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Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2011
or
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to
Commission file number: 001-34726
LYONDELLBASELL INDUSTRIES N.V.
(Exact name of registrant as specified in its charter)
     
The Netherlands   98-0646235
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
Weena 737
3013 AM Rotterdam
The Netherlands

(Address of principal executive offices)
31 10 275 5500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
             
Large accelerated filer o   Accelerated filer o   Non-accelerated filer þ   Smaller reporting company o
        (Do not check if a smaller reporting company)    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No o
The registrant had 571,581,047 ordinary shares, €0.04 par value, outstanding at August 10, 2011.
 
 

 


 

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Table of Contents

PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF INCOME
                                           
    Successor       Predecessor  
    Three                            
    months     Six Months     May 1       April 1     January 1  
    ended     Ended     through       through     through  
    June 30,     June 30,     June 30,       April 30,     April 30,  
Millions of dollars, except earnings per share
 
  2011     2011     2010       2010     2010  
Sales and other operating revenues:
                                         
Trade
  $ 13,733     $ 25,693     $ 6,655       $ 3,654     $ 13,260  
Related parties
    309       601       117         58       207  
 
                               
 
    14,042       26,294       6,772         3,712       13,467  
Operating costs and expenses:
                                         
Cost of sales
    12,474       23,417       6,198         3,284       12,414  
Selling, general and administrative expenses
    247       458       129         91       308  
Research and development expenses
    56       89       23         14       55  
 
                               
 
    12,777       23,964       6,350         3,389       12,777  
 
                                         
Operating income
    1,265       2,330       422         323       690  
Interest expense
    (177 )     (340 )     (132 )       (302 )     (713 )
Interest income
    13       21       12         3       5  
Other income (expense), net
    45       2       54         (65 )     (265 )
 
                               
Income (loss) before equity investments, reorganization items and income taxes
    1,146       2,013       356         (41 )     (283 )
 
                                         
Income from equity investments
    73       131       27         29       84  
Reorganization items
    (28 )     (30 )     (8 )       7,181       7,388  
 
                               
Income before income taxes
    1,191       2,114       375         7,169       7,189  
Provision for (benefit from) income taxes
    388       651       28         (1,327 )     (1,315 )
 
                               
Net income
    803       1,463       347         8,496       8,504  
Net (income) loss attributable to non-controlling interests
    1       4       (5 )       58       60  
 
                               
Net income attributable to the Company
  $ 804     $ 1,467     $ 342       $ 8,554     $ 8,564  
 
                               
Earnings per share:
                                         
Net income:
                                         
Basic
  $ 1.41     $ 2.58     $ 0.60                    
 
                                   
Diluted
  $ 1.38     $ 2.56     $ 0.60                    
 
                                   
See Notes to the Consolidated Financial Statements.

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LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED BALANCE SHEETS
                 
    June 30,     December 31,  
Millions, except shares and par value data
 
  2011     2010  
ASSETS
               
Current Assets:
               
Cash and cash equivalents
  $ 4,687     $ 4,222  
Restricted cash
    250       11  
Accounts receivable:
               
Trade, net
    4,605       3,482  
Related parties
    296       265  
Inventories
    5,577       4,824  
Prepaid expenses and other current assets
    1,098       975  
 
           
Total current assets
    16,513       13,779  
Property, plant and equipment, net
    7,569       7,190  
Investments and long-term receivables:
               
Investment in PO joint ventures
    436       437  
Equity investments
    1,654       1,587  
Related party receivables
    19       14  
Other investments and long-term receivables
    63       67  
Goodwill
    621       595  
Intangible assets, net
    1,310       1,360  
Other assets
    290       273  
 
           
Total assets
  $ 28,475     $ 25,302  
 
           
See Notes to the Consolidated Financial Statements.

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LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED BALANCE SHEETS
                 
    June 30,     December 31,  
Millions, except shares and par value data
 
  2011     2010  
LIABILITIES AND EQUITY
               
Current liabilities:
               
Current maturities of long-term debt
  $ 2     $ 4  
Short-term debt
    50       42  
Accounts payable:
               
Trade
    2,988       1,968  
Related parties
    1,011       793  
Accrued liabilities
    1,613       1,705  
Deferred income taxes
    315       319  
 
           
Total current liabilities
    5,979       4,831  
Long-term debt
    5,813       6,036  
Other liabilities
    2,110       2,183  
Deferred income taxes
    947       656  
Commitments and contingencies
               
Stockholders’ equity:
               
Ordinary shares, €0.04 par value, 1,275 million shares authorized, 568,814,697 and 565,676,222 shares issued, respectively
    30       30  
Additional paid-in capital
    9,982       9,837  
Retained earnings
    2,997       1,587  
Accumulated other comprehensive income
    586       81  
Treasury stock, at cost, 1,323,677 and 1,122,651 ordinary shares, respectively
    (16 )      
 
           
Total Company share of stockholders’ equity
    13,579       11,535  
Non-controlling interests
    47       61  
 
           
Total equity
    13,626       11,596  
 
           
Total liabilities and equity
  $ 28,475     $ 25,302  
 
           
See Notes to the Consolidated Financial Statements.

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LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
                           
    Successor       Predecessor  
    Six Months     May 1       January 1  
    Ended     through       through  
    June 30,     June 30,       April 30,  
Millions of dollars
 
  2011     2010       2010  
Cash flows from operating activities:
                         
Net income
  $ 1,463     $ 347       $ 8,504  
Adjustments to reconcile net income to net cash provided by (used in) operating activities
                         
Depreciation and amortization
    439       129         565  
Asset impairments
    18               9  
Amortization of debt-related costs
    20       5         307  
Inventory valuation adjustment
          333          
Equity investments -
                         
Equity income
    (131 )     (27 )       (84 )
Distribution of earnings
    107       28         18  
Deferred income taxes
    316       (3 )       (1,321 )
Reorganization items and fresh start accounting adjustments, net
    30       8         (7,388 )
Reorganization-related payments, net
    (10 )     (275 )       (407 )
(Gain) loss on sale of assets
    (48 )             4  
Unrealized foreign currency exchange loss (gain)
    (1 )     14         264  
Changes in assets and liabilities that provided (used) cash:
                         
Accounts receivable
    (1,002 )     139         (650 )
Inventories
    (619 )     56         (368 )
Accounts payable
    1,140       226         249  
Prepaid expenses and other current assets
    (96 )     (7 )       58  
Other, net
    (379 )     132         (685 )
 
                   
Net cash provided by (used in) operating activities
    1,247       1,105         (925 )
 
                   
Cash flows from investing activities:
                         
Expenditures for property, plant and equipment
    (482 )     (113 )       (226 )
Proceeds from disposal of assets
    70       4         1  
Short-term investments
                  12  
Restricted cash
    (239 )     (1 )       (11 )
 
                   
Net cash used in investing activities
    (651 )     (110 )       (224 )
 
                   
Cash flows from financing activities:
                         
Issuance of Class B common stock
                  2,800  
Shares issued upon exercise of warrants
    37                
Dividends paid
    (57 )              
Repayments of debtor-in-possession term loan facility
                  (2,170 )
Net repayments under debtor-in-possession revolving credit facility
                  (325 )
Net borrowings on revolving credit facilities
          130         38  
Proceeds from short-term debt
                  8  
Repayments of short-term debt
                  (14 )
Issuance of long-term debt
                  3,242  
Repayments of long-term debt
    (260 )             (9 )
Payments of debt issuance costs
    (15 )     (2 )       (253 )
Other, net
    (4 )     5         (2 )
 
                   
Net cash provided by (used in) financing activities
    (299 )     133         3,315  
 
                   
Effect of exchange rate changes on cash
    168       (86 )       (13 )
 
                   
Increase in cash and cash equivalents
    465       1,042         2,153  
Cash and cash equivalents at beginning of period
    4,222       2,711         558  
 
                   
Cash and cash equivalents at end of period
  $ 4,687     $ 3,753       $ 2,711  
 
                   
See Notes to the Consolidated Financial Statements.

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LYONDELLBASELL INDUSTRIES N.V.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
                                                                 
                                    Accumulated     Total              
    Ordinary Shares     Additional     Retained     Other     Stockholders’     Non-        
                    Paid-in     Earnings     Comprehensive     Equity     Controlling     Comprehensive  
Millions of dollars
 
  Issued     Treasury     Capital     (Deficit)     Income (Loss)     (Deficit)     Interests     Income  
Balance, January 1, 2011
  $ 30     $     $ 9,837     $ 1,587     $ 81     $ 11,535     $ 61          
Warrants exercised
                125                   125                
Shares purchased
          (16 )                       (16 )              
Share-based compensation
                20                   20                
Net income (loss)
                      1,467             1,467       (4 )   $ 1,463  
Cash dividends ($0.10 per share)
                      (57 )           (57 )            
Distributions to non- controlling interests
                                        (21 )      
Contributions from non- controlling interests
                                        11        
Unrealized gain on held-for-sale securities held by equity investees
                            2       2             2  
Changes in unrecognized employee benefits gains and losses, net of tax of less than $1
                            3       3             3  
Foreign currency translations, net of tax of less than $1
                            500       500             500  
 
                                               
Comprehensive income
                                                          $ 1,968  
 
                                                             
Balance, June 30, 2011
  $ 30     $ (16 )   $ 9,982     $ 2,997     $ 586     $ 13,579     $ 47          
 
                                                 
See Notes to the Consolidated Financial Statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
1. Basis of Presentation
LyondellBasell Industries N.V. is a limited liability company (Naamloze Vennootschap) incorporated under Dutch law by deed of incorporation dated October 15, 2009. LyondellBasell Industries N.V. was formed to serve as the parent holding company for certain subsidiaries of LyondellBasell Industries AF S.C.A. (together with its subsidiaries, “LyondellBasell AF,” the “Predecessor Company” or the “Predecessor”) after completion of proceedings under chapter 11 (“chapter 11”) of title 11 of the United States Bankruptcy Code (the “U.S. Bankruptcy Code”). LyondellBasell Industries AF S.C.A. and 93 of its subsidiaries were debtors (the “Debtors”) in jointly administered bankruptcy cases (the “Bankruptcy Cases”) in the United States Bankruptcy Court in the Southern District of New York (the “Bankruptcy Court”). As of April 30, 2010 (the “Emergence Date”), LyondellBasell Industries AF S.C.A.’s equity interests in its indirect subsidiaries terminated and LyondellBasell Industries N.V. now owns and operates, directly and indirectly, substantially the same business as LyondellBasell Industries AF S.C.A. owned and operated prior to emergence from the Bankruptcy Cases, which business includes subsidiaries of LyondellBasell Industries AF S.C.A. that were not involved in the Bankruptcy Cases. LyondellBasell Industries AF S.C.A. is no longer part of the LyondellBasell group.
Effective May 1, 2010, we adopted fresh-start accounting pursuant to Accounting Standards Codification (“ASC”) 852, Reorganizations. Accordingly, the basis of the assets and liabilities in LyondellBasell AF’s financial statements for periods prior to May 1, 2010 will not be comparable to the basis of the assets and liabilities in the financial statements prepared for LyondellBasell N.V. after emergence from bankruptcy.
LyondellBasell Industries N.V., together with its consolidated subsidiaries (collectively “LyondellBasell N.V.,” the “Successor Company” or the “Successor”), is a worldwide manufacturer of chemicals and polymers, a refiner of crude oil, a significant producer of gasoline blending components and a developer and licensor of technologies for production of polymers and other chemicals. When we use the terms “LyondellBasell N.V.,” the “Successor Company,” the “Successor,” “we,” “us,” “our” or similar words, unless the context otherwise requires, we are referring to LyondellBasell N.V. after April 30, 2010. References herein to the “Company” for periods through April 30, 2010 are to the Predecessor Company, LyondellBasell AF, and for periods after the Emergence Date, to the Successor Company, LyondellBasell N.V.
The accompanying consolidated financial statements are unaudited and have been prepared from the books and records of LyondellBasell N.V. after April 30, 2010 and LyondellBasell AF for periods up to and including that date in accordance with the instructions to Form 10-Q and Rule 10-1 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In our opinion, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results for the entire year. These consolidated financial statements should be read in conjunction with the LyondellBasell N.V. consolidated financial statements and notes thereto included in the LyondellBasell Industries N.V. Current Report on Form 8-K/A filed with the SEC on August 12, 2011.
2. Accounting and Reporting Changes
Comprehensive Income—In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) related to ASC 220, Comprehensive Income: Presentation of Comprehensive Income. This standard eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. Under the ASC 220, an entity can elect to present either 1) one continuous statement of comprehensive income or 2) in two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format used today, and the second statement would include components of other comprehensive income (OCI). The ASU does

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
not change the items that must be reported in OCI. The statement(s) would need to be presented with equal prominence as the other primary financial statements. The ASU is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted but full retrospective application is required. The adoption of this amendment will have an affect on the presentation of our Consolidated Financial Statements by inclusion of either Consolidated Statements of Other Comprehensive Income or a Consolidated Statements of Comprehensive Income.
Fair Value Measurement — In May, 2011 the FASB issued new guidance related to ASC 820, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The new guidance results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS and changes some fair value measurement principles and disclosure requirements. This guidance aligns the fair value measurement of instruments classified within an entity’s shareholders’ equity with the guidance for liabilities and as a result, requires an entity to measure the fair value of its own equity instruments from the perspective of a market participant that holds the equity instruments as assets. This guidance also enhances disclosure requirements for recurring Level 3 fair value measurements to include quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements. New disclosures on the use of a nonfinancial asset measured or disclosed at fair value are required if its use differs from its highest and best use. In addition, entities must report the level in the fair value hierarchy of assets and liabilities not recorded at fair value but where fair value is disclosed. The ASU is effective for interim and annual periods beginning on or after December 15, 2011, with early adoption prohibited. The adoption of this amendment is not expected to have a material effect on the presentation of our consolidated financial statements.
In January 2010, the FASB issued additional guidance on improving disclosures regarding fair value measurements. The guidance requires the disclosure of the amounts of, and the rationale for, significant transfers between Level 1 and Level 2 of the fair value hierarchy, as well as the rationale for transfers in or out of Level 3. In 2010, we adopted all of the amendments regarding fair value measurements except for a requirement to disclose information about purchases, sales, issuances, and settlements in the reconciliation of recurring Level 3 measurements on a gross basis. Our implementation in January 2011 of the requirement to separately disclose purchases, sales, issuances, and settlements of recurring Level 3 measurements did not have a material impact on the presentation of our consolidated financial statements.
Business Combinations — In December 2010, the FASB issued guidance related to ASC Topic 805, Business Combinations, to clarify that if a public entity presents comparative financial statements, the entity should disclose pro-forma revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. This guidance also expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. This guidance is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. Adoption of this amendment in January 2011 did not have a material effect on our consolidated financial statements.
Goodwill—In December 2010, the FASB issued guidance related to ASC Topic 350, Intangibles—Goodwill and Other, to require a company with reporting units having a carrying amount of zero or less to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. This guidance is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2010. Adoption of this amendment in January 2011 did not have a material effect on our consolidated financial statements.

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Revenue Recognition — In October 2009, the FASB ratified the consensus reached by its emerging issues task force to require companies to allocate revenue in multiple-element arrangements based on the estimated selling price of an element if vendor-specific or other third-party evidence of value is not available. The adoption of these changes, in January 2011, did not have a material effect on our consolidated financial statements.
3. Emergence from Chapter 11 Proceedings
On April 23, 2010, the U.S. Bankruptcy Court confirmed LyondellBasell AF’s Third Amended and Restated Plan of Reorganization and the Debtors emerged from chapter 11 protection on April 30, 2010. As of June 30, 2011, approximately $106 million of priority and administrative claims are accrued but have yet to be paid.
The Company’s charges (credits) for reorganization items were as follows:
                                           
    Successor       Predecessor  
    Three                              
    Months             May 1       April 1     January 1  
    Ended     Six Months Ended     through       through     through  
    June 30,     June 30,     June 30,       April 30,     April 30,  
Millions of dollars
  2011     2011     2010       2010     2010  
Change in net assets resulting from the application of fresh-start accounting
  $     $     $       $ 6,278     $ 6,278  
Gain on discharge of liabilities subject to compromise
                        (13,617 )     (13,617 )
Asset write-offs and rejected contracts
                        (3 )     25  
Estimated claims
    25       24               59       (262 )
Professional fees
    1       5       4         91       172  
Employee severance costs
                        8        
Plant closures costs
                        3       12  
Other
    2       1       4               4  
 
                               
Total
  $ 28     $ 30     $ 8       $ (7,181 )   $ (7,388 )
 
                               
Estimated claims in the above table include adjustments made to reflect the Debtors’ estimated claims to be allowed.
4. Restricted Cash
Restricted cash primarily represents amounts deposited with financial institutions to collateralize letters of credit. As of June 30, 2011, letters of credit totaling $221 million were cash collateralized. Such cash is included in the $250 million reflected as Restricted cash on the Consolidated Balance Sheet as of June 30, 2011.

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
5. Accounts Receivable
Our allowance for doubtful accounts receivable, which is reflected in the Consolidated Balance Sheets as a reduction of accounts receivable, totaled $14 million and $12 million at June 30, 2011 and December 31, 2010, respectively.
6. Inventories
Inventories consisted of the following components:
                 
    June 30,     December 31,  
Millions of dollars
  2011     2010  
Finished goods
  $ 3,547     $ 3,127  
Work-in-process
    273       230  
Raw materials and supplies
    1,757       1,467  
 
           
Total inventories
  $ 5,577     $ 4,824  
 
           
The two months ended June 30, 2010 include a $333 million non-cash charge to adjust the value of inventory at June 30, 2010 to market value, which was lower than the April 30, 2010 value applied during fresh-start accounting.
7. Property, Plant and Equipment, Goodwill, Intangibles and Other Assets
The components of property, plant and equipment, at cost, and the related accumulated depreciation were as follows:
                 
    June 30,     December 31,  
Millions of dollars
  2011     2010  
Land
  $ 301     $ 286  
Manufacturing facilities and equipment
    7,292       6,752  
Construction in progress
    750       569  
 
           
Total property, plant and equipment
    8,343       7,607  
Less accumulated depreciation
    (774 )     (417 )
 
           
Property, plant and equipment, net
  $ 7,569     $ 7,190  
 
           
In the first six months of 2011, we recognized $13 million of impairment charges related to the capital expenditures at the Berre refinery. Capital spending required for the operation of the Berre refinery will continue to be impaired until such time as the discounted cash flow projections for the Berre refinery are sufficient to recover the asset’s carrying amount.
In July 2010, we ceased production and permanently shut down our polypropylene plant at Terni, Italy. We recognized charges of $23 million, in cost of sales, related to plant and other closure costs in the first quarter of 2010.

