LYONDELLBASELL INDUSTRIES N.V. GENERAL
This discussion should be read in conjunction with the information contained in our Consolidated Financial Statements, and the accompanying notes elsewhere in this report. Unless otherwise indicated, the "Company", "we", "us," "our" or similar words are used to refer toLyondellBasell Industries N.V. together with its consolidated subsidiaries ("LyondellBasell N.V. "). InNovember 2020 , theU.S. Securities and Exchange Commission (the "SEC") adopted the final rule under SEC Release No. 33-10890, Management's Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information, which we applied as ofDecember 31, 2021 . Pursuant to this final rule, for interim reporting, we have elected to compare the changes in our results of operations of the most recently completed quarter to the immediately preceding sequential quarter as management believes this is more useful in identifying current business trends and provides a more meaningful comparison.
OVERVIEW
During the first quarter 2022 we reversed fourth quarter trends and achieved price increases for polyethylene and polypropylene while rapidly rising feedstock and energy costs compressed olefins and polyolefins margins in our O&P-Americas segment. European demand for polymers remained solid despite ongoing challenges from the war inUkraine . Our ethylene cracker inLa Porte, Texas , restarted ahead of schedule in March after completing a major planned maintenance turnaround. In our oxyfuels and refining businesses, increasing demand for transportation fuels and higher prices for gasoline and diesel led to improvements in our results.Advanced Polymer Solutions profitability increased due to higher volumes and margins as automotive demand improved from the fourth quarter of 2021.
As a result of the war in
We continued to generate substantial cash during the quarter as cash provided by operating activities provided$1,502 million in the first quarter of 2022. During the first quarter of 2022 we repurchased approximately 2.1 million of our outstanding ordinary shares. 24
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Results of operations for the periods discussed are presented in the table
below:
Three Months Ended
March 31, December 31, March 31,
Millions of dollars 2022 2021 2021
Sales and other operating revenues $ 13,157 $ 12,830 $ 9,082
Cost of sales 11,136 10,934 7,678
Impairments - 624 -
Selling, general and administrative expenses 328 328 287
Research and development expenses 32 33 29
Operating income 1,661 911 1,088
Interest expense (74) (153) (110)
Interest income 2 1 2
Other income, net 19 35 25
Income from equity investments 29 72 137
Income from continuing operations before income taxes 1,637 866 1,142
Provision for income taxes 316 135 70
Income from continuing operations 1,321 731 1,072
Loss from discontinued operations, net of tax (1) (5) (2)
Net income 1,320 726 1,070
Other comprehensive income (loss), net of tax -
Financial derivatives 88 (60) 175
Defined benefit pension and other postretirement benefit 5 168 11
plans
Foreign currency translations (25) (28) (107) Total other comprehensive income, net of tax 68 80 79 Comprehensive income$ 1,388 $ 806$ 1,149 25
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RESULTS OF OPERATIONS
Revenues-Revenue increased by $327 million , or 3%, in the first quarter of 2022
compared to the fourth quarter of 2021. Average sales prices were higher for
many of our products as sales prices generally correlate with crude oil prices,
which increased relative to the fourth quarter of 2021. These higher prices led
to a 7% increase in revenue. This increase was partially offset by a 3% decline
in revenue as a result of lower sales volumes driven by outages in our
O&P-Americas and Refining segments. Revenue also decreased 1% as a result of
unfavorable foreign exchange impacts.
Revenues increased by $4,075 million , or 45%, in the first quarter of 2022
compared to the first quarter of 2021. Average sales prices were higher for many
of our products as sales prices generally correlate with crude oil prices, which
increased relative to the first quarter of 2021. These higher prices led to a
31% increase in revenue. Higher sales volumes, driven by increased demand,
resulted in a revenue increase of 14%.
Cost of Sales-Cost of sales increased by $202 million , or 2%, in the first
quarter of 2022 compared to the fourth quarter of 2021 and by $3,458 million , or
45%, in the first quarter of 2022 compared to the first quarter of 2021. The
increase primarily related to higher feedstock and energy costs.
Operating Income-Operating income increased by $750 million , or 82%, in the
first quarter of 2022 compared to the fourth quarter of 2021. Operating income
in our Refining, I&D, APS and O&P-EAI segments increased $644 million ,
$329 million , $101 million and $81 million , respectively. These increases were
partially offset by a decrease in Operating income in our O&P-Americas and
Technology segments of $339 million and $70 million , respectively.
Operating income increased by $573 million , or 53%, in the first quarter of 2022
compared to the first quarter of 2021. Operating income in our I&D, Refining,
O&P-Americas and Technology segments increased by $380 million , $278 million ,
$41 million and $11 million , respectively. These increases were partially offset
by a decrease in Operating income in our O&P-EAI and APS segments of $121
million and $16 million , respectively.
Results for each of our business segments are discussed further in the Segment Analysis section below.
