shortages. But all of that stuff goes into our computation when we decide what we're going to crack every day.

So I just don't see how that all that capacity could go to Europe..

Fair enough. Now as a follow-up, changing gears a bit, you had mentioned that in terms of usage of cash, you'd look at acquisitions obviously being accretive and the like. I mean, could you comment on just your appetite in terms of specialty versus commodity? Because again and again, obviously you've reiterated the back-to-basic strategy.

Does that still hold?.

Yes. There's several companies that like to talk about becoming more specialty-oriented. We're very happy with who we are. We compete very well. We have a commodity mindset in the way that we maintain our cost, the way that we work our debottlenecks in adding cheap capacity.

We also believe that very well-run commodity chemical companies perform better across the cycle than specialty. So overall, we're more interested in accretive transactions versus whether they're this type or that type. We're interested in high return on our capital and the deployment of our cash..

And our next question comes from Nils Wallin with CLSA..

There's been a number of announcements on around condensate splitters being built over the next couple of years. And I was curious to get your thoughts on if that would change the economics at all at Corpus. Obviously, you're doing an expansion there, too.

And if so, how that would affect the economics there?.

Yes. Actually, I think there will be some condensate splitters built. And frankly, we're looking at that as well because we have some opportunity potentially to do that at a very cheap cost. So we think it's a positive development for us instead of a potential negative. Yes, condensate prices could in theory go up.

But we expect there to be a lot of condensate available, some out of South Texas already from the Eagle Ford that has a positive impact on us, to the point where we're just not taking any Middle East condensate in our U.S. operations any more. And we expect some additional condensates to come from some of the Northeast fields, particularly the Utica.

So we think there's an opportunity for us there for the Corpus at our refinery, and we'll see how that all develops..

And then just a follow-up on that. Obviously, there's still wrangling going on in Washington whether condensate can be allowed to be exported. But if there's all this capacity that comes on, it may not matter because you'll have a lot of naphtha.

In either case, would you be a participant either on condensate exports or naphtha exports into your European assets?.

Well, so far, we haven't needed to export any naphtha into our European operations. But potentially condensates could move in at the right pricing, although one of those things that's happened is there's been a displacement of foreign imports into United States. Those have been flowing into our European operations.

And in fact, in one instance, we just changed a contract from being a U.S. contract to a European contract and moved those cheap condensates in..

Next question is Laurence Alexander with Jefferies..

A quick couple of questions.

First, can you give a sense for how -- what you think aggregate outages will be as a headwind in Q2 and possibly also Q3, if you have that available?.

Yes. There's a fair amount of capacity that we expect to be down in olefins in the second quarter. Obviously, La Porte is down now, our asset, and we talked about that being an 80-day outage. DuPont has a cracker down. ExxonMobil Beaumont and Baytown will be down. We're hearing about 10% of capacity down.

And then with the pipeline looking like it's coming up into Louisiana, we're already seeing spot ethylene move up fairly aggressively. So we think that's all a nice development for margins into the second quarter..

And then secondly, on the European dynamic, in terms of condensate and naphtha coming available, is -- are you seeing any competitor assets that would not be able to benefit from that dynamic over the next several years that would just keep the cost curves steeper? Or is this going to be something that everybody in the industry should eventually be able to benefit from?.

Well, I think the United States and the Middle East assets still are so competitively advantaged. It all gets down to a crude-to-natural gas ratio. And we still very much favor -- like what we see here in the United States and our Middle East assets are also benefiting. But we see that ratio staying high.

And that's why you see people like Enterprise making announcements like they did. One thing I should have also said is obviously Europe has a large number of inland crackers. So that's something to consider when you start thinking about the ability to take advantaged feedstocks. There aren't that many coastal crackers with that kind of opportunity..

Next question I'm showing comes from Frank Mitsch with Wells Fargo..

Thanks so much, Jim, for the project-by-project review. I thought it was interesting in listening to the commentary about the rising labor and material costs that you're seeing.

So it kind of begs the question regarding all these mega crackers that may be coming up in 2016, 2017, even 2018, what are your thoughts about those projects? And how should we be thinking about that timeframe in terms of startups, et cetera?.

Those projects are going to be expensive. We're already seeing a lot of pressure. Since we're in the field today, we can see firsthand what's going on. And there's a couple of dynamics. One, labor is definitely going up and the quality of that labor is not what it used to be.

And so productivity is going down, and that's at this stage when there's not as much out there to do. We're still in the early phases. So when some of those big projects ramp up, I think it's going to get worse, not better. So I would expect cost to be higher and I expect things to come in a little slower. We'll see what really develops.

But I can tell you from our own experience, that's absolutely what we're seeing today..

All right, terrific. And then obviously, you have a very enviable balance sheet. You spent over $1 billion on buying back stock in Q1.

