Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-175136

Prospectus Supplement No. 1
(To prospectus dated September 13, 2011)

Lyondell Chemical Company

$602,883,016 11% Senior Secured Notes due 2018

     This prospectus supplement (the “prospectus supplement”) supplements and amends the prospectus dated September 13, 2011 as filed with the Securities and Exchange Commission on August 16, 2011 (the “prospectus”) relating to up to $602,883,016 aggregate principal amount of 11% Senior Secured Notes due 2018 of Lyondell Chemical Company to be sold for the account of the selling security holders named in the prospectus. You should read this prospectus supplement together with the prospectus. This prospectus supplement is qualified by reference to the prospectus, except to the extent that the information in this prospectus supplement supersedes the information contained in the prospectus. This prospectus supplement is not complete without, and may not be delivered or utilized except in connection with, the prospectus.

     This prospectus supplement includes the following documents, as filed by LyondellBasell Industries N.V. with the Securities and Exchange Commission: LyondellBasell Industries N.V.’s Quarterly Report on Form 10-Q for the period ended September 30, 2011 and Current Reports on Form 8-K filed on October 3, October 11, October 21 (two reports), November 8, November 9 and November 17, 2011.

     Investing in the notes involves risks. See “Risk Factors” beginning on page 5 of the prospectus.

     Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is November 29, 2011.

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-34726

LYONDELLBASELL INDUSTRIES N.V.

The Netherlands		98-0646235
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Weena 737
3013 AM Rotterdam
The Netherlands
(Address of principal executive offices)

31 10 275 5500
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No o

The registrant had 577,441,527 ordinary shares, €0.04 par value, outstanding at October 28, 2011.

 

 

LYONDELLBASELL INDUSTRIES N.V.

TABLE OF CONTENTS

		Page
Part I — Financial Information			1
Item 1. Financial Statements			1
Consolidated Statements of Income			1
Consolidated Balance Sheets			2
Consolidated Statements of Cash Flows			4
Consolidated Statement of Stockholders’ Equity			5
Notes to the Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			47
Item 3. Quantitative and Qualitative Disclosures About Market Risk			68
Item 4. Controls and Procedures			68
Part II — Other Information			69
Item 1. Legal Proceedings			69
Item 1A. Risk Factors			70
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			70
Item 6. Exhibits			71
Signature			72

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENTS OF INCOME

		Successor																	Predecessor
																			January 1
		Three Months Ended								Nine Months Ended				May 1 through					through
		September 30,								September 30,				September 30,					April 30,
Millions of dollars, except earnings per share		2011				2010				2011				2010					2010
Sales and other operating revenues:
Trade		$	13,023			$	10,116			$	38,716			$	16,771				$	13,260
Related parties			274				186				875				303					207
			13,297				10,302				39,591				17,074					13,467
Operating costs and expenses:
Cost of sales			11,538				9,075				34,955				15,273					12,414
Selling, general and administrative expenses			239				204				697				333					308
Research and development expenses			53				35				142				58					55
			11,830				9,314				35,794				15,664					12,777
Operating income			1,467				988				3,797				1,410					690
Interest expense			(155	)			(182	)			(495	)			(314	)				(713	)
Interest income			10				(4	)			31				8					5
Other income (expense), net			10				(97	)			12				(43	)				(265	)
Income (loss) before equity investments, reorganization items and income taxes			1,332				705				3,345				1,061					(283	)
Income from equity investments			52				29				183				56					84
Reorganization items			—				(13	)			(30	)			(21	)				7,388
Income before income taxes			1,384				721				3,498				1,096					7,189
Provision for (benefit from) income taxes			489				254				1,140				282					(1,315	)
Net income			895				467				2,358				814					8,504
Net loss attributable to non-controlling interests			—				7				4				2					60
Net income attributable to the Company		$	895			$	474			$	2,362			$	816				$	8,564
Earnings per share:
Net income:
Basic		$	1.56			$	0.84			$	4.14			$	1.45
Diluted		$	1.51			$	0.84			$	4.12			$	1.45

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED BALANCE SHEETS

		September 30,				December 31,
Millions, except shares and par value data		2011				2010
ASSETS
Current Assets:
Cash and cash equivalents		$	5,609			$	4,222
Restricted cash			292				11
Accounts receivable:
Trade, net			3,786				3,482
Related parties			252				265
Inventories			5,682				4,824
Prepaid expenses and other current assets			1,097				975
Total current assets			16,718				13,779
Property, plant and equipment, net			7,363				7,190
Investments and long-term receivables:
Investment in PO joint ventures			422				437
Equity investments			1,594				1,587
Related party receivables			4				14
Other investments and long-term receivables			67				67
Goodwill			598				595
Intangible assets, net			1,237				1,360
Other assets			264				273
Total assets		$	28,267			$	25,302

