Doug Pike - VP - Investor Relations Jim Gallogly - CEO Karyn Ovelmen - CFO Sergey Vasnetsov - SVP - Strategic Planning and Transactions.

Bob Koort - Goldman Sachs Duffy Fischer - Barclays Capital John McNulty - Credit Suisse Kevin McCarthy - Bank of America Merrill Lynch P.J.

Juvekar - Citigroup Jeff Zekauskas - JPMorgan Evelyn Rodriguez - UBS Frank Mitsch - Wells Fargo Securities Don Carson - Susquehanna Nils Wallin - CLSA Ram Sivalingam - Deutsche Bank Vincent Andrews - Morgan Stanley Arun Viswanathan - RBC Capital Markets Laurence Alexander - Jefferies Hassan Ahmed - Alembic Global Charles Nievert - Cowen and Company.

Hello, and welcome to the LyondellBasell teleconference. At the request of LyondellBasell, this conference is being recorded for instant replay purposes. Following today’s presentation, we will conduct a question-and-answer session. (Operator Instructions) I'd now like to turn the conference over to Mr. Doug Pike, Vice President, Investor Relations.

Sir, you may begin..

Thank you, Holly. So hello, and welcome to LyondellBasell's Second 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 & 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 Web site 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. Actual results could differ materially from those forward-looking statements.

And 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.

A 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 Web site, at www.lyondellbasell.com.

And finally, I'd like to point out that a recording of this call will be available by telephone beginning at 2 PM Eastern Time today until 11 PM Eastern Time on August 25th by calling 800-839-1171 in the United States and 1203-369-3030 outside the United States. And the pass code for both numbers is 3675.

Now during today's call, we'll focus on second quarter results, the current environment and the near-term outlook. And with that being said, I would like 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 Web site. Let’s take a look at Slide Number 4 and review a few financial highlights. Second quarter earnings per share were $2.22, with EBITDA up approximately $1.94 billion, both represent record quarterly results.

Every segment contributed to our strong earnings. Underlying oil and natural gas fundamentals continue to provide a strategic advantage of our North America businesses. However, the quarter could have been even better, had we not experienced various internal operating issues and third-party disruptions.

These issues particularly impacted our O&P Americas and intermediates and derivatives businesses. I will speak more about those in a moment. Turning to Slide Number 5, you will see that our safety statistics continue at the level that we established over the past several years.

We were recently recognized by the American Chemistry Council as the Responsible Care Company of the Year in our size category. We are very proud of this award as it demonstrates our strong commitment to safety and environmental stewardship. I would now like to turn the call over to Karyn to discuss our financial performance..

Thanks, Jim. Please turn to Slide number 6, which charts second quarter and last 12 month segment EBITDA. As Jim said, our results have been strong and steady. Within the segments, the O&P Americas business established a new record as EBITDA was slightly less than $1 billion.

In O&P-EAI, our EBITDA of approximately $320 million was slightly higher than the strong underlying first quarter result. Intermediates and Derivatives continued to follow normal trends. Oxyfuels results improved as we entered the summer gasoline blending season. Exclusive of this seasonality, results were relatively unchanged from the first quarter.

Refining posted results similar to the last two quarters. The Technology segment continued to report consistent strong earnings. Slide 7 and 8 provide a picture of our cash generation and use. During the second quarter, we generated $1.6 billion from our operations.

Our cash and short-term security balance declined by $850 million, as we devoted $2.2 billion to share repurchases and dividends. Capital spending was consistent with our full year guidance of approximately $1.6 billion. During the past 12 months, we generated $5.3 billion in cash from operations and raised $2.5 billion from bond issuances.

This cash was devoted to share repurchases and dividends totaling $6.1 billion. Another $1.5 billion went towards capital investment with approximately 50% towards growth projects. I’ll turn things back to Jim for a further discussion of our business results..

Thanks, Karyn. Let’s discuss segment performance beginning on Slide number 9 with Olefins and Polyolefins Americas. Second quarter EBITDA was $978 million a record quarter and $242 million greater than the first quarter. Operationally our La Porte Olefins plant was down throughout the quarter versus the planned mid June start up.

The plant operated briefly during early July prior to shutting down to address a compressor issue. We restarted over this past weekend. Second quarter sales were met through inventory, new purchases and some operating adjustments across our system, however July sales have been impacted by the equipment issue.

In total the turnaround and subsequent equipment related delay have reduced annual ethylene production by approximately 600 million pounds. We estimate the delayed restart impacted the second quarter by approximately $50 million.

Despite the delayed restart Olefin results significantly outperformed the first quarter increasing by approximately $220 million. This was partially related to the impact of first quarter ethylene purchases and inventory build in preparation for the turnaround.

The second quarter benefited from a lower cost per unit of ethylene production due to both lower raw material cost and increased co-product values. During the quarter ethane accounted for 72% of our ethylene production and NGLs represented 85%.

Our average ethylene price decreased by approximately $0.01 per pound, contribution from our Naphtha’s unit was relatively unchanged. Within Polyolefins to polyethylene spread over ethylene increased by approximately $0.02 per pound. Polyethylene sales were steady with exports representing approximately 13% of the volume.

Our 200 million pound per year polyethylene expansion at Matagorda operated to expectations throughout the quarter, however during June tight ethylene availability impacted polyethylene sales volumes. Polypropylene results were relatively unchanged.

Thus far during the third quarter industry conditions have remained relatively strong and are benefiting from lower ethane prices. The delayed La Porte restart is expected to impact third quarter ethylene production by approximately 100 million pounds. The delay will also impact ethylene derivative sales.