Income from Equity Investments-Income from our equity investments decreased by$43 million , or 60%, in the first quarter of 2022 compared to the fourth quarter of 2021 and by$108 million , or 79%, in the first quarter of 2022 compared to the first quarter of 2021. The decrease was mainly attributable to margin compression due to decreased demand and lower prices inAsia . Income Taxes-Our effective income tax rate for the first quarter of 2022 was 19.3% compared to 15.6% for the fourth quarter of 2021. The higher effective tax rate in the first quarter of 2022 was primarily attributable to higher pre-tax earnings and lower exempt income which resulted in a 3% and 2.6% increase in our effective tax rate, respectively. These increases were partially offset by a 2.6% decrease in the effective tax rate driven by changes in unrecognized tax benefits. Our effective income tax rate for the first quarter of 2022 was 19.3% compared to 6.1% for the first quarter of 2021. In the first quarter of 2021, we benefited from return to accrual adjustments primarily associated with a step-up of certain Italian assets to fair market value and benefits resulting from the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") of 10.5% and 2.6% respectively; such benefits did not impact our effective tax rate in the first quarter of 2022. Our income tax results are discussed further in Note 8 to the Consolidated Financial Statements. 26
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Comprehensive Income-Comprehensive income increased by$582 million in the first quarter of 2022 compared to the fourth quarter of 2021. The increase is primarily due to higher net income and changes in financial derivative instruments primarily driven by periodic changes in benchmark interest rates, partially offset by the impact of defined pension and other post-retirement benefits. Comprehensive income increased by$239 million in the first quarter of 2022 compared to the first quarter of 2021. The increase is primarily due to higher net income and changes in foreign currency translation adjustments, partially offset by changes in financial derivative instruments primarily driven by periodic changes in benchmark interest rates. In the first quarter of 2022, the cumulative after-tax effects of our derivatives designated as cash flow hedges were net gains of$88 million . Pre-tax gains of$112 million related to forward-starting interest rate swaps were driven by periodic changes in benchmark interest rates in the first quarter of 2022. The fluctuations of theU.S. dollar against the euro and the periodic changes in benchmark interest rates, in the first quarter of 2022, resulted in pre-tax gains of$9 million , related to our cross-currency swaps. Pre-tax losses of$25 million related to our cross-currency swaps were reclassified from Accumulated other comprehensive loss to Interest expense in the first quarter of 2022. The remaining change pertains to our commodity cash flow hedges. In the fourth quarter of 2021, the cumulative after-tax effects of our derivatives designated as cash flow hedges were net losses of$60 million . Included in this amount, were pre-tax losses of$42 million related to forward-starting interest rate swaps, driven by the periodic change in benchmark interest rates in the fourth quarter of 2021. The fluctuations of theU.S. dollar against the euro and the periodic changes in benchmark interest rates in the fourth quarter of 2021, resulted in pre-tax gains of$80 million , related to our cross-currency swaps. Pre-tax losses of$88 million related to our cross-currency swaps were reclassified from Accumulated other comprehensive loss to Interest expense in the fourth quarter of 2021.
In the first quarter of 2021, the cumulative after-tax effects of our
derivatives designated as cash flow hedges were net gains of
We recognized defined benefit pension and other post-retirement benefit plan
pre-tax gains of
The predominant functional currency for our operations outside of theU.S. is the euro. Relative to theU.S. dollar, the value of the euro weakened in the first quarter of 2022, the fourth and the first quarter of 2021, resulting in net losses reflected in the Consolidated Statements of Comprehensive Income. The net losses related to unrealized changes in foreign currency translation impacts include pre-tax gains of$35 million ,$52 million and$62 million , in the first quarter of 2022, the fourth and the first quarter of 2021, respectively, which represent the effective portion of our net investment hedges. 27
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Segment Analysis
We use earnings from continuing operations before interest, income taxes, and
depreciation and amortization ("EBITDA") as our measure of profitability for
segment reporting purposes. This measure of segment operating results is used by
our chief operating decision maker to assess the performance of and allocate
resources to our operating segments. Intersegment eliminations and items that
are not directly related or allocated to business operations, such as foreign
exchange gains or losses and components of pension and other postretirement
benefits other than service costs are included in "Other". For additional
information related to our operating segments, as well as a reconciliation of
EBITDA to its nearest GAAP measure, Income from continuing operations before
income taxes, see Note 12 to our Consolidated Financial Statements.