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED BALANCE SHEETS

		September 30,				December 31,
Millions, except shares and par value data		2011				2010
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt		$	2			$	4
Short-term debt			49				42
Accounts payable:
Trade			2,440				1,968
Related parties			867				793
Accrued liabilities			1,505				1,705
Deferred income taxes			315				319
Total current liabilities			5,178				4,831
Long-term debt			5,782				6,036
Other liabilities			2,021				2,183
Deferred income taxes			1,204				656
Commitments and contingencies
Stockholders’ equity:
Ordinary shares, €0.04 par value, 1,275 million shares authorized, 573,257,117 and 565,676,222 shares issued, respectively			31				30
Additional paid-in capital			10,265				9,837
Retained earnings			3,778				1,587
Accumulated other comprehensive income			79				81
Treasury stock, at cost, 4,184,410 and 1,122,651 ordinary shares, respectively			(128	)			—
Total company share of stockholders’ equity			14,025				11,535
Non-controlling interests			57				61
Total equity			14,082				11,596
Total liabilities and equity		$	28,267			$	25,302

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Successor									Predecessor
						May 1					January 1
		Nine Months Ended				through					through
		September 30,				September 30,					April 30,
Millions of dollars		2011				2010					2010
Cash flows from operating activities:
Net income		$	2,358			$	814				$	8,504
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization			676				351					565
Asset impairments			44				—					9
Amortization of debt-related costs			28				15					307
Inventory valuation adjustment			—				365					—
Equity investments -
Equity income			(183	)			(56	)				(84	)
Distribution of earnings, net of tax			162				28					18
Deferred income taxes			667				185					(1,321	)
Reorganization items and fresh start accounting adjustments, net			30				21					(7,388	)
Reorganization-related payments, net			(10	)			(334	)				(407	)
(Gain) loss on sale of assets			(45	)			—					4
Unrealized foreign currency exchange loss (gain)			16				21					264
Changes in assets and liabilities that provided (used) cash:
Accounts receivable			(282	)			34					(650	)
Inventories			(864	)			131					(368	)
Accounts payable			552				167					249
Prepaid expenses and other current assets			(139	)			150					58
Other, net			(232	)			337					(685	)
Net cash provided by (used in) operating activities			2,778				2,229					(925	)
Cash flows from investing activities:
Expenditures for property, plant and equipment			(761	)			(266	)				(226	)
Proceeds from disposal of assets			71				—					1
Short-term investments			—				—					12
Restricted cash			(281	)			—					(11	)
Net cash used in investing activities			(971	)			(266	)				(224	)
Cash flows from financing activities:
Issuance of Class B common stock			—				—					2,800
Shares issued upon exercise of warrants			37				—					—
Dividends paid			(171	)			—					—
Repayments of debtor-in-possession term loan facility			—				—					(2,170	)
Net repayments under debtor-in-possession revolving credit facility			—				—					(325	)
Net borrowings on revolving credit facilities			—				52					38
Proceeds from short-term debt			—				7					8
Repayments of short-term debt			—				(8	)				(14	)
Issuance of long-term debt			—				—					3,242
Repayments of long-term debt			(260	)			—					(9	)
Payments of debt issuance costs			(15	)			(2	)				(253	)
Other, net			(8	)			(4	)				(2	)
Net cash provided by (used in) financing activities			(417	)			45					3,315
Effect of exchange rate changes on cash			(3	)			113					(13	)
Increase in cash and cash equivalents			1,387				2,121					2,153
Cash and cash equivalents at beginning of period			4,222				2,711					558
Cash and cash equivalents at end of period		$	5,609			$	4,832				$	2,711

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

																		Accumulated
										Additional								Other				Total				Non-
		Ordinary Shares								Paid-in				Retained				Comprehensive				Stockholders’				Controlling				Comprehensive
Millions of dollars		Issued				Treasury				Capital				Earnings				Income (Loss)				Equity				Interests				Income
Balance, January 1, 2011		$	30			$	—			$	9,837			$	1,587			$	81			$	11,535			$	61
Warrants exercised			1				—				402				—				—				403				—
Shares purchased			—				(133	)			—				—				—				(133	)			—
Share-based compensation			—				5				26				—				—				31				—
Net income (loss)			—				—				—				2,362				—				2,362				(4	)		$	2,358
Cash dividends ($0.30 per share)			—				—				—				(171	)			—				(171	)			—				—
Changes in unrecognized employee benefits gains and losses, net of tax of less than $1			—				—				—				—				2				2				—				2
Foreign currency translations, net of tax of less than $1			—				—				—				—				(4	)			(4	)			—				(4	)
Comprehensive income																														$	2,356
Balance, September 30, 2011		$	31			$	(128	)		$	10,265			$	3,778			$	79			$	14,025			$	57

See Notes to the Consolidated Financial Statements.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

		Page
1. Basis of Presentation			7
2. Accounting and Reporting Changes			7
3. Restricted Cash			9
4. Accounts Receivable			9
5. Inventories			10
6. Property, Plant and Equipment, Goodwill, Intangibles and Other Assets			10
7. Investment in PO Joint Ventures			11
8. Equity Investments			12
9. Debt			14
10. Financial Instruments and Derivatives			16
11. Pension and Other Post-retirement Benefits			24
12. Income Taxes			25
13. Commitments and Contingencies			26
14. Stockholders’ Equity and Non-Controlling Interests			29
15. Per Share Data			30
16. Segment and Related Information			32
17. Emergence from Chapter 11 Proceedings			35
18 Supplemental Guarantor Information			36