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Depreciation and amortization expense is summarized as follows:
                                           
    Successor       Predecessor  
    Three                            
    Months     Six Months     May 1       April 1     January 1  
    Ended     Ended     through       through     through  
    June 30,     June 30,     June 30,       April 30,     April 30,  
Millions of dollars
  2011     2011     2010       2010     2010  
Property, plant and equipment
  $ 184     $ 351     $ 94       $ 125     $ 499  
Investment in PO joint ventures
    8       15       9         4       19  
Emission allowances
    18       36                      
Various contracts
    13       35                      
Technology, patent and license costs
                5         6       25  
Software costs
    1       2               3       12  
Other
                21         3       10  
 
                               
Total depreciation and amortization
  $ 224     $ 439     $ 129       $ 141     $ 565  
 
                               
Asset Retirement Obligations — The liabilities recognized for all asset retirement obligations were $148 million and $132 million at June 30, 2011 and December 31, 2010, respectively.
Goodwill — Goodwill increased from $595 million at December 31, 2010 to $621 million at June 30, 2011. The $26 million change in goodwill is a result of foreign exchange translation.
8. Investment in PO Joint Ventures
     We, together with Bayer AG and Bayer Corporation (collectively “Bayer”), share ownership in a U.S. propylene oxide (“PO”) manufacturing joint venture (the “U.S. PO Joint Venture”) and a separate joint venture for certain related PO technology. Bayer’s ownership interest represents ownership of annual in-kind PO production of the U.S. PO Joint Venture of 1.5 billion pounds in 2010. We take in-kind the remaining PO production and all co-product (styrene monomer (“SM”) or “styrene”) and tertiary butyl alcohol (“TBA”) production from the U.S. PO Joint Venture.
In addition, we and Bayer each have a 50% interest in a separate manufacturing joint venture (the “European PO Joint Venture”), which includes a world-scale PO/SM plant at Maasvlakte near Rotterdam, The Netherlands. We and Bayer each are entitled to 50% of the PO and SM production at the European PO Joint Venture.

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Changes in our investment in the U.S. and European PO joint ventures for 2011 and 2010 are summarized as follows:
 
                         
Millions of dollars
 
  U.S. PO Joint     European PO     Total PO  
Successor
  Venture     Joint Venture     Joint Ventures  
Investments in PO joint ventures — January 1, 2011
  $ 291     $ 146     $ 437  
Cash contributions
          2       2  
Depreciation and amortization
    (11 )     (4 )     (15 )
Effect of exchange rate changes
          12       12  
 
                 
Investments in PO joint ventures — June 30, 2011
  $ 280     $ 156     $ 436  
 
                 
 
                       
Investments in PO joint ventures — May 1, 2010
  $ 303     $ 149     $ 452  
Cash contributions
          1       1  
Depreciation and amortization
    (6 )     (3 )     (9 )
Effect of exchange rate changes
          (10 )     (10 )
 
                 
Investments in PO joint ventures — June 30, 2010
  $ 297     $ 137     $ 434  
 
                 
 
                       
 
 
                       
Predecessor
                       
Investments in PO joint ventures — January 1, 2010
  $ 533     $ 389     $ 922  
Return of investment
          (5 )     (5 )
Depreciation and amortization
    (14 )     (5 )     (19 )
Effect of exchange rate changes
          (31 )     (31 )
 
                 
Investments in PO joint ventures — April 30, 2010
  $ 519     $ 348     $ 867  
 
                 
9. Equity Investments
The changes in equity investments were as follows:
                           
    Successor       Predecessor  
    Six months               January 1  
    ended     May 1 through       through  
    June 30,     June 30,       April 30,  
Millions of dollars
  2011     2010       2010  
Beginning balance
  $ 1,587     $ 1,524       $ 1,085  
Income from equity investments
    131       27         84  
Dividends received
    (114 )     (28 )       (18 )
Contributions to joint venture
          7         20  
Currency exchange effects
    50       (23 )       (8 )
Other
                  10  
 
                   
Ending balance
  $ 1,654     $ 1,507       $ 1,173  
 
                   

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Summarized income statement information and our share for the periods for which the respective equity investments were accounted for under the equity method is set forth below:
                                                   
    Successor       Predecessor  
    Three months ended     May 1 through       April 1 through  
    June 30, 2011     June 30, 2010       April 30, 2010  
            Company             Company               Company  
Millions of dollars
  100%     Share     100%     Share       100%     Share  
Revenues
  $ 3,113     $ 894     $ 1,382     $ 553       $ 789     $ 245  
Cost of sales
    (2,659 )     (767 )     (1,222 )     (485 )       (664 )     (216 )
 
                                     
Gross profit
    454       127       160       68         125       29  
Net operating expense
    (59 )     (17 )     (63 )     (22 )       (19 )     (8 )
 
                                     
Operating income
    395       110       97       46         106       21  
Interest income
    6       2       2               (5 )     (2 )
Interest expense
    (63 )     (18 )     (21 )     (6 )       (6 )     (1 )
Foreign currency translation
    17       5       42       6         61       14  
Income from equity
                                                 
investments
    (41 )     (8 )     (59 )     (17 )       2       2  
 
                                     
Income before
                                                 
income taxes
    314       91       61       29         158       34  
(Provision for) benefit from
                                                 
income taxes
    (69 )     (18 )     1       (2 )       (16 )     (5 )
 
                                     
Net income
  $ 245     $ 73     $ 62     $ 27       $ 142     $ 29  
 
                                     
                                                   
    Successor       Predecessor  
    Six Months Ended     May 1 through       January 1 through  
    June 30, 2011     June 30, 2010       April 30, 2010  
            Company             Company               Company  
Millions of dollars
  100%     Share     100%     Share       100%     Share  
Revenues
  $ 6,700     $ 2,133     $ 1,382     $ 553       $ 3,127     $ 989  
Cost of sales
    (5,829 )     (1,876 )     (1,222 )     (485 )       (2,699 )     (869 )
 
                                     
Gross profit
    871       257       160       68         428       120  
Net operating expenses
    (157 )     (49 )     (63 )     (22 )       (82 )     (29 )
 
                                     
Operating income
    714       208       97       46         346       91  
Interest income
    6       2       2               2       1  
Interest expense
    (121 )     (34 )     (21 )     (6 )       (43 )     (13 )
Foreign currency translation
    (22 )     (5 )     42       6         83       24  
Income from equity
                                                 
investments
    (31 )     (5 )     (59 )     (17 )       3       2  
 
                                     
Income before
                                                 
income taxes
    546       166       61       29         391       105  
(Provision for) benefit from
                                                 
income taxes
    (122 )     (35 )     1       (2 )       (67 )     (21 )
 
                                     
Net income
  $ 424     $ 131     $ 62     $ 27       $ 324     $ 84  
 
                                     

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A joint venture of ours is in default under its financing arrangement due to a delay in the start-up of its assets. The parties are currently negotiating in good faith to resolve the default and at present there is no evidence that such negotiations will not be concluded successfully or that the resolution of this matter will have a material adverse impact on our operations or liquidity.
10. Debt
Long-term loans, notes and other long-term debt consisted of the following:
                 
    June 30,     December 31,  
Millions of dollars
  2011     2010  
Bank credit facilities:
               
Senior Term Loan Facility due 2016
  $ 5     $ 5  
Senior Secured Notes due 2017, $2,250 million, 8.0%
    1,822       2,025  
Senior Secured Notes due 2017, €375 million, 8.0%
    440       452  
Senior Secured Notes due 2018, $3,240 million, 11.0%
    3,240       3,240  
Guaranteed Notes, due 2027
    300       300  
Other
    8       18  
 
           
Total
    5,815       6,040  
Less current maturities
    (2 )     (4 )
 
           
Long-term debt
  $ 5,813     $ 6,036  
 
           
Short-term loans, notes and other short-term debt consisted of the following:
                 
    June 30,     December 31,  
Millions of dollars
  2011     2010  
$2,000 million Senior Secured Asset-Based Revolving Credit Agreement
  $     $  
Financial payables to equity investees
    10       11  
Other
    40       31  
 
           
Total short-term debt
  $ 50     $ 42  
 
           
Senior Secured 8% Notes—In December 2010, we redeemed $225 million of the dollar denominated and €37.5 million ($50 million) of the Euro denominated Senior Secured 8% Notes at a redemption price of 103% of par, paying premiums totaling $8 million. In May 2011, we redeemed an additional $203 million of Senior Secured 8% dollar Notes and €34 million ($50 million) of Senior Secured 8% Euro notes due 2017 at a redemption price of 103% of par, paying premiums totaling $7 million.
The Senior Secured 8% Notes were issued by our wholly owned subsidiary, Lyondell Chemical Company (“Lyondell Chemical”). Lyondell Chemical may redeem the notes (i) prior to maturity at specified redemption premium percentages according to the date the notes are redeemed or (ii) from time to time at a redemption price of 100% of such principal amount plus an applicable premium as calculated pursuant to a formula.

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In addition, Lyondell Chemical has the option to redeem up to 10% of the outstanding Senior Secured 8% Notes annually prior to May 1, 2013 at a redemption price equal to 103% of such notes’ principal amount. Also prior to May 1, 2013, Lyondell Chemical has the option to redeem up to 35% of the original aggregate principal amount of the Senior Secured 8% Notes at a redemption price of 108% of such principal amount, with the net proceeds of one or more equity offerings, provided that (i) at least 50% of the original aggregate principal amount remains outstanding immediately after such redemption and (ii) the redemption occurs within 90 days of the closing of the equity offering. The value of this embedded derivative is nominal.
Senior Secured 11% Notes—The Senior Secured 11% Notes also were issued by Lyondell Chemical. Lyondell Chemical may redeem the notes (i) at par on or after May 1, 2013 and (ii) from time to time at a redemption price of 100% of such principal amount plus an applicable premium as calculated pursuant to a formula.
In addition, Lyondell Chemical has the option to redeem up to 35% of the original aggregate principal amount of the Senior Secured 11% Notes at a redemption price of 111% of such principal amount, with the net proceeds of one or more equity offerings, provided that (i) at least 50% of the original aggregate principal amount remains outstanding immediately after such redemption and (ii) the redemption occurs within 90 days of the closing of the equity offering. The value of this embedded derivative is nominal.
Registration Rights Agreements—In connection with the issuance of the Senior Secured 8% Notes and the Senior Secured 11% Notes (collectively, the “Senior Secured Notes”), we entered into certain registration rights agreements. The agreements require us to (i) exchange the Senior Secured 8% Notes for notes with substantially identical terms, except that the new notes will be registered with the SEC under the Securities Act of 1933, as amended, and will therefore be free of any transfer restrictions and (ii) register for resale the Senior Secured 11% Notes held by the parties to the agreement related to those notes. The registration rights agreements require registration statements for the exchange or resale, as applicable, to be effective with the SEC by May 3, 2011, which has not occurred. As a result, beginning May 4, 2011, we are subject to penalties in the form of increased interest rates. The interest penalties are 0.25% per annum for the first 90 days that the registration statements are not effective, increasing by an additional 0.25% per annum for each additional 90 days, up to a maximum of 1.00% per annum. We do not expect the amount of penalties that we will ultimately pay to be material.
Senior Term Loan Facility—In March 2011, we amended and restated our Senior Secured Term Loan Agreement to, among other things, change the administrative agent and to modify the term of the agreement and certain restrictive covenants. This amended and restated agreement matures in April 2014.
U.S. ABL Facility—On June 2, 2011, we amended our U.S. ABL Facility to, among other things, (i) increase the size of the facility to $2 billion; (ii) extend the maturity date to June 2016; (iii) reduce the applicable margin and commitment fee; and (iv) amend certain covenants and conditions in order to provide additional flexibility. We paid fees of $15 million in connection with this amendment.
At June 30, 2011 and December 31, 2010, there were no borrowings outstanding under the U.S. ABL facility and outstanding letters of credit totaled $263 million and $370 million, respectively. Pursuant to the U.S. ABL facility, Lyondell Chemical could, subject to a borrowing base, borrow up to $1,737 million at June 30, 2011. Advances under this facility are available to Lyondell Chemical and certain of its wholly owned subsidiaries, Equistar Chemicals LP (“Equistar”), Houston Refining LP, and LyondellBasell Acetyls LLC.
Other—In the six months ended June 30, 2011 amortization of debt premiums and debt issuance costs resulted in amortization expense of $20 million that was included in interest expense in the Consolidated Statements of Income. In the two months ended June 30, 2010, amortization expense was $5 million.

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
At June 30, 2011 and 2010, our weighted average interest rates on outstanding short-term debt were 3.8% and 3.7%, respectively.
11. Financial Instruments and Derivatives
Cash Concentration — Our cash equivalents are placed in high-quality commercial paper, money market funds and time deposits with major international banks and financial institutions.
Market Risks—We are exposed to market risks, such as changes in commodity pricing, currency exchange rates and interest rates. To manage the volatility related to these exposures, we selectively enter into derivative transactions pursuant to our policies. Designation of the derivatives as fair-value or cash-flow hedges is performed on a specific exposure basis. Hedge accounting may or may not be elected with respect to certain short-term exposures. The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the fair value or cash flows of the underlying exposures being hedged.
Commodity Prices — We are exposed to commodity price volatility related to anticipated purchases of natural gas, crude oil and other raw materials and sales of our products. We selectively use commodity swap, option, and futures contracts with various terms to manage the volatility related to these risks. Such contracts are generally limited to durations of one year or less. Cash-flow hedge accounting may be elected for these derivative transactions. In cases, when the duration of a derivative is short, hedge accounting generally would not be elected. When hedge accounting is not elected, the changes in fair value of these instruments will be recorded in earnings. When hedge accounting is elected, gains and losses on these instruments will be deferred in accumulated other comprehensive income (“AOCI”), to the extent that the hedge remains effective, until the underlying transaction is recognized in earnings.
We have entered into futures contracts with respect to sales of gasoline and heating oil. These futures transactions were not designated as hedges, and the changes in the fair value of the futures contracts were recognized in earnings. In the six months ended June 30, 2011, we settled futures positions for gasoline and heating oil of 280 million gallons and 293 million gallons, respectively, resulting in net gains of $1 million and $4 million, respectively. We settled futures positions for gasoline of 69 million gallons in the two months ended June 30, 2010, resulting in a net loss of $4 million. We settled futures positions for heating oil of 59 million gallons in the two months ended June 30, 2010, resulting in a net loss of less than $1 million. At June 30, 2011, futures contracts for 27 million gallons of gasoline and heating oil in the notional amount of $79 million, maturing in August 2011, were outstanding. The fair values, based on quoted market prices, resulted in a net receivable of $4 million at June 30, 2011 and a net payable of $1 million at December 31, 2010.
We also entered into futures contracts during the six months ended June 30, 2011 with respect to purchases of butane and sales of gasoline. These futures transactions were not designated as hedges. At June 30, 2011, futures contracts for 97 million gallons of butane and 100 million gallons of gasoline in the notional amounts of $10 million and $11 million, respectively, maturing in October, November and December 2011, were outstanding. The fair values, based on quoted market prices, resulted in a net receivable of $1 million at June 30, 2011.
In addition, we have entered into futures positions for crude oil. These futures transactions were not designated as hedges. In the six months ended June 30, 2011, we settled futures positions for crude oil of less than 1 million barrels resulting in a net loss of $1 million. We settled futures positions for crude oil of 2 million barrels during the two months ended June 30, 2010, resulting in net gains of $1 million. At June 30, 2011, futures contracts for 1 million barrels of crude oil in the notional amount of $88 million, maturing in August and September 2011, were outstanding. The fair values, based on quoted market prices, resulted in net payables of $2 million at June 30, 2011.