We expect to increase ethylene production at La Porte to the expanded capacity during September. This 800 million pound expansion will increase our U.S. ethylene system capacity to 10.7 billion pounds annually. Work continues on the 250 million pound per year Channel View expansion.

Additionally we’re beginning construction on the 800 million pound Corpus Christi expansion on receipt of our environmental permits. Let’s turn to Slide number 11 and review performance in the Olefins and Polyolefins, Europe, Asia and International segment.

Second quarter EBITDA was $319 million, exclusive of the first quarter environmental indemnity settlement, this was approximately $15 million better than the first quarter.

Olefin results improved moderately versus the first quarter, naphtha cost increases and a $0.02 per pound ethylene price decline were more than offset by increased co-product prices and the benefit from processing advantage raw materials.

Approximately 55% of our ethylene production was sourced from advantage raw material such as propane, butane and condensates. Our ethylene plants operated at approximately 95% of capacity, significantly above reported industry rates and slightly above our first quarter rate.

Results for both Polyolefins and Joint Ventures also improved from the first quarter. Combined polypropylene compounds and PB1 results were unchanged. Following normal seasonal trends third quarter polyolefin and polypropylene compound volumes are expected to be slightly lower than the second quarter.

Naphtha prices have fallen somewhat which is expected to improve olefin margins at least temporarily. During the third quarter equity earnings are anticipated to be impacted by the scheduled turnaround at two Joint Ventures. Now please turn to Slide number 12 for a discussion of our intermediates and derivatives segment.

Second quarter EBITDA was $430 million, $55 million higher than the first quarter. The primary contributor to this improvement was a typical seasonal increase in Oxyfuels margins and volumes.

Propylene oxide and derivative results declined by approximately $20 million versus the strong first quarter results, a portion of the decline can be attributed to seasonal propylene glycol demand into the aircraft deicing industry. Lower solvent margins also contributed to the decline.

The quarter finished with tight market conditions following a fire at a European competitor’s facility. Intermediate chemical performance improved by approximately $10 million.

Styrene results improved by approximately $20 million from higher volume and margins following first quarter maintenance, this helped to absorb lower EOEG results driven by lower margins. Within acetyls, lower methanol margins were offset by increased acetic acid and final acetate monomer results.

During the second quarter, we experienced some planned and unplanned downtime at our Channelview and La Porte acetyls complexes. The seasonal increase in Oxyfuels margins and volumes led to an approximately $65 million increase in results. The majority of the improvement can be attributed to lower butane raw material costs relative to gasoline prices.

The change in the industry benchmark can be seen in the chart on the lower right. Across the segment, overall July business conditions have been relatively similar to the second quarter. We anticipate that the incident at our competitor’s propylene oxide styrene monomer facility would benefit propylene oxide during the quarter.

However styrene margins have temporarily declined due to increase benzene costs. It is difficult for Oxyfuels margins to decline late in the third quarter, but it’s difficult to forecast either the timing or the magnitude of the decline. Let’s move to Slide number 13 for a discussion of the refining segment.

Second quarter EBITDA was $137 million slightly better than the past two quarters. During the second quarter, the Maya 2-1-1 spread averaged $27.01 per barrel and crude throughput averaged 257,000 barrels per day. The spread at the refinery decreased following a trend similar to the Maya 2-1-1 benchmark.

Crude oil throughput increased versus the first quarter, contributing approximately $10 million to second quarter results. Fuel products yields improved versus the first quarter but this was largely offset by lower byproduct values. During the quarter, Canadian and light crudes represented almost 25% of our throughput.

Exports accounted for approximately 5% of finished fuel product sales. July benchmark spreads have averaged approximately $26 per barrel in line with the second quarter spread. Thus far, RIN costs for the quarter are relatively unchanged.

Operationally, during the third quarter, we have a scheduled HTS catalyst change which is expected to negatively impact product yields. EBITDA in the Technology Segment contributed -- continued to be strong at $71 million.

In summary, during the second quarter, we generated record EBITDA and earnings but results could have been even better due to equipment and supplier problems. We completed our initial 10% share repurchase program and initiated purchased under the second 10% authorization granted in April.

We finished the quarter with 515 million shares outstanding, a reduction of 62 million shares since the program began for approximately 11%. Apart from the delayed La Porte turnaround, business conditions during the first weeks of the third quarter have been similar to the second quarter with some typical industry volatility.

We have now restated the La Porte ethylene plant and expect to implement the ethylene expansion later in the quarter. The Channelview and Corpus Christi expansion are progressing as planned. We are now pleased to take questions, Holly..

Question:.

and:.

Thank you. (Operator Instructions) And our first question comes from Bob Koort with Goldman Sachs. Your line is open..

Jim I am curious on your latest and greatest thoughts on the NGL complex.

We can look out now, it looks through the 2016 and see sub $0.30 ethane prices, I think there have been some concern maybe as units came back online, this summer you get a rally in ethane but it doesn’t seem to be happening, so I wonder if you could just give us some assessment of maybe ethane, propane and if you have any thoughts on butane?.

Jim I am curious on your latest and greatest thoughts on the NGL complex.

We can look out now, it looks through the 2016 and see sub $0.30 ethane prices, I think there have been some concern maybe as units came back online, this summer you get a rally in ethane but it doesn’t seem to be happening, so I wonder if you could just give us some assessment of maybe ethane, propane and if you have any thoughts on butane?.

Bob, the ethane prices have fallen quite a bit in the last couple of weeks. They are down in the low 20s at this point in time I think most people did expect rise in the summer but they are doing exactly the opposite. Some of that is due to various operating issues.

As you are probably aware, there is complex at Port Arthur, a olefins cracker that is down due to fire, there has been a variety of operational issues, our turnaround went long. And so as a result of those things and then very, very strong supply, the prices have fallen. I think that’s very, very positive for a business.