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

1. Basis of Presentation

LyondellBasell Industries N.V. is a limited liability company (Naamloze Vennootschap) incorporated under Dutch law by deed of incorporation dated October 15, 2009. LyondellBasell Industries N.V. was formed to serve as the parent holding company for certain subsidiaries of LyondellBasell Industries AF S.C.A. (together with its subsidiaries, “LyondellBasell AF,” the “Predecessor Company” or the “Predecessor”) after completion of proceedings under chapter 11 (“chapter 11”) of title 11 of the United States Bankruptcy Code (the “U.S. Bankruptcy Code”). LyondellBasell Industries AF S.C.A. and 93 of its subsidiaries were debtors (the “Debtors”) in jointly administered bankruptcy cases (the “Bankruptcy Cases”) in the United States Bankruptcy Court in the Southern District of New York (the “Bankruptcy Court”). As of April 30, 2010 (the “Emergence Date”), LyondellBasell Industries AF S.C.A.’s equity interests in its indirect subsidiaries terminated and LyondellBasell Industries N.V. now owns and operates, directly and indirectly, substantially the same business as LyondellBasell Industries AF S.C.A. owned and operated prior to emergence from the Bankruptcy Cases, which business includes subsidiaries of LyondellBasell Industries AF S.C.A. that were not involved in the Bankruptcy Cases. LyondellBasell Industries AF S.C.A. is no longer part of the LyondellBasell group.

Effective May 1, 2010, we adopted fresh-start accounting pursuant to Accounting Standards Codification (“ASC”) 852, Reorganizations. Accordingly, the basis of the assets and liabilities in LyondellBasell AF’s financial statements for periods prior to May 1, 2010 will not be comparable to the basis of the assets and liabilities in the financial statements prepared for LyondellBasell N.V. after emergence from bankruptcy.

LyondellBasell Industries N.V., together with its consolidated subsidiaries (collectively “LyondellBasell N.V.,” the “Successor Company” or the “Successor”), is a worldwide manufacturer of chemicals and polymers, a refiner of crude oil, a significant producer of gasoline blending components and a developer and licensor of technologies for production of polymers and other chemicals. When we use the terms “LyondellBasell N.V.,” the “Successor Company,” the “Successor,” “we,” “us,” “our” or similar words, unless the context otherwise requires, we are referring to LyondellBasell N.V. after April 30, 2010. References herein to the “Company” for periods through April 30, 2010 are to the Predecessor Company, LyondellBasell AF, and for periods after the Emergence Date, to the Successor Company, LyondellBasell N.V.

The accompanying consolidated financial statements are unaudited and have been prepared from the books and records of LyondellBasell N.V. after April 30, 2010 and LyondellBasell AF for periods up to and including that date in accordance with the instructions to Form 10-Q and Rule 10-1 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In our opinion, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results for the entire year. These consolidated financial statements should be read in conjunction with the LyondellBasell N.V. consolidated financial statements and notes thereto included in the LyondellBasell Industries N.V. Current Report on Form 8-K/A filed with the SEC on August 12, 2011.

2. Accounting and Reporting Changes

Compensation—In September 2011, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) related to Accounting Standards Codification (“ASC’) Topic 715, Compensation—Retirement Benefits. This ASU requires enhanced disclosures in the annual financial statements of the employers that participate in multiemployer pension plans and therefore, helps users better understand the financial health of all the significant plans in which the employer participates. The amendments are effective for fiscal years ending after December 15, 2011. Early adoption is permitted. The amendments in the ASU should be applied retrospectively for

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

all periods presented. We are currently evaluating the impact of the adoption of this amendment on the presentation of our consolidated financial statements.

Goodwill—In September 2011, the FASB issued an ASU related to ASC Topic 350, Intangibles—Goodwill and Other, which amends the guidance on testing goodwill for impairment. Under the revised guidance, an entity has the option of first performing a qualitative assessment before calculating the fair value of the reporting unit (i.e. step 1 of the goodwill impairment test). If an entity believes, as a result of its qualitative assessment, that the fair value of the reporting unit is more-likely-than-not less than the carrying amount, the two-step impairment test would be required. The new qualitative indicators replace those currently used to determine whether an interim goodwill impairment test is required. An entity can choose to perform the qualitative assessment on none, some or all of its reporting units. The ASU does not change how goodwill is calculated, nor does it revise the requirement to test goodwill annually or when events or circumstances warrant interim testing. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The adoption of this amendment is not expected to have a material effect on our consolidated financial statements.

In December 2010, the FASB issued guidance related to ASC Topic 350 that requires a company with reporting units having a carrying amount of zero or less to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. This guidance is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2010. Adoption of this amendment in January 2011 did not have a material effect on our consolidated financial statements.

