Refining driving Lyondell up to 10 - JPMorgan

03 May 2007 16:48  [Source: ICIS news]

TORONTO (ICIS news)--Lyondell's results will be driven more by its refining business in the coming years, sheltering the company from the expected cyclical petrochemicals trough, JPMorgan said on Thursday.

 

“We forecast refinery operating performance to remain above historical averages, and this should allow Lyondell to generate a consistently high level of free cashflow despite the cyclical downturn in petrochemicals we expect in 2009-2010,” JPMorgan said in a research note to clients.

 

Lyondell’s Houston-based refinery operations could generate earnings before interest, tax, depreciation and amortisation (EBITDA) of $1.1bn (€814m) in both 2007 and 2008, according to JPMorgan’s analysis.

 

This compares with $869m in 2006 and four-year annual average EBITDA of $255m for 2002-2005, the analysts said.

 

The Houston refinery was expected to operate with an EBITDA margin of $11/bbl during the next three years due to a shortage of US domestic refinery capacity and the refinery’s capacity to process lower quality crude oil, JPMorgan said. 

 

Also, Lyondell’s petrochemical business produces large volumes of propylene and benzene with gasoline blending values that could add to profitability, the analysts added.

 

Lyondell has become fundamentally more valuable and less cyclical following its $2.1bn purchase last year of the interest held by Venezuela’s state oil and gas firm PDVSA in the two companies’ joint venture refinery in Houston, JPMorgan added.

 

($1 = €0.74)

By: Stefan Baumgarten
+1 713 525 2653

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