Propane prices have come down some butane prices. That’s been helpful for us in Europe, particularly in butane. We have been cracking lighter there particularly out of there facility. So all of this has been positive for our results and natural gas prices have also fallen and so things are looking good..

I know it’s not a huge business but certainly helped incrementally in the last couple of quarters the methanol industry is seeing price drop to about a two year low, is that just an echo of gas or do you think there is incremental supply that’s pressuring prices or what’s happened there and what’s your outlook on methanol?.

I know it’s not a huge business but certainly helped incrementally in the last couple of quarters the methanol industry is seeing price drop to about a two year low, is that just an echo of gas or do you think there is incremental supply that’s pressuring prices or what’s happened there and what’s your outlook on methanol?.

Methanol has come down as you say, natural gas prices have come down, that’s part of it people have cooperated a bit better. There were some turnarounds earlier, so my impression is that we bounced off the bottom there. It seems to be firming a bit, so we will see how that develops..

Next question is from Duffy Fischer with Barclays. Your line is open..

Yes, good morning.

The first question is just around La Porte, how should we think about the effect of the July shut down and how should we think about the ramp of that 800,000 pounds coming on in September, when will that kind of get the full run rate?.

Yes, good morning.

The first question is just around La Porte, how should we think about the effect of the July shut down and how should we think about the ramp of that 800,000 pounds coming on in September, when will that kind of get the full run rate?.

First about the turnaround, we have originally thought that turnaround will take us about 80 days it took us about 115 days. We had a considerable amount of work to do.

It took longer than we had expected and then we had the first stage compressor of our crack gas machine blow a seal there when we restarted that took us a couple of more weeks to get back on line that certainly wasn’t expected. But our people worked incredibly hard and I am proud of what they have done. It just took so much longer than we expected.

I indicated about how much that impacted our first quarter, our second quarter in our prepared comments, about a 100 million pounds here in July. In terms of the 800 million pounds, we have got two furnaces that are almost mechanically complete. They are on schedule.

We have increased the budget for that project as you know in-part because we can see the turnaround cost probably going up and labor cost increasing, productivity going down a bit.

So, it’s about at the cost that we had forecasted recently, taking a bit longer will bring one of the new furnaces up in the second and it shouldn’t take us very long to line them out. We haven’t operated before the big furnaces but we are pretty hopeful we will get those on-stream and bring them up rapidly.

One item taking care of the start-up of La Porte was pretty smooth. .

Great and then on the tax rate getting better, some of that I am assuming is just because Europe is contributing more profitability in vacuum NOLs and lower tax rate there.

But is there some other structural stuff and how should we think about the tax rate going forward?.

Great and then on the tax rate getting better, some of that I am assuming is just because Europe is contributing more profitability in vacuum NOLs and lower tax rate there.

But is there some other structural stuff and how should we think about the tax rate going forward?.

With regards to the effective tax rate, there is a change in the mix of the earnings floor primarily due to increases in non-taxable income and some internal financing and partially offset by changes in our valuation allowances. Going forward for the remainder of the year, we expect the effective tax rate to be around 28%..

Next question is from John McNulty with Credit Suisse. Your line is open..

Wanted to check with regard to your European business, clearly Europe you are really processing a lot of advantage raw materials at 55% of your suede.

How much further do you think you can push at this point and are there other opportunities may be adjustments if you can make with a little bit more investment that even further broaden that opportunity?.

Wanted to check with regard to your European business, clearly Europe you are really processing a lot of advantage raw materials at 55% of your suede.

How much further do you think you can push at this point and are there other opportunities may be adjustments if you can make with a little bit more investment that even further broaden that opportunity?.

John, European crackers are running lighter than they used to, to be sure whether it is propane or butane we have been able to crack lighter. Our folks over there learning from what we have done here in the United States and the way to take those flexible crackers and take them to new levels.

We have very modest capital that we are putting in to help but it’s minor. It’s more of a learning as we go, obviously we have improved there. We have also cracked more common sites and that’s been positive for us. So, we are running at great rates, 95% utilization is so far above what’s happening in the rest of the industry that’s a plus for us.

I think between the cost structure changes that we have made 1,000 people or so less than we used to operate within that region. Lining out our operations and working hard on the revenue side. We have been able to post quarter after quarter good solid results in Europe..

Thanks. And then just a quick question, we have seen with some of the outages we have seen really moving north pretty solidly over the last month or so, yet we haven’t really seen much on the polyethylene side in terms of movement.

I guess if you can give us an update on your thoughts on that and what may be holding it back or if it’s just a timing issue?.

Thanks. And then just a quick question, we have seen with some of the outages we have seen really moving north pretty solidly over the last month or so, yet we haven’t really seen much on the polyethylene side in terms of movement.

I guess if you can give us an update on your thoughts on that and what may be holding it back or if it’s just a timing issue?.

Polyethylene margins are very strong right now and a lot of price increases haven’t happened. Our perception is that market is extremely tight, some of these ethylene outages have an impact on those derivatives and we have seen some competitor announcements of force majeure. We have been in force majeure.

I think the market is tied and I think some of the forecasters are saying polyethylene prices should go up in the United States..

Next is Kevin McCarthy with Bank of America Merrill Lynch. Your line is open..

Yes, good morning. Jim, there has been some tremendous M&A activity recently across the chemicals industry. Just wondering if you could comment on whether you see anything in your pipeline that might be tempting or whether it’s more likely we will continue on in the current passes returning cash through meaningful repurchase activity….

Yes, good morning. Jim, there has been some tremendous M&A activity recently across the chemicals industry. Just wondering if you could comment on whether you see anything in your pipeline that might be tempting or whether it’s more likely we will continue on in the current passes returning cash through meaningful repurchase activity….