Comprehensive Income—In June 2011, the FASB issued ASU related to ASC Topic 220, Comprehensive Income: Presentation of Comprehensive Income. This standard eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. Under the ASC 220, an entity can elect to present either 1) one continuous statement of comprehensive income or 2) in two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format used today, and the second statement would include components of other comprehensive income (OCI). The ASU does not change the items that must be reported in OCI. The statement(s) would need to be presented with equal prominence as the other primary financial statements. The ASU is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted but full retrospective application is required. The adoption of this amendment will have an affect on the presentation of our Consolidated Financial Statements by inclusion of either Consolidated Statements of Other Comprehensive Income or a Consolidated Statements of Comprehensive Income.

Fair Value Measurement—In May, 2011 the FASB issued new guidance related to ASC Topic 820, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The new guidance results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS and changes some fair value measurement principles and disclosure requirements. This guidance aligns the fair value measurement of instruments classified within an entity’s shareholders’ equity with the guidance for liabilities and as a result, requires an entity to measure the fair value of its own equity instruments from the perspective of a market participant that holds the equity instruments as assets. This guidance also enhances disclosure requirements for recurring Level 3 fair value measurements to include quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements. New disclosures on the use of a nonfinancial asset measured or disclosed at fair value are required if its use differs from its highest and best use. In addition, entities must report the level in the fair value hierarchy of assets and liabilities not recorded at fair value but where fair value is disclosed. The ASU is effective for interim and annual periods beginning on or after December 15, 2011, with early adoption prohibited. The adoption of this amendment is not expected to have a material effect on the presentation of our consolidated financial statements.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In January 2010, the FASB issued additional guidance on improving disclosures regarding fair value measurements. The guidance requires the disclosure of the amounts of, and the rationale for, significant transfers between Level 1 and Level 2 of the fair value hierarchy, as well as the rationale for transfers in or out of Level 3. In 2010, we adopted all of the amendments regarding fair value measurements except for a requirement to disclose information about purchases, sales, issuances, and settlements in the reconciliation of recurring Level 3 measurements on a gross basis. Our implementation in January 2011 of the requirement to separately disclose purchases, sales, issuances, and settlements of recurring Level 3 measurements did not have a material impact on the presentation of our consolidated financial statements.

Business Combinations—In December 2010, the FASB issued guidance related to ASC Topic 805, Business Combinations, to clarify that if a public entity presents comparative financial statements, the entity should disclose pro-forma revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. This guidance also expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. This guidance is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. Adoption of this amendment in January 2011 did not have a material effect on our consolidated financial statements.

Revenue Recognition—In October 2009, the FASB ratified the consensus reached by its emerging issues task force to require companies to allocate revenue in multiple-element arrangements based on the estimated selling price of an element if vendor-specific or other third-party evidence of value is not available. The adoption of these changes, in January 2011, did not have a material effect on our consolidated financial statements.

3. Restricted Cash

Restricted cash primarily represents amounts deposited with financial institutions to collateralize letters of credit. As of September 30, 2011, letters of credit totaling $267 million were cash collateralized. Such cash is included in the $292 million reflected as Restricted cash on the Consolidated Balance Sheet as of September 30, 2011.

4. Accounts Receivable

Our allowance for doubtful accounts receivable, which is reflected in the Consolidated Balance Sheets as a reduction of accounts receivable, totaled $17 million and $12 million at September 30, 2011 and December 31, 2010, respectively.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. Inventories

Inventories consisted of the following components:

		Successor
		September 30,				December 31,
Millions of dollars		2011				2010
Finished goods		$	3,765			$	3,127
Work-in-process			239				230
Raw materials and supplies			1,678				1,467
Total inventories		$	5,682			$	4,824

The nine months ended September 30, 2010 include a $365 million non-cash charge to adjust the vale of inventory at September 30, 2010 to market value, which was lower than the April 30, 2010 value applied during fresh-start accounting.

6. Property, Plant and Equipment, Goodwill, Intangibles and Other Assets

The components of property, plant and equipment, at cost, and the related accumulated depreciation were as follows:

		Successor
		September 30,				December 31,
Millions of dollars		2011				2010
Land		$	292			$	286
Manufacturing facilities and equipment			7,269				6,752
Construction in progress			732				569
Total property, plant and equipment			8,293				7,607
Less accumulated depreciation			(930	)			(417	)
Property, plant and equipment, net		$	7,363			$	7,190

In the first nine months of 2011, we recognized $20 million of impairment charges related to the capital expenditures at the Berre refinery due to the discounted cash flow projections for the Berre refinery being insufficient to recover the asset’s carrying amount.