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We also entered into futures contracts during the two months ended June 30, 2010 with respect to purchases of crude oil and sales of gasoline. These futures transactions were not designated as hedges. We settled futures positions for gasoline of 1 million barrels in the two months ended June 30, 2010, resulting in a net gain of $5 million. We settled futures positions for crude oil of 1 million barrels in the two months ended June 30, 2010, resulting in a net loss of $7 million.
Foreign Currency Rates — We have significant operations in several countries of which functional currencies are primarily the U.S. dollar for U.S. operations and the Euro for operations in Europe. We enter into transactions denominated in other than our functional currency and the functional currencies of our subsidiaries and are, therefore, exposed to foreign currency risk on receivables and payables. We maintain risk management control systems intended to monitor foreign currency risk attributable to both the outstanding foreign currency balances and future commitments. The risk management control systems involve the centralization of foreign currency exposure management, the offsetting of exposures and the estimating of expected impacts of changes in foreign currency rates on our earnings. We enter into foreign currency spot, forward and swap contracts to reduce the effects of our net currency exchange exposures. At June 30, 2011, foreign currency spot, forward and swap contracts in the notional amount of $165 million, maturing in July 2011, were outstanding. The fair values, based on quoted market exchange rates, resulted in a net receivable of $8 million at June 30, 2011 and a net payable of $1 million at December 31, 2010.
For forward and swap contracts that economically hedge recognized monetary assets and liabilities in foreign currencies, no hedge accounting is applied. Changes in the fair value of foreign currency forward and swap contracts are reported in the Consolidated Statements of Income and offset the currency exchange results recognized on the assets and liabilities.
Foreign Currency Gain (Loss) — Other income, net, in the Consolidated Statements of Income reflected a loss of $4 million and a gain of $6 million for the three and six months ended June 30, 2011; a gain of $40 million in the two months ended June 30, 2010; and losses of $54 million and $258 million in the one and four months ended April 30, 2010, respectively.
Interest Rates — Pursuant to the provisions of the Plan of Reorganization, the $201 million liability associated with interest rate swaps designated as cash flow hedges in the notional amount of $2,350 million were discharged on April 30, 2010. The Company discontinued accounting for the interest rate swap as a hedge and, in April 2010, $153 million of unamortized loss was released from accumulated other comprehensive income and recognized in earnings.
Warrants—As of June 30, 2011, we have warrants outstanding to purchase 8,169,148 ordinary shares at an exercise price of $15.90 per ordinary share. As of December 31, 2010 we had 11,508,104 warrants outstanding. The warrants have anti-dilution protection for in-kind stock dividends, stock splits, stock combinations and similar transactions and may be exercised at any time during the period from April 30, 2010 to the close of business on April 30, 2017. Upon an affiliate change of control, the holders of the warrants may put the warrants to LyondellBasell N.V., which would require cash settlement at a price equal to, as applicable, the in-the-money value of the warrants or the Black-Scholes-Merton value of the warrants. The warrants are classified as a liability and are recorded at fair value at the end of each reporting period.
During the second quarter of 2011 the Company’s warrants were thinly traded and as such the Company concluded that the market price alone could not be relied upon to substantiate fair value. Therefore, we also used the Black-Scholes-Merton option pricing model, incorporating management adjusted observable inputs to determine the estimated fair value of each warrant. The market price as quoted at June 30, 2011 and the price calculated using the Black-Scholes-Merton model were not materially different. As a result, we concluded that the use of the quoted market price to determine the fair value is an appropriate measure, but we have now classified them as level 2 in the

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
valuation hierarchy. The fair values of the warrants were determined to be $196 million and $215 million at June 30, 2011 and December 31, 2010, respectively.
The following table summarizes derivative financial instruments outstanding as of June 30, 2011 and December 31, 2010 that are measured at fair value on a recurring basis and the bases used to determine their fair value in the consolidated balance sheets.
                                         
                    Quoted Prices              
                    in Active     Significant        
                    Markets for     Other     Significant  
                    Identical     Observable     Unobservable  
    Notional             Assets     Inputs     Inputs  
Millions of dollars
  Amount     Total     (Level 1)     (Level 2)     (Level 3)  
June 30, 2011:
                                       
Assets at fair value:
                                       
Derivatives:
                                       
Commodities
  $ 100     $ 5     $     $ 5     $  
Foreign currency
    165       8             8        
 
                             
 
  $ 265     $ 13     $     $ 13     $  
 
                             
Liabilities at fair value:
                                       
Derivatives:
                                       
Commodities
  $ 88     $ 2     $     $ 2     $  
Warrants
    130       196             196        
 
                             
 
  $ 218     $ 198     $     $ 198     $  
 
                             
 
                                       
December 31, 2010:
                                       
Liabilities at fair value:
                                       
Derivatives:
                                       
Gasoline and heating oil
  $ 70     $ 1     $     $ 1     $  
Warrants
    183       215       215              
Foreign currency
    93       1             1        
 
                             
 
  $ 346     $ 217     $ 215     $ 2     $  
 
                             
The fair value of all non-derivative financial instruments included in current assets, including cash and cash equivalents, restricted cash and accounts receivable, and accounts payable, approximated the applicable carrying value due to the short maturity of those instruments.
There were no financial instruments measured on a recurring basis using Level 3 inputs during the six months ended June 30, 2011, the two months ended June 30, 2010 and the four months ended April 30, 2010.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table provides the fair value of derivative instruments and their balance sheet classifications:
                   
    Balance Sheet   June 30,     December 31,
Millions of dollars
  Classification   2011     2010
Fair Value of Derivative Instruments Asset Derivatives
                 
Not designated as hedges:
                 
Commodities
  Prepaid expenses and other current assets   $ 5     $
Foreign currency
  Prepaid expenses and other current assets     8      
 
             
 
      $ 13     $
 
             
Fair Value of Derivative Instruments Liability Derivatives
                 
Not designated as hedges:
                 
Warrants
  Accrued liabilities   $ 196     $ 215
Foreign currency
  Accrued liabilities           1
Commodities
  Accrued liabilities     2       1
 
             
 
      $ 198     $ 217
 
             

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table summarizes the pretax effect of derivative instruments charged directly to income:
                                 
    Effect of Financial Instruments  
    Three months ended June 30, 2011  
            Gain (Loss)     Additional        
    Gain (Loss)     Reclassified     Gain (Loss)        
Successor
  Recognized     from AOCI     Recognized     Income Statement  
Millions of dollars
  in AOCI     to Income     in Income     Classification  
Derivatives not designated as hedges:
                               
 
                               
Warrants
  $     $     $ 6     Other income (expense), net
Commodities
                3     Cost of sales
Foreign currency
                1     Other income (expense), net
 
                         
 
  $     $     $ 10          
 
                         
                                 
    May 1 through June 30, 2010  
          Gain (Loss)     Additional         
    Gain (Loss)     Reclassified     Gain (Loss)        
    Recognized     from AOCI     Recognized     Income Statement  
Millions of dollars
  in AOCI     to Income     in Income     Classification  
Derivatives not designated as hedges:
                               
Warrants
  $     $     $ 17     Other income (expense), net
Commodities
                (5 )   Cost of sales
 
                         
 
  $     $     $ 12          
 
                         
 
 
                                 
    April 1 through April 30, 2010  
            Gain (Loss)     Additional        
    Gain (Loss)     Reclassified     Gain (Loss)        
Predecessor
  Recognized     from AOCI     Recognized     Income Statement  
Millions of dollars
  in AOCI     to Income     in Income     Classification  
Derivatives designated as cash-flow hedges:
                               
Interest rate
  $     $ (4 )   $     Interest expense
 
                         
 
                               
Derivatives not designated as hedges:
                               
Commodities
                1     Cost of sales
Foreign currency
                3     Other income (expense), net
 
                         
 
                4          
 
                         
 
  $     $ (4 )   $ 4          
 
                         

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
                                 
    Effect of Financial Instruments  
    Six Months Ended June 30, 2011  
          Gain (Loss)     Additional         
    Gain (Loss)     Reclassified     Gain (Loss)        
Successor
  Recognized     from AOCI     Recognized     Income Statement  
Millions of dollars
  in AOCI     to Income     in Income     Classification  
Derivatives not designated as hedges:
                               
Warrants
  $     $     $ (53 )   Other income
(expense), net
Commodities
                9     Cost of sales
Foreign currency
                (1 )   Other income
(expense), net
 
                         
 
  $     $     $ (45 )        
 
                         
                                 
    May 1 through June 30, 2010  
            Gain (Loss)     Additional        
    Gain (Loss)     Reclassified     Gain (Loss)        
    Recognized     from AOCI     Recognized     Income Statement  
Millions of dollars
  in AOCI     to Income     in Income     Classification  
Derivatives not designated as hedges:
                               
Warrants
                17     Other income (expense), net
Commodities
                (5 )   Cost of sales
 
                         
 
  $     $     $ 12          
 
                         
 
                                 
    January 1 through April 30, 2010  
            Gain (Loss)     Additional        
    Gain (Loss)     Reclassified     Gain (Loss)        
Predecessor
  Recognized     from AOCI     Recognized     Income Statement  
Millions of dollars
  in AOCI     to Income     in Income     Classification  
Derivatives designated as cash-flow hedges:
                               
Interest rate
  $     $ (17 )   $     Interest expense
 
                         
 
                               
Derivatives not designated as hedges:
                               
Commodities
                6     Cost of sales
Foreign currency
                8     Other income (expense), net
 
                         
 
                14          
 
                         
 
  $     $ (17 )   $ 14          
 
                         

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The carrying value and the estimated fair value of our non-derivative financial instruments are shown in the table below:
                                 
    June 30, 2011     December 31, 2010  
    Carrying     Fair     Carrying     Fair  
Millions of dollars
  Value     Value     Value     Value  
Short and long-term debt, including current maturities
  $ 5,862     $ 6,515     $ 6,079     $ 6,819  
 
                       
The following table summarizes the bases used to measure certain liabilities at fair value which are recorded at historical cost or amortized cost, in the consolidated balance sheet:
                                         
            Fair Value Measurement  
                    Quoted prices     Significant        
    Carrying             in active     other     Significant  
    Value     Fair Value     markets for     observable     unobservable  
    June 30,     June 30,     identical assets     inputs     inputs  
Millions of dollars
  2011     2011     (Level 1)     (Level 2)     (Level 3)  
Short term and long-term debt, including current maturities
  $ 5,862     $ 6,515     $     $ 6,471     $ 44  
 
                             
The following table is a reconciliation of the beginning and ending balances of Level 1 and Level 2 inputs for financial instruments measured at fair value on a recurring basis:
                 
    Fair Value     Fair Value  
    Measurement     Measurement  
    Using Quoted     Using  
    prices in active     Significant  
    markets for     Other  
    identical assets     Observable  
Millions of dollars
  (Level 1)     Inputs (Level 2)  
Balance at January 1, 2011
  $ 215     $  
Purchases, sales, issuances, and settlements
    (49 )     (23 )
Transfers in and/or out of Levels 1 and 2
    (225 )     225  
Total gains or losses (realized/unrealized)
    59       (6 )
 
           
Balance at June 30, 2011
  $     $ 196  
 
           
For liabilities classified as Level 1, the fair value is measured using quoted prices in active markets. The total fair value is either the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs. For liabilities classified as Level 2, fair value is based on the price a market participant would pay for the security, adjusted for the terms specific to that asset and

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
liability. Broker quotes were obtained from well established and recognized vendors of market data for debt valuations. The inputs for liabilities classified as Level 3 reflect our assessment of the assumptions that a market participant would use in determining the price of the asset or liability, including our liquidity risk at June 30, 2011.
The fair values of Level 3 instruments are determined using pricing data similar to that used in Level 2 financial instruments described above, and reflect adjustments for less liquid markets or longer contractual terms. For these Level 3 financial instruments, pricing data obtained from third party pricing sources is adjusted for the liquidity of the underlying over the contractual terms to develop an estimated price that market participants would use. Our valuation of these instruments considers specific contractual terms, present value concepts and other internal assumptions related to (i) contract maturities that extend beyond the periods in which quoted market prices are available; (ii) the uniqueness of the contract terms; and (iii) our creditworthiness or that of our counterparties (adjusted for collateral related to our asset positions). Based on our calculations, we expect that a significant portion of other debts will react in a generally proportionate manner to changes in the benchmark interest rate. Accordingly, these financial instruments are fair valued at par and are classified as Level 3.
12. Pension and Other Post-retirement Benefits
Net periodic pension benefits included the following cost components:
                                             
    U.S. Plans  
    Successor       Predecessor  
    Three months                            
    ended     Six months ended     May 1 through       April 1 through     January 1 through  
    June 30,     June 30,     June 30,       April 30,     April 30,  
Millions of dollars
  2011     2011     2010       2010     2010  
Service cost
  $ 9     $ 20     $ 7       $ 4     $ 15  
Interest cost
    22       45       16         8       31  
Expected return on plan assets
    (26 )     (52 )     (15 )       (7 )     (31 )
Amortization
                              3  
 
                               
Net periodic benefit costs
  $ 5     $ 13     $ 8       $ 5     $ 18  
 
                               
 
    Non-U.S. Plans  
    Successor       Predecessor  
    Three months                            
    ended     Six months ended     May 1 through       April 1 through     January 1 through  
    June 30,     June 30,     June 30,       April 30,     April 30,  
Millions of dollars
  2011     2011     2010       2010     2010  
Service cost
  $ 12     $ 21     $ 4       $     $ 9  
Interest cost
    17       29       9         4       17  
Expected return on plan assets
    (16 )     (23 )     (5 )       (3 )     (10 )
Settlement and curtailment loss
    4       6                      
Amortization
    2       2               1       1  
 
                               
Net periodic benefit costs
  $ 19     $ 35     $ 8       $ 2     $ 17  
 
                               

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Net periodic other post-retirement benefits included the following cost components:
                                                
    U.S. Plans  
    Successor     Predecessor  
    Three months                            
    ended     Six months ended     May 1 through     April 1 through       January 1 through  
    June 30,     June 30,     June 30,     April 30,       April 30,  
Millions of dollars
  2011     2011     2010     2010       2010  
Service cost
  $ 1     $ 5     $ 1     $ 1       $ 2  
Interest cost
    4       8       3       1         5  
Amortization
                      (1 )       (3 )
 
                               
Net periodic benefit costs
  $ 5     $ 13     $ 4     $ 1       $ 4  
 
                               
                                                
    Non-U.S. Plans  
    Successor     Predecessor  
    Three months                            
    ended     Six months ended     May 1 through     April 1 through       January 1 through  
    June 30,     June 30,     June 30,     April 30,       April 30,  
Millions of dollars
  2011     2011     2010     2010       2010  
Service cost
  $ 3     $ 5     $     $       $  
Interest cost
                      1         1  
 
                               
Net periodic benefit costs
  $ 3     $ 5     $     $ 1       $ 1  
 
                               
The Company contributed $178 million to its pension plans during the six months ended June 30, 2011, which consisted of $176 million and $2 million to its U.S. and non-U.S. pension plans, respectively.
Employees in the U.S. are eligible to participate in defined contribution plans (“Employee Savings Plans”) by contributing a portion of their compensation. We match a part of the employees’ contribution.
13. Income Taxes
Our effective income tax rate for the first six months of 2011 was 30.8% resulting in tax expense of $651 million on pretax income of $2,114 million. The 2011 effective income tax rate was lower than the U.S. statutory 35% rate primarily due to the effect of pretax income in countries with lower statutory tax rates and tax deductible foreign currency losses which were partially offset by the non-deductible expenses related to stock warrants. In the two month Successor period ended June 30, 2010, we recorded a tax provision of $28 million, representing an effective tax rate of 7.5% on pre-tax income of $375 million. In the four months ended April 30, 2010, the Predecessor recorded a tax benefit of $1,315 million, representing an effective tax rate of (18.3)% on pre-tax income of $7,189 million. The provision for the 2010 Successor period differs from the U.S. statutory rate of 35% primarily due to the fact that in several countries the Company generated either income with no tax expense or losses where we recorded no tax expense or benefit due to valuation allowances on our deferred tax assets in those countries.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
14. Commitments and Contingencies
Commitments — We have various purchase commitments for materials, supplies and services resulting from the ordinary course of business. These commitments, which are at prevailing market prices, are generally for quantities required for the operation of our businesses and are designed to assure sources of supply not expected to be in excess of normal requirements. Our capital expenditure commitments at June 30, 2011 were in the normal course of business.
Financial Assurance Instruments—We have obtained letters of credit, performance and surety bonds and have issued financial and performance guarantees to support trade payables, potential liabilities and other obligations. Considering the frequency of claims made against the financial instruments we use to support our obligations, and the magnitude of those financial instruments in light of our current financial position, management does not expect that any claims against or draws on these instruments would have a material adverse effect on our consolidated financial statements. We have not experienced any unmanageable difficulty in obtaining the required financial assurance instruments for our current operations.
Environmental Remediation—Our accrued liability for future environmental remediation costs at current and former plant sites and other remediation sites totaled $129 million and $107 million as of June 30, 2011 and December 31, 2010, respectively. At June 30, 2011, the accrued liabilities for individual sites range from less than $1 million to $39 million. The remediation expenditures are expected to occur over a number of years, and not to be concentrated in any single year. In our opinion, it is reasonably possible that losses in excess of the liabilities recorded may have been incurred. However, we cannot estimate any amount or range of such possible additional losses. New information about sites, new technology or future developments such as involvement in investigations by regulatory agencies, could require us to reassess our potential exposure related to environmental matters.
The following table summarizes the activity in the Company’s accrued environmental liability included in “Accrued liabilities” and “Other liabilities”:
                             
    Successor       Predecessor  
            May 1          
    Six Months Ended     through       January 1 through  
    June 30,     June 30,       April 30,  
Millions of dollars
  2011     2010       2010  
Balance at beginning of period
  $ 107     $ 93       $ 89  
Additional provisions
    20               11  
Amounts paid
    (4 )     (1 )       (2 )
Foreign exchange effects
    6       (4 )       (5 )
 
                   
Balance at end of period
  $ 129     $ 88       $ 93  
 
                   
Litigation and Other Matters
BASF Lawsuit
On April 12, 2005, BASF Corporation (“BASF”) filed a lawsuit against Lyondell Chemical in the Superior Court of New Jersey, Morris County, asserting various claims relating to alleged breaches of a propylene oxide toll manufacturing contract and seeking damages in excess of $100 million. Lyondell Chemical denied breaching the contract and argued that at most it owed BASF $22.5 million, which it has paid. On August 13, 2007, a jury

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
returned a verdict in favor of BASF in the amount of approximately $170 million (inclusive of the $22.5 million refund). On October 3, 2007, the judge in the state court case determined that prejudgment interest on the verdict amounted to $36 million and issued a final judgment. Lyondell Chemical appealed the judgment and has posted an appeal bond, which is collateralized by a $200 million letter of credit.
On April 21, 2010, oral arguments in the appeal were held before the Appellate Division and, on December 28, 2010, the judgment was reversed and the case was remanded for a new trial, which will be in New Jersey state court. Based on the remaining legal and fact issues to be decided, management has estimated the reasonably possible range of loss, excluding interest, to be between $0 and $135 million.
Access Indemnity Demand
On December 20, 2010, one of our subsidiaries received demand letters from affiliates of Access Industries, (collectively, “Access”) a more than five percent shareholder of the Company. We conducted an initial investigation of the facts underlying the demand letters and engaged in discussions with Access. We requested that Access withdraw its demands with prejudice and, and on January 17, 2011, Access declined to withdraw the demands, with or without prejudice.
Specifically, Access affiliates Nell Limited (“Nell”) and BI S.á.r.l. (“BI”) have demanded that LyondellBasell Industries Holdings B.V., a wholly owned subsidiary of the Company (“LBIH”), indemnify them and their shareholders, members, affiliates, officers, directors, employees and other related parties for all losses, including attorney’s fees and expenses, arising out of a pending lawsuit styled Edward S. Weisfelner, as Litigation Trustee of the LB Litigation Trust v. Leonard Blavatnik, et al., Adversary Proceeding No. 09-1375 (REG), in the United States Bankruptcy Court, Southern District of New York.
In the Weisfelner lawsuit, the plaintiffs seek to recover damages from numerous parties, including Nell, Access and their affiliates. The damages sought from Nell, Access and their affiliates include, among other things, the return of all amounts earned by them related to their acquisition of shares of Lyondell Chemical prior to its acquisition by Basell AF S.C.A. in December 2007, distributions by Basell AF S.C.A. to its shareholders before it acquired Lyondell Chemical, and management and transaction fees and expenses. This trial is currently scheduled for October 2011.
Nell and BI have also demanded that LBIH pay $50 million in management fees for 2009 and 2010 and that LBIH pay other unspecified amounts relating to advice purportedly given in connection with financing and other strategic transactions.
Nell and BI assert that LBIH’s responsibility for indemnity and the claimed fees and expenses arise out of a management agreement entered into on December 11, 2007, between Nell and Basell AF S.C.A. They assert that LBIH, as a former subsidiary of Basell AF S.C.A., is jointly and severally liable for Basell AF S.C.A.’s obligations under the agreement, notwithstanding that LBIH was not a signatory to the agreement and the liabilities of Basell AF S.C.A., which was a signatory, were discharged in the LyondellBasell bankruptcy proceedings.
On June 26, 2009, Nell filed a proof of claim in Bankruptcy Court against LyondellBasell AF (successor to Basell AF S.C.A.) seeking “no less than” $723 thousand for amounts allegedly owed under the 2007 management agreement. On April 27, 2011, Lyondell Chemical filed an objection to Nell’s claim and, together with LyondellBasell N.V. (successor to LyondellBasell AF) and LBIH, brought a declaratory judgment action in the Bankruptcy Court for a determination that Nell and BI’s demands are not valid. By a Joint Stipulated Order dated June 13, 2011, the declaratory judgment action is stayed pending the outcome of the Weisfelner lawsuit.