Kevin, we’ve been very active in the M&As here but buying our own shares. We still think we are the best investment out there and we completed our first 10% program, commenced the second 10% program. We watch every asset that comes to market, we evaluate it.

So far we haven’t seen something, that’s been attractive to us, but we remain open to accretive transactions if they appear. We obviously have a great balance sheet and the ability to execute should something appropriate appear. But again, today we like ourselves as the best investment.

And in terms of whether returning cash to shareholders, I think we’ve demonstrated year-to-date that we are very willing to do that in a significant way..

Certainly.

And as a second question, can you provide us any updates on your timelines for expansions at Channelview and Corpus how is that tracking?.

Certainly.

And as a second question, can you provide us any updates on your timelines for expansions at Channelview and Corpus how is that tracking?.

Yes. The Channelview and Corpus projects are tracking as we expect. The last time we talked that everyone on our earnings call, we did update the cost profile that was primarily related to Corpus. The Channelview expansion is two furnaces, we already have the tie-ins ready. So that should be a fairly simple transition from to bring those assets online.

That’s expected to be early 2015 for Channelview for the couple of furnaces and then at Corpus, like 2015, we expect it to progress as we earlier indicated..

Next question is from P.J. Juvekar with Citi. Your line is open..

There seems to be a targeted effort to export more hydrocarbons from the U.S. did the approval of this condensate exports recently.

So how does it impact your Corpus Christi operations, but you are buying some distressed cargoes and then also your refinery?.

There seems to be a targeted effort to export more hydrocarbons from the U.S. did the approval of this condensate exports recently.

So how does it impact your Corpus Christi operations, but you are buying some distressed cargoes and then also your refinery?.

Yes. So far P.J., we haven’t seen much impact at all on condensate, so they are very long in South Texas and seem to be increasing instead of decreasing. What we are working on right now is getting some of that pipeline up into the Houston region instead of barging to reduce our cost even further. So far that’s been in the mix.

I think when the original announcements of a couple of people moving some condensates offshore and that was approved by the department of energy when that was approved people thought gee maybe that’s a change step. I think after that’s been evaluated people maybe don’t believe that so much.

And we still think that these discounted Texas condensate show up in our mix, primarily in cracking more at Channelview and some at Corpus, but not so much in our refinery at this point..

Thank you. And have you seen any progress on ethane exports on the U.S. I mean have you heard of any new contracts being signed or what are your thoughts on sparking LNG with ethane? Thank you..

Thank you. And have you seen any progress on ethane exports on the U.S. I mean have you heard of any new contracts being signed or what are your thoughts on sparking LNG with ethane? Thank you..

Well, so far I haven’t heard of any new thing, so there has been an announcement that Reliance is looking building some tankers, but how that’s sourcing there hasn’t been a lot of detail.

But still based on maybe a feature of 300,000 barrels per day things that we’re seeing that’s still in the 2020 period, something 10% to 15% of the volume, so we think it’s manageable. Of course we’d rather stay home, but it is competitive world and some volumes could be exported..

Next question is Jeff Zekauskas with JPMorgan. Your line is open..

I was surprised that how strong your EBITDA was in the olefins business in the United States. I would have thought that benchmark margins year-over-year were lower both on the NGL side and on naphtha side. So my guess is that there might have been a positive artifact from the purchases of ethylene in the first quarter.

Was there a material benefit or could you quantify that benefit that you might have received?.

I was surprised that how strong your EBITDA was in the olefins business in the United States. I would have thought that benchmark margins year-over-year were lower both on the NGL side and on naphtha side. So my guess is that there might have been a positive artifact from the purchases of ethylene in the first quarter.

Was there a material benefit or could you quantify that benefit that you might have received?.

Jeff, there is arguably some benefit. Movement from first quarter to second quarter, but we already talked about that in our prepared remarks. I actually was disappointed in our Olefin results in the second quarter. As I said the turnaround went longer, I wish we would have been up in the middle of June with our cracker and posted some more numbers.

So it was a record quarter for that business as I have tried to be very clear, we could have done even better. .

I don’t recall the quantification that you’ve provided..

I don’t recall the quantification that you’ve provided..

Jeff, maybe I can help you out a bit. If you recall what we’ve done is with the turnaround at La Porte in the second quarter, we were preparing for that in the prior quarters. So as we spoke about first quarter results, we talked about a $150 million basically it was from purchases and inventory, so some of that moved forward.

Now if you think about that, so that impacts the first second quarter comparison. In the second quarter what we have is really the turnaround running a couple of weeks longer that required us to go into the market and purchase some additional inventories and that’s the $50 million that Jim spoke about previously. .

All right, and I can follow up on that. And then secondly, the crack spreads seem to be moving lower, can you talk about prospects for your refinery operations in the third quarter and do you plan to provide methanol volume, methanol production volumes in your I&D segment in the future as you provide so many of the data for the things you produce. .

All right, and I can follow up on that. And then secondly, the crack spreads seem to be moving lower, can you talk about prospects for your refinery operations in the third quarter and do you plan to provide methanol volume, methanol production volumes in your I&D segment in the future as you provide so many of the data for the things you produce. .

Yes, let me comment a bit, first on refining and then I’ll talk about methanol volumes. On refining, the two on one crack spread is down a bit; we’re running very well at the refinery at the moment, well above nameplate. That’s positive.

We haven’t done that recently but you know I’m quite pleased that Todd and his team are doing a nice job running the asset hard like we should. We’ve had better yield structure, I think we’ve been doing a pretty good job of purchasing crude and so while the two on one is a bit lower, we’ve been able to make up for that.