Revenues and the components of EBITDA for the periods presented are reflected in
the table below:
Three Months Ended
March 31, December 31, March 31,
Millions of dollars 2022 2021 2021
Sales and other operating revenues:
O&P-Americas segment $ 3,595 $ 4,012 $ 2,859
O&P-EAI segment 3,762 3,530 3,047
I&D segment 3,339 2,934 1,767
APS segment 1,408 1,253 1,270
Refining segment 2,720 2,643 1,126
Technology segment 181 257 165
Other, including intersegment eliminations (1,848) (1,799) (1,152)
Total $ 13,157 $ 12,830 $ 9,082
Operating income (loss):
O&P-Americas segment $ 728 $ 1,067 $ 687
O&P-EAI segment 138 57 259
I&D segment 468 139 88
APS segment 88 (13) 104
Refining segment 148 (496) (130)
Technology segment 93 163 82
Other, including intersegment eliminations (2) (6) (2)
Total $ 1,661 $ 911 $ 1,088
Depreciation and amortization:
O&P-Americas segment $ 144 $ 151 $ 143
O&P-EAI segment 47 47 53
I&D segment 81 115 80
APS segment 29 34 28
Refining segment - 21 19
Technology segment 10 9 12
Total $ 311 $ 377 $ 335
Income (loss) from equity investments:
O&P-Americas segment $ 33 $ 21 $ 30
O&P-EAI segment 1 50 95
I&D segment (5) 2 12
APS segment - (1) -
Total $ 29 $ 72 $ 137
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Three Months Ended
March 31, December 31, March 31,
Millions of dollars 2022 2021 2021Other income (expense), net:
O&P-Americas segment$ 6 $ 23$ 7 O&P-EAI segment 2 1 5 I&D segment 2 (4) 2 APS segment 8 4 3 Refining segment - 1 1 Technology segment - 1 - Other, including intersegment eliminations 1 9 7 Total$ 19 $ 35$ 25 EBITDA: O&P-Americas segment$ 911 $ 1,262 $ 867 O&P-EAI segment 188 155 412 I&D segment 546 252 182 APS segment 125 24 135 Refining segment 148 (474) (110) Technology segment 103 173 94 Other, including intersegment eliminations (1) 3 5 Total$ 2,020 $ 1,395 $ 1,585
Olefins and Polyolefin-Americas Segment
Overview-EBITDA in the first quarter of 2022 decreased compared to fourth quarter of 2021 due to higher feedstock cost and increased relative to the first quarter of 2021 driven by higher polyolefins results.
Ethylene Raw Materials-We have flexibility to vary the raw material mix and process conditions in ourU.S. olefins plants in order to maximize profitability as market prices fluctuate for both feedstocks and products. Although prices of crude-based liquids and natural gas liquids 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 first quarter of 2022 and the first and fourth quarter of 2021 approximately 60% to 70% of the raw materials used in our North American crackers was ethane. The following table sets forth selected financial information for the O&P-Americas segment including Income from equity investments, which is a component of EBITDA: Three Months Ended March 31, December 31, March 31, Millions of dollars 2022 2021 2021
Sales and other operating revenues
2,859
Income from equity investments 33 21 30
EBITDA 911 1,262 867
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Revenue-Revenues for our O&P-Americas segment declined by$417 million , or 10%, in the first quarter of 2022 compared to the fourth quarter of 2021 and increased by$736 million , or 26%, in the first quarter of 2022 compared to the first quarter of 2021. First quarter of 2022 versus fourth quarter of 2021-Volume declines resulted in a revenue decrease of 8% due to planned and unplanned outages. Lower average sales prices resulted in a 2% decrease in revenue primarily driven by lower demand. First quarter of 2022 versus first quarter of 2021-Higher average sales prices resulted in a 23% increase in revenue primarily driven by tight market conditions. Higher sales volume resulted in a revenue increase of 3% as the first quarter of 2021 was impacted by the effects of unusually cold temperatures and associated electrical power outages that led to shutdowns of manufacturing facilities inTexas . EBITDA-EBITDA decreased by$351 million , or 28%, in the first quarter of 2022 compared to the fourth quarter of 2021 and increased by$44 million , or 5%, in the first quarter of 2022 compared to the first quarter of 2021. First quarter of 2022 versus fourth quarter of 2021-Lower olefin results led to a 14% decrease in EBITDA primarily due to lower margins driven by higher feedstock costs. Lower polyethylene and polypropylene results led to a 10% and 5% decrease in EBITDA, respectively, primarily due to polyolefin sales price decreases in combination with higher feedstock costs. First quarter of 2022 versus first quarter of 2021-Higher polyethylene and polypropylene results led to a 18% and 3% increase in EBITDA, respectively, primarily due to sales price increases and lower feedstock costs. Lower olefin results led to a 15% decrease in EBITDA due to margin constraints from rising feedstock and energy costs and lower ethylene sales prices.
Olefins and Polyolefin-Europe,
Overview-EBITDA increased in the first quarter of 2022 compared to the fourth quarter of 2021 due to higher product margins and decreased relative to the first quarter of 2021 mainly as a result of lower olefin margins and equity income.
