Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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. When we use the terms “we,” “us,” “our” or similar words in this discussion, unless the context otherwise requires, we are referring to LyondellBasell Industries N.V. and its consolidated subsidiaries (“LyondellBasell N.V.”).

OVERVIEW

During 2018, we continued to deliver strong earnings despite market challenges in the second half of the year and planned and unplanned downtime that negatively impacted fourth quarter 2018 results by approximately $225 million. Noteworthy annual results for our I&D segment driven by market improvements and targeted contracting strategies and in our Technology segment due to an increased number of polyolefin technology licenses were partially offset by declines in our O&P–Americas and O&P–EAI results. With our acquisition of A. Schulman Inc. (“A. Schulman”) in August 2018, we captured an opportunity to expand into new markets and created an additional platform for growth. We continued to manage our business portfolio by, among other things, investing in a recycling joint venture, and divesting our carbon black subsidiary in France.

As oil prices fell by 40% during the fourth quarter 2018, our O&P–EAI segment experienced declining demand as customers delayed orders and destocked inventories in expectations of lower pricing. This destocking and associated pricing pressures compounded the effects of typical fourth quarter seasonality. Our O&P–EAI segment was also impacted by low water levels on the Rhine River, extended maintenance at our Wesseling, Germany cracker and feedstock supply constraints at our Münchsmünster, Germany cracker during the fourth quarter. Our APS segment volumes were affected by decreased automotive demand in recent quarters and our Refining segment’s fourth quarter margins were negatively impacted by high gasoline inventories and unusually weak discounts for Maya crude oil.

Significant items that affected EBITDA in 2018 relative to 2017 include:

•	Lower Olefins and Polyolefins–Americas (“O&P–Americas”) segment results with lower ethylene margins and higher fixed costs, offset by higher polyolefins margins;

•	Lower Olefins and Polyolefins–Europe, Asia, International (“O&P–EAI”) segment results with lower margins and volumes in Europe, partly offset by favorable foreign exchange impacts;

•	Higher Intermediates and Derivatives (“I&D”) segment results with increased margins and volumes;

•	Lower Advanced Polymer Solutions (“APS”) segment results as lower margins and the impact of acquisition-related transaction and integration costs were partly offset by the contribution of results from A. Schulman product lines following the August 21, 2018 acquisition;

•	Higher Refining segment results with higher refining margins and better yields; and

•	Higher Technology segment results due mostly to increased licensing revenue.

Other noteworthy items in 2018 include the following:

•	Completion of the $1.9 billion acquisition of A. Schulman, a leading global supplier of high-performance plastic compounds, composites and powders, on August 21, 2018;

•	Groundbreaking for our new $2.4 billion PO/TBA plant at our Channelview, Texas facility on August 22, 2018;

•	Construction of our Hyperzone high density polyethylene plant on track for planned start-up in the third quarter of 2019;

•	Non-cash income tax benefit of $346 million related to an audit settlement associated with specific uncertain tax positions recognized in the second quarter of 2018;

•	Acquisition of a 50% interest in Quality Circular Polymers, a premium plastics recycling company in Sittard-Geleen, Netherlands on March 14, 2018; and

•	Increase in quarterly dividend from $0.90 to $1.00 in February 2018.

Results of operations for the periods discussed are presented in the table below.

		Year Ended December 31,
Millions of dollars		2018				2017				2016
Sales and other operating revenues		$	39,004			$	34,484			$	29,183
Cost of sales		32,529				28,059				23,191
Selling, general and administrative expenses		1,129				859				833
Research and development expenses		115				106				99
Operating income		5,231				5,460				5,060
Interest expense		(360		)		(491		)		(322		)
Interest income		45				24				17
Other income, net		106				179				111
Income from equity investments		289				321				367
Provision for income taxes		613				598				1,386
Income from continuing operations		4,698				4,895				3,847
Loss from discontinued operations, net of tax		(8		)		(18		)		(10		)
Net income		$	4,690			$	4,877			$	3,837

RESULTS OF OPERATIONS

Revenues—We had revenues of $39,004 million in 2018, $34,484 million in 2017 and $29,183 million in 2016.

2018 versus 2017—Revenues increased by $4,520 million, or 13%, in 2018 compared to 2017.

Higher average sales prices led to a revenue increase of 11% in 2018. Average sales prices in 2018 were higher for most of our products as sales prices generally correlate with crude oil prices, which increased relative to 2017, despite a 40% decrease in oil prices during the fourth quarter 2018. A revenue decrease of 1% in 2018 reflects lower sales volumes for our O&P–Americas, O&P–EAI and APS segments, which were partly offset by an improvement in Refining and I&D segment sales volumes. Favorable foreign exchange impacts in 2018 resulted in a revenue increase of 1% relative to the prior year period. The operations of A. Schulman contributed $846 million of revenues following the acquisition which accounts for the remaining improvement in revenues for 2018.

2017 versus 2016—Revenues increased by $5,301 million, or 18%, in 2017 compared to 2016.

Average sales prices in 2017 were higher across most products as sales prices generally correlate with crude oil and natural gas prices, which on average, increased compared to the corresponding period in 2016. These higher prices led to a 15% increase in revenues. Higher sales volumes in our O&P–Americas, O&P–EAI and Refining segments, which were partly offset by lower I&D segment volumes, led to a revenue increase in 2017 of 2%. Favorable foreign exchange impacts were responsible for a 1% revenue increase in 2017.

Cost of Sales—Cost of sales were $32,529 million in 2018, $28,059 million in 2017 and $23,191 million in 2016.

Fluctuations in our cost of sales are generally driven by changes in feedstock and energy costs, as all other material components remain relatively flat from year to year. Feedstock and energy related costs generally represent approximately 75% to 80% of cost of sales, other variable costs account for approximately 10% of cost of sales on an annual basis and fixed operating costs, consisting primarily of expenses associated with employee compensation, depreciation and amortization, and maintenance, range from approximately 10% to 15% in each annual period.

2018 versus 2017—Cost of sales increased by $4,470 million, or 16%, in 2018 compared to 2017. This increase in cost of sales is primarily due to increases in feedstock and energy costs. Costs for crude oil, heavy liquid feedstocks and natural gas liquids (“NGLs”) and other feedstocks were higher in 2018 relative to 2017.

2017 versus 2016—Cost of sales increased by $4,868 million, or 21%, in 2017 compared to 2016. This increase was primarily due to higher feedstock and energy costs. Costs for crude oil, heavy liquid feedstocks, NGLs and natural gas were higher in 2017 relative to 2016.

SG&A Expense—Selling, general and administrative (“SG&A”) expenses were $1,129 million in 2018, $859 million in 2017 and $833 million in 2016.

2018 versus 2017—SG&A expenses increased by $270 million in 2018 compared to 2017.

The $105 million of SG&A expenses incurred by the operations of A. Schulman following the acquisition together with $73 million of acquisition and integration costs associated with the acquisition accounted for approximately 66% of the 2018 increase in SG&A expenses. Higher employee-related expenses accounted for approximately 26% of the increase in 2018 SG&A expense.

Operating Income—Our operating income was $5,231 million in 2018, $5,460 million in 2017 and $5,060 million in 2016.

2018 versus 2017—Operating income decreased by $229 million in 2018 compared to 2017.

Operating income for our O&P–EAI, O&P–Americas, APS and Refining segments declined $626 million, $131 million, $76 million and $6 million, respectively, over 2017. These declines were partially offset by increases in operating income of $514 million and $101 million, in our I&D and Technology segments respectively.

2017 versus 2016—Operating income increased by $400 million in 2017. This improvement over 2016 was primarily due to increases of $144 million, $101 million and $74 million in operating income for our I&D, O&P–EAI and O&P–Americas segments, respectively, and $77 million of lower operating losses for our Refining segment.

Operating results for each of our business segments are reviewed further in the “Segment Analysis” section below.

Interest Expense—Interest expense was $360 million in 2018, $491 million in 2017 and $322 million in 2016.

In 2017, we recognized charges totaling $113 million related to the March 2017 redemption of $1,000 million of our outstanding 5% senior notes due 2019. These charges included $65 million of prepayment premiums, $44 million for adjustments associated with fair value hedges and $4 million for the write-off of associated unamortized debt issuance costs.

2018 versus 2017—Interest expense decreased by $131 million in 2018 compared to 2017 primarily due to the 2017 redemption of $1,000 million of our 5% senior notes due 2019 as discussed above. Higher capitalized interest accounted for $25 million of lower interest expense relative to 2017.

