Occidental Joins Lyondell and Millennium in Equistar Partnership
-- Addition of ethylene, propylene and EO/EG businesses enhances
Equistar's cost position and diversifies downstream product mix.
-- Increases Equistar's synergy opportunities to more than $275 million
-- Creates world's second-largest ethylene producer, with total annual
revenues of almost $6 billion.
HOUSTON, ISELIN, N.J., LONDON, England, LOS ANGELES, March 20 /PRNewswire/ -- Lyondell Petrochemical Company (NYSE: LYO), Millennium Chemicals Inc. (NYSE: MCH) and Occidental Petroleum Corporation (NYSE: OXY) today announced the signing of a definitive agreement to expand Equistar Chemicals, LP with the addition of the ethylene, propylene, ethylene oxide (EO) and derivatives businesses of Occidental Chemical Corporation, a subsidiary of Occidental Petroleum Corporation. The addition of the Occidental assets will make Equistar the second- largest producer of ethylene in the world, with more than 11.4 billion pounds of annual capacity. It will bring Equistar's total propylene production capacity to almost 5 billion pounds, making it the world's third-largest producer. Equistar is currently North America's largest producer of polyethylene. Launched in December 1997 as a joint venture of Lyondell and Millennium, Equistar was initially comprised primarily of the olefins and polymers businesses of the two companies. Following the closing of the agreement, which is expected to occur by mid- year 1998, Equistar will be owned 41% by Lyondell Petrochemical. Millennium and Occidental will each have a 29.5% share. Dan F. Smith, President and Chief Executive Officer of Lyondell, will also continue to serve as CEO of Equistar. Eugene R. Allspach will continue to serve as Equistar's President and COO. As part of the transaction, Occidental is contributing the following: -- Olefins plants at Corpus Christi and Chocolate Bayou, TX, and Lake Charles, LA, producing 3.65 billion pounds per year of ethylene. -- Ethylene oxide, ethylene glycol and ethylene oxide derivatives businesses located at Bayport, TX, and Occidental's 50% ownership of PD Glycol, which operates EO/EG plants at Beaumont, TX. (PD Glycol is a 50/50 joint venture with DuPont.) -- A distribution system consisting of more than 950 miles of ethylene/propylene pipelines in the U.S. Gulf Coast and two storage wells in South Texas. -- $200 million of debt currently associated with these businesses. The partnership will borrow an additional $500 million upon the addition of Occidental's assets and will distribute cash of $425 million to Occidental Petroleum and $75 million to Millennium. Equistar is expected to maintain its investment-grade debt rating. The transaction also includes a long-term agreement for Equistar to supply the ethylene requirements for Occidental's chloro vinyl business. "We believe Equistar sets the industry standard for the most efficient and cost effective method of operating these commodity chemical businesses," said Dan F. Smith, CEO of Lyondell and Equistar. "The addition of Occidental will enable us to increase annual profit improvement synergies for these combined businesses to more than $275 million in the year 2000. This translates into additional earnings that are available to Lyondell and our partners during all parts of the business cycle." "Occidental is an excellent fit with the existing Equistar operations and can be readily integrated into our synergy-improvement and manufacturing- efficiency programs," Smith said. "The proximity of the assets to Equistar's existing Gulf Coast facilities enables us to capture additional cost savings and efficiencies." "The addition of Occidental's ethylene, propylene, ethylene oxide and derivatives businesses provide added opportunity to drive down even further Equistar's already low-cost structure," said William M. Landuyt, Chairman and CEO of Millennium Chemicals Inc. and co-chairman of Equistar's Owner's Committee. "The cost advantage afforded by the additional synergies and the $75 million cash that will be distributed to Millennium Chemicals combine for an EVA(R)-positive and earnings-accretive result." "We are pleased to be a part of Equistar," said Dale R. Laurance, President of Occidental Petroleum. "The operating synergies and cost savings from the alliance will improve Occidental's earnings from its petrochemical assets and will significantly increase our return on assets in our petrochemicals segment. In addition, it will contribute $625 