We’ve now been able to post a few quarters in a row of decent refining margins and I’m happy to say that business operationally is doing better. On I&D in methanol, we had some downtime.

We had some supplier interruptions in one of our sites and then some of the loan downtime at Channelview, we don’t typically give those volumes but they have been -- there’s room for improvement there as well. .

Next is from Evelyn Rodriguez with UBS, your line is open. .

Thank you, good morning guys, just one quick question. Of course given that fundamentals are not very strong we’d just like to change the subject a little bit to something that investors seem to be focusing on. That’s MLPs.

Can you remind us again why, or why not, is that more of a challenge for you to do something similar that your competitor in Houston is doing and what assets are available for you to potentially do some that way. .

Thank you, good morning guys, just one quick question. Of course given that fundamentals are not very strong we’d just like to change the subject a little bit to something that investors seem to be focusing on. That’s MLPs.

Can you remind us again why, or why not, is that more of a challenge for you to do something similar that your competitor in Houston is doing and what assets are available for you to potentially do some that way. .

We'll continuing to study the possibility for an MLP, we’re watching very closely our competitor and how that transaction goes over the next days and we obviously could do the same thing, our asset base is dramatically larger and so that opportunity is greater, we’re not sure the market’s that’s big but certainly we could do that.

Olefins is a core business for us, is very-very key as we talk to investors some favor this, some don’t but we will continue to study it.

One of the differences is, we went through bankruptcy in 2009, early 2010 and our assets were written down so you know the tax basis is quite different so I suspect our economics are different in that particular transaction in a variety of ways. .

Frank Mitsch with Wells Fargo Securities your line is open. .

Good morning folks and congrats on the record, and obviously a record in O&P Americas despite the issues at La Porte.

As I think about it, you’re going to continue to have some issues here in Q3 in La Porte but the order of magnitude is going to be lower than what is was in Q2 and it sounds like margins are trending in the right direction for O&P Americas in Q3 so, would it be surprising if we sit here three months from now talking about yet another record in O&P Americas in Q3?.

Good morning folks and congrats on the record, and obviously a record in O&P Americas despite the issues at La Porte.

As I think about it, you’re going to continue to have some issues here in Q3 in La Porte but the order of magnitude is going to be lower than what is was in Q2 and it sounds like margins are trending in the right direction for O&P Americas in Q3 so, would it be surprising if we sit here three months from now talking about yet another record in O&P Americas in Q3?.

Well we try not to give those kind of forecasts but the market is very tight right now. Ethane prices are low and we’re running better, I mentioned that the refinery is running above nameplate. We’ve got all that horsepower now at La Porte and we’re running above nameplate there despite the fact that we don’t have extra couple furnaces.

So we’ll try to put products in the pipe and we’ll see what margins are. .

All right, fair enough and then just looking at I&D, you know you mentioned the [indiscernible] business margins are improving in the VAM area obviously there were some operational issues that probably contributed to that.

Can you update us on where that stands and where the [indiscernible] stands in that area?.

All right, fair enough and then just looking at I&D, you know you mentioned the [indiscernible] business margins are improving in the VAM area obviously there were some operational issues that probably contributed to that.

Can you update us on where that stands and where the [indiscernible] stands in that area?.

Yes, VAM margins are strong right now, we’re back running but we got to rebuild inventories so you know assuming we can continue to run well there we should be in good shape, we’ve got the issues that we had lined out at this moment, some of those were third party issues as well, occasionally the things that happened on our equipment but in some of that it was third party.

.

Don Carson with Susquehanna, your line is open. .

Jim, a question on some of your future growth projects, as you complete Channelview and Corpus Christi next year, you will have the bulk of your expansions behind you. I know in the past you talked about perhaps 400 million of growth projects that you identified.

Beyond that have you identified more and as if not, as your CapEx starts to wind down because your expansion spending declines, should we expect an acceleration in return of cash to shareholders?.

Jim, a question on some of your future growth projects, as you complete Channelview and Corpus Christi next year, you will have the bulk of your expansions behind you. I know in the past you talked about perhaps 400 million of growth projects that you identified.

Beyond that have you identified more and as if not, as your CapEx starts to wind down because your expansion spending declines, should we expect an acceleration in return of cash to shareholders?.

Don, we'll continue to work potential growth items. I did mention that we have an opportunity at Channelview to do some backend work. It looks like a very good project economics as we do our preliminary engineering, look like may be a 400 million pound expansion there.

In addition to what we already have is the possibility at we think a reasonably low cost, so we'll keep working there. We have talked about a polyethylene plant. We are studying a couple other growth projects. We are always aware that capital costs are going up in the timeframe of ‘16, ‘17, ‘18 because of all the work going on.

So, we are going to be hopefully smart about what we bring on and when we do it but some of these debottleneck opportunities and expansion opportunities still look very good to us.

In terms of return of cash to shareholders, I think since we have been a new company regardless of whether it’s being special dividends, regular dividends, share repurchases. I think we have set a very nice track record of being shareholder friendly. .

So, with that $400 million basket you have identified as possible growth projects beyond 2015, is that number now growing with some of these other things you have identified?.

So, with that $400 million basket you have identified as possible growth projects beyond 2015, is that number now growing with some of these other things you have identified?.

We're continuing to work right now and the capital budget cycle at the front end of that and looking at a variety of things that we began to do the initial engineering on. So, it’s a bit early for me to comment on what all we'll include but we've been spending roughly $1.5 billion to $1.6 billion in capital.

We've got -- we should expect something like that next year although that budget isn’t finalized and then after that we'll see what else we can add to the portfolio. .

Next is from Nils Wallin with CLSA. Your line is open. .

With ethane here in the low $0.20 range and natural gas below $4 it seems like ethane prices are actually below their fuel value.