In July 2010, we ceased production and permanently shut down our polypropylene plant at Terni, Italy. We recognized charges of $23 million, in cost of sales, related to plant and other closure costs in the first quarter of 2010.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Depreciation and amortization expense is summarized as follows:

		Successor																	Predecessor
		Three Months Ended								Nine Months Ended				May 1 through					January 1 through
		September 30,				September 30,				September 30,				September 30,					April 30,
Millions of dollars		2011				2010				2011				2010					2010
Property, plant and equipment		$	194			$	165			$	545			$	259				$	499
Investment in PO joint ventures			7				—				22				9					19
Emission allowances			16				18				52				30					—
Various contracts			19				39				54				52					—
Technology, patent and license costs			—				—				—				—					25
Software costs			1				—				3				1					12
Other			—				—				—				—					10
Total depreciation
and amortization		$	237			$	222			$	676			$	351				$	565

During the third quarter of 2011, we recognized impairments of $19 million, in Research and Development, related to certain in-process research and development projects, which were abandoned. These projects were recognized as intangible assets at emergence.

Asset Retirement Obligations—The liabilities recognized for all asset retirement obligations were $149 million and $132 million at September 30, 2011 and December 31, 2010, respectively.

Goodwill—Goodwill increased from $595 million at December 31, 2010 to $598 million at September 30, 2011. The $3 million change in goodwill is a result of foreign exchange translation.

7. Investment in PO Joint Ventures

We, together with Bayer AG and Bayer Corporation (collectively “Bayer”), share ownership in a U.S. propylene oxide (“PO”) manufacturing joint venture (the “U.S. PO Joint Venture”) and a separate joint venture for certain related PO technology. Bayer’s ownership interest represents ownership of annual in-kind PO production of the U.S. PO Joint Venture of 1.5 billion pounds in 2010. We take in-kind the remaining PO production and all co-product (styrene monomer (“SM”) or “styrene”) and tertiary butyl alcohol (“TBA”) production from the U.S. PO Joint Venture.

In addition, we and Bayer each have a 50% interest in a separate manufacturing joint venture (the “European PO Joint Venture”), which includes a world-scale PO/SM plant at Maasvlakte near Rotterdam, The Netherlands. We and Bayer each are entitled to 50% of the PO and SM production at the European PO Joint Venture.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Changes in our investment in the U.S. and European PO joint ventures for 2011 and 2010 are summarized as follows:

		U.S. PO Joint				European PO				Total PO
Millions of dollars		Venture				Joint Venture				Joint Ventures
Successor
Investments in PO joint ventures — January 1, 2011		$	291			$	146			$	437
Cash contributions			3				3				6
Depreciation and amortization			(15	)			(7	)			(22	)
Effect of exchange rate changes			—				1				1
Investments in PO joint ventures — September 30, 2011		$	279			$	143			$	422
Investments in PO joint ventures — May 1, 2010		$	303			$	149			$	452
Depreciation and amortization			(8	)			(1	)			(9	)
Effect of exchange rate changes			—				4				4
Investments in PO joint ventures — September 30, 2010		$	295			$	152			$	447
Predecessor
Investments in PO joint ventures — January 1, 2010		$	533			$	389			$	922
Return of investment			—				(5	)			(5	)
Depreciation and amortization			(14	)			(5	)			(19	)
Effect of exchange rate changes			—				(31	)			(31	)
Investments in PO joint ventures — April 30, 2010		$	519			$	348			$	867

8. Equity Investments

The changes in equity investments were as follows:

		Successor									Predecessor
		Nine Months
		Ended				May 1 through					January 1 through
		September 30,				September 30,					April 30,
Millions of dollars		2011				2010					2010
Beginning balance		$	1,587			$	1,524				$	1,085
Income from equity investments			183				56					84
Dividends received, gross			(168	)			(28	)				(18	)
Contributions to joint venture			—				7					20
Currency exchange effects			(8	)			8					(8	)
Other			—				15					10
Ending balance		$	1,594			$	1,582				$	1,173

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Summarized income statement information and our share for the periods for which the respective equity investments were accounted for under the equity method is set forth below:

		Successor
		Three Months Ended September 30,
		2011								2010
						Company								Company
Millions of dollars		100%				Share				100%				Share
Revenues		$	2,688			$	783			$	1,995			$	745
Cost of sales			(2,336	)			(680	)			(1,717	)			(672	)
Gross profit			352				103				278				73
Net operating expense			(74	)			(23	)			(55	)			(18	)
Operating income			278				80				223				55
Interest income			3				1				—				—
Interest expense			(76	)			(20	)			(63	)			(18	)
Foreign currency translation			(3	)			(5	)			(66	)			(13	)
Income from equity investments			35				10				55				13
Income before income taxes			237				66				149				37
Provision for income taxes			(45	)			(14	)			(19	)			(8	)
Net income		$	192			$	52			$	130			$	29