During the first quarter of 2022 and fourth quarter of 2021 we operated our ethylene crackers at 74% and 71% of capacity, respectively, due to planned maintenance compared with an operating rate of 98% in the first quarter of 2021. The first quarter of 2022 was also impacted by feedstock disruptions driven by the war inUkraine . Ethylene Raw Materials-In Europe, heavy liquids are the primary raw materials for our ethylene production and represented approximately 70% of the raw materials used in the first quarter of 2022 and the first and fourth quarter of 2021. The following table sets forth selected financial information for the O&P-EAI segment including Income from equity investments, which is a component of EBITDA: Three Months Ended March 31, December 31, March 31, Millions of dollars 2022 2021 2021
Sales and other operating revenues
3,047
Income from equity investments 1 50 95
EBITDA 188 155 412
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-------------------------------------------------------------------------------- Table of Contents Revenue-Revenues increased by$232 million , or 7%, in the first quarter of 2022 compared to the fourth quarter of 2021 and by$715 million , or 23%, in the first quarter of 2022 compared to the first quarter of 2021. First quarter of 2022 versus fourth quarter of 2021-Higher average sales prices resulted in a 7% increase in revenue as sales prices generally correlate with crude oil prices, which on average, increased compared to the fourth quarter of 2021. Volume improvements resulted in a revenue increase of 3% primarily due to increased demand. Unfavorable foreign exchange impacts resulted in a revenue decrease of 3%. First quarter of 2022 versus first quarter of 2021-Higher average sales prices resulted in a 27% increase in revenue as sales prices generally correlate with crude oil prices, which on average, increased compared to the first quarter of 2021. Lower volumes resulted in a revenue decrease of 3% primarily due to lower demand. Unfavorable foreign exchange impacts resulted in a revenue decrease of 1%. EBITDA-EBITDA increased by$33 million , or 21%, in the first quarter of 2022 compared to the fourth quarter of 2021 and decreased by$224 million , or 54%, in the first quarter of 2022 compared to the first quarter of 2021. First quarter of 2022 versus fourth quarter of 2021-Higher polyethylene and polypropylene results led to a 19% and 5% increase in EBITDA, respectively, largely attributed to higher margins. Higher olefins results led to a 14% increase in EBITDA primarily driven by higher margins as monomer prices increased, partially offset by higher feedstock and energy costs. Lower income from our equity investments led to decreases in EBITDA of 32% mainly attributable to margin compression due to decreased demand and lower prices inAsia . The fourth quarter of 2021 included a$30 million LIFO inventory valuation charge, a similar charge was not incurred during the first quarter of 2022. First quarter of 2022 versus first quarter of 2021-Lower olefins results led to a 25% decrease in EBITDA primarily driven by lower margins attributable to higher feedstock and energy costs which outpaced increased ethylene and co-product prices. Lower income from our equity investments led to decreases in EBITDA of 23% mainly attributable to margin compression as noted above. Unfavorable foreign exchange impacts resulted in a EBITDA decrease of 4%. Other-Planned maintenance in 2022 for our O&P-EAI segment is expected to impact EBITDA by approximately$95 million for the full year,$35 million higher than previously estimated due to additional work related to planned maintenance at our cracker in Berre,France in the second quarter of 2022.
Intermediates and Derivatives Segment
Overview-EBITDA increased in the first quarter of 2022 compared to the first and fourth quarter of 2021, primarily driven by higher margins across most businesses due to market supply tightness coupled with strong demand recovery.
The following table sets forth selected financial information for the I&D
segment including Income (loss) from equity investments, which is a component of
EBITDA:
Three Months Ended
March 31, December 31, March 31,
Millions of dollars 2022 2021 2021
Sales and other operating revenues
(5) 2 12
EBITDA 546 252 182
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-------------------------------------------------------------------------------- Table of Contents Revenue-Revenues increased by$405 million , or 14%, in the first quarter of 2022 compared to the fourth quarter of 2021 and by$1,572 million , or 89%, in the first quarter of 2022 compared to the first quarter of 2021. First quarter of 2022 versus fourth quarter of 2021-Sales volumes increased resulting in a 9% increase in revenue, largely due to improved operating rates at our acetyls facilities. Higher average sales prices resulted in a 6% increase in revenue as sales prices generally correlate with crude oil prices, which on average, increased compared to the fourth quarter of 2021. Unfavorable foreign exchange impacts resulted in a revenue decrease of 1%. First quarter of 2022 versus first quarter of 2021-Higher average sales prices resulted in a 55% increase in revenue as sales prices generally correlate with crude oil prices, which on average, increased compared to the same period in 2021. Sales volumes increased resulting in a 35% increase in revenue, mainly due to absence of the impact of unusually cold temperatures and associated electrical power outages that led to shutdowns of our manufacturing facilities inTexas in early 2021. Unfavorable foreign exchange impacts resulted in a revenue decrease of 1%.