2017 versus 2016—In 2017, interest expense increased $169 million in 2017 compared to 2016 primarily due to the 2017 redemption of $1,000 of our 5% senior notes due 2019 as discussed above. A reduction in the amount of capitalized interest and increased charges from our fair value hedges resulted in incremental increases in interest expense of $13 million and $45 million respectively, relative to 2016.

For additional information related to our fair value hedges, see Notes 13 and 15 to the Consolidated Financial Statements.

Other Income, Net—Other income, net, was $106 million in 2018, $179 million in 2017 and $111 million in 2016.

2018 versus 2017—Other income, net decreased by $73 million in 2018 compared to 2017. In 2018, we recognized a $36 million gain in our O&P–EAI segment related to the sale of our carbon black subsidiary in France. We also recognized $24 million of foreign exchange gains and approximately $45 million of other income primarily related to gains on investments, dividend income and pension benefits. In 2017, we recognized gains of $108 million on the sale of our O&P–EAI segment’s interest in its Geosel joint venture and $31 million on the sale of a portion of property in Lake Charles, Louisiana. We also recognized a $21 million non-cash gain in our O&P–EAI segment related to the elimination of an obligation related to a lease in 2017.

2017 versus 2016—The $68 million increase in Other income, net, is primarily due to the gains discussed above related to the sales of our joint venture interest, a property in Lake Charles, Louisiana and the elimination of the obligation associated with a lease discussed above, as compared to the gain recognized in 2016 related to the sale of our wholly owned Argentine subsidiary. We allocated $57 million and $21 million of that gain to our O&P–Americas and APS segments, respectively.

Income from Equity Investments—Our income from equity investments was $289 million in 2018, $321 million in 2017 and $367 million in 2016.

2018 versus 2017—Income from our equity investments decreased in 2018 largely as a result of reduced polyolefin spreads.

2017 versus 2016—Income from our equity investments decreased in 2017 mainly due to lower results for our joint ventures in Poland, Asia and Mexico.

Income Taxes—Our effective income tax rates of 11.5% in 2018, 10.9% in 2017 and 26.5% in 2016 resulted in tax provisions of $613 million, $598 million and $1,386 million, respectively.

In 2017, the U.S. enacted “H.R.1,” also known as the “Tax Cuts and Jobs Act” (the “Tax Act”) materially impacting our Consolidated Financial Statements by, among other things, decreasing the tax rate and significantly affecting future periods. To determine the full effects of the tax law for 2018, we are awaiting the finalization of several proposed U.S. Treasury regulations under the Tax Act that were issued during 2018, as well as additional regulations to be proposed and finalized pursuant to the Treasury’s expanded regulatory authority under the Tax Act. It is also possible that technical correction legislation concerning the Tax Act could retroactively affect tax liabilities for 2018. The Tax Act reduced the federal corporate tax rate from 35% to 21% for years beginning after 2017, which resulted in the remeasurement of our U.S. net deferred income tax liabilities. As a result, we recognized a tax benefit of $819 million in 2017. Including subsequent adjustments made in 2018, the cumulative impact of the remeasurement of our U.S. net deferred income tax liabilities and tax accruals was an $814 million income tax benefit.

Our effective income tax rate fluctuates based on, among other factors, changes in pre-tax income in countries with varying statutory tax rates, the U.S. domestic production activity deduction that applied to periods prior to 2018, changes in valuation allowances, changes in foreign exchange gains/losses, the amount of exempt income, and changes in unrecognized tax benefits associated with uncertain tax positions.

Our exempt income primarily includes interest income, export incentives, and equity earnings of our joint ventures. Interest income earned by certain of our European subsidiaries through intercompany financings is either untaxed or taxed at rates substantially lower than the U.S. statutory rate. Tax regulations proposed in 2018 may affect tax deductible interest in the U.S. in future periods; however, we do not believe they will have a material impact as proposed. Export incentives relate to tax benefits derived from elections and structures available for U.S. exports. Equity earnings attributable to the earnings of our joint ventures, when paid through dividends to certain European subsidiaries, are exempt from all or portions of normal statutory income tax rates. We currently anticipate the favorable treatment for interest income, dividends, and export incentives to continue in the near term; however, this treatment is based on current law and tax rulings, which could change, including changes with respect to proposed Treasury regulations under the Tax Act if finalized. Foreign exchange gains/losses have a

permanent impact on our effective income tax rate that can cause unpredictable movement in our effective income tax rate. We continue to maintain valuation allowances in various jurisdictions totaling $120 million as of 2018, which could impact our effective income tax rate in the future. We believe our effective income tax rate for 2019 will be approximately 20%.

In 2016, the U.S. Treasury issued final Section 385 debt-equity regulations that impact our internal financings beginning in 2017. Pursuant to a 2017 Executive Order, the Treasury Department reviewed these regulations and determined that they should be retained, subject to further review following the enactment of U.S. tax reform. We are awaiting the U.S. Treasury’s review of the existing Section 385 debt-equity regulations which could impact our internal financings in future years as well as any final regulations impacting interest deductions under the Tax Act.

2018—The 2018 effective income tax rate, which was lower than the U.S. statutory tax rate of 21%, was favorably impacted by changes in unrecognized tax benefits associated with uncertain tax positions (-6.0%) and exempt income (-5.6%). These favorable items were partially offset by the effects of earnings in various countries, notably in Europe, with higher statutory tax rates (1.7%) and U.S. state and local income taxes (1.0%).

During 2018, we entered into various audit settlements impacting specific uncertain tax positions. These audit settlements resulted in a $358 million non-cash benefit to our effective tax rate consisting of the recognition of $299 million of previously unrecognized tax benefits as a reduction for tax positions of prior years and the release of $59 million of previously accrued interest.

2017—The 2017 effective income tax rate, which was lower than the U.S. statutory tax rate of 35%, was favorably impacted by the remeasurement of U.S. net deferred tax liabilities due to the enactment of the Tax Act (-14.9%), exempt income (-7.0%), earnings in various countries, notably in Europe, with lower statutory tax rates (-3.0%), and the U.S. domestic production activity deduction (-1.0%). These favorable items were partially offset by the effects of U.S. state and local income taxes (0.7%) and changes in uncertain tax positions (0.5%). Although the Tax Act lowered the U.S. statutory federal income tax rate to 21% for tax years beginning after 2017, the reconciliation uses the 35% rate in effect for the year ended December 31, 2017.

2016—The 2016 effective income tax rate, which was lower than the U.S. statutory tax rate of 35%, was favorably impacted by exempt income (-6.7%), earnings in various countries, notably in Europe, with lower statutory tax rates (-3.0%), the impact of a change in non-U.S. tax law on our deferred tax liabilities (-1.0%) and the U.S. domestic production activity deduction (-0.8%). These favorable items were partially offset by the effects of non-cash out-of-period adjustments (2.5%) and U.S. state and local income taxes (0.5%).

Our 2016 income tax provision included $135 million of non-cash out of period adjustments from prior years. For further information on these adjustments, please see Note 18 to our Consolidated Financial Statements.

Comprehensive Income—We had comprehensive income of $4,682 million in 2018, $5,103 million in 2017 and $3,764 million in 2016.

2018 versus 2017—Comprehensive income decreased by $421 million in 2018 compared to 2017 primarily due to unfavorable net changes in foreign currency translations, lower net income and defined pension and other postretirement benefits. These decreases were offset by favorable impacts of financial derivatives primarily driven by periodic changes in benchmark interest rates.

The predominant functional currency for our operations outside of the U.S. is the euro. Relative to the U.S. dollar, the value of the euro decreased during 2018 resulting in net losses as reflected in the Consolidated Statements of Comprehensive Income. These net losses include pre-tax gains of $124 million in 2018, which represent the effective portion of our net investment hedges.

In 2018, the cumulative after-tax effect of our derivatives designated as cash flow hedges was a net gain of $54 million. The strengthening of the U.S. dollar against the euro in 2018 and periodic changes in benchmark interest rates resulted in a pre-tax gain of $107 million related to our cross-currency swaps. A $100 million pre-tax loss related to our cross-currency swaps represents reclassification adjustments included in Other income, net in 2018. In 2018, a pre-tax gain of $43 million related to

forward-starting interest rate swaps was driven by changes in benchmark interest rates. A $30 million pre-tax gain related to our commodity hedges was also recognized in 2018. An $11 million pre-tax loss related to our commodity hedges represents reclassification adjustments included in Cost of sales in 2018.