		Successor																	Predecessor
		Nine Months Ended								May 1 through									January 1 through
		September 30, 2011								September 30, 2010									April 30, 2010
						Company								Company									Company
Millions of dollars		100%				Share				100%				Share					100%				Share
Revenues		$	9,388			$	2,916			$	3,377			$	1,298				$	3,127			$	989
Cost of sales			(8,165	)			(2,556	)			(2,939	)			(1,157	)				(2,699	)			(869	)
Gross profit			1,223				360				438				141					428				120
Net operating expenses			(231	)			(72	)			(118	)			(40	)				(82	)			(29	)
Operating income			992				288				320				101					346				91
Interest income			9				3				2				—					2				1
Interest expense			(197	)			(54	)			(84	)			(24	)				(43	)			(13	)
Foreign currency translation			(25	)			(10	)			(24	)			(7	)				83				24
Income from equity
investments			4				5				(4	)			(4	)				3				2
Income before
income taxes			783				232				210				66					391				105
Provision for income taxes			(167	)			(49	)			(18	)			(10	)				(67	)			(21	)
Net income		$	616			$	183			$	192			$	56				$	324			$	84

A joint venture of ours is in default under its financing arrangement due to a delay in the start-up of its assets. The parties are currently negotiating in good faith to resolve the default and at present there is no evidence that such

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

negotiations will not be concluded successfully or that the resolution of this matter will have a material adverse impact on our operations or liquidity.

9. Debt

Long-term loans, notes and other long-term debt consisted of the following:

		Successor
		September 30,				December 31,
Millions of dollars		2011				2010
Bank credit facilities:
Senior Term Loan Facility due 2014		$	5			$	5
Senior Secured 8% Notes due 2017, $2,250 million			1,822				2,025
Senior Secured 8% Notes due 2017, €375 million			410				452
Senior Secured 11% Notes due 2018, $3,240 million			3,240				3,240
Guaranteed Notes, due 2027			300				300
Other			7				18
Total			5,784				6,040
Less current maturities			(2	)			(4	)
Long-term debt		$	5,782			$	6,036

Short-term loans, notes and other short-term debt consisted of the following:

		Successor
		September 30,				December 31,
Millions of dollars		2011				2010
$2,000 million Senior Secured Asset-Based Revolving Credit Agreement		$	—			$	—
Financial payables to equity investees			10				11
Other			39				31
Total short-term debt		$	49			$	42

On October 20, 2011, we announced a cash tender offer for up to $1,470 million aggregate principal amount of our outstanding 8% Senior Secured Dollar Notes due 2017 and 8% Senior Secured Euro Notes due 2017 and up to $1,319 million aggregate principal amount of our outstanding 11% Senior Secured Dollar Notes due 2018. In conjunction with the tender offer, we are soliciting consents from the note holders to release the collateral securing the notes and to modify other provisions related to restrictive covenants. The tender offer expires on November 21, 2011 and the consent solicitation expires on November 2, 2011. We cannot be assured that note holders will tender their notes or consent to the changes in the terms of the notes, and, subject to applicable securities laws and certain terms and conditions set forth in the related Offer to Purchase and Consent Solicitation Statement (as it may be amended or supplemented from time to time), we have the right to terminate the tender at any time.

Senior Secured 8% Notes—In December 2010, we redeemed $225 million of the dollar denominated and €37.5 million ($50 million) of the Euro denominated Senior Secured 8% Notes at a redemption price of 103% of par, paying premiums totaling $8 million. In May 2011, we redeemed an additional $203 million of Senior Secured

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8% dollar Notes and €34 million ($50 million) of Senior Secured 8% Euro notes due 2017 at a redemption price of 103% of par, paying premiums totaling $7 million.

The Senior Secured 8% Notes were issued by our wholly owned subsidiary, Lyondell Chemical Company (“Lyondell Chemical”). Lyondell Chemical may redeem the notes (i) prior to maturity at specified redemption premium percentages according to the date the notes are redeemed or (ii) from time to time at a redemption price of 100% of such principal amount plus an applicable premium as calculated pursuant to a formula.

In addition, Lyondell Chemical has the option to redeem up to 10% of the outstanding Senior Secured 8% Notes annually prior to May 1, 2013 at a redemption price equal to 103% of such notes’ principal amount. Also prior to May 1, 2013, Lyondell Chemical has the option to redeem up to 35% of the original aggregate principal amount of the Senior Secured 8% Notes at a redemption price of 108% of such principal amount, with the net proceeds of one or more equity offerings, provided that (i) at least 50% of the original aggregate principal amount remains outstanding immediately after such redemption and (ii) the redemption occurs within 90 days of the closing of the equity offering. The value of this embedded derivative is nominal.

Senior Secured 11% Notes—The Senior Secured 11% Notes also were issued by Lyondell Chemical. Lyondell Chemical may redeem the notes (i) at par on or after May 1, 2013 and (ii) from time to time at a redemption price of 100% of such principal amount plus an applicable premium as calculated pursuant to a formula.

In addition, Lyondell Chemical has the option to redeem up to 35% of the original aggregate principal amount of the Senior Secured 11% Notes at a redemption price of 111% of such principal amount, with the net proceeds of one or more equity offerings, provided that (i) at least 50% of the original aggregate principal amount remains outstanding immediately after such redemption and (ii) the redemption occurs within 90 days of the closing of the equity offering. The value of this embedded derivative is nominal.