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
We do not believe that the management agreement is in effect or that the Company, LBIH, or any other Company-affiliated entity owes any obligations under the management agreement. We intend to defend vigorously any proceedings, claims or demands that may be asserted.
We cannot at this time estimate the reasonably possible loss or range of loss that Nell, Access, or their affiliates may incur as a result of the lawsuit, and therefore we cannot at this time estimate the reasonably possible loss or range of loss that Nell, Access, or their affiliates may seek from LBIH by way of indemnity.
Indemnification—We are parties to various indemnification arrangements, including arrangements entered into in connection with acquisitions, divestitures and the formation of joint ventures. Pursuant to these arrangements, we provide indemnification to and/or receive indemnification from other parties in connection with liabilities that may arise in connection with the transactions and in connection with activities prior to completion of the transactions. These indemnification arrangements typically include provisions pertaining to third party claims relating to environmental and tax matters and various types of litigation. As of June 30, 2011, we had not accrued any significant amounts for our indemnification obligations, and we are not aware of other circumstances that would likely lead to significant future indemnification obligations. We cannot determine the potential amount of future payments under the indemnification arrangements until events arise that would trigger a liability under the arrangements.
In addition, certain third parties entered into agreements with the Predecessor, LyondellBasell AF, to indemnify LyondellBasell AF for a significant portion of the potential obligations that could arise with respect to costs relating to contamination at various sites in Europe. These indemnity obligations are currently in dispute. We recognized a pretax charge of $64 million as a change in estimate in the third quarter 2010 related to the dispute, which arose during that period.
As part of our technology licensing contracts, we give indemnifications to our licensees for liabilities arising from possible patent infringement claims with respect to proprietary licensed technology. Such indemnifications have a stated maximum amount and generally cover a period of five to ten years.
Other—We have identified an agreement related to a former project in Kazakhstan under which a payment was made that raises compliance concerns under the U.S. Foreign Corrupt Practices Act (the “FCPA”). We have engaged outside counsel to investigate these activities, under the oversight of the Audit Committee of the Supervisory Board, and to evaluate internal controls and compliance policies and procedures. We made a voluntary disclosure of these matters to the U.S. Department of Justice and are cooperating fully with that agency. We cannot predict the ultimate outcome of these matters at this time since our investigations are ongoing. In this respect, we may not have conducted business in compliance with the FCPA and may not have had policies and procedures in place adequate to ensure compliance. Therefore, we cannot reasonably estimate a range of liability for any potential penalty resulting from these matters. Violations of these laws could result in criminal and civil liabilities and other forms of relief that could be material to us.
Certain of our non-U.S. subsidiaries conduct or have conducted business in countries subject to U.S. economic sanctions, including Iran. U.S. and European laws and regulations prohibit certain persons from engaging in business activities, in whole or in part, with sanctioned countries, organizations and individuals. We have made voluntary disclosure of these matters to the U.S. Treasury Department and intend to cooperate fully with that agency. The ultimate outcome of this matter cannot be predicted at this time because our investigations are ongoing. Therefore, we cannot reasonably estimate a range of liability for any potential penalty resulting from these matters. In addition, we have made the decision to cease all business with the government, entities and individuals in Iran, Syria and Sudan. We have notified our counterparties in these countries of our decision and may be subject to legal actions to enforce agreements with the counterparties. These business activities present a potential risk that could subject the Company to civil and criminal penalties as well as private legal proceedings that could be material to us.

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
We cannot predict the ultimate outcome of this matter at this time because our investigations and withdrawal activities are ongoing.
We and our joint ventures are, from time to time, defendants in lawsuits and other commercial disputes, some of which are not covered by insurance. Many of these suits make no specific claim for relief. Although final determination of any liability and resulting financial impact with respect to any such matters cannot be ascertained with any degree of certainty, we do not believe that any ultimate uninsured liability resulting from these matters will, individually or in the aggregate, have a material adverse effect on the financial position, liquidity or results of operations of LyondellBasell N.V.
General—In our opinion, the matters discussed in this note are not expected to have a material adverse effect on the financial position or liquidity of LyondellBasell N.V. However, the adverse resolution in any reporting period of one or more of these matters could have a material impact on our results of operations for that period, which may be mitigated by contribution or indemnification obligations of others, or by any insurance coverage that may be available.
15. Stockholders’ Equity and Non-Controlling Interests
Dividend distribution — On May 5, 2011, shareholders approved the payment of a dividend of $0.10 per ordinary share at the Annual General Meeting of Shareholders in Rotterdam, Netherlands. The dividend, totaling $57 million, was paid May 26, 2011 to shareholders of record on May 5, 2011. On August 3, 2011, the Management Board of the Company recommended the payment of a dividend of $0.20 per share. The Supervisory Board has authorized and directed the Management Board to take action necessary to pay the dividend. Subject to the Management Board’s adoption of a resolution declaring the dividend, it is expected that the dividend will be paid on September 7, 2011 to shareholders of record as of August 17, 2011.
We are subject to restrictive covenants that limit our ability to pay cumulative dividends to the sum of a) the greater of (i) $50 million per year and (ii) in general, 50 percent of net income for the period from March 31, 2012 until the end of the most recently completed fiscal quarter for which financial statements are available, plus b) dividends not to exceed the greater of (i) $350 million and (ii) 1.75% of consolidated tangible assets at the time the dividend is paid.
Ordinary shares—The changes in the outstanding amounts of ordinary shares issued and treasury shares were as follows:
         
Ordinary shares issued:
       
Balance at January 1, 2011
    565,676,222  
Share-based compensation
    209,557  
Warrants exercised
    2,928,918  
 
     
Balance at June 30, 2011
    568,814,697  
 
     
 
       
Ordinary shares held as treasury shares:
       
Balance at January 1, 2011
    1,122,651  
Warrants exercised
    410,039  
Share-based compensation
    (209,013 )
 
     
Balance at June 30, 2011
    1,323,677  
 
     

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Non-controlling Interests — Losses attributable to non-controlling interests consisted of the following components:
                             
    Successor       Predecessor  
    Six months ended     May 1 through       January 1 through  
    June 30,     June 30,       April 30,  
Millions of dollars
  2011     2010       2010  
Non-controlling interests’ comprehensive income (loss):
                         
Net income (loss) attributable to non-controlling interests
  $ 7     $ 9       $ (53 )
Fixed operating fees paid to Lyondell Chemical by the PO/SM II partners
    (11 )     (4 )       (7 )
 
                   
Comprehensive loss attributable to non-controlling interests
  $ (4 )   $ 5       $ (60 )
 
                   
16. Per Share Data
Basic earnings per share for the periods subsequent to April 30, 2010 are based upon the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per share includes the effect of certain stock options. The Company has unvested restricted stock and restricted stock units that are considered participating securities for earnings per share. The outstanding warrants were anti-dilutive for the six months ended June 30, 2011.

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Earnings per share data and dividends declared per share of common stock were as follows:
                         
    Three Months Ended     Six Months Ended     May 1 through  
    June 30,     June 30,     June 30,  
Millions of dollars   2011     2011     2010  
Basic:
                       
Net income
  $ 803     $ 1,463     $ 347  
Less: net loss attributable to non-controlling interests
    1       4       (5 )
 
                 
Net income attributable to LyondellBasell N.V.
    804       1,467       342  
Net income attributable to participating securities
    (5 )     (9 )     (2 )
 
                 
Net income attributable to common stockholders
  $ 799     $ 1,458     $ 340  
 
                 
 
                       
Diluted:
                       
Net income
  $ 803     $ 1,463     $ 347  
Less: net loss attributable to non-controlling interests
    1       4       (5 )
 
                 
Net income attributable to LyondellBasell N.V.
    804       1,467       342  
Net income attributable to participating securities
    (5 )     (9 )     (2 )
Effect of dilutive securities — warrants
    (6 )            
 
                 
Net income attributable to common stockholders
  $ 793     $ 1,458     $ 340  
 
                 
 
                       
Millions of shares                        
Basic weighted average common stock outstanding
    566       566       564  
Effect of dilutive securities:
                       
Warrants
    6              
Stock options
    3       3        
 
                 
Dilutive potential shares
    575       569       564  
 
                 
 
                       
Earnings per share:
                       
Basic
  $ 1.41     $ 2.58     $ 0.60  
 
                 
Diluted
  $ 1.38     $ 2.56     $ 0.60  
 
                 
Anti-dilutive stock options, restricted stock, restricted stock units and warrants in millions
          8.2       8.4  
 
                 
Dividends declared per share of common stock
  $ 0.10     $ 0.10     $  
 
                 

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
17. Segment and Related Information
We operate in five segments:
    Olefins and Polyolefins—Americas, primarily manufacturing and marketing of olefins, including ethylene and its co-products, primarily propylene, butadiene, and aromatics, which include benzene and toluene, as well as ethanol; and polyolefins, including polyethylene, comprising high density polyethylene (“HDPE”), low density polyethylene (“LDPE”) and linear low density polyethylene (“LLDPE”), and polypropylene; and Catalloy process resins;
 
    Olefins and Polyolefins—Europe, Asia, International (“O&P—EAI”), primarily manufacturing and marketing of olefins, including ethylene and its co-products, primarily propylene and butadiene; polyolefins, including polyethylene, comprising HDPE, LDPE, and polypropylene; polypropylene-based compounds, materials and alloys (“PP Compounds”), Catalloy process resins and polybutene-1 polymers;
 
    Intermediates and Derivatives (“I&D”), primarily manufacturing and marketing of propylene oxide (“PO”); PO co-products, including styrene and the TBA intermediates tertiary butyl alcohol (“TBA”), isobutylene and tertiary butyl hydroperoxide; PO derivatives, including propylene glycol, propylene glycol ethers and butanediol; ethylene derivatives, including ethylene glycol, ethylene oxide (“EO”), and other EO derivatives; acetyls, including vinyl acetate monomer, acetic acid and methanol and fragrance and flavor chemicals;
 
    Refining and Oxyfuels, primarily manufacturing and marketing of refined petroleum products, including gasoline, ultra-low sulfur diesel, jet fuel, lubricants (“lube oils”), alkylate, and oxygenated fuels, or oxyfuels, such as methyl tertiary butyl ether (“MTBE”) and ethyl tertiary butyl ether (“ETBE”); and
 
    Technology, primarily licensing of polyolefin process technologies and supply of polyolefin catalysts and advanced catalysts.

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Summarized financial information concerning reportable segments is shown in the following table for the periods presented:
                                                         
    Successor  
            Olefins                                  
            and                                  
    Olefins     Polyolefins                                  
Millions of dollars   and     -Europe,             Refining                    
Three Months Ended   Polyolefins     Asia &     Intermediates     and                    
June 30, 2011   -Americas     International     & Derivatives     Oxyfuels     Technology     Other     Total  
Sales and other operating revenues:
                                                       
Customers
  $ 2,825     $ 4,116     $ 1,769     $ 5,223     $ 103     $ 6     $ 14,042  
Intersegment
    1,185       148       8       610       23       (1,974 )      
 
                                         
 
    4,010       4,264       1,777       5,833       126       (1,968 )     14,042  
 
                                                       
Operating income (loss)
    509       207       235       296       23       (5 )     1,265  
Income from equity investments
    8       61       4                         73  
                                                         
    Successor  
            Olefins                                  
            and                                  
    Olefins     Polyolefins                                  
Millions of dollars   and     -Europe,             Refining                    
Six Months Ended   Polyolefins     Asia &     Intermediates     and                    
June 30, 2011   -Americas     International     & Derivatives     Oxyfuels     Technology     Other     Total  
Sales and other operating revenues:
                                                       
Customers
  $ 5,260     $ 7,969     $ 3,440     $ 9,395     $ 212     $ 18     $ 26,294  
Intersegment
    2,322       239       29       1,158       53       (3,801 )      
 
                                         
 
    7,582       8,208       3,469       10,553       265       (3,783 )     26,294  
 
                                                       
Operating income (loss)
    930       386       469       460       89       (4 )     2,330  
Income from equity investments
    11       112       8                         131  

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
                                                         
    Successor  
            Olefins                                  
            and                                  
    Olefins     Polyolefins                                  
Millions of dollars   and     -Europe,             Refining                    
May 1 through   Polyolefins     Asia &     Intermediates     and                    
June 30, 2010   -Americas     International     & Derivatives     Oxyfuels     Technology     Other     Total  
Sales and other operating revenues:
                                                       
Customers
  $ 1,500     $ 2,098     $ 940     $ 2,178     $ 52     $ 4     $ 6,772  
Intersegment
    504       42             225       23       (794 )      
 
                                         
 
    2,004       2,140       940       2,403       75       (790 )     6,772  
 
                                                       
Operating income
    149       114       109       14       23       13       422  
Income (loss) from equity investments
    3       25       (1 )                       27  
                                                         
    Predecessor  
            Olefins                                  
            and                                  
    Olefins     Polyolefins                                  
Millions of dollars   and     -Europe,             Refining                    
April 1 through   Polyolefins     Asia &     Intermediates     and                    
April 30, 2010   -Americas     International     & Derivatives     Oxyfuels     Technology     Other     Total  
Sales and other operating revenues:
                                                       
Customers
  $ 885     $ 1,059     $ 504     $ 1,232     $ 22     $ 10     $ 3,712  
Intersegment
    278       7             101       13       (399 )      
 
                                         
 
    1,163       1,066       504       1,333       35       (389 )     3,712  
 
                                                       
Segment operating income
    175       44       34       29       8       18       308  
Current cost adjustment
                                                    15  
 
                                                     
Operating income
                                                    323  
Income from equity investments
    1       28                               29  

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
                                                         
    Predecessor  
            Olefins                                  
            and                                  
    Olefins     Polyolefins                                  
Millions of dollars   and     -Europe,             Refining                    
January 1 through   Polyolefins     Asia &     Intermediates     and                    
April 30, 2010   -Americas     International     & Derivatives     Oxyfuels     Technology     Other     Total  
Sales and other operating revenues:
                                                       
Customers
  $ 3,220     $ 4,018     $ 1,820     $ 4,293     $ 104     $ 12     $ 13,467  
Intersegment
    963       87             455       41       (1,546 )      
 
                                         
 
    4,183       4,105       1,820       4,748       145       (1,534 )     13,467  
 
                                                       
Segment operating income (loss)
    320       115       157       (99 )     39       (41 )     491  
Current cost adjustment
                                                    199  
 
                                                     
Operating income
                                                    690  
Income (loss) from equity investments
    5       80       (1 )                       84  
Sales and other operating revenues and operating income (loss) in the “Other” column above include elimination of intersegment transactions.
18. Supplemental Guarantor Information
LyondellBasell N.V. has jointly and severally, and fully and unconditionally guaranteed the Senior Secured Notes issued by Lyondell Chemical. Subject to certain exceptions, each of our existing and future wholly owned U.S. restricted subsidiaries (other than Lyondell Chemical, as issuer), other than any such subsidiary that is a subsidiary of a non-U.S. subsidiary (the “Subsidiary Guarantors” and, together with LyondellBasell N.V., the “Guarantors”) has also guaranteed the Senior Secured Notes. Each Subsidiary Guarantor is 100% owned by LyondellBasell N.V.
There are no significant restrictions that would impede the Guarantors from obtaining funds by dividend or loan from their subsidiaries. Subsidiaries are generally prohibited from entering into arrangements that would limit their ability to make dividends to or enter into loans with the Guarantors.
As a result of these guarantee arrangements, we are required to present the following condensed consolidating financial information. In this note, LCC refers to Lyondell Chemical Company without its subsidiaries.