million to our previously announced goal of raising $4.7 billion to fund the purchase of the Elk Hills field and our common stock repurchase program." The benefits of the Occidental addition to the Equistar partnership include: -- Increased total value creation from Equistar through additional synergies generated by leveraging costs over a larger asset base. Cost efficiencies have been identified in areas such as: manufacturing, purchasing, transportation and staffing consolidation. -- Opportunity to expand into less cyclical, higher margin markets, which include a significant specialty product component, through EO derivatives. Ethylene oxide derivatives are used by customers to make detergents, coatings, automotive fluids and cleaning products. -- Reduced average cost of Equistar's ethylene production. More than two- thirds of Occidental's ethylene production is from flexible crackers, meaning that they are able to use a wide variety of feedstocks, making them among the lowest cost producers in the industry. -- Expanded diversification into products that use ethylene as a feedstock with the addition of the EO/EG businesses. Nearly 60% of ethylene oxide is used to make ethylene glycol, which goes into PET fibers, film and bottles and antifreeze. -- A significantly improved Gulf Coast olefin distribution system with the combination of complementary pipeline assets that already support Equistar facilities and span from Corpus Christi to Lake Charles. Two new officer positions will be created at Equistar. Brian Gittings of Occidental will be Vice President, Oxygenated Chemicals, and Clifton B. Currin, Jr. of Lyondell will become Vice President, Supply and Optimization. All other Equistar officer positions remain the same. The Equistar governance committee will be expanded from six to nine members, with three representatives from each of the partner organizations. Joining Dan F. Smith of Lyondell and William M. Landuyt of Millennium as a co-chair will be Dale R. Laurance, President of Occidental Petroleum. Lyondell Petrochemical Company is a major chemical and refining company, with majority ownership positions in the premier olefins, polymers and refining companies in North America. Lyondell is: -- The largest producer of ethylene, propylene and polyethylene in North America and a leading producer of high value-added specialty polymers, color concentrates and polymeric powder through its interest in Equistar Chemicals, LP. -- One of the largest and most profitable refiners in the United States, processing very heavy Venezuelan crude oil to produce gasoline, low sulfur diesel and jet fuel, through its 58.5% interest in LYONDELL- CITGO Refining Company Ltd. -- The third-largest methanol producer in the U.S., through its 75% interest in Lyondell Methanol Company LP. Millennium Chemicals Inc. is a major international chemical company, with leading market positions in a broad range of commodity, industrial, performance and specialty chemicals. Millennium Chemicals Inc. is: -- The second-largest producer of TiO2 in the world and a leading producer of titanium tetrachloride; -- The second-largest producer of acetic acid and vinyl acetate monomer in the United States; -- A leading producer of fragrance and flavor chemicals and other products, including cadmium/selenium pigments and silica gel; and -- Through its partnership interest in Equistar Chemicals LP, a partner in the largest producer of ethylene, propylene and polyethylene in North America and a leading producer of high value-added specialty polymers, color concentrates and polymeric powders. Occidental Petroleum Corporation has operations in two main businesses: oil and gas and chemicals. In oil and gas, Occidental has ongoing production and exploration in 19 countries, including the United States. Occidental's OxyChem subsidiary is one of the world's largest commodity chemical producers, with interests in chlorovinyls, specialty businesses and petrochemicals. OxyChem is: -- The largest merchant marketer of chlorine and the third-largest producer of PVC resins in the United States. -- The world's largest producer of potassium hydroxide, chlorinated isocyanurate products and resorcinol. -- The world's largest marketer of EDC. -- The number one U.S. producer of chrome chemicals, phenolic molding compounds, antimony oxide and mercaptan warning agents. -- The number two U.S. producer of VCM and sodium silicates. -- The number three U.S. producer of ethylene oxide and ethylene