Registration Rights Agreements—In connection with the issuance of the Senior Secured 8% Notes and the Senior Secured 11% Notes (collectively, the “Senior Secured Notes”), we entered into certain registration rights agreements. The agreements required us to (i) exchange the Senior Secured 8% Notes for notes with substantially identical terms, except that the new notes would be registered with the SEC under the Securities Act of 1933, as amended, and therefore be free of any transfer restrictions and (ii) register for resale the Senior Secured 11% Notes held by the parties to the agreement related to those notes. The registration rights agreements required registration statements for the exchange or resale, as applicable, to be effective with the SEC by May 3, 2011. The registration statement became effective on September 13, 2011. Interest and penalties for the delay in effectiveness were not material.

Senior Term Loan Facility—In March 2011, we amended and restated our Senior Secured Term Loan Agreement to, among other things, change the administrative agent and to modify the term of the agreement and certain restrictive covenants. This amended and restated agreement matures in April 2014.

U.S. ABL Facility—On June 2, 2011, we amended our U.S. ABL Facility to, among other things, (i) increase the size of the facility to $2 billion; (ii) extend the maturity date to June 2016; (iii) reduce the applicable margin and commitment fee; and (iv) amend certain covenants and conditions in order to provide additional flexibility. We paid fees of $15 million in connection with this amendment.

At September 30, 2011 and December 31, 2010, there were no borrowings outstanding under the U.S. ABL facility and outstanding letters of credit totaled $262 million and $370 million, respectively. Pursuant to the U.S. ABL facility, Lyondell Chemical could, subject to a borrowing base, borrow up to $1,738 million at September 30, 2011. Advances under this facility are available to Lyondell Chemical and certain of its wholly owned subsidiaries, Equistar Chemicals LP (“Equistar”), Houston Refining LP, and LyondellBasell Acetyls LLC.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Other—In the nine months ended September 30, 2011, amortization of debt premiums and debt issuance costs resulted in amortization expense of $28 million that was included in interest expense in the Consolidated Statements of Income. In the five months ended September 30, 2010, amortization expense was $15 million.

At September 30, 2011 and 2010, our weighted average interest rates on outstanding short-term debt were 3.8% and 3.8%, respectively.

10. Financial Instruments and Derivatives

Cash Concentration—Our cash equivalents are placed in high-quality commercial paper, money market funds and time deposits with major international banks and financial institutions.

Market Risks—We are exposed to market risks, such as changes in commodity pricing, currency exchange rates and interest rates. To manage the volatility related to these exposures, we selectively enter into derivative transactions pursuant to our policies. Designation of the derivatives as fair-value or cash-flow hedges is performed on a specific exposure basis. Hedge accounting may or may not be elected with respect to certain short-term exposures. The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the fair value or cash flows of the underlying exposures being hedged.

Commodity Prices—We are exposed to commodity price volatility related to anticipated purchases of natural gas, crude oil and other raw materials and sales of our products. We selectively use commodity swap, option, and futures contracts with various terms to manage the volatility related to these risks. Such contracts are generally limited to durations of one year or less. Cash-flow hedge accounting may be elected for these derivative transactions. In cases, when the duration of a derivative is short, hedge accounting generally would not be elected. When hedge accounting is not elected, the changes in fair value of these instruments are recorded in earnings. When hedge accounting is elected, gains and losses on these instruments are deferred in accumulated other comprehensive income (“AOCI”), to the extent that the hedge remains effective, until the underlying transaction is recognized in earnings.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the pretax effect of settled commodity futures contracts charged directly to income:

Settled Commodity Contracts

Nine Months Ended September 30, 2011

Gain (Loss)

Recognized

Volumes

Millions of dollars

in Income

Settled

Volume Unit

Successor

Futures:

Gasoline sales

$

4

403

million gallons

Heating oil sales

6

450

million gallons

Crude oil

(4

)

5

million barrels

$

6

		May 1 through September 30, 2010
		Gain (Loss)
		Recognized				Volumes
		in Income				Settled				Volume Unit
Futures:
Gasoline sales		$	(1	)			236			million gallons
Heating oil sales			1				172			million gallons
Crude oil			(4	)			3			million barrels
		$	(4	)

		January 1 through April 30, 2010
		Gain (Loss)
		Recognized				Volumes
Predecessor		in Income				Settled				Volume Unit
Futures:
Gasoline sales		$	(4	)			243			million gallons
Heating oil sales			2				126			million gallons
Crude oil purchases			10				3			million barrels
		$	8

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The estimated fair value and notional amounts of our open commodity futures contracts are shown in the table below:

		Open Commodity Contracts
		September 30, 2011
						Notional Amounts
Millions of dollars		Fair Value				Value				Volumes				Volume Unit				Maturity Dates
Futures:
Gasoline sales		$	46			$	278				111			million gallons				October 2011 — February 2012
Heating oil sales			(3	)			76				27			million gallons				November 2011
Butane purchases			(10	)			184				101			million gallons				October 2011 — February 2012
Crude oil			—				90				1			million barrels				December 2011 — January 2012
		$	33			$	628