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
BALANCE SHEET
As of June 30, 2011
                                                 
    Successor  
                                            Consolidated  
    LyondellBasell                     Non-             LyondellBasell  
Millions of dollars   N.V.     LCC     Guarantors     Guarantors     Eliminations     N.V.  
Cash and cash equivalents
  $     $ 17     $ 2,149     $ 2,521     $     $ 4,687  
Restricted cash
                197       53             250  
Accounts receivable
          352       1,592       2,957             4,901  
Accounts receivable — affiliates
    657       2,907       3,078       1,378       (8,020 )      
Inventories
          600       2,592       2,385             5,577  
Notes receivable — affiliates
    91       3       440       42       (576 )      
Other current assets
    2       309       160       677       (50 )     1,098  
Property, plant and equipment, net
          375       2,945       4,249             7,569  
Investments in subsidiaries
    14,105       12,197       5,170             (31,472 )      
Other investments and long-term receivables
                      2,235       (63 )     2,172  
Notes receivable — affiliates
                      500       (500 )      
Other assets, net
          756       1,135       732       (402 )     2,221  
 
                                   
Total assets
  $ 14,855     $ 17,516     $ 19,458     $ 17,729     $ (41,083 )   $ 28,475  
 
                                   
 
                                               
Current maturities of long-term debt
  $     $     $     $ 2     $     $ 2  
Short-term debt
                11       39             50  
Notes payable — affiliates
    13       490       8       84       (595 )      
Accounts payable
          233       1,292       2,474             3,999  
Accounts payable — affiliates
    531       4,661       1,764       1,045       (8,001 )      
Other current liabilities
    197       368       596       819       (52 )     1,928  
Long-term debt
          5,507       3       303             5,813  
Notes payable — affiliates
    535       3,758       9,956             (14,249 )      
Other liabilities
          265       700       1,145             2,110  
Deferred income taxes
                800       548       (401 )     947  
Company share of stockholders’ equity
    13,579       2,234       4,328       11,223       (17,785 )     13,579  
Non-controlling interests
                      47             47  
 
                                   
Total liabilities and stockholders’ equity
  $ 14,855     $ 17,516     $ 19,458     $ 17,729     $ (41,083 )   $ 28,475  
 
                                   

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
BALANCE SHEET
As of December 31, 2010
                                                 
    Successor  
                                            Consolidated  
    LyondellBasell                     Non-             LyondellBasell  
Millions of dollars   N.V.     LCC     Guarantors     Guarantors     Eliminations     N.V.  
Cash and cash equivalents
  $     $ 25     $ 2,086     $ 2,111     $     $ 4,222  
Restricted cash
                      11             11  
Accounts receivable
          313       1,108       2,326             3,747  
Accounts receivable — affiliates
    636       2,727       2,593       1,444       (7,400 )      
Inventories
          489       2,560       1,775             4,824  
Notes receivable — affiliates
    98       444       59       110       (711 )      
Other current assets
          287       133       601       (46 )     975  
Property, plant and equipment, net
          383       2,746       4,061             7,190  
Investments in subsidiaries
    12,070       10,489       5,122             (27,681 )      
Other investments and long-term receivables
          2       4       2,174       (75 )     2,105  
Notes receivable — affiliates
                      500       (500 )      
Other assets, net
    13       1,054       1,170       688       (697 )     2,228  
 
                                   
Total assets
  $ 12,817     $ 16,213     $ 17,581     $ 15,801     $ (37,110 )   $ 25,302  
 
                                   
 
                                               
Current maturities of long-term debt
  $     $     $     $ 4     $     $ 4  
Short-term debt
                12       30             42  
Notes payable — affiliates
    1       74       498       178       (751 )      
Accounts payable
          160       741       1,860             2,761  
Accounts payable — affiliates
    530       4,363       1,504       950       (7,347 )      
Other current liabilities
    216       418       674       764       (48 )     2,024  
Long-term debt
          5,722       3       311             6,036  
Notes payable — affiliates
    535       3,672       9,124       1       (13,332 )      
Other liabilities
          413       699       1,071             2,183  
Deferred income taxes
                832       522       (698 )     656  
Company share of stockholders’ equity
    11,535       1,391       3,494       10,049       (14,934 )     11,535  
Non-controlling interests
                      61             61  
 
                                   
Total liabilities and stockholders’ equity
  $ 12,817     $ 16,213     $ 17,581     $ 15,801     $ (37,110 )   $ 25,302  
 
                                   

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
STATEMENT OF INCOME
Three months ended June 30, 2011
                                                 
    Successor  
                                            Consolidated  
    LyondellBasell                     Non-             LyondellBasell  
Millions of dollars   N.V.     LCC     Guarantors     Guarantors     Eliminations     N.V.  
 
                                   
Sales and other operating revenues
  $     $ 1,230     $ 7,691     $ 6,326     $ (1,205 )   $ 14,042  
Cost of sales
    2       1,135       6,766       5,776       (1,205 )     12,474  
Selling, general and administrative expenses
    2       85       11       149             247  
Research and development expenses
          16       7       33             56  
 
                                   
Operating income (loss)
    (4 )     (6 )     907       368             1,265  
Interest income (expense), net
    7       (178 )     4       (1 )     4       (164 )
Other income (expense), net
    12       (7 )     37       7       (4 )     45  
Income (loss) from equity investments
    829       592       (112 )     73       (1,309 )     73  
Reorganization items
          (19 )     (8 )     (1 )           (28 )
(Provision for) benefit from income taxes
    (40 )     84       (354 )     (78 )           (388 )
 
                                   
Net income
    804       466       474       368       (1,309 )     803  
Less: net loss attributable to non-controlling interests
                      1             1  
 
                                   
Net income attributable to the Company
  $ 804     $ 466     $ 474     $ 369     $ (1,309 )   $ 804  
 
                                   

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
STATEMENT OF INCOME
Six Months Ended June 30, 2011
                                                 
    Successor  
                                            Consolidated  
    LyondellBasell                     Non-             LyondellBasell  
Millions of dollars   N.V.     LCC     Guarantors     Guarantors     Eliminations     N.V.  
Sales and other operating revenues
  $     $ 2,438     $ 13,770     $ 12,298     $ (2,212 )   $ 26,294  
Cost of sales
    2       2,249       12,085       11,293       (2,212 )     23,417  
Selling, general and administrative expenses
    5       162       29       262             458  
Research and development expenses
          16       14       59             89  
 
                                   
Operating income (loss)
    (7 )     11       1,642       684             2,330  
Interest income (expense), net
    15       (344 )     8       (2 )     4       (319 )
Other income (expense), net
    (42 )     (23 )     31       40       (4 )     2  
Income (loss) from equity investments
    1,517       1,070       (192 )     131       (2,395 )     131  
Reorganization items
          (20 )     (8 )     (2 )           (30 )
(Provision for) benefit from income taxes
    (16 )     141       (618 )     (158 )           (651 )
 
                                   
Net income
    1,467       835       863       693       (2,395 )     1,463  
Less: net loss attributable to non-controlling interests
                      4             4  
 
                                   
Net income attributable to the Company
  $ 1,467     $ 835     $ 863     $ 697     $ (2,395 )   $ 1,467  
 
                                   

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
STATEMENT OF INCOME
May 1 through June 30, 2010
                                                 
    Predecessor  
                                            Consolidated  
    LyondellBasell                     Non-             LyondellBasell  
Millions of dollars   AF     LCC     Guarantors     Guarantors     Eliminations     AF  
Sales and other operating revenues
  $     $ 687     $ 3,420     $ 3,388     $ (723 )   $ 6,772  
Cost of sales
    7       704       3,161       3,049       (723 )     6,198  
Selling, general and administrative expenses
    (2 )     24       40       67             129  
Research and development expenses
          3       4       16             23  
 
                                   
Operating income (loss)
    (5 )     (44 )     215       256             422  
Interest income
                                               
(expense), net
    9       (121 )     (3 )     (5 )           (120 )
Other income (expense), net
    16       (9 )           47             54  
Income (loss) from equity investments
    325       161       (94 )     28       (393 )     27  
Reorganization items
          (5 )           (3 )           (8 )
(Provision for) benefit from income taxes
          52       (75 )     (5 )           (28 )
 
                                   
Net income (loss)
    345       34       43       318       (393 )     347  
Less: net income attributable to non-controlling interests
    (3 )                 (2 )           (5 )
 
                                   
Net income attributable to the Company
  $ 342     $ 34     $ 43     $ 316     $ (393 )   $ 342  
 
                                   

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
STATEMENT OF INCOME
April 1 through April 30, 2010
                                                 
    Predecessor  
                                            Consolidated  
    LyondellBasell                     Non-             LyondellBasell  
Millions of dollars   AF     LCC     Guarantors     Guarantors     Eliminations     AF  
Sales and other operating revenues
  $     $ 387     $ 2,001     $ 1,671     $ (347 )   $ 3,712  
Cost of sales
    (25 )     373       1,760       1,523       (347 )     3,284  
Selling, general and administrative expenses
    2       30       26       33             91  
Research and development expenses
          (1 )     4       11             14  
 
                                   
Operating income (loss)
    23       (15 )     211       104             323  
Interest income (expense), net
    8       (276 )     1       (32 )           (299 )
Other expense, net
    (7 )     (7 )           (91 )     40       (65 )
Income (loss) from equity investments
    7,488       5,101       2,702       165       (15,427 )     29  
Reorganization items
    1,042       2,827       3,019       293             7,181  
(Provision for) benefit from income taxes
          (192 )     1,504       15             1,327  
 
                                   
Net income (loss)
    8,554       7,438       7,437       454       (15,387 )     8,496  
Less: net loss attributable to non-controlling interests
                      58             58  
 
                                   
Net income attributable to the Company
  $ 8,554     $ 7,438     $ 7,437     $ 512     $ (15,387 )   $ 8,554  
 
                                   

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
STATEMENT OF INCOME
For the four months ended April 30, 2010
                                                 
    Predecessor  
                                            Consolidated  
    LyondellBasell                     Non-             LyondellBasell  
Millions of dollars
  AF     LCC     Guarantors     Guarantors     Eliminations     AF  
Sales and other operating revenues
  $     $ 1,355     $ 7,102     $ 6,238     $ (1,228 )   $ 13,467  
Cost of sales
    (25 )     1,327       6,605       5,735       (1,228 )     12,414  
Selling, general and administrative expenses
    9       42       95       162             308  
Research and development expenses
          3       12       40             55  
 
                                   
Operating income (loss)
    16       (17 )     390       301             690  
Interest income (expense), net
    22       (618 )     2       (114 )           (708 )
Other income (expense), net
    (44 )     18       4       (243 )           (265 )
Income from equity investments
    7,452       5,367       2,532       93       (15,360 )     84  
Reorganization items
    1,118       2,673       3,029       568             7,388  
(Provision for) benefit from income taxes
          (34 )     1,432       (83 )           1,315  
 
                                   
Net income
    8,564       7,389       7,389       522       (15,360 )     8,504  
Less: net loss attributable to non-controlling interests
                      60             60  
 
                                   
Net income attributable to the Company
  $ 8,564     $ 7,389     $ 7,389     $ 582     $ (15,360 )   $ 8,564  
 
                                   

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2011
                                                 
    Successor  
                                            Consolidated  
    LyondellBasell                     Non-             LyondellBasell  
Millions of dollars
  N.V.     LCC     Guarantors     Guarantors     Eliminations     N.V.  
Net cash provided by (used in) operating activities
  $ 18     $ (481 )   $ 1,367     $ 343     $     $ 1,247  
 
                                   
Expenditures for property, plant and equipment
          (13 )     (353 )     (116 )           (482 )
Proceeds from disposal of assets
          5       58       7             70  
Restricted cash
                (197 )     (42 )           (239 )
Loans to affiliates
          (181 )     (812 )           993        
 
                                   
Net cash provided by (used in) investing activities
          (189 )     (1,304 )     (151 )     993       (651 )
 
                                   
Shares issued upon exercise of warrants
    37                               37  
Dividends paid
    (57 )                             (57 )
Repayments of long-term debt
          (260 )                       (260 )
Proceeds from notes payable to affiliates
          941             52       (993 )      
Payments of debt issuance costs
          (15 )                       (15 )
Other, net
    2       (4 )           (2 )           (4 )
 
                                   
Net cash provided by (used in) financing activities
    (18 )     662             50       (993 )     (299 )
 
                                   
Effect of exchange rate changes on cash
                      168             168  
 
                                   
Increase (decrease) in cash and cash equivalents
          (8 )     63       410             465  
Cash and cash equivalents at beginning of period
          25       2,086       2,111             4,222  
 
                                   
Cash and cash equivalents at end of period
  $     $ 17     $ 2,149     $ 2,521     $     $ 4,687  
 
                                   

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
STATEMENT OF CASH FLOWS
May 1 through June 30, 2010
                                                 
    Successor  
                                            Consolidated  
    LyondellBasell                     Non-             LyondellBasell  
Millions of dollars
  N.V.     LCC     Guarantors     Guarantors     Eliminations     N.V.  
Net cash provided by (used in) operating activities
  $     $ (285 )   $ 864     $ 526     $     $ 1,105  
 
                                   
Expenditures for property, plant and equipment
          (1 )     (71 )     (41 )           (113 )
Proceeds from disposal of assets
                      4             4  
Short-term investments
                                   
Restricted cash
                      (1 )           (1 )
Loans to affiliates
          (371 )     (3 )           374        
 
                                   
Net cash used in investing activities
          (372 )     (74 )     (38 )     374       (110 )
 
                                   
Net repayments on revolving credit facilities
                      130             130  
Payments of debt issuance costs
          (2 )                       (2 )
Proceeds from notes payable to affiliates
          26       371       (23 )     (374 )      
Other, net
          14       (9 )                 5  
 
                                   
Net cash provided by financing activities
          38       362       107       (374 )     133  
 
                                   
Effect of exchange rate changes on cash
                      (86 )           (86 )
 
                                   
Increase (decrease) in cash and cash equivalents
          (619 )     1,152       509             1,042  
Cash and cash equivalents at beginning of period
          642       603       1,466             2,711  
 
                                   
Cash and cash equivalents at end of period
  $     $ 23     $ 1,755     $ 1,975     $     $ 3,753  
 
                                   

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LYONDELLBASELL INDUSTRIES N.V.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
STATEMENT OF CASH FLOWS
For the four months ended April 30, 2010
                                                 
    Predecessor  
                                            Consolidated  
    LyondellBasell                     Non-             LyondellBasell  
Millions of dollars
  AF     LCC     Guarantors     Guarantors     Eliminations     AF  
Net cash provided by (used in) operating activities
  $ (107 )   $ (590 )   $ (182 )   $ (46 )   $     $ (925 )
 
                                   
 
                                               
Expenditures for property, plant and equipment
          (3 )     (96 )     (127 )           (226 )
Proceeds from disposal of assets
                1                   1  
Short-term investments
                10       2             12  
Restricted cash
                      (11 )           (11 )
Contributions and advances to affiliates
    (2,550 )                       2,550        
Loans to affiliates
    (57 )     543       375             (861 )      
 
                                   
Net cash provided by (used in) investing activities
    (2,607 )     540       290       (136 )     1,689       (224 )
 
                                   
 
                                               
Issuance of class B ordinary shares
    2,800                               2,800  
Repayments of debtor-in- possession term loan facility
          (2,167 )           (3 )           (2,170 )
Net repayments of debtor-in- possession revolving credit facility
          (325 )                       (325 )
Net borrowings on revolving credit facilities
                      38             38  
Proceeds from short-term debt
                      8             8  
Repayments of short-term debt
                      (14 )           (14 )
Issuance of long-term debt
          3,242                         3,242  
Repayments of long-term debt
                      (9 )           (9 )
Payments of debt issuance costs
    (86 )     (154 )           (13 )           (253 )
Contributions from owners
                      2,550       (2,550 )      
Proceeds from notes payable to affiliates
                364       (1,225 )     861        
Other, net
                2       (4 )           (2 )
 
                                   
Net cash provided by financing activities
    2,714       596       366       1,328       (1,689 )     3,315  
 
                                   
Effect of exchange rate changes on cash
                      (13 )           (13 )
 
                                   
Increase in cash and cash equivalents
          546       474       1,133             2,153  
Cash and cash equivalents at beginning of period
          96       129       333             558  
 
                                   
Cash and cash equivalents at end of period
  $     $ 642     $ 603     $ 1,466     $     $ 2,711  
 
                                   