EBITDA-EBITDA increased by
First quarter of 2022 versus fourth quarter of 2021-Oxyfuels and related products results led to an EBITDA increase of 50% primarily driven by margin improvement as a result of higher product prices. Propylene oxide and derivatives results led to increases in EBITDA of 20% due to improved margins driven by increased demand for durable goods. Intermediate chemicals results increased EBITDA by 17% equally driven by higher margins and volumes due to tight industry supply and improved operations. The fourth quarter of 2021 included a$93 million LIFO inventory valuation charge; a similar charge was not incurred during the first quarter of 2022. First quarter of 2022 versus first quarter of 2021-Propylene oxide and derivatives results increased EBITDA by 113% primarily as a result of higher margins due to strong demand recovery coupled with tight market supply resulting from industry outages. Intermediate chemicals results increased EBITDA by 77% due to improved margins driven by higher demand and tight market conditions. Oxyfuels and related products results increased EBITDA by 42% primarily driven by margin improvement as a result of improved demand and higher gasoline prices. Lower income from our equity investments led to decreases in EBITDA of 10% mainly attributable to lower propylene oxide margins inAsia . Unfavorable foreign exchange impacts resulted in a EBITDA decrease of 9%.
Advanced Polymer Solutions Segment
Overview-EBITDA increased in the first quarter of 2022 relative to the fourth
quarter of 2021 primarily due to higher demand for our products and the absence
of a LIFO adjustment recognized during the fourth quarter of 2021. EBITDA
decreased in the first quarter of 2022 relative to the first quarter of 2021
primarily due to lower demand for our products.
The following table sets forth selected financial information for the APS
segment including losses from equity investments, which is a component of
EBITDA:
Three Months Ended
March 31, December 31, March 31,
Millions of dollars 2022 2021 2021
Sales and other operating revenues
1,270
Loss from equity investments - (1) -
EBITDA 125 24 135
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-------------------------------------------------------------------------------- Table of Contents Revenue-Revenues increased by$155 million , or 12%, in the first quarter of 2022 compared to the fourth quarter of 2021 and by$138 million , or 11%, in the first quarter of 2022 compared to the first quarter of 2021.
First quarter of 2022 versus fourth quarter of 2021-Sales volumes improved resulting in a 12% increase in revenue stemming from higher automotive and construction demand. Average sales price increased resulting in a 3% increase in revenue as sales prices generally correlate with crude oil prices, which on average, increased compared to the fourth quarter of 2021. Foreign exchange impacts resulted in a revenue decrease of 3%.
First quarter of 2022 versus first quarter of 2021-Average sales price increased resulting in a 19% increase in revenue as sales prices generally correlate with crude oil prices, which on average, increased compared to the same period in 2021. Sales volumes decreased resulting in a 7% decrease in revenue stemming from lower automotive demand. Foreign exchange impacts resulted in a revenue decrease of 1%. EBITDA-EBITDA increased by$101 million , or 421%, in the first quarter of 2022 compared to the fourth quarter of 2021 and decreased by$10 million , or 7%, in the first quarter of 2022 compared to the first quarter of 2021. First quarter of 2022 versus fourth quarter of 2021-Compounding and solutions results led to an EBITDA increase of 146% primarily due to higher volumes driven by higher demand from automotive manufacturers. Increased advanced polymer results led to an EBITDA increase of 42% due to higher volumes driven by increased seasonal demand. The fourth quarter of 2021 included a$55 million LIFO inventory valuation charge; a similar charge was not incurred during the first quarter of 2022. First quarter of 2022 versus first quarter of 2021-Compounding and solutions results led to an EBITDA decrease of 13% primarily due to lower volumes driven by lower demand due to constrained production in automotive, appliance and other end markets as a result of semiconductor shortages. Our advanced polymers business results increased 8%, driven by higher price spreads. Unfavorable foreign exchange impacts resulted in a EBITDA decrease of 6%.
Refining Segment
Overview-EBITDA increased in the first quarter of 2022 relative to the first and fourth quarter of 2021 due to higher margins and the absence of a non-cash impairment charge recognized during the fourth quarter of 2021.
The following table sets forth selected financial information and heavy crude oil processing rates for the Refining segment and theU.S. refining market margins for the applicable periods. "Brent" is a light sweet crude oil and is one of the main benchmark prices for purchases of oil worldwide. "Maya" is a heavy sour crude oil grade produced inMexico that is a relevant benchmark for heavy sour crude oils in theU.S. Gulf Coast market. References to industry benchmarks for refining market margins are to industry prices reported by Platts, a division of S&P Global. Three Months Ended March 31, December 31, March 31, Millions of dollars 2022 2021 2021
Sales and other operating revenues
1,126 EBITDA 148 (474) (110) Thousands of barrels per day Heavy crude oil processing rates 255 266
152
Market margins, dollars per barrel Brent - 2-1-1$ 22.31 $ 15.54 $ 10.57 Brent - Maya differential 8.51 8.04 4.75 Total Maya 2-1-1$ 30.82 $ 23.58 $ 15.32 33
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Revenue-Revenues increased by$77 million , or 3%, in the first quarter of 2022 compared to the fourth quarter of 2021 and by$1,594 million , or 142%, in the first quarter of 2022 compared to the first quarter of 2021. First quarter of 2022 versus fourth quarter of 2021-Higher product prices led to a revenue increase of 10% due to an average Brent crude oil price increase of approximately$18 per barrel. Sales volumes decreased resulting in a 7% decrease in revenue due to the impact of downtime associated with unplanned outages at one of our coking units. First quarter of 2022 versus first quarter of 2021-Higher product prices led to a revenue increase of 87% due to an average Brent crude oil price increase of approximately$36 per barrel. Sales volumes increased resulting in a 55% increase in revenue due to improved supply and demand as the first quarter of 2021 was impacted by planned and unplanned outages, including the effects of unusually cold temperatures and associated electrical power outages that led to shutdowns of our manufacturing facilities inTexas .