I know you said that there were some turnarounds that probably affects it but is there anything else, is there incremental supply that is contributing to this below fuel value price for ethane and do you think that’s going to continue through the rest of the year?.

With ethane here in the low $0.20 range and natural gas below $4 it seems like ethane prices are actually below their fuel value.

I know you said that there were some turnarounds that probably affects it but is there anything else, is there incremental supply that is contributing to this below fuel value price for ethane and do you think that’s going to continue through the rest of the year?.

The apex line is running now, that help bring in some supplies, as a result of natural gas prices being higher.

I think there was a drill bit response having formally been in that business they have prospects ready to drill typically when the prices are there recognizing that you get a decline curve in something like 60%, 80% depending upon which player and we're going to drill those wells when the gas prices are elevated like they will over the winter.

And so I think some of this is a response with the drill bit. Overall it'sshaping up very nicely for the petrochemical industry though. .

And then just on your crude slate, I know at one point you talked about having Western Canadian almost 20%.

Would you remind us if that’s still the number you are looking for and whether you've started to receive any shipments from Flanigan as yet?.

And then just on your crude slate, I know at one point you talked about having Western Canadian almost 20%.

Would you remind us if that’s still the number you are looking for and whether you've started to receive any shipments from Flanigan as yet?.

Yes, at this moment our crude slate is about 75% formed mostly Maya and a variety of other crudes, about 60% Canadian, 8% domestic. We expect that once Flanigan is running and at this point in time we are hoping late third quarter, early fourth quarter that we can get our slate up to about 35% Canadian.

Obviously, today dependent upon dislocations in crude, we also did some work on our crude units so that we can have light crude capacity of about 50%. But we do hope to have more Canadian later in the year and that should help our refining results. .

Next is David Begleiter with Deutsche Bank. Your line is open. .

Good morning. This is Ram Sivalingam sitting in for David.

Guys, obviously strong performance in O&P-EAI for the last two quarters given elevated operating rates, do you sort of view $300 million plus run rate for the back part of the year and into ‘15 is reasonable?.

Good morning. This is Ram Sivalingam sitting in for David.

Guys, obviously strong performance in O&P-EAI for the last two quarters given elevated operating rates, do you sort of view $300 million plus run rate for the back part of the year and into ‘15 is reasonable?.

We've obviously had a few quarters that have been in that range. You remember that EAI has about half of this portfolio that’s pretty stable between our compounding business PB1, some of our joint ventures. There is an element of EAI that’s nice and stable.

We've now seen some contribution on a fairly steady basis from the more commodity oriented olefins and polyolefins business. Our inventories have been tight. We have been running very hard. We have had some operational bubbles there too and I think our results could have been better in the second quarter in Europe as well.

We have got a nice structure there, our cost structure and we’re monomer short, so we can run our crackers hard. We are doing everything we can to improve the feedstock slate. So Bob and his team keep delivering and we told him we'd like that to be a normal term. .

Next is Vincent Andrews with Morgan Stanley. Your line is open. .

Just a quick question. If you take out the issue at La Porte, what was your capacity utilization in the U.S.

this quarter?.

Just a quick question. If you take out the issue at La Porte, what was your capacity utilization in the U.S.

this quarter?.

We ran without La Porte at about 96% to 97% utilization. But if you remember that this was same company that ran over 100% utilization first solid year. So our expectations of ourselves are pretty high. .

And what -- if you know the delta between running at 96% to 97% versus over a 100%, is something within your control or is it just the way the quarter plays out?.

And what -- if you know the delta between running at 96% to 97% versus over a 100%, is something within your control or is it just the way the quarter plays out?.

We’re running mechanical equipment but we work our maintenance hard and we’ve got some people who know this business inside and out. I’d like to say that our La Porte turnaround was not represented of what we typically do.

Having said that, it was not for a lack of effort, we had people working amazingly hard to get all of that work done, it was a huge amount of work that we had in front of us given that we're reworking a bunch in towers and everything for else for this increasing capacity. So most of the industry can do a 95% something like that.

It depends on the moment whether you include turnarounds are not in there, but we typically are operating more for percentage points about our competition. And when you look at some of the Salomon data and all of that, we benchmark extremely well. .

Arun Viswanathan with RBC Capital Markets. Your line is open. .

I guess I just wanted to ask a question about how you look at the industry and overall projects I mean [indiscernible] you guys with the brownfield and Dow with Freeport in a couple of years.

I mean how are you looking at ethylene supply generally and is there any risk to being oversupplied in the U.S.?.

I guess I just wanted to ask a question about how you look at the industry and overall projects I mean [indiscernible] you guys with the brownfield and Dow with Freeport in a couple of years.

I mean how are you looking at ethylene supply generally and is there any risk to being oversupplied in the U.S.?.

Generally there is - at the same time, the ethylene capacity is being added, derivatives are being added. We are long ethylene, we have a portfolio of customers that we sell to, we're in constant discussions with them about the following -- the years following our expansions.

And so for now we're feeling comfortable that we would be able to move the product. The United States is in such a nice advantage cost position that if we need to export, we can. And I think that’s been a realization of all the competitors and gives them confidence to go ahead and expand capacity. .

So just along those lines, can you just talk a little bit more about the potential for greater PE capacity addition as well you said you were considering a project there?.

So just along those lines, can you just talk a little bit more about the potential for greater PE capacity addition as well you said you were considering a project there?.

We’ve been talking about the polyethylene expansion with a brand new technology. We think that will be a very competitive line both in terms of the product that makes and the value it brings the capital cost. But also very importantly, this should help us a significant amount in our licensing efforts.