glycol. The statements in this release relating to matters that are not historical facts are forward-looking statements that involve risks and uncertainties, including, but not limited to, future global economic conditions, production capacity, competitive products and prices and other risks and uncertainties detailed in the Securities and Exchange Commission filings of Lyondell, Millennium Chemicals and Occidental Petroleum. Attachment 1: MANUFACTURING OPERATIONS OF THE EXPANDED EQUISTAR VENTURE New additions with Occidental transaction are shown in all caps Location Principal products Annual capacity BEAUMONT, TEXAS (50% ETHYLENE OXIDE 657 MILLION POUNDS OF PD GLYCOL VENTURE) ETHYLENE GLYCOL 910 MILLION POUNDS Channelview, Texas Ethylene 3.8 billion pounds Propylene 2.7 billion pounds Butadiene 615 million pounds Benzene 90 million gallons Toluene 40 million gallons Dicyclopentadiene (DCPD) 80 million pounds Isoprene 108 million pounds Resin oil 120 million pounds Piperylenes 100 million pounds Alkylate 19,000 barrels per day MTBE 13,000 barrels per day High -density Chocolate Bayou, Texas polyethylene 400 million pounds CHOCOLATE BAYOU, TEXAS ETHYLENE 1.2 BILLION POUNDS PROPYLENE 725 MILLION POUNDS BUTADIENE 150 MILLION POUNDS BENZENE 105 MILLION GALLONS TOLUENE 26 MILLION GALLONS MTBE 2,300 BARRELS/DAY Clinton, Iowa Ethylene 960 million pounds Propylene 150 million pounds Low-density polyethylene 430 million pounds High-density polyethylene 450 million pounds CORPUS CHRISTI, TEXAS ETHYLENE 1.7 BILLION POUNDS PROPYLENE 664 MILLION POUNDS BUTADIENE 195 MILLION POUNDS BENZENE 79 MILLION GALLONS Crockett, Texas Wire & cable compounds, color and additive concentrates Fairport Harbor, Ohio Wire & cable compounds, color concentrates Heath, Ohio Color, additive and foam concentrates, performance compounds LAKE CHARLES, LOUISIANA ETHYLENE 850 MILLION POUNDS PROPYLENE 200 MILLION POUNDS La Porte, Texas Ethylene 1.74 billion pounds Propylene 360 million pounds Low-density polyethylene 395 million pounds Linear-low density polyethylene 480 million pounds High-density polyethylene 545 million pounds Matagorda County, Texas High-density polyethylene 1,050 million pounds Morris, Illinois Ethylene 1.13 billion pounds Propylene 280 million pounds Low-density polyethylene 540 million pounds Linear low density polyethylene 650 million pounds Polypropylene 280 million pounds Pasadena, Texas (Bayport plant) Polypropylene 400 million pounds Low-density polyethylene 140 million pounds PASADENA, TEXAS (BAYPORT INDUSTRIAL DISTRICT) ETHYLENE OXIDE 750 MILLION POUNDS ETHYLENE GLYCOL 675 MILLION POUNDS ETHYLENE OXIDE DERIVATIVES 225 MILLION POUNDS Port Arthur, Texas Low-density polyethylene 190 million pounds High-density polyethylene 540 million pounds Tuscola, Illinois Ethyl alcohol Diethyl ether Compounds for wire & cable Microfine polyolefin powders Victoria, Texas High-density polyethylene 450 million pounds Anaheim, California Denatured alcohol Newark, New Jersey Denatured alcohol Attachment 2 Equistar Governance Committee Representing Lyondell Petrochemical Company: Dan F. Smith, President and CEO Jeffrey R. Pendergraft, Senior Vice President and Chief Administrative Officer Third representative to be named Representing Millennium Chemicals Inc.: William M. Landuyt, Chairman and CEO John E. Lushefski, Senior Vice President and CFO George W. Robbins, President and CEO of Millennium Specialty Chemicals Representing Occidental Petroleum Corporation: Dale R. Laurance, President Stephen I. Chazen, Executive Vice President/Corporate Development Roger Hirl, President of Occidental Chemical Corporation Equistar Officers: Dan F. Smith, Chief Executive Officer Eugene R. Allspach, President and Chief Operating Officer Joseph M. Putz, Senior Vice President, Finance and Administration Debra L. Starnes, Senior Vice President, Polymers Michael Baldwin, Vice President, Responsible CareO John R. Beard, Vice President, Manufacturing Clifton B. Currin, Jr., Vice President, Supply and Optimization J.R. Fontenot, Vice President, Engineering Brian Gittings, Vice President, Oxygenated Chemicals Alan Houlton, Vice President, Customer Supply Chain Gerald A. O'Brien, Vice President, Legal & Secretary Myra J. Perkinson, Vice President, Human Resources W. Norman Phillips, Jr., Vice President, Petrochemicals Kerry F. Williams, Vice President, Research and Development Jeffrey L. Hemmer, Director, Business Process ImprovementRELATED LINKS
SOURCE Lyondell Petrochemical Company