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
This discussion should be read in conjunction with the information contained in our Consolidated Financial Statements, and the notes thereto contained elsewhere in this report. When we use the terms “we,” “us,” “our” or similar words in this discussion, unless the context otherwise requires, we are referring to LyondellBasell Industries N.V. and its consolidated subsidiaries. We also refer to the Company as “LyondellBasell N.V.,” the “Successor Company” and the “Successor.”
In addition to comparisons of current operating results with the same period in the prior year, we have included, as additional disclosure, certain “trailing quarter” comparisons of second quarter 2011 operating results to first quarter 2011 operating results. Our businesses are highly cyclical, in addition to experiencing some less significant seasonal effects. Trailing quarter comparisons may offer important insight into current business direction.
References to industry benchmark prices or costs, including the weighted average cost of ethylene production, are generally to industry prices and costs reported by CMAI, except that references to industry benchmarks for refining and oxyfuels market margins are to industry prices reported by Platts, a reporting service of The McGraw-Hill Companies, and crude oil and natural gas benchmark price references are to Bloomberg.
OVERVIEW
Our performance is driven by, among other things, global economic conditions generally and their impact on demand for our products, raw material and energy prices, and industry-specific issues, such as production capacity. Our businesses are subject to the cyclicality and volatility seen in the chemicals and refining industries generally.
LyondellBasell N.V., the successor holding company, owns and operates, directly and indirectly, substantially the same business owned and operated by LyondellBasell AF prior to the Company’s emergence from bankruptcy. For accounting purposes, the operations of LyondellBasell AF are deemed to have ceased on April 30, 2010 and LyondellBasell N.V. is deemed to have begun operations on that date. Effective May 1, 2010, we adopted fresh-start accounting. References in the following discussions to the “Company” for periods prior to April 30, 2010, the Emergence Date, are to the Predecessor Company and, for periods after the Emergence Date, to the Successor Company.
Foreign Currency Translations of Non-U.S. Denominated Financial Statements — In countries outside of the United States, we generally generate revenues and incur operating expenses denominated in local currencies. The predominant local currency of our operations outside of the United States is the Euro. The gains and losses that result from the process of translating foreign functional currency financial statements to U.S. dollars are included in Accumulated other comprehensive income (loss) in Stockholders’ equity. These translation adjustments may be material in any given period, based on the fluctuations of the Euro relative to the U.S. Dollar. In the quarters ended June 30, 2011 and March 31, 2011, increases in the value of the U.S. dollar relative to the Euro resulted in gains of $124 million and $376 million, respectively. Such gains, which are reflected in the $500 million gain in
To ensure a proper analysis of the quarter over quarter results, the effects of fresh-start accounting on the Successor period are specifically addressed throughout this discussion. The primary impacts of our reorganization pursuant to the Plan of Reorganization and the adoption of fresh-start accounting on our results of operations are as follows:
Tax Impact of Reorganization—The application of the tax provisions of the Internal Revenue Code to the Plan of Reorganization resulted in the reduction or elimination of the majority of our tax attributes that otherwise would have carried forward into 2011 and later years. As a result, we do not expect to retain any U.S. net operating loss carryforwards, alternative minimum tax credits or capital loss carryforwards. In addition, we expect that most, if not all, of our tax basis in depreciable assets will be eliminated. Accordingly, it is expected that our liability for U.S. income taxes in future periods will reflect these adjustments and we estimate our cash tax liabilities for the years following 2010 will be significantly higher than in 2009 or 2010. This situation may be somewhat postponed by the temporary bonus depreciation provisions contained in the Job Creation Act of 2010, which allows current year expensing for certain qualified acquisitions. As a result of certain prior year limitations on the deductibility of our interest expense in the U.S. we retained approximately $2,500 million of interest carryforwards which are available to offset future taxable income, subject to certain limitations.
Inventory—We adopted the last in, first out (“LIFO”) method of accounting for inventory upon implementation of fresh-start accounting. Prior to the emergence from bankruptcy, LyondellBasell AF used both the first in, first out

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(“FIFO”) and LIFO methods of accounting to determine inventory cost. For purposes of evaluating segment results, management reviewed operating results for LyondellBasell AF determined using current cost, which approximates results using the LIFO method of accounting for inventory. Subsequent to the Emergence Date, our operating results are reviewed using the LIFO method of accounting for inventory. While determining the impact of the adoption of LIFO on predecessor periods is not practicable, we believe that the current cost method used by the Predecessor for segment reporting is similar to LIFO.
Depreciation and amortization expense—Depreciation and amortization expense is lower in the Successor period as a result of our revaluation of assets for fresh-start accounting. Depreciation and amortization as reported for all periods presented is as follows:
                                           
    Successor       Predecessor  
    Three Months     Six Months     May 1       April 1     January 1  
    Ended     Ended     through       through     through  
    June 30,     June 30,     June 30,       April 30,     April 30,  
Millions of dollars
  2011     2011     2010       2010     2010  
Cost of sales:
                                         
Depreciation
  $ 179     $ 339     $ 93       $ 116     $ 464  
Amortization
    35       79       33         18       75  
 
                                         
Research and development expenses:
                                         
Depreciation
    4       9       2         3       8  
 
                                         
Selling, general and administrative
                                         
expenses:
                                         
Depreciation
    6       12       1         4       18  
 
                               
 
  $ 224     $ 439     $ 129       $ 141     $ 565  
 
                               
Interest expense—Lower interest expense in the Successor period was largely driven by the discharge or repayment of debt, upon which interest was accruing during the bankruptcy, through the Company’s reorganization on April 30, 2010 pursuant to the Plan of Reorganization, partially offset by interest expense on the new debt incurred as part of the emergence from bankruptcy.
                                           
    Successor       Predecessor  
                    May 1       April 1     January 1  
    Three Months Ended     Six Months Ended     through       through     through  
    June 30,     June 30,     June 30,       April 30,     April 30,  
Millions of dollars
  2011     2011     2010       2010     2010  
Interest expense
  $ 177     $ 340     $ 132       $ 302     $ 713  

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Accumulated other comprehensive income on the consolidated statement of stockholders’ equity at June 30, 2011, represent increases to comprehensive income for the respective periods.
Overview of Results of Operations
Global market conditions in the second quarter and first six months of 2011 improved from those experienced in the same periods in 2010 as general economic activities and demand in the durable goods sector, particularly the automotive markets, were higher. As a result, demand and operating rates were higher in 2011 than in 2010.
Excluding the impacts of fresh-start accounting, operating results in the second quarter and first six months 2011 generally reflected higher product margins compared to the same periods in 2010. The O&P-Americas business segment benefited from higher product margins driven by lower natural gas liquid prices relative to the price of crude oil. Higher operating results in the O&P-EAI and the I&D businesses were primarily a reflection of higher product margins and higher sales volumes due to improvement in the global economy and in the durable goods markets. The Refining and Oxyfuels business segment results reflected the benefit of higher refining margins at the Houston refinery. Revenues associated with licenses granted in prior periods contributed to higher results in the Technology segment.
Results of operations for the Successor and Predecessor periods discussed in these “Results of Operations” are presented in the table below.
                                           
    Successor       Predecessor  
    Three Months             May 1       April 1     January 1  
    Ended     Six Months Ended     through       through     through  
    June 30,     June 30,     June 30,       April 30,     April 30,  
Millions of dollars
  2011     2011     2010       2010     2010  
Sales and other operating revenues
  $ 14,042     $ 26,294     $ 6,772       $ 3,712     $ 13,467  
Cost of sales
    12,474       23,417       6,198         3,284       12,414  
Selling, general and administrative expenses
    247       458       129         91       308  
Research and development expenses
    56       89       23         14       55  
 
                               
Operating income
    1,265       2,330       422         323       690  
Interest expense
    (177 )     (340 )     (132 )       (302 )     (713 )
Interest income
    13       21       12         3       5  
Other income (expense), net
    45       2       54         (65 )     (265 )
Income from equity investments
    73       131       27         29       84  
Reorganization items
    (28 )     (30 )     (8 )       7,181       7,388  
Provision for (benefit from) income taxes
    388       651       28         (1,327 )     (1,315 )
 
                               
Net income
  $ 803     $ 1,463     $ 347       $ 8,496     $ 8,504  
 
                               
RESULTS OF OPERATIONS
Revenues—Revenues increased by $3,558 million, or 34%, in the second quarter 2011 compared to the second quarter 2010 and $6,055 million, or 30%, in the first six months of 2011 compared to the first six months of 2010. Higher average product prices were responsible for revenue increases of 19% and 17%, respectively, in the second quarter and first six months of 2011, while higher sales volumes added the remaining 15% and 13%, respectively, compared to the same periods in 2010. Average product sales prices were higher across most products and sales volumes increased primarily due to higher refining volumes and, to a lesser extent, higher sales volumes for European olefins and styrene.

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Cost of Sales—The $2,992 million and $4,805 million increases in cost of sales for the second quarter and first six months was primarily due to higher raw material costs, which reflect the effects of higher prices for crude oil and other hydrocarbons compared to the second quarter and first six months of 2010. Depreciation and amortization expense was lower by $46 million and $247 million, respectively, in the second quarter and first six months of 2011 compared to the combined second quarter and first six months of 2010, primarily due to the $7,474 million write-down of Property, plant and equipment associated with the April 2010 revaluation of our assets in fresh-start accounting. The 2010 Successor period included a $333 million non-cash charge to adjust the value of inventory at June 30, 2010 to market value, which was lower than the April 30, 2010 value applied during fresh-start accounting.
SG&A Expenses— Selling, general and administrative (“SG&A”) expenses in the second quarter and first six months of 2011 were higher by $27 million and $21 million, respectively, compared to the second quarter and first six months of 2010. The increases reflect charges associated with activities to reorganize certain functional organizations, partially offset by lower employee-related expenses as a result of a lower headcount.
R&D Expenses—Research and development (“R&D”) expenses in the second quarter and first six months of 2011 increased $19 million and $11 million, respectively, primarily due to $16 million of charges related to employee severance and asset retirement obligations associated with an R&D facility that is being relocated.
Operating Income—The increases in operating income in the second quarter and first six months of 2011, compared to the second quarter and first six months of 2010, are primarily due to higher product margins across most of our products, and the effect of higher refining and product sales volumes. Operating results in the second quarter and first six months of 2011 and the Successor period in 2010 benefited from lower depreciation and amortization expense of $46 million, $255 million and $209 million, respectively, primarily due to the $7,474 million write-down of Property, plant, and equipment associated with the revaluation of our assets in fresh-start accounting in April 2010. Results in the 2010 Successor period included a $333 million non-cash charge to adjust inventory as described above. Operating results for each of our business segments are reviewed further in the “Segment Analysis” section below.
Interest Expense—Interest expense was $257 million and $505 million lower in the second quarter and first six months 2011 compared to the same periods in 2010, primarily due to the repayment or discharge of higher cost debt on the Emergence Date in accordance with the Plan of Reorganization, upon which interest had been accruing during the bankruptcy, and the repayment of $1,486 million of debt since the beginning of the fourth quarter 2010.
Other Income (Expense), net—Other income, net, in the second quarter and first six months of 2011 included a $41 million gain on the sale of surplus precious metals and the fair value adjustment of the warrants to purchase our shares, which reflected a $6 million benefit in the second quarter 2011 and a negative effect of $59 million in the first six months of 2011. The first six months of 2011 also benefited from $7 million of foreign exchange gains.
Other expense, net, in the second quarter and first six months of 2010 included foreign exchange losses of $14 million and $218 million, respectively. The foreign exchange losses for the first six months of 2010 are primarily related to the revaluation of third party debt of certain of our subsidiaries due to a decrease in the foreign exchange rates in effect at June 30, 2010 compared to December 31, 2009. Such debt was denominated in currencies other than the functional currencies of these subsidiaries and was refinanced upon emergence from bankruptcy.
Reorganization Items—The Company had reorganization items expense totaling $28 million and $30 million in the second quarter and first six months of 2011, respectively, and income from reorganization items of $7,173 million and $7,380 million in the second quarter and first six months of 2010. Income from reorganization items in the 2010 periods included gains totaling $13,617 million related to settlement of liabilities subject to compromise, deconsolidation of entities upon emergence, adjustments related to rejected contracts, and a reduction of environmental remediation liabilities. These gains were partially offset by a charge of $6,278 million related to the changes in net assets resulting from the application of fresh-start accounting and by several one-time emergence costs, including the success and other fees earned by certain professionals upon the Company’s emergence from bankruptcy, damages related to the rejection of executory contracts and plant closure costs.

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Income Tax—Our effective income tax rate for the first six months of 2011 was 30.8% resulting in tax expense of $651 million on pretax income of $2,114 million. The 2011 effective income tax rate was lower than the U.S. statutory 35% rate primarily due to the effect of pretax income in countries with lower statutory tax rates and tax deductible foreign currency losses which were partially offset by the non-deductible expenses related to stock warrants. In the two months Successor period ended June 30, 2010, we recorded a tax provision of $28 million, representing an effective tax rate of 7.5% on pre-tax income of $375 million. In the four months ended April 30, 2010, the Predecessor recorded a tax benefit of $1,315 million, representing a negative effective tax rate of 18.3% on pretax income of $7,189 million. The provision for the 2010 Successor period differs from the statutory 35% rate primarily due to the fact that in several countries the Company generated either income with no tax expense or losses where no tax benefit was recorded due to valuation allowances on our deferred tax assets in those countries.
Net Income—The following table summarizes the major components contributing to net income:
                                           
    Successor       Predecessor  
    Three                            
    Months     Six Months     May 1       April 1     January 1  
    Ended     Ended     through       through     through  
    June 30,     June 30,     June 30,       April 30,     April 30,  
    2011     2011     2010       2010     2010  
Millions of dollars
                                         
Operating income
  $ 1,265     $ 2,330     $ 422       $ 323     $ 690  
Interest expense, net
    (164 )     (319 )     (120 )       (299 )     (708 )
Other income (expense), net
    45       2       54         (65 )     (265 )
Income from equity investments
    73       131       27         29       84  
Reorganization items
    (28 )     (30 )     (8 )       7,181       7,388  
Provision for (benefit from) income taxes
    388       651       28         (1,327 )     (1,315 )
 
                               
Net income
  $ 803     $ 1,463     $ 347       $ 8,496     $ 8,504  
 
                               
Second Quarter 2011 versus First Quarter 2011—Net income was $803 million in the second quarter 2011 compared to $660 million in the first quarter 2011. Net income in the first quarter 2011 reflected a net pretax charge of $59 million related to the fair value adjustment of our outstanding warrants, partially offset by a $34 million pretax insurance recovery associated with misappropriation of assets. The second quarter 2011 reflected pretax charges totaling $102 million, including $61 million related to corporate restructurings, $28 million of reorganization items, $16 million of environmental charges and $12 million related to the early repayment of debt. These charges were partially offset by pretax benefits totaling $47 million, including a $41 million benefit from the sale of surplus precious metals. Apart from these items, net income in the second quarter 2011 reflected improvements in operating results for most of our business segments. These net benefits were partially offset by lower net operating income for the technology business segment and a higher provision for income taxes in the second quarter 2011.
Segment Analysis
Our operations are primarily in five reportable segments: O&P—Americas; O&P—EAI; I&D; Refining and Oxyfuels; and Technology. These operations comprise substantially the same businesses owned and operated by LyondellBasell AF prior to the Company’s emergence from bankruptcy. However, for accounting purposes, the operations of LyondellBasell AF are deemed to have ceased on April 30, 2010 and LyondellBasell N.V. is deemed to have begun operations on that date. The results of operations for the Successor are not comparable to the Predecessor due to adjustments made under fresh-start accounting as described in “Overview.” The impact of these items is addressed in the discussion of each segment’s results below.

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The following tables reflect selected financial information for our reportable segments. Operating income (loss) for segment reporting is on a LIFO basis for the Successor and on a current cost basis for the Predecessor.
                                           
    Successor       Predecessor  
    Three                            
    Months     Six Months     May 1       April 1     January 1  
    Ended     Ended     through       through     through  
    June 30,     June 30,     June 30,       April 30,     April 30,  
    2011     2011     2010       2010     2010  
Millions of dollars
                                         
Sales and other operating revenues:
                                         
O&P — Americas segment
  $ 4,010     $ 7,582     $ 2,004       $ 1,163     $ 4,183  
O&P — EAI segment
    4,264       8,208       2,140         1,066       4,105  
I&D segment
    1,777       3,469       940         504       1,820  
Refining and Oxyfuels segment
    5,833       10,553       2,403         1,333       4,748  
Technology segment
    126       265       75         35       145  
Other, including intersegment eliminations
    (1,968 )     (3,783 )     (790 )       (389 )     (1,534 )
 
                               
Total
  $ 14,042     $ 26,294     $ 6,772       $ 3,712     $ 13,467  
 
                               
 
                                         
Operating income (loss):
                                         
O&P — Americas segment
  $ 509     $ 930     $ 149       $ 175     $ 320  
O&P — EAI segment
    207       386       114         44       115  
I&D segment
    235       469       109         34       157  
Refining and Oxyfuels segment
    296       460       14         29       (99 )
Technology segment
    23       89       23         8       39  
Other, including intersegment eliminations
    (5 )     (4 )     13         18       (41 )
Current cost adjustment
                        15       199  
 
                               
Total
  $ 1,265     $ 2,330     $ 422       $ 323     $ 690  
 
                               
 
                                         
Income (loss) from equity investments:
                                         
O&P — Americas segment
  $ 8     $ 11     $ 3       $ 1     $ 5  
O&P — EAI segment
    61       112       25         28       80  
I&D segment
    4       8       (1 )             (1 )
 
                               
Total
  $ 73     $ 131     $ 27       $ 29     $ 84  
 
                               
Olefins and Polyolefins—Americas Segment
Overview—In the second quarter and first six months of 2011, the U.S. ethylene industry benefited from processing natural gas liquids, which yielded lower cost ethylene compared to that produced from crude oil-based liquids, which is the predominant feedstock used in the rest of the world. Ethylene margins remained strong in 2011 primarily due to advantaged prices for ethane, which was the favored feedstock during the second quarter and first six months of 2011, and high co-product sales prices. The polyethylene market decreased as a result of general industry conditions and because certain customers delayed purchases in anticipation of lower prices. Increasing prices for propylene throughout the second quarter and most of the first six months of 2011 pressured the polypropylene market. Operating results for both 2011 periods and the Successor period in 2010 also reflected the impacts of fresh-start accounting, including the benefit of lower depreciation and amortization expense related to the write-down of segment assets. The 2010 Successor period also includes the negative impact of a non-cash charge to adjust inventory to market value (see “Results of Operations-Cost of Sales”).
Ethylene Raw Materials—Benchmark crude oil and natural gas prices generally have been indicators of the level and direction of the movement of raw material and energy costs for ethylene and its co-products in the O&P—Americas segment. Ethylene and its co-products are produced from two major raw material groups:

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    crude oil-based liquids (“liquids” or “heavy liquids”), including naphtha, condensates, and gas oils, the prices of which are generally related to crude oil prices; and
 
    natural gas liquids (“NGLs”), principally ethane and propane, the prices of which are generally affected by natural gas prices.
Although the prices of these raw materials are generally related to crude oil and natural gas prices, during specific periods the relationships among these materials and benchmarks may vary significantly.
In the U.S., we have significant capability to shift the ratio of raw materials used in the production of ethylene and its co-products to take advantage of the relative costs of heavy liquids and NGLs.
Production economics for the U.S. industry have favored NGLs during 2011. As a result, we focused on maximizing the use of NGLs at our U.S. plants. During the second quarter of 2011, approximately 80% of our ethylene production was from NGLs. A temporary disruption of NGLs supply from one of our suppliers in the first quarter of 2011 modestly reduced the amount of our ethylene production from NGLs in the first six months of 2011 to approximately 75%. Based on current trends and assuming the price of crude oil remains at a high level, we would expect production economics in the U.S. to continue to favor NGLs for the near and mid-term.
The following table shows the average U.S. benchmark prices for crude oil and natural gas for the applicable periods, as well as benchmark U.S. sales prices for ethylene and propylene, which we produce and sell or consume internally, and certain polyethylene and polypropylene products. The benchmark weighted average cost of ethylene production, which is reduced by co-product revenues, is based on CMAI’s estimated ratio of heavy liquid raw materials and NGLs used in U.S. ethylene production.
                                                 