EBITDA-EBITDA increased by
First quarter of 2022 versus fourth quarter of 2021-During the fourth quarter of 2021, we recognized a non-cash impairment charge of$624 million relating to ourHouston refinery's asset group as well as a$52 million LIFO inventory benefit; no similar items were incurred during the first quarter of 2022. Margin improvements, driven by an increase in the Maya 2-1-1 market margin, resulted in a 13% increase in EBITDA. Volumes declined as a result of unplanned maintenance which resulted in a 3% decrease in EBITDA. First quarter of 2022 versus first quarter of 2021-Volumes increased as demand improved for refined products which resulted in a 8% increase in EBITDA. The remaining increase in EBITDA was driven by margin improvements due to an increase in the Maya 2-1-1 market margin resulting from higher demand.
Other-In
Technology Segment
Overview-EBITDA decreased in the first quarter of 2022 compared to the fourth
quarter of 2021 from lower licensing revenues and increased in the first quarter
of 2022 relative to the first of 2021 driven by higher catalyst volumes.
The following table sets forth selected financial information for the Technology
segment:
Three Months Ended
March 31, December 31, March 31,
Millions of dollars 2022 2021 2021
Sales and other operating revenues
165 EBITDA 103 173 94 Revenue-Revenues decreased by$76 million , or 30%, in the first quarter of 2022 compared to the fourth quarter of 2021 and increased by$16 million , or 10%, in the first quarter of 2022 compared to the first quarter of 2021. First quarter of 2022 versus fourth quarter of 2021-Licensing revenues decreased by 32% as fewer contracts reached significant milestones during the quarter. Higher catalyst volumes resulted in a 3% increase in revenue driven by continued strong demand. Changes in average catalyst sales price resulted in a revenue increase of 4%. An unfavorable foreign exchange impact decreased revenue by 5%. 34 -------------------------------------------------------------------------------- Table of Contents First quarter of 2022 versus first quarter of 2021-Higher catalyst volumes resulted in a 13% increase in revenue primarily driven by strong demand. Changes in average catalyst sales price resulted in a 3% decrease in revenue. Higher licensing revenues resulted in a 1% increase in revenue. An unfavorable foreign exchange impact decreased revenue by 1%. EBITDA-EBITDA decreased by$70 million , or 40%, in the first quarter of 2022 compared to the fourth quarter of 2021 and increased by$9 million , or 10%, in the first quarter of 2022 compared to the first quarter of 2021. First quarter of 2022 versus fourth quarter of 2021-EBITDA decreases were primarily driven by lower licensing revenue resulting from fewer contracts reaching significant milestones which resulted in a 49% decrease in revenue. This decrease was partially offset by an increase in catalyst margins driven by higher average sales prices which resulted in a 7% increase in EBITDA.
First quarter of 2022 versus first quarter of 2021-EBITDA improvements were driven by higher catalyst volumes which resulted in an EBITDA increase of 19%. Unfavorable foreign exchange impacts resulted in an EBITDA decrease of 7%.
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FINANCIAL CONDITIONOperating, investing and financing activities of continuing operations, which are discussed below, are presented in the following table:
Three Months Ended
March 31,
Millions of dollars 2022 2021
Cash provided by (used in):
Operating activities $ 1,502 $ 571
Investing activities (456) (59)
Financing activities (713) (782)
Operating Activities-Cash provided by operating activities of $1,502 million in
the first quarter of 2022 primarily reflected earnings adjusted for non-cash
items and cash used by the main components of working capital-Accounts
receivable, Inventories and Accounts payable.
In the first quarter of 2022, the main components of working capital used $22
million of cash driven primarily by an increase in Inventories and Accounts
receivable, partially offset by an increase in Accounts payable. The increase in
Inventories was primarily due to an increase in raw material costs coupled with
an increase in inventory in anticipation of turnaround activity in the I&D
segment. The increase in Accounts receivable was driven by higher revenues
across several of our businesses primarily driven by higher volumes and higher
average sales prices. The increase in Accounts payable was primarily driven by
increases in our Refining and O&P-Americas segments as a result of increased raw
material and energy costs.