We are going to build serial number 001 of the new technology and we’re already very strong and low density polyethylene, the best in polypropylene in our view and this will add another leg to our technology stool that we think is very positive. .

I am sorry, what’s the potential timing on that?.

I am sorry, what’s the potential timing on that?.

Well, that project is supposed to come about 2017 middle part of the year as best we can predict at this moment. .

And have you disclosed how much that’s going to add to your PE capacity or….

And have you disclosed how much that’s going to add to your PE capacity or….

Yes, it’s about 1 billion pounds; maybe we’ve get more than that. .

Next question is from Laurence Alexander with Jefferies. Your line is open. .

I have two quick ones.

Can give a sense for the rhythm of outages over the next four quarters, so how the back half compares to the first half of the year but also how you think this first half of next year might look by comparison?.

I have two quick ones.

Can give a sense for the rhythm of outages over the next four quarters, so how the back half compares to the first half of the year but also how you think this first half of next year might look by comparison?.

Laurence, are we talking about industry-wise or us?.

Just for yourself, it’s just for yourself. .

Just for yourself, it’s just for yourself. .

Okay. Yes, we have BOTBA turnaround coming at Bayport. There is a couple of JV turnarounds coming but otherwise we expect to be running and I am hoping that we get ourselves lined out here shortly and that second quarter was an anomaly. .

And then I guess secondly just a longer term question. If single step conversion of methane to ethylene becomes viable I guess there is one of your competitors is doing a plant that was to come on next year. Is that something that would be significant for you in terms of a potential extra feedstock or how do you look at that.

I know it’s been talked about for a few decades but.

And then I guess secondly just a longer term question. If single step conversion of methane to ethylene becomes viable I guess there is one of your competitors is doing a plant that was to come on next year. Is that something that would be significant for you in terms of a potential extra feedstock or how do you look at that.

I know it’s been talked about for a few decades but.

I haven’t been too worried about that one way or the other at this point, there is always something new like that but it’s a maybe, but been around the industry a long time and haven’t seen many of those maybes turned into reality, so we’ll see, I just don’t know yet. .

Okay, thanks. .

Okay, thanks. .

One of the things I failed to mention but I did in my prepared remarks is, we do have an HS unit at the refinery that will go down and turnaround too and that’ll affect yield but not volume very much. .

Next is from Hassan Ahmed with Alembic Global, your line is open. .

Morning, Jim. Question around the sustainability of these good results that you’re seeing at O&P-EAI, you know good Q1, other good Q2 and as I took a look at your presentation slide for the segment, your July margins were even better on the ethylene side than Q2 margins.

I was talking to one of your competitors in the US with a large sort of European asset base and they were telling me that they’re running their ethylene facilities at 90% plus operating rates, so now is this a sign of call it an evolving sort of tightness in the broader cycle in your mind?.

Morning, Jim. Question around the sustainability of these good results that you’re seeing at O&P-EAI, you know good Q1, other good Q2 and as I took a look at your presentation slide for the segment, your July margins were even better on the ethylene side than Q2 margins.

I was talking to one of your competitors in the US with a large sort of European asset base and they were telling me that they’re running their ethylene facilities at 90% plus operating rates, so now is this a sign of call it an evolving sort of tightness in the broader cycle in your mind?.

Well I think it’s too early to say that. The rates have been higher you know our inventories are low in polymers, we’ve been running our crackers hard, some of the product that has been coming into Europe from the Middle East is going to Asia.

There have been some new duties and things like that but there has been a bit more strength in Europe than there’s been in the past but it’s still an oversupply condition in my mind still near bottom of the cycle type economics.

But you know, one of the things that happened in July was naphtha prices came down and that always builds a little bit of margin so that’s a positive. .

Sure thing.

Now can you guess to the methanol side of things, you know a couple of moving parts over there obviously? You know pricing had come down but I just noticed this morning, methane exports did their August prices which were flat with July level so seems to be some semblance of a bottoming out there, but then again you know towards the end of the year methane ex itself would bring online some incremental capacity.

So how much sort of comfort do you have in your earlier sort of comment about a bottoming out or maybe even potentially an uptick in methanol pricing near term. .

Sure thing.

Now can you guess to the methanol side of things, you know a couple of moving parts over there obviously? You know pricing had come down but I just noticed this morning, methane exports did their August prices which were flat with July level so seems to be some semblance of a bottoming out there, but then again you know towards the end of the year methane ex itself would bring online some incremental capacity.

So how much sort of comfort do you have in your earlier sort of comment about a bottoming out or maybe even potentially an uptick in methanol pricing near term. .

So we’ve got to watch what happens in natural gas pricing, but at this moment our sense is that we hit a bottom and we’re headed a little bit up instead of down again, we’ll see how the market develops, some -- we have to watch and see what happens in China too.

If there’s strength there or not strength later in the year, but we also could do a bit of self-help, we could have run better. .

Fair enough, and just adding on to that, I mean Q1 seemed to be a bit of a quirky quarter where you had some [indiscernible] outages obviously, you know the real outages were there as well but did you see a fundamental sort of improvement in demand in Q2 and where we are right now call it in July for ethanol. .

Fair enough, and just adding on to that, I mean Q1 seemed to be a bit of a quirky quarter where you had some [indiscernible] outages obviously, you know the real outages were there as well but did you see a fundamental sort of improvement in demand in Q2 and where we are right now call it in July for ethanol. .

Well, for instance in VAM I think there’s a structural change going on, you know there is some capacity taken down in Europe because it simply wasn’t competitive on a cost basis and as a result of that the United States capacities have increased margins and able to ship to different places in the world.

So VAM I think it’s structural, acidic acid is pretty strong right now and again the same thing, if we run a bit better those businesses can do better. .