    Average Benchmark Price and Percent Change  
    Versus Prior Year Period Average  
    Three months ended             Six Months Ended        
    June 30,             June 30,        
    2011     2010     Change     2011     2010     Change  
Crude oil — dollars per barrel
    102.34       78.05       31 %     98.50       78.46       26 %
Natural gas — dollars per million BTUs
    4.43       4.04       10 %     4.31       4.70       (8 )%
Weighted average cost of ethylene production — cents per pound
    33.8       26.7       27 %     33.2       30.4       9 %
United States — cents per pound:
                                               
Ethylene
    57.5       45.6       26 %     53.4       49.0       9 %
Polyethylene (HD)
    95.3       84.0       13 %     91.5       83.7       9 %
Propylene — polymer grade
    87.3       63.3       38 %     79.5       62.4       27 %
Polypropylene
    113.8       89.8       27 %     107.3       88.8       21 %

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The following table sets forth the O&P—Americas segment’s sales and other operating revenues, operating income, income from equity investments and selected product sales volumes.
                                           
    Successor       Predecessor  
    Three                            
    Months     Six Months     May 1       April 1     January 1  
    Ended     Ended     through       through     through  
    June 30,     June 30,     June 30,       April 30,     April 30,  
    2011     2011     2010       2010     2010  
Millions of dollars
                                         
Sales and other operating revenues
  $ 4,010     $ 7,582     $ 2,004       $ 1,163     $ 4,183  
Operating income
    509       930       149         175       320  
Income from equity investments
    8       11       3         1       5  
 
                                         
Production Volumes, in millions of pounds
                                         
Ethylene
    1,929       4,018       1,249         749       2,768  
Propylene
    556       1,325       513         264       1,019  
Sales Volumes, in millions of pounds
                                         
Polyethylene
    1,377       2,782       885         435       1,765  
Polypropylene
    611       1,196       449         221       836  
Revenues—O&P—Americas revenues increased by $843 million, or 27%, in the second quarter 2011, compared to the same period in 2010 and by $1,395 million, or 23%, in the first six months of 2011 compared to same period in 2010. Higher average sales prices for most products in the second quarter and first six months of 2011 were responsible for revenue increases of 31% and 26%, respectively, while lower sales volumes reduced revenues by 4% in each period. An improved supply/demand balance and higher crude-oil based raw material costs have contributed to the higher average sales prices seen to date in 2011.
Operating Income—Operating results for the O&P—Americas segment in the second quarter and first six months of 2011 reflected increases of $185 million and $461 million, respectively, compared to the second quarter and first six months of 2010. Operating results for the 2010 Successor period were negatively impacted by a $171 million non-cash charge to adjust inventory at June 30, 2010 to market value, which was lower than the April 30, 2010 value applied during fresh-start accounting. The second quarter and first six months of 2011 benefited from lower depreciation expense of $33 million and $94 million, respectively, compared to the same periods in 2010. This was a result of the application of fresh-start accounting and the revaluation of our assets.
Both the second quarter 2011 and 2010 showed strong operating results for ethylene and polyethylene; however, operating income for the second quarter 2011 was slightly lower than the comparative period. Our second quarter 2010 operating results reflected a benefit from planned and unplanned competitor outages as margins were especially strong during that period. Operating results for the second quarter 2011 included the negative impact of a major turnaround at our Channelview plant and a utility supplier outage at our Morris, Illinois facility. Lower polypropylene operating results in the second quarter 2011 reflected the effects of elevated raw material costs and lower sales volumes as certain customers delayed purchases in anticipation of a decrease in polypropylene prices.
The $461 million increase in operating results for the first six months of 2011 compared to the first six months of 2010 was primarily the result of higher polyethylene product margins and sales volumes. Polyethylene product margins in 2011, particularly in the first quarter, were higher than those attained in the same periods of 2010 as higher average sales prices driven by strong demand more than offset higher ethylene feedstock costs. Polyethylene sales volumes increased 5% during the first half of 2011 primarily due to sales being limited by planned maintenance at one of our plants during the first half of 2010.
Second Quarter 2011 versus First Quarter 2011—The O&P—Americas segment had operating income of $509 million in the second quarter 2011 compared to $421 million in the first quarter 2011. The increase in operating results for the second quarter 2011 reflects higher product margins for ethylene and the effect of higher

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polypropylene sales volumes, which more than offset the effect of lower polyethylene product margins and sales volumes. The higher product margins for ethylene were primarily the result of higher average sales prices. The lower product margins for polyethylene reflect higher average sales prices which could not keep pace with increases in the price of ethylene. Polyethylene volumes were lower reflecting inventory-related buying patterns, general market conditions and the effect of planned and unplanned production outages.
Olefins and PolyolefinsEurope, Asia and International Segment
Overview—Ethylene market demand in Europe in the second quarter and first six months of 2011 was comparable to that in the second quarter and first six months of 2010. Ethylene industry margins expanded in 2011 as benchmark average sales prices increased more than the benchmark weighted average cost of ethylene production. Market demand for polyolefins in the second quarter of 2011 reflected the effect of delayed purchases as customers anticipated lower prices. Market demand for polyolefins was reduced in the second quarter of 2011 compared to second quarter 2010 and first quarter 2011. Total demand for the first six months of 2011 reflects a small increase over the same period in 2010.
In the second quarter and first six months of 2011, operating results for the O&P—EAI segment reflected strong product margins, particularly for ethylene, butadiene, and polypropylene, and higher sales volumes across most products compared to the second quarter and first six months of 2010. Operating results for the both 2011 periods and the Successor period in 2010 also reflected the impacts of fresh-start accounting, including the benefit of lower depreciation and amortization expense related to the write-down of segment assets. The 2010 Successor period also includes the negative impact of a non-cash charge to adjust inventory to market value (see “Results of Operations-Cost of Sales”).
Ethylene Raw Materials—In Europe, heavy liquids are the primary raw materials for our ethylene production.
The following table shows the average West Europe benchmark prices for Brent crude oil for the applicable periods, as well as benchmark West Europe prices for ethylene and propylene, which we produce and consume internally or purchase from unrelated suppliers, and certain polyethylene and polypropylene products.
                                                 
    Average Benchmark Price and Percent Change  
    Versus Prior Year Period Average  
    Three Months Ended             Six Months Ended        
    June 30,             June 30,        
    2011     2010     Change     2011     2010     Change  
Brent crude oil — dollars per barrel
    115.95       79.41       46 %     110.80       78.61       41 %
Western Europe — €0.01 per pound
                                               
Weighted average cost of ethylene production
    35.4       27.3       30 %     35.0       28.0       25 %
Ethylene
    54.7       43.7       25 %     53.4       42.6       25 %
Polyethylene (high density)
    65.9       53.8       22 %     64.0       52.6       22 %
Propylene
    55.3       45.1       23 %     53.1       42.0       26 %
Polypropylene (homopolymer)
    69.4       60.3       15 %     68.0       55.8       22 %
 
                                               
Average Exchange Rate — $US per €
    1.4394       1.2749       13 %     1.4026       1.3273       6 %

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The following table sets forth the O&P—EAI segment’s sales and other operating revenues, operating income, income from equity investments and selected product production and sales volumes.
                                           
    Successor       Predecessor  
    Three                            
    Months     Six Months     May 1       April 1     January 1  
    Ended     Ended     through       through     through  
    June 30,     June 30,     June 30,       April 30,     April 30,  
    2011     2011     2010       2010     2010  
Millions of dollars
                                         
Sales and other operating revenues   $ 4,264     $ 8,208     $ 2,140       $ 1,066     $ 4,105  
Operating income
    207       386       114         44       115  
Income from equity investments
    61       112       25         28       80  
 
                                         
Production volumes, in millions of pounds
                                         
Ethylene
    999       1,996       595         247       1,108  
Propylene
    631       1,239       388         152       661  
Sales volumes, in millions of pounds
                                         
Polyethylene
    1,279       2,584       811         419       1,658  
Polypropylene
    1,631       3,335       1,183         580       2,117  
Revenues—Revenues increased by $1,058 million and $1,963 million, respectively, in the second quarter and first six months of 2011 compared to revenues in the second quarter and first six months of 2010 primarily due to higher average product sales prices and to a lesser extent, higher sales volumes, mainly in olefins. The sales price increases reflect the effects of higher raw material costs and demand, which was particularly weak in the first half of 2010. Higher average sales prices were responsible for revenue increases of 32% in the second quarter 2011 and 27% in the first six months of 2011 compared to the overall revenue increases of 33% and 31%, respectively. The remaining increases in both periods were due to higher sales volumes.
Operating Income—Operating results for the O&P—EAI segment increased by $49 million and $157 million, respectively, in the second quarter and first six months of 2011 compared to the same periods in 2010. The operating results of our O&P—EAI business segment were higher in the second quarter and first six months of 2011 compared to the same periods in 2010, but reflected the impact of charges associated with activities to reorganize certain functional organizations and for increased liabilities at our Wesseling, Germany site. Improved business results were primarily a result of higher product margins for ethylene, butadiene and polypropylene and the effect of higher sales volumes for most products, partially offset by lower product margins for polyethylene. The strength in butadiene margins reflects strong global demand coupled with constrained supply as a result of a global preference for NGL processing. The lower product margins for polyethylene in the first half of 2011 reflect higher monomer prices compared to those experienced in the comparable 2011 period. Operating results for the 2010 Successor period included a $23 million charge for a plant closure and other costs related to a polypropylene plant in Terni, Italy, and a $5 million non-cash charge to adjust inventory at June 30, 2010 to market value, which was lower than the April 30, 2010 value applied during the application of fresh-start accounting. Depreciation and amortization expense was $17 million lower in the first six months of 2011 compared to the same 2010 period primarily due to the write-down of Property, plant and equipment associated with the revaluation of our assets in fresh-start accounting.
Second Quarter 2011 versus First Quarter 2011—The O&P¯EAI segment had operating income of $207 million in the second quarter 2011 compared to $179 million in the first quarter 2011. The increase in operating results in the second quarter 2011, compared to the first quarter 2011, is primarily attributable to higher olefins margins, partially offset by fixed costs in the second quarter 2011 that reflect higher maintenance spending and a charge for reorganization activities. The higher product margins for olefins reflected the benefit of falling naphtha prices after monthly product prices had been settled. The combined operating results of polyethylene, polypropylene and polypropylene compounding reflected an improvement of approximately $10 million. Together, polypropylene and

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polypropylene compounding results improved primarily due to higher margins for polypropylene as volumes remained relatively unchanged. Polyethylene volumes were relatively unchanged.
Intermediates and Derivatives Segment
Overview—The PO and PO derivatives market remained generally steady during the second quarter and first six months of 2011 despite the effect of rising propylene prices.
The I&D segment results for the second quarter and first six months of 2011 reflected higher product margins for intermediates, acetyls, EO and derivatives and styrene. PO and derivative operating results in the first six months of 2011, compared to the same period in 2010, reflected the effect of higher deicer sales volumes, while results for the second quarter 2011 remained relatively unchanged. Operating results for the second quarter and first six months of 2011 reflected the impacts of fresh-start accounting, including the benefit of lower depreciation and amortization expense related to the write-down of segment assets. The 2010 Successor period also includes the negative impact of a non-cash charge to adjust inventory to market value. See “Results of OperationsCost of Sales.”
The following table sets forth the Intermediates & Derivatives segment’s sales and other operating revenues, operating income, income from equity investments and selected product sales volumes.
                                           
    Successor       Predecessor  
    Three                            
    Months     Six Months     May 1       April 1     January 1  
    Ended     Ended     through       through     through  
    June 30,     June 30,     June 30,       April 30,     April 30,  
    2011     2011     2010       2010     2010  
Millions of dollars
                                         
Sales and other operating revenues
  $ 1,777     $ 3,469     $ 940       $ 504     $ 1,820  
Operating income
    235       469       109         34       157  
Income (loss) from equity investments
    4       8       (1)               (1 )
 
                                         
Sales Volumes, in millions of pounds
                                         
PO and derivatives
    791       1,629       516         265       1,134  
EO and derivatives
    277       565       157         93       358  
Styrene
    817       1,669       511         269       858  
Acetyls
    417       855       300         139       518  
TBA intermediates
    459       944       329         141       613  
Revenues—Revenues for the second quarter and first six months of 2011 increased $333 million and $709 million compared to the second quarter and first six months of 2010, respectively. The second quarter and first six months of 2010 include revenues of our Flavor and Fragrances business, which was sold in December 2010. These revenues were approximately 3% of total I&D segment revenues in each of the periods in 2010. Higher average sales prices resulted in revenue increases of 19% and 15%, respectively, in the second quarter and first six months of 2011. Higher sales volumes were responsible for revenue increases of 7% and 14% in the second quarter and first six months of 2011, respectively. Average sales prices for most products and were higher in both 2011 periods, and in the first six months of 2011, styrene and to a lesser extent EO and derivatives were the main contributors to volume increases.
Operating Income—Operating results for the I&D segment reflected an increase of $92 million in the second quarter 2011 compared to the second quarter 2010 and an increase of $203 million in the first six months of 2011 compared to the same 2010 period. Significant margin expansion in both 2011 periods resulted in higher product margins for acetyls, EO and derivatives and TBA intermediates, and in the first six months of 2011, higher styrene margins. Operating results for PO and PO derivatives remained relatively steady in the 2011 periods compared to the same periods in 2010. Operating results in the second quarter and first six months of 2011 benefited from lower depreciation and amortization expense of $8 million and $43 million, respectively, compared to the combined second quarter and first six months of 2010 primarily due to the write-down of Property, plant and equipment associated with the revaluation of our assets in fresh-start accounting. Operating results for the 2010 Successor

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period were negatively impacted by a $25 million non-cash charge to adjust inventory at June 30, 2010 to market, which was lower than the value at April 30, 2010 applied during fresh-start accounting.
Second Quarter 2011 versus First Quarter 2011—The I&D segment had operating income of $235 million in the second quarter 2011 compared to $234 million in the first quarter 2011. Operating results for the second quarter 2011 primarily reflected higher product margins for acetyls and styrene, partially offset by the effect of lower PO and PO derivative sales volumes with the end of the aircraft deicer season. Margins for acetyls and styrene benefited from higher average sales prices. Product margins for PO and PO derivatives remained relatively unchanged.
Refining and Oxyfuels Segment
Overview—Benchmark U.S. heavy crude refining margins were higher in the second quarter and first six months of 2011 as a result of higher discounts for heavy crude oil. European refining margins were challenged by industry overcapacity and the loss of Libyan crude oil supply. Oxyfuels margins in 2011 improved compared to 2010 due to higher gasoline prices relative to the cost of natural gas liquids-based raw material costs.
Segment operating results in the second quarter and first six months of 2011 primarily reflected the effect of higher crude oil refining margins, higher oxyfuels margins, and increased crude runs at the Houston refinery compared to the same periods in 2010. Crude processing rates at the Houston refinery were significantly higher in the second quarter 2011, compared to the second quarter 2010, as the refinery experienced a crude unit shutdown in 2010. Second quarter 2011 crude processing rates at the Berre refinery were lower than the second quarter 2010 as crude margins did not support higher processing rates. Oxyfuels results in the second quarter and first six months of 2011 were higher compared to the same period in 2010. Operating results for the second quarter and first six months of 2011 and the Successor period in 2010 reflect the impacts of fresh-start accounting, including the benefit of lower depreciation and amortization expense related to the write-down of segment assets. In addition, the 2010 Successor period was negatively impacted by a non-cash charge to adjust inventory to market value. See “Results of Operations—Cost of Sales.”

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The following table sets forth the Refining and Oxyfuels segment’s sales and other operating revenues, operating income and sales volumes for certain gasoline blending components for the applicable periods. In addition, the table shows market refining margins for the U.S. and Europe and MTBE margins in Northwest Europe (“NWE”). In the U.S., “LLS,” or Light Louisiana Sweet and “WTI,” or West Texas Intermediate, are light crude oils, while “Maya” is a heavy crude oil. In Europe, “Urals — 4-1-2-1” is a measure of West European refining margins.
                                           
    Successor       Predecessor  
    Three                            
    Months     Six Months     May 1       April 1     January 1  
    Ended     Ended     through       through     through  
    June 30,     June 30,     June 30,       April 30,     April 30,  
    2011     2011     2010       2010     2010  
Millions of dollars
                                         
Sales and other operating revenues
  $ 5,833     $ 10,553     $ 2,403       $ 1,333     $ 4,748  
Operating income (loss)
    296       460       14         29       (99 )
Sales Volumes, in millions
                                         
Gasoline blending components - MTBE/ETBE (gallons)
    206       398       159         77       266  
 
                               
Crude processing rates (thousands of barrels per day)
                                         
Houston Refinery
    263       261       152         264       263  
 
                               
Berre Refinery
    85       93       106         83       75  
 
                               
 
                               
Market margins — $  per barrel
                                         
Light crude oil - 2-1-1 *
    10.28       8.18       10.98         9.41       7.50  
Light crude oil — Maya differential*
    15.50       16.82       8.80         11.01       9.46  
 
                               
Total Maya 2-1-1
    25.78       25.00       19.78         20.42       16.96  
 
                               
Urals — 4-1-2-1
    7.71       7.75       7.53         6.93       6.17  
 
                               
 
                               
Market margins — cents per gallon
                                         
MTBE — NWE
    92.7       75.4       64.2         87.1       50.2  
 
                               
 
*   WTI crude oil was used as the Light crude reference for periods prior to 2011. As of January 1, 2011 Light Louisiana Sweet (“LLS”) crude oil is used as the Light crude oil reference. Beginning in early 2011, the WTI crude oil reference has not been an effective indicator of light crude oil pricing given the large location differential compared to other light crude oils.
Revenues—Revenues for the Refining and Oxyfuels segment increased $2,097 million and $3,402 million, respectively, in the second quarter and first six months of 2011 compared to second quarter and first six months of 2010. These increases are primarily due to higher average sales prices and the effect of higher refining sales volumes. Higher average sales prices were responsible for revenue increases of 48% and 40%, respectively, in the second quarter and first six months of 2011. The remaining increases in revenues of 8% and 7% in the second quarter and first six months of 2011 were related to higher sales volumes.
Houston refinery crude processing rates were higher by 39% and 15%, respectively, in the second quarter and first six months of 2011, compared to the same 2010 periods, primarily due to a crude unit fire in the second quarter 2010. Crude processing rates for the Berre refinery were 12% lower and 9% higher, respectively, in the second quarter and first six months of 2011, compared to the same 2010 periods, partially due to a local port strike in 2011.