We recognized defined benefit pension and other post-retirement benefit pre-tax losses of $41 million and $106 million in 2018 and 2017, respectively. See Note 16 to the Consolidated Financial Statements for additional information regarding net actuarial gains.

2017 versus 2016—The $1,339 million increase in Comprehensive income in 2017 relative to 2016 reflects higher net income, the net favorable impacts of unrealized net changes in foreign currency translation adjustments and actuarial losses related to our defined benefit pension and other postretirement benefit plans. These increases were offset by an unfavorable impact of financial derivative instruments recognized in 2017.

The predominant functional currency for our operations outside of the U.S. is the euro. Relative to the U.S. dollar, the value of the euro increased during 2017 resulting in net gains as reflected in the Consolidated Statements of Comprehensive Income. These net gains in 2017 include pre-tax losses of $288 million, which represent the effective portion of our net investment hedges.

We recognized net actuarial gains of $74 million in 2017 and net actuarial losses of $188 million in 2016. The $74 million net gain in 2017 reflects $74 million of gains due to changes in pension and other postretirement benefit discount rate assumptions and $6 million of gains due to favorable postretirement liability experience and other immaterial items. These gains were partly offset by $7 million of losses due to pension asset experience (actual asset return compared to expected return). In 2016, the $188 million net loss was primarily attributable to $279 million of losses due to pension and other postretirement benefit discount rate decreases, which was offset by $79 million of gains related to pension asset experience and $10 million due to favorable postretirement liability experience and other immaterial items. In 2016, we also recognized a $61 million reclassification adjustment related primarily to a voluntary lump sum program offered to certain former employees in select U.S. pension plans. Total lump sum payments from these plans exceeded annual service and interest cost in 2016 resulting in this loss.

The cumulative effects of our derivatives designated as cash flow hedges were losses of $323 million. The euro strengthened against the U.S. dollar in 2017 resulting in pre-tax losses of $287 million in 2017 related to our cross-currency swaps. Pre-tax gains of $264 million related to our cross-currency swaps were reclassification adjustments included in 2017 net income. Unrealized pre-tax losses of $25 million in 2017 related to forward-starting interest rate swaps were driven by increases in benchmark interest rates during those periods.

Segment Analysis

We use earnings 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 (losses) and components of pension and other postretirement benefit costs other than service cost, are included in “Other.” For additional information related to our operating segments, as well as a reconciliation of EBITDA to its nearest generally accepted accounting principles (“GAAP”) measure, Income from continuing operations before income taxes, see Note 22, Segment and Related Information, to our Consolidated Financial Statements.

Following our acquisition of A. Schulman, our continuing operations are managed through six reportable segments: O&P–Americas, O&P–EAI, I&D, APS, Refining and Technology.

Our new APS segment produces and markets compounding and solutions, such as polypropylene compounds, engineered plastics, masterbatches, engineered composites, colors and powders; and advanced polymers, which includes Catalloy and polybutene-1. Polypropylene compounds, Catalloy and polybutene-1 were previously reported in our O&P–EAI and O&P–Americas segments. Accordingly, the historical results of our O&P–EAI and O&P–Americas segments have been recast for all comparable periods presented. For additional information related to our segments, see Note 3, Business Combination and Dispositions and Note 22, Segment and Related Information to the Consolidated Financial Statements. The following tables reflect selected financial information for our reportable segments.

		Year Ended December 31,
Millions of dollars		2018				2017				2016
Sales and other operating revenues:
O&P–Americas segment		$	10,408			$	10,004			$	8,722
O&P–EAI segment		10,838				10,218				8,718
I&D segment		9,588				8,472				7,226
APS segment		4,024				2,922				2,601
Refining segment		9,157				6,848				5,135
Technology segment		583				450				479
Other, including segment eliminations		(5,594		)		(4,430		)		(3,698		)
Total		$	39,004			$	34,484			$	29,183
Operating income (loss):
O&P–Americas segment		$	2,251			$	2,382			$	2,308
O&P–EAI segment		682				1,308				1,207
I&D segment		1,716				1,202				1,058
APS segment		329				405				372
Refining segment		(28		)		(22		)		(99		)
Technology segment		284				183				221
Other, including segment eliminations		(3		)		2				(7		)
Total		$	5,231			$	5,460			$	5,060

		Year Ended December 31,
Millions of dollars		2018				2017				2016
Depreciation and amortization:
O&P–Americas segment		$	442			$	433			$	359
O&P–EAI segment		208				210				201
I&D segment		287				279				269
APS segment		69				35				31
Refining segment		192				177				163
Technology segment		43				40				41
Total		$	1,241			$	1,174			$	1,064
Income from equity investments:
O&P—Americas segment		$	58			$	42			$	59
O&P—EAI segment		225				271				302
I&D segment		6				8				6
Total		$	289			$	321			$	367
Other income (expense), net:
O&P—Americas segment		$	11			$	42			$	62
O&P—EAI segment		48				138				19
I&D segment		2				1				—
APS segment		2				(2		)		24
Refining segment		3				2				8
Technology segment		1				—				—
Other, including intersegment eliminations		39				(2		)		(2		)
Total		$	106			$	179			$	111
EBITDA:
O&P—Americas segment		$	2,762			$	2,899			$	2,788
O&P—EAI segment		1,163				1,927				1,729
I&D segment		2,011				1,490				1,333
APS segment		400				438				427
Refining segment		167				157				72
Technology segment		328				223				262
Other, including intersegment eliminations		36				—				(9		)
Total		$	6,867			$	7,134			$	6,602

Olefins and Polyolefins–Americas Segment

Overview—In calculating the impact of margin and volume on EBITDA, consistent with industry practice, management offsets revenues and volumes related to ethylene co-products against the cost to produce ethylene. Volume and price impacts of ethylene co-products are reported in margin. Ethylene is a major building block of olefins and polyolefins and as such, ethylene sales volumes and prices and our internal cost of ethylene production are included in management’s assessment of the segment’s performance.

2018 versus 2017—EBITDA declined in 2018 as lower ethylene margins more than offset the improvement in polyolefins margins relative to 2017. EBITDA for 2017 also included a $31 million gain resulting from the sale of property in Lake Charles, Louisiana.

2017 versus 2016—EBITDA improved in 2017 due to higher olefins volumes stemming from the expansion of our Corpus Christi, Texas olefins facility in late 2016. Higher olefins and polyethylene margins in 2017 were offset by lower polypropylene margins. EBITDA for 2017 was favorably impacted by the gain related to the sale of property in Lake Charles, Louisiana mentioned above. EBITDA for 2016 was also impacted by a $57 million gain on the first quarter sale of our wholly owned Argentine subsidiary and a $26 million non-cash lower of cost or market (“LCM”) inventory valuation charge recognized in the fourth quarter due primarily to a reduction in polypropylene prices.

Ethylene Raw Materials—Ethylene and its co-products are produced from two major raw material groups:

•	NGLs, principally ethane and propane, the prices of which are generally affected by natural gas prices; and

•	crude oil-based liquids (“liquids” or “heavy liquids”), including naphtha, condensates, and gas oils, the prices of which are generally related to crude oil prices.

Although prices of these raw materials are generally related to crude oil and natural gas prices, during specific periods the relationships among these materials and benchmarks may vary significantly. We have significant flexibility to vary the raw material mix and process conditions in our U.S. olefins plants in order to maximize profitability as market prices for both feedstocks and products change.

As in recent years, strong supplies from the U.S. shale gas/oil boom resulted in ethane being a preferred feedstock in our U.S. plants in 2018. Ethane remained the preferred U.S. feedstock for ethylene despite higher recent prices driven by increased demand from newly-constructed U.S. olefins units and supply constraints in the Gulf Coast NGL fractionation and pipeline systems. In 2018, we produced approximately 80% of our ethylene from ethane compared to approximately 75% and 70% in 2017 and 2016, respectively. Despite generally higher liquid feedstock prices, strong propylene and butadiene coproduct prices at various points in the year also brought liquids into our feedslate.

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.

		Year Ended December 31,
Millions of dollars		2018				2017				2016
Sales and other operating revenues		$	10,408			$	10,004			$	8,722
Income from equity investments		58				42				59
EBITDA		2,762				2,899				2,788

Revenues—Revenues increased by $404 million, or 4%, in 2018 compared to 2017 and by $1,282 million, or 15%, in 2017 compared to 2016.

