Lower NGL costs drive LyondellBasell’s Q2 profit jump

(adds division details and updates throughout)

LONDON (ICIS)–Lower natural gas liquids (NGL) prices and a favourable ethylene-polyethylene (PE) price spread helped to drive a 25% year-on-year increase in LyondellBasell’s net income for the second quarter of the year to $1.18bn, the Netherlands-headquartered chemicals producer said on Friday.

Group sales increased 9% year on year to $12.12bn, and EBITDA increased 17% over the same period to $1.94bn, according to the company.

The jump in profit was driven primarily by the Americn olefins and polymers (O&P) business, which posted earnings before interest, taxes, depreciation and amortisation (EBITDA) of nearly $1bn despite a maintenance turnaround for its flagship La Porte, Texas cracker.

The unit was down between late March and late June to add 363,000 tonnes/year of ethylene capacity, bringing its total to 1.152m tonnes/year.

The improved results were achieved in spite of significant setbacks during the period, according to company CEO Jim Gallogly.

“As encouraging as these results are, we did not fully deliver on our reliability expectations, and the quarterly earnings could have been better. Specifically, we were late in completing our La Porte ethylene turnaround in part due to a mechanical issue with a compressor,” he said.

“Both supplier upsets and mechanical issues impacted our Intermediates and Derivatives business as well,” he added.

Olefins and polymers Americas EBITDA for the quarter was $978m, a $27m year on year increase primarily on the back of lower polymers feedstock costs.

A $150m increase in earnings from the improving spread between ethylene and polyethylene offset a $130m year on year drop in olefins earnings, the company said.

LyondellBasell is to take advantage of the La Porta cracker expansion from the third quarter of the year, Gallogly added.

“During the third quarter we expect to begin production from the 800 million pound per year La Porte ethylene expansion. This is the first of three ethylene expansions and continues to put us well ahead of new greenfield plants pursued by others in the industry,” he said.

O&P earnings for the company’s Europe, Asia and international division increased $24m year on year to $319m, as higher operating rates and butadiene volumes offset a $20m drop in olefins earnings on the back of lower margins. Equity income from joint ventures also increased $32m compared to the second quarter of 2013, the company added.

Second-quarter intermediates and derivatives EBITDA increased by $92m year on year to $430m on the back of higher propylene oxide, methanol and styrene volumes, and higher methanol and vinyl acetate margins, the company said.

Refining division EBITDA jumped from $20m in the second quarter of 2013 to $137m in the same period this year, due in part to improved yields and higher margins on secondary products.

Favourable conditions in the second quarter have continued into July, but the extent of third-quarter gains will be tempered by the delayed ramp-up of La Porta cracker capacity, according to Gallogly.

“During the first weeks of the third quarter, industry conditions have been similar to the second quarter environment.  US oil, natural gas, and natural gas liquids production remain strong.  Together these support margins in our Olefins and Polyolefins – Americas, Intermediates and Derivatives, and Refining segments,” Gallogly said.

“However, our results in the next quarter will be negatively impacted by the delayed start-up of our La Porte ethylene plant,” he added.