		December 31, 2010
						Notional Amounts
		Fair Value				Value				Volumes				Volume Unit				Maturity Dates
Futures:
Gasoline sales		$	—			$	16				7			million gallons				February 2011
Heating oil sales			(1	)			54				21			million gallons				February 2011
		$	(1	)		$	70

Foreign Currency Rates—We have significant operations in several countries of which functional currencies are primarily the U.S. dollar for U.S. operations and the Euro for operations in Europe. We enter into transactions denominated in other than our functional currency and the functional currencies of our subsidiaries and are, therefore, exposed to foreign currency risk on receivables and payables. We maintain risk management control systems intended to monitor foreign currency risk attributable to both the outstanding foreign currency balances and future commitments. The risk management control systems involve the centralization of foreign currency exposure management, the offsetting of exposures and the estimating of expected impacts of changes in foreign currency rates on our earnings. We enter into foreign currency spot, forward and swap contracts to reduce the effects of our net currency exchange exposures. At September 30, 2011, foreign currency spot, forward and swap contracts in the notional amount of $208 million, maturing in October 2011, were outstanding. The fair values, based on quoted market exchange rates, resulted in a net receivable of $2 million at September 30, 2011 and a net payable of $1 million at December 31, 2010.

For forward and swap contracts that economically hedge recognized monetary assets and liabilities in foreign currencies, no hedge accounting is applied. Changes in the fair value of foreign currency forward and swap contracts are reported in the Consolidated Statements of Income and offset the currency exchange results recognized on the assets and liabilities.

Foreign Currency Gain (Loss)—Other income, net, in the Consolidated Statements of Income reflected losses of $17 million and $11 million for the three and nine months ended September 30, 2011; a loss of $18 million and a gain of $22 million in the three and five months ended September 30, 2010, respectively; and a loss of $258 million in the four months ended April 30, 2010.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Interest Rates—Pursuant to the provisions of the Plan of Reorganization, the $201 million liability associated with interest rate swaps designated as cash flow hedges in the notional amount of $2,350 million were discharged on April 30, 2010. The Company discontinued accounting for the interest rate swap as a hedge and, in April 2010, $153 million of unamortized loss was released from accumulated other comprehensive income and recognized in earnings.

Warrants—As of September 30, 2011, we have warrants outstanding for the purchase of 865,994 ordinary shares at an exercise price of $15.90 per ordinary share. As of December 31, 2010 we had 11,508,104 warrants outstanding. The warrants have anti-dilution protection for in-kind stock dividends, stock splits, stock combinations and similar transactions and may be exercised at any time during the period from April 30, 2010 to the close of business on April 30, 2017. Upon an affiliate change of control, the holders of the warrants may put the warrants to LyondellBasell N.V., which would require cash settlement at a price equal to, as applicable, the in-the-money value of the warrants or the Black-Scholes-Merton value of the warrants. The warrants are classified as a liability and are recorded at fair value at the end of each reporting period.

During the second and third quarters of 2011, the Company’s warrants were thinly traded and as such the Company concluded that the market price alone could not be relied upon to substantiate fair value. Therefore, we also used the Black-Scholes-Merton option pricing model, incorporating management adjusted observable inputs to determine the estimated fair value of each warrant. The current market price at September 30, 2011 and the price calculated using the Black-Scholes-Merton model were not materially different. As a result, we concluded that the use of the quoted market price to determine the fair value is an appropriate measure, but we have now classified them as level 2 in the valuation hierarchy. The fair values of the warrants were determined to be $13 million and $215 million at September 30, 2011 and December 31, 2010, respectively.

LYONDELLBASELL INDUSTRIES N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes derivative financial instruments outstanding as of September 30, 2011 and December 31, 2010 that are measured at fair value on a recurring basis, the balance sheet classifications of the fair value adjustments and the bases used to determine their fair value in the consolidated balance sheets.

														Quoted Prices
														in Active				Significant
														Markets for				Other				Significant
														Identical				Observable				Unobservable
		Balance Sheet				Notional				Fair				Assets				Inputs				Inputs
Millions of dollars		Classification				Amount				Value				(Level 1)				(Level 2)				(Level 3)
September 30, 2011:
Assets at fair value:
Derivatives:
Commodities		Prepaid expenses and other current assets				$	251			$	46			$	—			$	46			$	—
Foreign currency		Prepaid expenses and other current assets				$	208				2				—				2				—
						$	459			$	48			$	—			$	48			$	—
Liabilities at fair value:
Derivatives:
Commodities		Accrued liabilities				$	377			$	13			$	—			$	13			$	—
Warrants		Accrued liabilities					14				13				—				13				—
						$	391			$	26			$	—			$	26			$	—
December 31, 2010:
Liabilities at fair value:
Derivatives:
Gasoline and
heating oil		Accrued liabilities				$	70			$	1			$	—			$	1			$	—
Warrants		Accrued liabilities					183				215				215				—				—
Foreign currency		Accrued liabilities					93				1				—				1				—
						$	346			$	217			$	215			$	2			$	—