LyondellBasell Earnings Call INSIGHTS: NGL Price Optimism, Midwest Conway Advantage

On Friday, LyondellBasell Industries NV (NYSE:LYB) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.

NGL Price Optimism

Jeffrey Zekauskas – JPMC: I have a question for Sergey Vasnetsov. So, Sergey, you’ve been Head of Strategic Planning at LyondellBasell now for almost two years. How is your view of Lyondell’s strategy changed since you first took the position compared to how you see it now?

Sergey Vasnetsov – SVP, Strategic Planning and Transactions: Jeff, well, when I joined the Company, I didn’t have a view and a strategy, and so I think my view has developed for this past couple of years in discussions with our managements and with our Board. Clearly, the strategy must be based on realization what kind of company we are, and so that’s perception both internally and externally. We’ve also developed, as you can see us in a stronger opposition than we were two years ago. I think in terms of our deployment of cash and (variety of different place), the basic premises hasn’t changed for the past two years. We identified some specific opportunities that I did not (indiscernible) two years ago, such as debottlenecks and restarts as Jim had mentioned. But I think there are underlying disciplines, the approach to viewing the world and trying to strike for the best really hasn’t changed. So hopefully this will continue to evolve over the next two years, and so (along there) and so you’ll see the results of it.

Jeffrey Zekauskas – JPMC: For my follow-up, natural gas liquids prices have (down-stopped ) since the end of June, do you read in anything into that, and do you have ideas of where natural gas liquids prices will be for the remainder of 2012?

James L. Gallogly – CEO: Well, Jeff, it’s always difficult to forecast NGL prices. You’re right that they have come up recently, some in the Midwest, some in the Gulf Coast, but if you look at ethane and propane inventories you’re going to see that they’re extremely high at this point in time, NGL prices have tracked up a little bit with gas prices and crude oil prices, but there is still so — strongly advantage in the United States that we’re quite optimistic about the future. We’ll see short-term volatility, but ethane price is still under $0.40 in the Gulf Coast and around $0.15 in the Midwest, so we’re in a good position.

Midwest Conway Advantage

David Begleiter – Deutsche Bank: Jim, just on the Midwest Conway advantage, is there new spread we’d be shipping about between Conway and Mont Belvieu going forward given the constrains still shipping ethane down?

James L. Gallogly – CEO: I think next year you’ll see some product moving south, but I think there still will be an advantage in the Midwest; it won’t be as great as we see today. At this moment in time there is such an abundance of supply that the pricing has been as low as $0.02 a gallon, that price has moved up as I mentioned, but there still is ethane rejection taking place, so that shows you just how long the market is.

David Begleiter – Deutsche Bank: Jim, just on the June, July PE strain, is this mainly restocking in a view and is it coming to an end from your perspective?

James L. Gallogly – CEO: There is a couple of things that happened when the overall complex of oil prices and gas prices start to increase again. People say okay we’ve hit that floor, it’s time to go and buy again, but the other thing that’s going on as we see a bit more export in a little bit by ourselves and quite a bit more by our competitors according to industry data, the U.S. is advantaged enough that we can move our product efficiently in other markets. LyondellBasell exported about 15% most of that was South versus Asia. We had a very, very modest volume to Asia or Africa just a couple percent. So, the good news is that the pricing advantage that we have here allows us to be an export platform and so we expect rates to remain pretty high in the U.S.