2018 versus 2017—Average polyethylene and polypropylene sales prices, supported globally by higher crude oil prices, increased relative to 2017. This favorable impact was partly offset by a 6 cents decline in ethylene prices resulting from increased supply driven by the start-up of new U.S. ethylene capacity. The overall average increase in sales prices was responsible for an 8% increase in 2018 revenues.

Segment volumes declined in 2018 mainly due to lower sales of purchased feedstock and the negative impact of planned and unplanned maintenance on polypropylene and polyethylene sales. These lower sales volumes were responsible for a revenue decrease of 4% in 2018.

2017 versus 2016—Average sales prices for most products increased in 2017, consistent with feedstock prices that are correlated with crude oil and natural gas prices, which on average increased relative to 2016. These higher sales prices were responsible for a 14% increase in 2017 revenues.

Operating rates and product volumes improved in 2017 due to turnaround activities and the expansion at our Corpus Christi, Texas facility during 2016. These increased volumes were responsible for a revenue increase of 1% in 2017.

EBITDA—EBITDA decreased by $137 million, or 5%, in 2018 compared to 2017 and increased by $111 million, or 4%, in 2017 compared to 2016.

2018 versus 2017—Lower olefins margins and higher fixed costs, which were partly offset by higher polyethylene and polypropylene margins, led to a 3% decline in 2018 EBITDA. Ethylene margins decreased by 5 cents per pound largely due to the decline in ethylene sales prices discussed above. Polyethylene and polypropylene margins reflect per pound increases in price spreads over ethylene and propylene of 7 cents and 3 cents, respectively, driven by higher sales prices and in the case of polyethylene, also by the lower cost of ethylene feedstock. The increase in polyethylene and polypropylene margins stem from strong demand and industry supply constraints. Lower polyethylene and polypropylene volumes also resulted in a 2% decline in 2018 EBITDA. An additional 1% decrease in EBITDA relative to 2017 was related to the gain on the sale of property in Lake Charles, Louisiana.

The remaining change in 2018 EBITDA was attributed to an increase in income from our equity investments.

2017 versus 2016—Increased volumes in 2017 due largely to the expansion of our Corpus Christi, Texas olefins facility was responsible for a 5% improvement in EBITDA. Margins were relatively unchanged in 2017 compared to 2016 due to an approximate 4 cents per pound decrease in polypropylene spreads that substantially offset per pound increases in olefins and polyethylene spreads of a half cent and 2 cents, respectively. Polypropylene margins declined from the high levels in 2016 on the higher cost of propylene feedstocks, while the increase in olefins and polyethylene margins was attributable to higher average sales prices that more than offset the increased cost of ethylene. Lower income from our joint venture relative to the prior year led to a 1% decline in EBITDA. The net impact to EBITDA of the gain on sale of our wholly owned Argentine subsidiary in the first quarter of 2016 and the fourth quarter LCM inventory valuation adjustment mentioned above was offset by the first quarter 2017 gain on sale of property in Lake Charles, Louisiana.

Olefins and Polyolefins–Europe, Asia, International Segment

Overview—In calculating the impact of margin and volume on EBITDA, consistent with industry practice, management offsets revenues and volumes related to ethylene co-products against the cost to produce ethylene. Volume and price impacts of ethylene co-products are reported in margin. Ethylene is a major building block of our olefins and polyolefins and as such, ethylene sales volumes and prices and our internal cost of ethylene production are included in management’s assessment of the segment’s performance.

2018 versus 2017—EBITDA in 2018 declined largely as a result of lower margins and volumes in Europe compared to a strong 2017. EBITDA for 2018 includes a $36 million gain from the fourth quarter 2018 sale of our carbon black subsidiary in France. In 2017, EBITDA included a $108 million gain on the third quarter 2017 sale of our 27% interest in Geosel and the $21 million beneficial impact related to the elimination of an obligation associated with a lease.

2017 versus 2016—EBITDA increased in 2017 compared to 2016. This improvement was driven by higher olefins margins and the impact of higher volumes across most products, partly offset by lower polyethylene margins and lower income from our equity investments.

EBITDA for 2017 also included the gain on the sale of our interest in Geosel and the beneficial impact related to the elimination of an obligation associated with a lease discussed above. In 2016, EBITDA reflected gains totaling $11 million from the sales of our joint venture in Japan and idled assets in Australia.

Ethylene Raw Materials—In Europe, heavy liquids are the primary raw materials for our ethylene production. In 2018, 2017 and 2016, we continued to benefit by sourcing advantaged NGLs as market opportunities arose.

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.

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Sales and other operating revenues	$	10,838			$	10,218			$	8,718
Income from equity investments	225				271				302
EBITDA	1,163				1,927				1,729

Revenues—Revenues in 2018 increased by $620 million, or 6%, compared to 2017 and by $1,500 million, or 17%, in 2017 compared to 2016.

2018 versus 2017—Average sales prices in 2018 were higher across most products as sales prices generally correlate with crude oil prices, which were significantly higher compared to 2017. These higher average sales prices were responsible for a revenue increase of 7% in 2018. Planned and unplanned maintenance, a weaker market and low Rhine River levels in the second half of 2018, compared to the prior year, led to lower sales volumes across most products. These decreased volumes resulted in a revenue decrease of 4% in 2018. Foreign exchange impacts in 2018, which were favorable on average compared to 2017, led to a revenue increase of 3%.

2017 versus 2016—Average sales prices in 2017 were higher across most products as sales prices generally correlate with crude oil prices, which on average, increased compared to 2016. These higher average sales prices were responsible for a revenue increase of 12% in 2017. Better product availability compared to 2016, which was affected by turnaround activity and inventory requirements, led to higher sales volumes across most products. These increased volumes resulted in a revenue increase of 3% in 2017. Foreign exchange impacts that, on average, were favorable for 2017 resulted in a revenue increase of 2% compared to the prior year.

EBITDA—EBITDA decreased by $764 million, or 40%, in 2018 compared to 2017 and increased by $198 million, or 11%, in 2017 compared to 2016.

2018 versus 2017—Olefins and polyolefins margins in Europe declined in 2018. Olefins margins decreased as the improvement in ethylene prices lagged a 10 cents per pound increase in the weighted average cost of ethylene production due to higher prices for naphtha and other olefin feedstocks. A decline in 2018 polyolefins margins reflected lower per pound price spreads over ethylene and propylene of 3 cents and 2 cents, respectively. These lower margins were due to weaker supply/demand balances in Europe and led to a decline in EBITDA of 29%, in comparison to a strong 2017. The impact of the lower volumes discussed above also led to a 9% decrease in 2018 EBITDA. A reduction in income from our equity investments resulted in an additional 2% decrease in EBITDA relative to 2017. The net impact of the 2018 gain on the sale of our carbon black subsidiary in France and the 2017 benefits related to the sale of our interest in Geosel and the elimination of an obligation associated with a lease discussed above resulted in a further 5% decline in EBITDA.

These unfavorable impacts were offset in part by a 5% increase to EBITDA due to favorable foreign exchange impacts in 2018.

2017 versus 2016—An increase in olefin margins driven largely by a 6 cents per pound increase in ethylene sales prices was partly offset in 2017 by a 3 cents per pound decrease in European polyethylene spreads due to a more balanced European market compared to the prior year. This net increase resulted in a 1% improvement in 2017 EBITDA compared to 2016. The higher 2017 volumes discussed above added another 5% to EBITDA. Favorable foreign exchange impacts in 2017 also contributed an additional 1% to EBITDA. The net beneficial impact of the transactions in 2016 and 2017 discussed above related to the sales of our joint venture interests and idled assets, and the elimination of a lease-related obligation, resulted in an additional 6% increase in EBITDA. These increases were partially offset by a 2% decrease in EBITDA driven by a reduction in income from equity investments in Poland and Asia in 2017 relative to very strong 2016 results.

Intermediates and Derivatives Segment

Overview—EBITDA for our I&D segment was higher across all businesses in 2018 compared to 2017, which included an approximate $50 million unfavorable impact related to precious metal catalysts.

2018 versus 2017—EBITDA improved in 2018 relative to 2017 as higher margins across most products benefited from industry supply constraints and strong demand.

2017 versus 2016—EBITDA was higher for our I&D segment in 2017 relative to 2016 due to stronger margins for intermediate chemicals products supported by reduced market supply stemming from industry outages and increased demand in Asia.