(Operator Instructions) Charles Nievert with Cowen and Company, your line is open. .

Well just well, actually sort of a series, when you looked at the turnaround that you made at La Porte is that going to improve cost structure through that or is it just something versus where it was whenever you took it offline for getting the expansion that’s going to come with it, or does it improve throughput on top of the expansion and the same would go for the other expansions as you're looking at ethylene does, is there going to be a little bit of a cost benefit once you make the turnaround?.

Well just well, actually sort of a series, when you looked at the turnaround that you made at La Porte is that going to improve cost structure through that or is it just something versus where it was whenever you took it offline for getting the expansion that’s going to come with it, or does it improve throughput on top of the expansion and the same would go for the other expansions as you're looking at ethylene does, is there going to be a little bit of a cost benefit once you make the turnaround?.

On a unit basis that will be a plus for us, because we got a 1.7 billion pound a year cracker already, we add 800 million, that’ll make it one of the biggest most efficient crackers in the United States, we hold ourselves accountable in order to get our cost structure on a continuous basis lower.

La Porte’s in a good position to do that, Corpus the same thing, it’s a different kind of turnaround, we’re retubing furnaces and a variety of things down at Corpus, but both of those will be far more competitive assets. We have Channelview that’s already a very competitive asset; add a couple more furnaces there.

We’re very well positioned cost structure wise within our olefins assets in the United States, I didn’t mention so far in this call our Midwest assets, Morris and Clinton, you probably have noticed that ethane prices have fallen rather rapidly there as well and they’re extremely well positioned despite being smaller assets and they’re running nice and hard.

.

Okay and just to reiterate on the refinery, the changes you’re making with it, the turn you’re going to take on the refinery, your throughput shouldn’t change as the mix of products will, I mean for the time while you are doing that. .

Okay and just to reiterate on the refinery, the changes you’re making with it, the turn you’re going to take on the refinery, your throughput shouldn’t change as the mix of products will, I mean for the time while you are doing that. .

That’s generally a proper statement. The yield structure will change, crude units should run hard but when you got some -- the next unit down, it will tuck the yield structure just a bit. .

Okay, so you ran 258, you said you are now at nameplate on the refinery which is in the 260s, so given everything we should see an increase overall quarter-over-quarter in the refinery throughput number. The crack spread may change but….

Okay, so you ran 258, you said you are now at nameplate on the refinery which is in the 260s, so given everything we should see an increase overall quarter-over-quarter in the refinery throughput number. The crack spread may change but….

Yes, depending upon where we are cracking, I mean we have gotten real close to 300,000 barrels a day with our refinery in some of the recent days, so we can run that thing harder now that we have done some work on the units there.

So, we haven’t been able to sustain above nameplate in any of the quarters but I certainly have a challenge out to the team to accomplish that. I think some of them are probably listening to this call. They have heard that before, they just heard it again. .

P.J. Juvekar with Citi. Your line is open. .

Jim, you talked about M&A and you said that you are looking at every opportunity.

Are you willing to get into new chemistries of new molecules to what you have in your portfolio?.

Jim, you talked about M&A and you said that you are looking at every opportunity.

Are you willing to get into new chemistries of new molecules to what you have in your portfolio?.

I never ruled that out P.J. It is a possibility but it has to be the right value. I wouldn’t say we are actively engaged in M&A activity. We evaluate everything that comes to market and see if it will make us better.

One thing that we generally bring to the table is the ability to run assets and so even if it’s different chemistry, we would have to look at it and see if we could contribute to improvement in whatever the structure is today. But again our focus remains on our share repurchases, ever increasing regular dividends and being shareholder friendly. .

And one quick question for Karyn, your accelerated repurchase as an option instead of buying your regularly?.

And one quick question for Karyn, your accelerated repurchase as an option instead of buying your regularly?.

I am sorry, P.J., this is Doug; you broke up in your question. .

Sorry, do you see accelerated repurchase as an option instead of buying your stocks on a regular basis?.

Sorry, do you see accelerated repurchase as an option instead of buying your stocks on a regular basis?.

You broke up again but you said do we see expanded stock purchases?.

Accelerated repurchases versus our buying today. Our view and approach to buyback really hasn’t changed.

We had a few more shares that we purchased this quarter than we have historically and that had to do with really just a bit of overlap as we were wrapping up the first 10%, 2013 authorization as we began executing on the second 10%, 2014 authorization. So, we have outlined that capital strategy and we have been executing on that.

Broadly speaking, nothing has really significantly changed in our view of the buyback and oil and gas ratio and our own operating fundamental to drive the strong cash flow remain in place. Our growth plans and actions should grow our future earnings and so we are in a position where we will continue to execute.

We won't speak prospectively as market factors could change, however today no change in our capital deployment policies and we'll continue to report what we have done each quarter on our activity. .

And I am showing no further questions at this time. .

Well, thank you. Let me make a few final comments. We did have a record quarter almost $2 billion of EBITDA, earnings per share of $2.22. We completed a first 10% share buyback program. In the last six months, we've had $6.1 billion of share repurchases and dividends. While these are very good results, we could have done better.

We built a reputation for operational excellence, strong safety performance, environmental stewardship and reliability. We didn’t deliver fully on that last leg. We had a long difficult turnaround at La Porte. It’s completed. We are running above nameplate. Our people work incredibly hard but we didn’t get it done within an acceptable timeframe.

We had other operational bubbles. We will get ourselves back on track. We will continue to earn your trust and faith and our operational excellence and the markets have been kind, ethane prices are lower, the U.S. advantage is very strong at the moment. And we'll hopefully continue to surprise you to the upside. Thank you. .

Thank you. This does conclude today’s conference call. You may disconnect at this time..