Does that pace seem reasonable for Q2 and beyond?.

Yes. So as of, you'll see we're going to file our Q here, you'll see as of the end of last week, we had approximately 10 million shares remaining on the initial 10% authorization. And the expectation is that we will purchase that through the end of this May. And then we have the new authorization.

It's about 53 million shares, which we have authorized over the next 18 months..

Yes. So I'd say we have a great balance sheet and we like our growth prospects a lot. So we're making an acquisition of ourselves..

The next question comes from Robert Koort with Goldman Sachs..

Jim, I was wondering if we're to presume that there is going to be a massive ethane imbalance for quite some time, have you seen that expressed yet in any greater willingness for long-term contracts or fixed fractionation margin contracts or something, where you could lock in a more secure price over the next 5 or 10 years?.

No, I really haven't. That's why I'm a bit anxious to see what's going on with the Enterprise project to see if there are more details on what they're doing. But right now, I don't see that. We'll just have to see how that develops. Frankly, if it's as long as we think, we're still going to get great pricing.

And so we're happy to let it all develop like it's going on right now..

And do you suspect that it's possible, like if they really had 3 virtual ethane crackers pop up in Europe, would that make your cracker system even better, would we get into some shorter supply that some of these -- as we've seen in the U.S.? Or is it just a drop in the bucket, given the scale of assets already over there, just won't make a big difference?.

Well, I just frankly can't see how all that Enterprise volume goes to Europe. Physically, I just don't know how that happens and how it gets integrated into the crackers over there.

And I don't see anybody that would build a new ethane cracker over there with these kind of economics, you'd build it here in the United States immediately and not have that shipping cost. So there's got to be more to their story. I think there must be an Asian dimension that we don't understand yet..

And I've seen some producers suggest the potential for ethane imports into Europe have allowed them to negotiate better feedstock terms.

Have you seen that creep up at all for you?.

Not really..

Okay. And the last one, if I might.

On the Refining side, do you think there's any scope for any change in the ethanol mandates in gasoline?.

I hope so..

But do you think there is?.

I think we'll know more in a short period of time. But at least in the first EPA announcement on certain of the cellulosic volumes, they were realistic on that. So we hope good judgment prevails..

Our next question comes from John Roberts with UBS..

Jim, when you say lighter feedstocks just don't work for you in Europe, is -- that's because of the propylene and propylene oxide integration that you've got over there?.

No, not really. This -- when I say lighter feedstocks don't work, I want to be careful. I said ethane doesn't work. Propane and butane does. Condensates do. Obviously, when we crack lighter like that, we make less propylene, less butadiene. But overall, within our system, we're still a major purchaser of propylene anyway. We're very short.

And so that we're buying on the open market. So overall, it's more a question of lightening up somewhat. Last year in the summer, we went quite a bit lighter and in the first quarter, maybe almost 1/3 of the feed. So we'll keep working that, trying to make money..

And then as a follow-up, it seems pretty certain that CapEx will decline materially in 2016. I know that's a little ways out here.

But is that far enough out that you could have some shorter-term projects come in and back-fill on the CapEx side?.

Well, we're not going to have all the big projects that we do today to expand U.S. olefins. We want those online soon. And that's why we've been racing to get those projects finished. But we'll have another pipeline of projects that come back in that point in time but maybe not as much as we're doing right now..

[Operator Instructions] Robert Rightsees [ph] with Broadwright Capital [ph]..

I just have one quick question. Regarding the first 2 months of the year. I was trying to put together how much that cost you with the weather and some of the outages, et cetera. And I'm not sure if you were saying a couple hundred million here and there.

But could you give us either margin number or a dollar number, what you think the weather and some of those effects cost you in the first quarter?.

Yes. What we're seeing is in O&P-Americas, the impact was about $200 million. And then there was $100 million of other items on the rest of the portfolio related to weather, natural gas prices, coker outage, all of those kinds of things..

And Bob, there's a little bit of an offset, of course, across the quarter as we raised prices moving across the quarter..

And February was our toughest month. March was much better..

I am showing no further questions at this time..

Okay. Well, thank you very much. We expect a very solid second quarter in U.S. O&P-Americas. As I said, the first quarter was not on our normal pace. We have the La Porte turnaround as a key project and other growth projects moving ahead very rapidly. So we feel very good about U.S. O&P.

EAI had a strong first quarter, running at exceptional rates, 93%, way above industry averages. And we think we're performing differentially in Europe compared to our peer groups. I&D had another very solid quarter, performing as expected. And now with methanol online, we have upside in our Refining operations. Margins are good.

We just need to run better. So we feel very good about our future. We're investing in our company. We've increased the regular dividend and are buying back our shares. We have a very bright future, and we thank you for your support..

Thank you. This does conclude today's conference call. You may disconnect at this time. Have a great day..