The following table sets forth selected financial information for the I&D segment including Income from equity investments, which is a component of EBITDA.

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Sales and other operating revenues	$	9,588			$	8,472			$	7,226
Income from equity investments	6				8				6
EBITDA	2,011				1,490				1,333

Revenues—Revenues for 2018 increased by $1,116 million, or 13%, compared to 2017 and increased by $1,246 million, or 17%, in 2017 compared to 2016.

2018 versus 2017—Higher average sales prices in 2018 for most products, which reflect the impacts of higher feedstock and energy costs and industry supply constraints, were responsible for a revenue increase of 10%. Higher sales volumes resulted in a revenue increase of 2% in 2018, primarily due to hurricane Harvey impacts and major turnarounds at our Botlek, Netherlands and Channelview, Texas facilities in 2017. Foreign exchange impacts that, on average, were favorably higher relative to 2017 resulted in a revenue increase of 1%.

2017 versus 2016—Higher average sales prices in 2017 for most products, which reflect the impacts of higher feedstock and energy costs and industry supply constraints, were responsible for a revenue increase of 17%. Favorable foreign exchange impacts also led to a 1% revenue increase in 2017. These increases were partially offset by a revenue decrease of 1% in 2017, primarily due to lower sales volumes for intermediate chemicals and oxyfuels and related products. This volume-driven decline was largely due to reduced production associated with two major turnarounds at our Botlek, Netherlands, and Channelview, Texas, facilities.

EBITDA—EBITDA increased by $521 million, or 35%, in 2018 compared to 2017 and increased by $157 million, or 12%, in 2017 compared to 2016.

2018 versus 2017—Higher margins were responsible for an improvement in EBITDA of 27% in 2018 relative to 2017. Industry outages and other supply constraints for several intermediate chemicals products, along with strong demand for PO and derivatives products, led to tight supplies and higher sales prices. Intermediate chemicals products accounted for approximately two thirds of the margin improvement in 2018 as most intermediate chemical products benefited from lower ethylene raw material costs and tight industry supply. PO and derivatives and oxyfuels and related products each accounted for approximately half of the remaining increase in 2018 margins. Margins for oxyfuels and related products improved with higher crude oil pricing which outpaced butane.

The impact of higher volumes as discussed above added 3% to EBITDA in 2018 while favorable foreign exchange impacts added 2%. An additional 3% increase in EBITDA, as compared to the prior year period, stems from the absence of the unfavorable impact associated with precious metal catalysts in 2017.

2017 versus 2016—Higher intermediate chemicals and PO and derivative product margins driven by higher average sales prices resulted in a 19% increase in EBITDA. This increase was offset in part by a 2% decline in margins for oxyfuels and related products primarily due to higher butane pricing. This margin improvement was partly offset by decreases in EBITDA of 4% and 1%, respectively, stemming from the unfavorable impacts associated with charges related to precious metals catalyst financings and the lower volumes discussed above.

Advanced Polymer Solutions Segment

Overview

2018 versus 2017—EBITDA for our APS segment declined relative to 2017 as lower margins and $69 million of acquisition-related transaction and integration costs were offset by $58 million of EBITDA stemming from the acquisition of A. Schulman.

2017 versus 2016—EBITDA improved slightly in 2017 with higher compounding and solutions volumes and improved advanced polymers margins relative to 2016, which included a $21 million gain on the sale of our wholly owned Argentine subsidiary.

The following table sets forth selected financial information for the APS segment including Income from equity investments, which is a component of EBITDA:

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Sales and other operating revenues	$	4,024			$	2,922			$	2,601
EBITDA	400				438				427

Revenues—Revenues increased in 2018 by $1,102 million, or 38%, compared to 2017 and by $321 million, or 12%, in 2017 compared to 2016.

2018 versus 2017—The acquisition of A. Schulman contributed $846 million to revenues of the APS segment, which accounts for a revenue increase in 2018 of approximately 29% relative to 2017. Higher average sales prices, which were driven by the increased cost of raw materials, also led to a revenue increase of 8% in 2018. Foreign exchange impacts, which on average, were favorable in 2018 also resulted in a revenue increase of 2%.

A decline in compounding and solutions product volumes in 2018 stemming from lower automotive production in Europe was substantially offset by higher advanced polymers product volumes due to strong demand in Europe and North America leading to a 1% decline in revenues.

2017 versus 2016—Higher average sales prices across all products in 2017 led to a revenue increase of 8% relative to 2016. An increase in 2017 compounding and solutions volumes driven by higher automotive demand in South America resulted in a 3% revenue increase. Another 1% increase in revenues stemmed from foreign exchange impacts, which on average, were favorable in 2017 relative to 2016.

EBITDA—EBITDA decreased in 2018 by $38 million, or 9%, compared to 2017 and increased by $11 million, or 3%, in 2017 compared to 2016.

2018 versus 2017—EBITDA declined by 16% in 2018 as a result of the $69 million of costs associated with the acquisition and integration of A. Schulman. The operations of A. Schulman following the acquisition contributed $58 million of EBITDA to the results of the APS segment leading to an increase in EBITDA of 13%.

Margins for compounding and solutions products declined in 2018 due primarily to increases in raw material costs in South America and Asia that outpaced increases in average sales prices. These lower margins and the decline in volumes discussed above resulted in decreases of 8% and 1%, respectively, in EBITDA.

Favorable foreign exchange impacts partly offset these declines with a 3% increase in 2018 EBITDA.

2017 versus 2016—The volume-driven increase related to our compounding and solutions products discussed above led to a 4% increase in 2018 EBITDA. Increased margins for advanced polymers driven by sales prices that increased more than raw material prices resulted in an additional increase in EBITDA of 3%. Favorable foreign exchange impacts in 2017 contributed another 1% to EBITDA. These favorable impacts were offset in part by a 5% decline relative to EBITDA in 2016, which included the gain on sale of our Argentine subsidiary discussed above.

Refining Segment

Overview

2018 versus 2017—EBITDA for our Refining segment benefited in 2018 from improved refining margins primarily driven by favorable crude oil discounts in Western Canadian Select and improved rates on our fluid catalytic converter leading to better yields.

2017 versus 2016—EBITDA benefited from higher crude processing rates in 2017 as the impacts of planned and unplanned maintenance outages were less than in 2016. Higher industry margins were offset by higher maintenance-related fixed costs in 2017.

The following table sets forth selected financial information and heavy crude processing rates for the Refining segment and the U.S. refining market margins for the applicable periods. “LLS” is a light crude oil, while “Maya” is a heavy crude oil.

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Sales and other operating revenues	$	9,157			$	6,848			$	5,135
EBITDA	167				157				72
Heavy crude oil processing rates, thousands of barrels per day	231				236				201
Market margins, dollars per barrel
Light crude oil—2-1-1	$	12.35			$	13.54			$	10.73
Light crude oil—Maya differential	7.50				7.02				8.51
Total Maya 2-1-1	$	19.85			$	20.56			$	19.24

Revenues—Revenues increased by $2,309 million, or 34%, in 2018 compared to 2017 and by $1,713 million, or 33%, in 2017 compared to 2016.

2018 versus 2017—Higher product prices led to a revenue increase of 26% relative to 2017 due to a per barrel increase in average crude oil prices of approximately $16 in 2018. Heavy crude oil processing rates in 2018 decreased 2% relative to 2017, with both comparative periods impacted by turnaround activity. Sales volumes increased in 2018 leading to a revenue increase of 8%, compared to the 2017 period due to an increase in downstream processing of intermediate oils.

2017 versus 2016—Higher product prices in 2017 largely driven by an increase in average crude oil prices of approximately $10 per barrel led to a revenue increase of 26% relative to 2016. Heavy crude oil processing rates increased by 17% in 2017, leading to a volume driven revenue increase of 7%, as the impacts of planned and unplanned outages and the effects of Hurricane Harvey in 2017 had less of an impact on processing rates than the unplanned outages in 2016 related to a

coker fire, downtime at crude units with reduced processing and several utility interruptions. In 2017, we completed planned turnarounds on one of our crude units and our fluid catalytic converter.

EBITDA—EBITDA increased by $10 million, or 6%, in 2018 compared to 2017 and by $85 million, or 118%, in 2017 compared to 2016.