Cash provided by operating activities of $571 million in the first quarter of
2021 reflected earnings adjusted for non-cash items and cash used by the main
components of working capital.
In the first quarter of 2021, the main components of working capital used $626
million of cash driven primarily by an increase in Accounts receivable and
Inventories partially offset by an increase in Accounts payable. The increase in
Accounts receivable was driven by higher revenues for our O&P-Americas , O&P-EAI,
and APS segments. The increase in Inventory was primarily driven by higher
inventory volumes, due to lower crude oil consumption as a result of Texas
weather events, and prices within our Refining segment. The increase in Accounts
payables was primarily driven by increased raw material costs.
Investing Activities-Capital expenditures in the first quarter of 2022 totaled
$446 million compared to $340 million in the first quarter of 2021.
Approximately 40% and 55% of our capital expenditures in the first quarter of
2022 and 2021, respectively, was for profit-generating growth projects,
primarily our PO/TBA plant, with the remaining expenditures supporting
sustaining maintenance. See Note 12 to the Consolidated Financial Statements for
additional information regarding capital expenditures by segment.
We invest cash in investment-grade and other high-quality instruments that provide adequate flexibility to redeploy funds as needed to meet our cash flow requirements while maximizing yield.
In the first quarter of 2022 and 2021, we received proceeds of$8 million and$226 million , respectively, from the liquidation of our investment in equity securities. Additionally, in the first quarter of 2021 we received proceeds of$74 million from maturities of certain available-for-sale debt securities. Financing Activities-In the first quarter of 2022, we made payments of$217 million to repurchase outstanding ordinary shares. We made dividend payments totaling$371 million and$352 million in the first quarter of 2022 and 2021, respectively. In the first quarter of 2022, we made net repayments of$169 million related to the issuance and repurchase of commercial paper instruments under our commercial paper program. 36
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In the first quarter of 2022 and 2021, we received a return of collateral of$51 million and$66 million , respectively, related to the positions held with our counterparties for certain forward-starting interest rate swaps.
In the first quarter of 2021, we repaid
Liquidity and Capital Resources
Overview
We plan to fund our working capital, capital expenditures, debt service, dividends and other cash requirements with our current available liquidity and cash from operations, which could be affected by general economic, financial, competitive, legislative, regulatory, business and other factors, many of which are beyond our control. Cash and cash equivalents, cash from our short-term investments, cash from operating activities, proceeds from the issuance of debt, or a combination thereof, may be used to fund the purchase of shares under our share repurchase authorization. We intend to continue to declare and pay quarterly dividends, with the goal of increasing the dividend over time, after giving consideration to our cash balances and expected results from operations. Our focus on funding our dividends while remaining committed to a strong investment grade balance sheet continues to be the foundation of our capital allocation strategy.
Cash and Liquid Investments
As ofMarch 31, 2022 , we had Cash and cash equivalents totaling$1,785 million , which includes$1,024 million in jurisdictions outside of theU.S. , principally in theUnited Kingdom . There are currently no legal or economic restrictions that would materially impede our transfers of cash.
Credit Arrangements
AtMarch 31, 2022 , we had total debt, including current maturities, of$11,324 million . Additionally, we had$211 million of outstanding letters of credit, bank guarantees and surety bonds issued under uncommitted credit facilities to support trade payables and other obligations.
We had total unused availability under our credit facilities of
•$3,215 million under our$3,250 million Senior Revolving Credit Facility, which backs our$2,500 million commercial paper program. Availability under this facility is net of outstanding borrowings, outstanding letters of credit provided under the facility and notes issued under our commercial paper program. AtMarch 31, 2022 , we had$35 million of outstanding commercial paper, net of discount, and no borrowings or letters of credit outstanding under this facility; and •$900 million under our$900 million U.S. Receivables Facility. Availability under this facility is subject to a borrowing base of eligible receivables, which is reduced by outstanding borrowings and letters of credit, if any. AtMarch 31, 2022 , we had no borrowings or letters of credit outstanding under this facility. At any time and from time to time, we may repay or redeem our outstanding debt, including purchases of our outstanding bonds in the open market, through privately negotiated transactions or a combination thereof, in each case using cash and cash equivalents, cash from our short-term investments, cash from operating activities, proceeds from the issuance of debt or proceeds from asset divestitures. Any repayment or redemption of our debt will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. In connection with such repurchases or redemptions, we may incur cash and non-cash charges, which could be material in the period in which they are incurred. In accordance with our current interest rate risk management strategy and subject to management's evaluation of market conditions and the availability of favorable interest rates among other factors, we may from time to time enter into interest rate swap agreements to economically convert a portion of our fixed rate debt to variable rate debt or convert a portion of our variable rate debt to fixed rate debt. 37
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Share Repurchases
InMay 2021 , our shareholders approved a proposal to authorize us to repurchase up to 34.0 million ordinary shares, throughNovember 28, 2022 ("2021 Share Repurchase Authorization"), which superseded any prior repurchase authorizations. Our share repurchase authorization does not have a stated dollar amount, and purchases may be made through open market purchases, private market transactions or other structured transactions. Repurchased shares could be retired or used for general corporate purposes, including for various employee benefit and compensation plans. The maximum number of shares that may yet be purchased is not necessarily an indication of the number of shares that will ultimately be purchased. In the first quarter of 2022, we purchased approximately 2.1 million shares under our 2021 Share Repurchase Authorization for$202 million . As ofApril 27, 2022 , we had approximately 26.7 million shares remaining under the current authorization. The timing and amounts of additional shares repurchased, if any, will be determined based on our evaluation of market conditions and other factors, including any additional authorizations approved by our shareholders. For additional information related to our share repurchase authorizations, see Note 10 to the Consolidated Financial Statements.