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Operating Income (Loss)—Operating results for the second quarter and first six months of 2011 increased by $253 million and $545 million, respectively, compared to the same periods in 2010. The improvement in the underlying operations of the refining and oxyfuels segment primarily reflects higher refining margins at the Houston refinery as indicated by the increase in the Maya 2-1-1 benchmark margin, and higher oxyfuels margins. Margins for oxyfuels products reflect the effect of higher spreads between the prices of gasoline and butane, a key raw material. Operating results in the first six months of 2011 include a $34 million insurance recovery associated with misappropriation of assets. Operating results for the second quarter and first six months of 2011 also benefited from lower depreciation expense of $12 million and $101 million, respectively, compared to the same 2010 periods as a result of the application of fresh-start accounting and the revaluation of our assets. Operating results for the 2010 Successor period were negatively impacted by a $132 million non-cash charge to adjust inventory at June 30, 2010 to market value, which was lower than the April 30, 2010 value applied during fresh-start accounting.
Second Quarter 2011 versus First Quarter 2011The Refining and Oxyfuels segment had operating income of $296 million in the second quarter 2011 compared to $164 million in the first quarter 2011. The first quarter 2011 included a $34 million insurance recovery described above. The improvement in the second quarter 2011 was primarily driven by higher heavy crude oil refining margins, higher oxyfuels margins, and a full quarter of operation of the Houston refinery fluid catalytic cracker unit following the first quarter 2011 turnaround. Higher profits at the Houston refinery are due to higher industry margins, improved process unit operating performance, and commercial improvements in both crude oil acquisition and product sales. Crude processing rates at the Houston refinery were relatively unchanged in the second quarter 2011 compared to the first quarter 2011. Berre refinery crude processing rates were reduced by 14% in the second quarter 2011 in response to market conditions. Realized margins at the Berre refinery were lower in the second quarter 2011 as replacement crude oils for Libyan crudes became more expensive and sale prices for naphtha sold as petrochemical feedstock did not keep pace with the higher cost of raw materials. Oxyfuels product margins were seasonally higher in the second quarter 2011 compared to the first quarter 2011, reflecting the benefit of a higher spread between butane and gasoline and the higher demand for high octane, clean gasoline components.
Technology Segment
Overview—The Technology segment results in 2011 reflected higher research and development costs offset by higher licensing revenue in the first six months of 2011 compared to the comparable 2010 period. The following table sets forth the Technology segment’s sales and other operating revenues and operating income.
                                           
    Successor       Predecessor  
    Three                            
    Months     Six Months     May 1       April 1     January 1  
    Ended     Ended     through       through     through  
    June 30,     June 30,     June 30,       April 30,     April 30,  
    2011     2011     2010       2010     2010  
Millions of dollars
                                         
Sales and other operating revenues
  $ 126     $ 265     $ 75       $ 35     $ 145  
Operating income
    23       89       23         8       39  
Revenues—Revenues for the second quarter and first six months of 2011 increased by $16 million, or 15%, and $45 million, or 20%, compared to second quarter and first six months of 2010, respectively. The increases were primarily due to the recognition in the 2011 periods of previously deferred process license revenue.
Operating Income—Operating income decreased by $8 million in the second quarter of 2011 and increased by $27 million in the first six months of 2011, compared to the second quarter and first six months of 2010. The decrease in the second quarter 2010 reflected higher R&D expenses, partially offset by the effects of higher revenue related to process licenses from prior years. The increase in the first six months of 2011 reflected the effects of higher revenue from process licenses from prior years, which was partially offset by higher R&D costs. Operating income in the

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2010 periods reflected the impact of a slowdown in polyolefin projects that stemmed from the economic crisis in late 2008. The higher R&D costs include charges totaling $16 million for employee severance and asset retirement obligations related to an R&D facility that is being relocated.
Second Quarter 2011 versus First Quarter 2011 —The Technology segment had operating income of $23 million in the second quarter 2011 compared to $66 million in the first quarter 2011. Operating results in the second quarter decreased by $43 million primarily due to the effects of lower process license revenue, as well as higher R&D costs. The higher R&D costs include charges totaling $16 million for employee severance and asset retirement obligations related to an R&D facility that is being relocated.
FINANCIAL CONDITION
Operating, investing and financing activities of continuing operations, which are discussed below, are presented in the following table:
                           
    Successor       Predecessor  
    Six Months     May 1       January 1  
    Ended     through       through  
    June 30,     June 30,       April 30,  
    2011     2010       2010  
Millions of dollars
                         
Source (use) of cash:
                         
Operating activities
  $ 1,247     $ 1,105       $ (925 )
Investing activities
    (651 )     (110 )       (224 )
Financing activities
    (299 )     133         3,315  
Operating Activities—Cash of $1,247 million provided in the first six months of 2011 primarily reflected an increase in earnings and higher distributions from our joint ventures, partially offset by an increase in cash used by the main components of working capital and company contributions to our pension plans. The $180 million of cash provided in the combined first six months of 2010 primarily reflected an increase in earnings offset by payments of reorganization items and certain annual payments related to sales rebates, employee bonuses, property taxes and insurance premiums.
The main components of working capital used cash of $481 million in the first six months of 2011 compared to $348 million in the first six months of 2010. The increase in these working capital components during the first half of 2011 reflects increases of $1,002 million and $619 million, respectively, in accounts receivable and inventory, partially offset by a $1,140 million increase in accounts payable. The increases in both accounts receivable and accounts payable reflects the effect of increasing prices over the period as well as the effect of a higher currency exchange rate on our European balances. The increase in inventory reflects temporary volume increases in our O&P EAI business segment and to a lesser extent, in our Refining and Oxyfuels business segment. Inventory was also affected by a higher currency exchange rate.
The $348 million use of cash by the main components of working capital in the first six months of 2010 reflected a $511 million increase in accounts receivable due to the effects of higher average sales prices and higher sales volumes and a $312 million increase in inventory, partially offset by a $475 million increase in accounts payable due to the higher costs and volumes of feedstocks, and more favorable payment terms. Price and volume changes in the first six months of 2010 more than offset the effects of lower exchange rates on the values of our European working capital.
Investing Activities—Cash of $651 million used in investing activities in the first six months of 2011 primarily reflects capital expenditures and a $239 million increase in restricted cash partially offset by $57 million in proceeds related to the sale of surplus precious metals. The increase in restricted cash is primarily related to the issuance of letters of credit, which are cash collateralized.

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Investing activities of $334 million in the combined 2010 period reflect capital expenditures that were partially offset by $12 million in proceeds from a money market fund that had suspended rights to redemption in 2008.
The following table summarizes capital expenditures for the periods presented:
                           
    Successor       Predecessor  
    Six Months     May 1       January 1  
    Ended     through       through  
    June 30,     June 30,       April 30,  
    2011     2010       2010  
Millions of dollars
                         
Capital expenditures by segment:
                         
O&P—Americas
  $ 204     $ 50       $ 52  
O&P—EAI
    79       31         102  
I&D
    20       5         8  
Refining and Oxyfuels
    159       22         49  
Technology
    10       3         12  
Other
    12       2         3  
 
                   
Total capital expenditures by segment
    484       113         226  
Less:
                         
Contributions to PO Joint Ventures
    2                
 
                   
Consolidated capital expenditures of continuing operations
  $ 482     $ 113       $ 226  
 
                   
The capital expenditures in the 2010 Predecessor period presented in the table above exclude costs of major periodic maintenance and repair activities, including turnarounds and catalyst recharges of $71 million.
Financing Activities—Financing activities used cash of $299 million in the first six months of 2011 and provided $3,448 million in the combined 2010 period. In May 2011, we redeemed $203 million and €34 million ($50 million) of our 8% Senior Secured Notes due 2017, comprising 10% of the outstanding senior secured dollar notes and senior secured Euro notes at March 31, 2011. We paid $7 million of premiums in conjunction with the redemption of the notes. Also in May 2011, we paid cash dividends of $0.10 per share of common stock totaling $57 million to shareholders of record on May 5, 2011. In June 2011, we paid $15 million of fees related to the amendment of our U.S. ABL facility. In the first quarter of 2011, we received proceeds of $37 million upon conversion of outstanding warrants to common stock.
The 2010 Successor period reflects a net increase in borrowings of $132 million under our European Securitization facility and a $2 million payment related to a previous factoring facility in France.
As part of the emergence from bankruptcy, we received gross proceeds of $2,800 million on April 30, 2010 in connection with the issuance of shares in a rights offering and paid $86 million of fees, including $70 million of fees to equity backstop providers. On April 30, 2010, we also received net proceeds of $3,242 million from the issuance of new debt by our subsidiary, Lyondell Chemical, including Senior Secured Notes in the amounts of $2,250 million and €375 million ($497 million) and from proceeds of the Senior Term Loan Facility of $495 million, and paid related fees of $72 million.
Proceeds from the rights offering and the Senior Notes, along with borrowings under the Senior Term Loan Facility and the amended and restated European Securitization, were used to repay outstanding amounts of $3,152 million under our DIP financing arrangement and to pay a $195 million exit fee required under the arrangement. We also paid fees totaling $92 million in connection with our new U.S. ABL Facility and amended and restated European Securitization facility. Predecessor debt classified as Liabilities subject to compromise immediately prior to the emergence from bankruptcy was discharged pursuant to the Plan of Reorganization (see Note 3).

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Apart from the payments reflected above, during the 2010 Predecessor period we repaid a $5 million Argentinean loan, made a $12 million mandatory quarterly amortization payment of a Dutch term loan, $3 million of which was related to the DIP financing arrangement, and made payments of $8 million on a previous factoring facility. In addition, we made payments totaling $13 million related to the extension of the DIP financing. We also had a net increase in borrowings of $47 million under the European Securitization facility in the 2010 Predecessor period.
Liquidity and Capital Resources—As of June 30, 2011, we had cash on hand of $4,687 million. In addition, we had total unused availability under our credit facilities of $2,382 million at June 30, 2011, which included the following:
    $1,737 million under our $2,000 million U.S. ABL facility, which is subject to a borrowing base, net of outstanding borrowings and outstanding letters of credit provided under the facility. At June 30, 2011, we had $263 million of outstanding letters of credit and no outstanding borrowings under the facility.
 
    €432 million and $25 million (totaling approximately $645 million) under our €450 million European receivables securitization facility. Availability under the European receivables securitization facility is subject to a borrowing base, net of outstanding borrowings. There were no outstanding borrowings under this facility at June 30, 2011.
In addition to the letters of credit issued under the U.S. ABL facility, we also have outstanding letters of credit totaling $221 million, which are collateralized by cash. Such cash is included in the $250 million of Restricted cash reflected on the Consolidated Balance Sheets as of June 30, 2011.
We may use cash on hand, cash from operating activities and proceeds from asset divestitures to repay debt, which may include additional purchases of our outstanding bonds in the open market or otherwise. We also plan to finance our ongoing working capital, capital expenditures, debt service and other funding requirements through our future financial and operating performance, which could be affected by general economic, financial, competitive, legislative, regulatory, business and other factors, many of which are beyond our control. We believe that our cash, cash from operating activities and proceeds from our credit facilities provide us with sufficient financial resources to meet our anticipated capital requirements and obligations as they come due.
At June 30, 2011, we had total debt, including current maturities, of $5,865 million.
In June 2011, we obtained an amendment to our U.S. ABL facility to, among other things: (i) increase the facility to $2 billion; (ii) extend the maturity date to June 2016; (iii) reduce the applicable margin and commitment fee and (iv) amend certain covenants and conditions to provide additional flexibility
In March 2011, we amended and restated our Senior Secured Term Loan Agreement to, among other things, modify the term of the agreement and certain restrictive covenants. This amended and restated agreement matures in April 2014.
In May 2011, we announced our intention to seek a buyer for our Berre refinery in France.
We are party to certain registration rights agreements relating to our Senior Secured 8% Notes and our Senior Secured 11% Notes, which obligate us to conduct an exchange offer for the 8% notes and register the resale of the 11% notes held by affiliates with the SEC. The registration rights agreements require the registration statements for the exchange or resale, as applicable, to be effective with the SEC by May 3, 2011, which has not occurred. As a result, beginning May 4, 2011, we are subject to penalties in the form of increased interest rates as required by the registration rights agreement. The interest penalties are 0.25% per annum for applicable notes for the first 90 days that the registration statements are not effective, increasing by an additional 0.25% per annum for each additional 90 days, up to a maximum of 1.00% per annum. We do not expect the amount of penalties that we will ultimately pay to be material.
On August 3, 2011, the Management Board of the Company recommended to the Supervisory Board that the Company pay a dividend of $0.20 per share. The Supervisory Board has authorized and directed the Management Board to take actions necessary to pay the dividend. Subject to the Management Board’s adoption of a resolution

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declaring the dividend, it is expected that the dividend will be paid on September 7, 2011 to shareholders of record as of August 17, 2011. Management intends to declare interim dividends to the extent the Company’s cash flows and results of operations support such dividend payments in the future.
ACCOUNTING AND REPORTING CHANGES
For a discussion of the potential impact of new accounting pronouncements on our consolidated financial statements, see Note 2 to the Consolidated Financial Statements.

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CAUTIONARY STATEMENT FOR THE PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions.
We based the forward-looking statements on our current expectations, estimates and projections about ourselves and the industries in which we operate in general. We caution you these statements are not guarantees of future performance as they involve assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Any differences could result from a variety of factors, including the following:
    if we are unable to comply with the terms of our credit facilities and other financing arrangements, those obligations could be accelerated, which we may not be able to repay;
 
    we may be unable to incur additional indebtedness or obtain financing on terms that we deem acceptable, including for refinancing of our current obligations; higher interest rates and costs of financing would increase our expenses;
 
    our ability to implement business strategies may be negatively affected or restricted by, among other things, governmental regulations or policies;
 
    the cost of raw materials represent a substantial portion of our operating expenses, and energy costs generally follow price trends of crude oil and natural gas; price volatility can significantly affect our results of operations and we may be unable to pass raw material and energy cost increases on to our customers;
 
    industry production capacities and operating rates may lead to periods of oversupply and low profitability;
 
    uncertainties associated with worldwide economies create increased counterparty risks, which could reduce liquidity or cause financial losses resulting from counterparty exposure;
 
    the negative outcome of any legal, tax and environmental proceedings may increase our costs;
 
    we may be required to reduce production or idle certain facilities because of the cyclical and volatile nature of the supply-demand balance in the chemical and refining industries, which would negatively affect our operating results;
 
    we may face operating interruptions due to events beyond our control at any of our facilities, which would negatively impact our operating results, and because the Houston refinery is our only North American refining operation, we would not have the ability to increase production elsewhere to mitigate the impact of any outage at that facility;
 
    regulations may negatively impact our business by, among other things, restricting our operations, increasing costs of operations or requiring significant capital expenditures;
 
    we face significant competition due to the commodity nature of many of our products and may not be able to protect our market position or otherwise pass on cost increases to our customers;
 
    we rely on continuing technological innovation, and an inability to protect our technology, or others’ technological developments could negatively impact our competitive position; and
 
    we are subject to the risks of doing business at a global level, including fluctuations in exchange rates, wars, terrorist activities, political and economic instability and disruptions and changes in governmental policies, which could cause increased expenses, decreased demand or prices for our products and/or disruptions in operations, all of which could reduce our operating results.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market and regulatory risks is described in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2010. Our exposure to such risks has not changed materially in the six months ended June 30, 2011.
Item 4. CONTROLS AND PROCEDURES
Our management, with the participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial officer) has evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such information is accumulated and communicated to management (including the principal executive and financial officers) as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were not effective as of June 30, 2011, the end of the period covered by this Quarterly Report on Form 10-Q. The ineffectiveness was caused by the material weakness disclosed in Item 9A. of our Form 10-K for the year ended December 31, 2010 and Item 8.01 of our Current Report on Form 8-K/A filed on August 12, 2011.
Nevertheless, based on a number of factors, including the performance of additional procedures by management designed to ensure the correctness of our tax provision and reliability of our financial reporting, we believe that the consolidated financial statements in this quarterly report fairly present, in all material respects, our financial position, results of operations, and cash flows as of the dates, and for the periods, presented, in conformity with U.S. GAAP.
In the six months ended June 30, 2011 and through the date of this quarterly report, the Company continues to implement measures to improve its internal controls in order to remediate the material weakness previously disclosed. Specifically, the Company implemented improved reporting processes designed to provide clarity of presentation and supporting documentation of its tax provision and is hiring additional personnel and retained outside resources to assist in the review and analysis of tax provision information. The Company believes these changes have materially affected its internal control over financial reporting by enhancing controls related to the material weakness previously identified. However, the material weakness will not be remediated until the enhanced procedures have been operating for a reasonable period of time.

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PART II. OTHER INFORMATION