2018 versus 2017—Advantaged pricing for Canadian crude oil and better yields equally contributed to the improvement in 2018 refining margins relative to 2017, which was negatively impacted by planned turnaround activity on our fluid catalytic cracking unit. These higher margins accounted for a 12% improvement in 2018 EBITDA. These margin improvements were offset by a 2% decrease in heavy crude oil processing rates which resulted in a volume-driven 6% decrease in EBITDA.

2017 versus 2016—Increased production accounted for approximately 90% of the improvement in 2017 EBITDA. Crude oil processing rates in 2017 were higher than 2016 as discussed above. Higher refining margins, which were partly offset by higher maintenance-related fixed costs, accounted for the remaining 10% improvement in 2017 EBITDA.

Technology Segment

Overview—The Technology segment recognizes revenues related to the sale of polyolefin catalysts and the licensing of chemical and polyolefin process technologies. These revenues are offset in part by the costs incurred in the production of catalysts, licensing and services activities and research and development (“R&D”) activities. In 2018, 2017 and 2016, our Technology segment incurred approximately 55% of all R&D costs.

2018 versus 2017—EBITDA improved in 2018 primarily due to higher licensing revenues.

2017 versus 2016—A decline in 2017 EBITDA reflects lower licensing revenues, partially offset by higher catalyst sales volumes, compared to 2016.

The following table sets forth selected financial information for the Technology segment.

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Sales and other operating revenues	$	583			$	450			$	479
EBITDA	328				223				262

Revenues—Revenues increased by $133 million, or 30%, in 2018 compared to 2017 and decreased by $29 million, or 6%, in 2017 compared to 2016.

2018 versus 2017—Higher licensing revenues were responsible for a revenue increase of 23% in 2018, relative to the corresponding period in 2017. Higher customer demand led to increased catalyst volumes in 2018 resulting in a revenue increase of 3%. Favorable foreign exchange impacts in 2018 led to an additional revenue increase of 4%.

2017 versus 2016—Lower licensing revenues were responsible for a revenue decrease of 12% in 2017 relative to 2016. This decrease was partially offset by revenue increases of 3% and 1%, respectively, related to increased catalyst sales volumes and higher average sales prices. Favorable foreign exchange impacts were responsible for an additional 2% increase in EBITDA.

EBITDA—EBITDA in 2018 increased by $105 million, or 47%, compared to 2017 and decreased by $39 million, or 15%, in 2017, compared to 2016.

2018 versus 2017—Higher licensing revenues resulted in EBITDA improvements of 38% in 2018. The catalyst sales volume increase in 2018 discussed above was responsible for a 5% increase in EBITDA. The remaining 4% increase in 2018 EBITDA was due to favorable foreign exchange impacts.

2017 versus 2016—Lower licensing revenues were largely responsible for a 20% decrease in 2017 EBITDA. This decline was partly offset by a 5% improvement in EBITDA resulting from an increase in catalyst volumes during 2017.

FINANCIAL CONDITION

Operating, investing and financing activities of continuing operations, which are discussed below, are presented in the following table:

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Source (use) of cash:
Operating activities	$	5,471			$	5,206			$	5,606
Investing activities	(3,559		)		(1,756		)		(2,301		)
Financing activities	(3,008		)		(2,859		)		(3,349		)

Operating Activities—Cash of $5,471 million generated by operating activities in 2018 reflected earnings adjusted for non-cash items and net cash provided by the main components of working capital–accounts receivable, inventories and accounts payable. A $358 million non-cash reduction in unrecognized tax benefits is reflected in Other operating activities in 2018. For additional information on this matter, see Note 18 to the Consolidated Financial Statements.

In 2018, the main components of working capital provided $93 million of cash. Lower accounts receivable due primarily to lower sales volumes in our O&P–Americas, O&P–EAI and I&D segments at year end and higher accounts payable due to higher feedstock prices were partially offset by an increase in inventory primarily due to the lower sales volumes at year end.

Cash of $5,206 million generated in 2017 primarily reflected earnings adjusted for non-cash items partly offset by $593 million of cash used by the main components of working capital. Higher sales prices across all of our segments in the fourth quarter of 2017 and brief delays in the receipt of payments for products in our Refining and I&D segments led to the increase in accounts receivable. Inventories increased for most products in our O&P–EAI and O&P–Americas segments and included an inventory build in our O&P–Americas segment in anticipation of first quarter 2018 turnaround activities. These increases were partly offset by an increase in feedstock prices in the fourth quarter of 2017 in our O&P–Americas, O&P–EAI and Refining segments which led to an increase in accounts payable.

Cash of $5,606 million generated in 2016 primarily reflected earnings adjusted for non-cash items and cash generated by the main components of working capital. The non-cash items in 2016 included a $78 million gain related to the sale of our wholly owned Argentine subsidiary with adjustments for related working capital and gains totaling $11 million related to sales of our joint venture in Japan and idled assets in Australia.

The main components of working capital generated cash of $123 million in 2016. Higher product sales prices in the fourth quarter of 2016 across all segments combined with the impact of higher fourth quarter 2016 sales volumes in our O&P–Americas, Refining and I&D segments led to an increase in accounts receivable. This increase in accounts receivable was offset by higher accounts payable, which was driven by the higher prices of crude oil and other feedstocks. The level of inventories fell in our O&P–Americas segment following the completion of turnaround activities in the fourth quarter of 2016 and in our Refining segment, which had higher crude oil inventories at the end of 2015 due to operational issues during the fourth quarter.

Investing Activities—We invested cash of $3,559 million, $1,756 million and $2,301 million in 2018, 2017 and 2016, respectively.

In August 2018, we acquired A. Schulman for $1,776 million, which is net of $81 million of cash acquired and a liability deemed as a component of the purchase price. For additional information on this transaction, see Note 3 to the Consolidated Financial Statements.

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 2018, 2017 and 2016, we invested $50 million, $653 million and $688 million, respectively, in debt securities that are deemed available-for-sale. We also invested $64 million in equity securities in 2018 and $76 million in held-to-maturity

securities in 2016. These investments are classified as Short-term investments. In 2017 and 2016, we invested $512 million and $674 million, respectively, in tri-party repurchase agreements.

We received proceeds of $423 million, $574 million and $674 million in 2018, 2017 and 2016, respectively, upon the sale and maturity of certain of our Short-term investments. In 2018, we also received proceeds of $97 million on the sale of a portion of our investment in equity securities. In 2017 and 2016, we received proceeds of $381 million and $685 million, respectively, upon the maturity of certain of our repurchase agreements. See Note 15 to the Consolidated Financial Statements for additional information regarding these investments.

Joint Venture Activity—In September 2017, we sold our 27% interest in our Geosel joint venture and received proceeds of $155 million.

Financial Instruments Activity—Upon expiration in 2018, 2017 and 2016, we settled foreign currency contracts with notional values totaling €925 million, €550 million and €1,200 million, respectively, which were designated as net investment hedges of our investments in foreign subsidiaries. Payments to and proceeds from our counterparties resulted in a net cash inflow of $30 million in 2018 and net cash outflows of $49 million and $61 million during 2017 and 2016, respectively. See Note 15 to the Consolidated Financial Statements for additional information regarding these foreign currency contracts.

Sales of Subsidiaries—In October 2018, we received net cash proceeds of $37 million for the sale of our carbon black subsidiary in France.

In February 2016, we received net cash proceeds of $137 million for the sale of our wholly owned Argentine subsidiary.

The following table summarizes our capital expenditures for continuing operations for the periods from 2016 through 2018:

	Year Ended December 31,
Millions of dollars	2018				2017				2016
Capital expenditures by segment:
O&P—Americas	$	1,079			$	741			$	1,370
O&P—EAI	248				163				229
I&D	409				332				333
APS	62				55				38
Refining	250				213				224
Technology	48				32				36
Other	9				11				13
Consolidated capital expenditures of continuing operations	$	2,105			$	1,547			$	2,243

In 2019, we expect to spend approximately $2.8 billion for capital expenditures and contributions to our PO joint ventures. The higher levels of expected capital expenditures in 2019 and 2018 relative to their respective comparative periods are largely driven by construction related to our new Hyperzone polyethylene plant at our La Porte, Texas facility and for the construction related to our new PO/TBA plant in Texas.

Financing Activities—Financing activities used cash of $3,008 million, $2,859 million and $3,349 million in 2018, 2017 and 2016, respectively.