CURRENT BUSINESS OUTLOOK
We expect typical improvements in summer seasonal demand will extend market strength for our products as the global economy continues to navigate geopolitical uncertainty and volatile costs for energy and feedstocks. Outside ofChina , we anticipate benefits from continued demand for consumer packaging, improving volumes for automotive polymer compounds, seasonal demand for durable goods used in building and construction markets as well as strong markets for our oxyfuels products. We forecast a favorable outlook for our refining segment as we work toward exiting the business by the end of next year. In the second quarter, margins are likely to improve as the prices for our products catch up with increased feedstock and energy costs. Additionally, we expect reductions in operating rates driven by maintenance downtime inEurope and unsustainable production economics inChina to tighten market supply over the coming months. We continue monitoring risks on supply chains and inflation.
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 forward-looking statements on our current expectations, estimates and projections of our business and the industries in which we operate. We caution you that these statements are not guarantees of future performance. They involve assumptions about future events that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. 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: •the cost of raw materials represents a substantial portion of our operating expenses, and energy costs generally follow price trends of crude oil, natural gas liquids and/or 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 due to the significant competition that we face, the commodity nature of our products and the time required to implement pricing changes; •our operations inthe United States ("U.S.") have benefited from low-cost natural gas and natural gas liquids; decreased availability of these materials (for example, from their export or regulations impacting hydraulic fracturing in theU.S. ) could reduce the current benefits we receive;
•if crude oil prices fall materially, or remain low relative to
•industry production capacities and operating rates may lead to periods of oversupply and low profitability;
•we may face unplanned operating interruptions (including leaks, explosions, fires, weather-related incidents, mechanical failures, unscheduled downtime, supplier disruptions, labor shortages, strikes, work stoppages or other labor difficulties, transportation interruptions, spills and releases and other environmental incidents) at any of our facilities, which would negatively impact our operating results; for example, because theHouston refinery is our only refining operation, we would not have the ability to increase production elsewhere to mitigate the impact of any outage at that facility; •changes in general economic, business, political and regulatory conditions in the countries or regions in which we operate could increase our costs, restrict our operations and reduce our operating results;
•our ability to execute our organic growth plans may be negatively affected by our ability to complete projects on time and on budget;
•our ability to acquire new businesses and assets and integrate those operations into our existing operations and make cost-saving changes in operations;
•uncertainties associated with worldwide economies could create reductions in demand and pricing, as well as increased counterparty risks, which could reduce liquidity or cause financial losses resulting from counterparty default; •uncertainties related to the extent and duration of the pandemic-related decline in demand, or other impacts due to the pandemic in geographic regions or markets served by us, or where our operations are located, including the risk of prolonged recession;
•the negative outcome of any legal, tax and environmental proceedings or changes in laws or regulations regarding legal, tax and environmental matters may increase our costs, reduce demand for our products, or otherwise limit our ability to achieve savings under current regulations;
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•any loss or non-renewal of favorable tax treatment under agreements or treaties, or changes in laws, regulations or treaties, may substantially increase our tax liabilities;
•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 rely on continuing technological innovation, and an inability to protect our technology, or others' technological developments could negatively impact our competitive position; •we may be unable to meet our sustainability goals, including the ability to operate safely, increase production of recycled and renewable-based polymers, and reduce our emissions;
•we may be unable to shut down the
•we have significant international operations, and fluctuations in exchange rates, valuations of currencies and our possible inability to access cash from operations in certain jurisdictions on a tax-efficient basis, if at all, could negatively affect our liquidity and our results of operations; •we are subject to the risks of doing business at a global level, including 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;
•if we are unable to comply with the terms of our credit facilities, indebtedness and other financing arrangements, those obligations could be accelerated, which we may not be able to repay; and
•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. Any of these factors, or a combination of these factors, could materially affect our future results of operations and the ultimate accuracy of the forward-looking statements. Our management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or prior earnings levels. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section and any other cautionary statements that may accompany such forward-looking statements. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements.
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