We made payments totaling $1,854 million, $866 million and $2,938 million in 2018, 2017 and 2016, respectively, to repurchase a portion of our outstanding ordinary shares. We also made dividend payments to holders of our ordinary shares totaling $1,554 million, $1,415 million and $1,395 million in 2018, 2017 and 2016, respectively. For additional information related to these share repurchases and dividend payments, see Note 20 to the Consolidated Financial Statements.

In September 2018, we repaid the $375 million 6.875% Senior Notes due June 2023 assumed in the acquisition of A. Schulman for a price of 105.156% of par.

In March 2017, we issued $1,000 million of 3.5% guaranteed notes due 2027 and received net proceeds of $990 million. The proceeds from these notes, together with available cash, were used to repay $1,000 million of our outstanding 5% senior notes due 2019. We paid $65 million in premiums in connection with this prepayment.

In March 2016, we issued €750 million of 1.875% guaranteed notes due 2022 and received net proceeds of $812 million.

Through the issuance and repurchase of commercial paper instruments under our commercial paper program, we received net proceeds of $810 million and $177 million in 2018 and 2016, respectively. We made net repayments of $493 million in 2017.

Additional information related to our commercial paper program and the issuance and repayment of debt can be found in the Liquidity and Capital Resources section below and in Note 13 to the Consolidated Financial Statements.

Liquidity and Capital Resources—As of December 31, 2018, we had $1,224 million of unrestricted cash and cash equivalents and marketable securities classified as Short-term investments. We also held $544 million of tri-party repurchase agreements classified as Prepaid expenses and other current assets at December 31, 2018. For additional information related to our purchases of marketable securities, which currently include time deposits, certificates of deposit, commercial paper, bonds and limited partnership investments, and our investments in tri-party repurchase agreements, see “Investing Activities” above and Note 15 to the Consolidated Financial Statements.

At December 31, 2018, we held $269 million of cash in jurisdictions outside the U.S., principally Europe and Asia. There are currently no material legal or economic restrictions that would impede our transfers of cash.

We also had total unused availability under our credit facilities of $2,517 million at December 31, 2018, which included the following:

•

$1,688 million under our $2,500 million 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. A small portion of our availability under this facility is impacted by changes in the euro/U.S. dollar exchange rate. At December 31, 2018, we had $809 million of outstanding commercial paper, net of discount, no outstanding letters of credit and no outstanding borrowings under the facility; and

•	$829 million under our $900 million U.S. accounts receivable 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. This facility had no outstanding borrowings or letters of credit at December 31, 2018.

At December 31, 2018, we had total debt, including current maturities, of $9,387 million, and $214 million of outstanding letters of credit, bank guarantees and surety bonds issued under uncommitted credit facilities.

In February 2019, LYB Americas Finance Company LLC (“LYB Americas Finance ), a direct, 100% owned finance subsidiary of LyondellBasell Industries N.V., entered into a 364-day, $2,000 million senior unsecured term loan credit facility and borrowed the entire amount. The proceeds of this term loan, which is fully and unconditionally guaranteed by LyondellBasell Industries N.V. are intended for general corporate purposes, including the repayment of debt.

Borrowings under the credit agreement will bear interest at either a LIBOR rate or a base rate, as defined, plus in each case, an applicable margin determined by reference to LyondellBasell N.V.’s current credit ratings.

The credit agreement contains customary covenants and warranties, including specified restrictions on indebtedness, including secured and subsidiary indebtedness, and merger and sales of assets. In addition, we are required to maintain a leverage ratio at the end of every fiscal quarter of 3.50 to 1.00 or less.

In February 2019, proceeds from the credit facility were used to redeem the remaining $1,000 million outstanding of our 5% Senior Notes due 2019 at par. In conjunction with the redemption of these notes, we recognized non-cash charges of less than $1 million for the write-off of unamortized debt issuance costs and $8 million for the write-off of the cumulative fair value hedge accounting adjustment related to the redeemed notes.

In July 2018, we amended our $900 million U.S. accounts receivable facility. This amendment, among other things, extended the term of the facility to July 2021.

For additional information related to our credit facilities discussed above, see Note 13 to the Consolidated Financial Statements.

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 variable rate debt to fixed rate debt.

In 2018, our shareholders approved a proposal to authorize us to repurchase up to an additional 10%, or 57,844,016, of our ordinary shares through December 2019 (“2018 Share Repurchase Program”). As a result, the authorization of the remaining unpurchased shares under the share repurchase program approved by our shareholders in May 2017 (“2017 Share Repurchase Program”) was superseded. Our share repurchase program 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. In 2018, we purchased approximately 19 million shares under these programs for approximately $1,878 million. As of February 19, 2019, we had approximately 38 million shares remaining under the current authorization. The timing and amounts of additional shares repurchased will be determined based on our evaluation of market conditions and other factors. For additional information related to our share repurchase programs, see Note 20 to the Consolidated Financial Statements.

We may repay or redeem our debt, including purchases of our outstanding bonds in the open market, using cash and cash equivalents, cash from our short-term investments and tri-party repurchase agreements, cash from operating activities, proceeds from the issuance of debt, proceeds from asset divestitures, or a combination thereof. In connection with any repayment or redemption of our debt, we may incur cash and non-cash charges, which could be material in the period in which they are incurred.

Construction of our Hyperzone high density polyethylene plant at our La Porte, Texas site, which commenced in May 2017, is on track for planned start-up in the third quarter of 2019.

In July 2017, we announced our final investment decision to build a world-scale PO/TBA plant in Texas with a capacity of 1.0 billion pounds of PO and 2.2 billion pounds of TBA. In August 2018, we broke ground on this project, which is estimated to cost approximately $2.4 billion. We anticipate the project to be completed in the third quarter of 2021.

We plan to fund our ongoing working capital, capital expenditures, debt service and other funding requirements with cash from operating activities, 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 and tri-party repurchase agreements, 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 program.

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.

We believe that our current liquidity availability and cash from operating activities provide us with sufficient financial resources to meet our anticipated capital requirements and obligations as they come due.

Contractual and Other Obligations—The following table summarizes, as of December 31, 2018, our minimum payments for long-term debt, including current maturities, short-term debt, and contractual and other obligations for the next five years and thereafter:

	Total				Payments Due By Period
Millions of dollars	2019				2020				2021				2022				2023				Thereafter
Total debt	$	9,554			$	891			$	1,001			$	1,001			$	859			$	751			$	5,051
Interest on total debt	5,155				382				357				357				298				281				3,480
Contract liabilities	138				128				1				—				—				—				9
Other	1,886				1,405				124				48				16				28				265
Deferred income taxes	1,975				318				118				112				117				66				1,244
Other obligations:
Purchase obligations:
Take-or-pay contracts	25,378				3,022				3,000				2,849				2,563				2,537				11,407
Other contracts	10,827				5,357				2,408				1,462				248				235				1,117
Operating leases	2,475				365				288				256				236				204				1,126
Total	$	57,388			$	11,868			$	7,297			$	6,085			$	4,337			$	4,102			$	23,699

Total Debt—Our debt includes unsecured senior notes, guaranteed notes and various other U.S. and non-U.S. loans. See Note 13 to the Consolidated Financial Statements for a discussion of covenant requirements under the credit facilities and indentures and additional information regarding our debt facilities.

Interest on Total Debt—Our debt and related party debt agreements contain provisions for the payment of monthly, quarterly or semi-annual interest at a stated rate of interest over the term of the debt.

Pension and other Postretirement Benefits—We maintain several defined benefit pension plans, as described in Note 16 to the Consolidated Financial Statements. Many of our U.S. and non-U.S. plans are subject to minimum funding requirements; however, the amounts of required future contributions for all our plans are not fixed and can vary significantly due to changes in economic assumptions, liability experience and investment return on plan assets. As a result, we have excluded pension and other postretirement benefit obligations from the Contractual and Other Obligations table above. Our annual contributions may include amounts in excess of minimum required funding levels. Contributions to our non-U.S. plans in years beyond 2019 are not expected to be materially different than the expected 2019 contributions disclosed in Note 16 to the Consolidated Financial Statements. At December 31, 2018, the projected benefit obligation for our pension plans exceeded the fair value of plan assets by $992 million. Subject to future actuarial gains and losses, as well as future asset earnings, we, together with our consolidated subsidiaries, will be required to fund the discounted obligation of $992 million in future years. We contributed $100 million, $103 million and $114 million to our pension plans in 2018, 2017 and 2016, respectively. We provide other postretirement benefits, primarily medical benefits to eligible participants, as described in Note 16 to the Consolidated Financial Statements. We pay other unfunded postretirement benefits as incurred.

Contract Liabilities—We are obligated to deliver products or services in connection with sales agreements under which customer payments were received before transfer of control to the customers occurs. These contract liabilities will be recognized in earnings when control of the product or service is transferred to the customer, which range predominantly from 1 to 15 years. The unamortized long-term portion of such advances totaled $10 million as of December 31, 2018.

Other—Other primarily consists of accruals for environmental remediation costs, obligations under deferred compensation arrangements, and anticipated asset retirement obligations. See “Critical Accounting Policies” below for a discussion of obligations for environmental remediation costs.

Deferred Income Taxes—The scheduled settlement of the deferred tax liabilities shown in the table is based on the scheduled reversal of the underlying temporary differences. Actual cash tax payments will vary depending upon future taxable income. See Note 18 to the Consolidated Financial Statements for additional information related to our deferred tax liabilities.

Purchase Obligations—We are party to various obligations to purchase products and services, principally for raw materials, utilities and industrial gases. These commitments are designed to assure sources of supply and are not expected to be in excess of normal requirements. The commitments are segregated into take-or-pay contracts and other contracts. Under the take-or-pay contracts, we are obligated to make minimum payments whether or not we take the product or service. Other contracts include contracts that specify minimum quantities; however, in the event that we do not take the contractual minimum, we are only obligated for any resulting economic loss suffered by the vendor. The payments shown for the other contracts assume that minimum quantities are purchased. For contracts with variable pricing terms, the minimum payments reflect the contract price at December 31, 2018.

Operating Leases—We lease various facilities and equipment under noncancelable lease arrangements for various periods. See Note 14 to the Consolidated Financial Statements for related lease disclosures.

CURRENT BUSINESS OUTLOOK

During the first month of 2019, we have seen normalization of markets with increased polymer demand. We expect our growth to accelerate in 2019 with the planned start-up of our new Hyperzone polyethylene plant in the third quarter and continued construction of our new PO/TBA plant which is on track for completion in 2021. Global polyethylene capacity additions are expected to moderate during 2019 and 2020, providing support for high industry operating rates and ethylene chain profitability.

RELATED PARTY TRANSACTIONS

We have related party transactions with our joint venture partners. We believe that such transactions are effected on terms substantially no more or less favorable than those that would have been agreed upon by unrelated parties on an arm’s length basis. See Note 5 to the Consolidated Financial Statements for additional related party disclosures.

CRITICAL ACCOUNTING POLICIES

Management applies those accounting policies that it believes best reflect the underlying business and economic events, consistent with accounting principles generally accepted in the U.S. (see Note 2 to the Consolidated Financial Statements). Our more critical accounting policies include those related to the valuation of inventory, long-lived assets, the valuation of goodwill, accruals for long-term employee benefit costs such as pension and other postretirement costs, and accruals for taxes based on income. Inherent in such policies are certain key assumptions and estimates made by management. Management periodically updates its estimates used in the preparation of the financial statements based on its latest assessment of the current and projected business and general economic environment.

Inventory—We account for our inventory using the last-in, first-out (“LIFO”) method of accounting.

The cost of raw materials, which represents a substantial portion of our operating expenses, and energy costs generally follow price trends for crude oil and/or natural gas. Crude oil and natural gas prices are subject to many factors, including changes in economic conditions.

Since our inventory consists of manufactured products derived from crude oil, natural gas, natural gas liquids and correlated materials, as well as the associated feedstocks and intermediate chemicals, our inventory market values are generally influenced by changes in benchmark crude oil and heavy liquid values and prices for manufactured finished goods. The degree of influence of a particular benchmark may vary from period to period, as the composition of the dollar value LIFO pools change. Due to natural inventory composition changes, variation in pricing from period to period does not necessarily result in a linear lower of cost or market (“LCM”) impact. Additionally, an LCM condition may arise due to a volumetric decline in a particular material that had previously provided a positive impact within a pool. As a result, market valuations and LCM conditions are dependent upon the composition and mix of materials on hand at the balance sheet date. In the measurement of

an LCM adjustment, the numeric input value for determining the crude oil market price includes pricing that is weighted by volume of inventories held at a point in time, including WTI, Brent and Maya crude oils.

As indicated above, fluctuation in the prices of crude oil, natural gas and correlated products from period to period may result in the recognition of charges to adjust the value of inventory to the lower of cost or market in periods of falling prices and the reversal of those charges in subsequent interim periods as market prices recover. Accordingly, our cost of sales and results of operations may be affected by such fluctuations.

While prices for our products and raw materials are inherently volatile and therefore no prediction can be given with certainty, we do not believe any of our inventory is at risk for impairment at this time.

Goodwill—As of December 31, 2018, we recognized $1,814 million of goodwill. Of this amount, $1,271 million was recognized as a result of the acquisition of A. Schulman, which mainly relates to acquired workforce and synergies expected from the acquisition. All of the goodwill was assigned to our APS segment. The remaining goodwill at December 31, 2018 primarily represents the tax effect of the differences between the tax and book bases of our assets and liabilities resulting from the revaluation of those assets and liabilities to fair value in connection with the Company’s emergence from bankruptcy and fresh-start accounting. We evaluate the recoverability of the carrying value of goodwill annually or more frequently if events or changes in circumstances indicate that the carrying amount of the goodwill of a reporting unit may not be fully recoverable.

Additional information on the amount of goodwill allocated to our reporting units appears in Note 3 and Note 22 to the Consolidated Financial Statements.

We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Qualitative factors assessed for each of the reporting units include, but are not limited to, changes in long-term commodity prices, discount rates, competitive environments, planned capacity, cost factors such as raw material prices, and financial performance of the reporting units. If the qualitative assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, a quantitative test is required.

We also have the option to proceed directly to the quantitative impairment test. Under the quantitative impairment test, the fair value of each reporting unit is compared to its carrying value, including goodwill. For the quantitative impairment test, the fair value of the reporting unit is calculated using a discounted cash-flow model. Such a model inherently utilizes a significant number of estimates and assumptions, including operating margins, tax rates, discount rates, capital expenditures and working capital changes. If the carrying value of goodwill exceeds its fair value, an impairment charge equal to the excess would be recognized, up to a maximum amount of goodwill allocated to that reporting unit.

For 2018 and 2017, management performed a qualitative impairment assessment of our reporting units which indicated that the fair value of our reporting units was greater than their carrying value. Accordingly, a quantitative goodwill impairment test was not required. Accordingly, no goodwill impairment was recognized in 2018 or 2017.

Long-Term Employee Benefit Costs—Our costs for long-term employee benefits, particularly pension and other postretirement medical and life insurance benefits, are incurred over long periods of time, and involve many uncertainties over those periods. The net periodic benefit cost attributable to current periods is based on several assumptions about such future uncertainties, and is sensitive to changes in those assumptions. It is management’s responsibility, often with the assistance of independent experts, to select assumptions that in its judgment represent its best estimates of the future effects of those uncertainties. It also is management’s responsibility to review those assumptions periodically to reflect changes in economic or other factors that affect those assumptions.

The current benefit service costs, as well as the existing liabilities, for pensions and other postretirement benefits are measured on a discounted present value basis. The discount rate is a current rate, related to the rate at which the liabilities could be settled. Our assumed discount rate is based on yield information for high-quality corporate bonds with durations comparable to the expected cash settlement of our obligations. For the purpose of measuring the benefit obligations at December 31, 2018, we used a weighted average discount rate of 4.51% for the U.S. plans which reflects the different terms of the related benefit obligations. The weighted average discount rate used to measure obligations for non-U.S. plans at December 31, 2018 was

2.07%, reflecting market interest rates. The discount rates in effect at December 31, 2018 will be used to measure net periodic benefit cost during 2019.

The benefit obligation and the periodic cost of other postretirement medical benefits are also measured based on assumed rates of future increase in the per capita cost of covered health care benefits. As of December 31, 2018, the assumed rate of increase for our U.S. plans was 6.4%, decreasing to 4.5% in 2038 and thereafter. A one hundred basis point change in the health care cost trend rate assumption as of December 31, 2018 would have resulted in a $17 million increase or $12 million decrease in the accumulated other postretirement benefit liability for our non-U.S. plans and would have resulted in an increase or decrease of less than $1 million for U.S. plans. Due to limits on our maximum contribution level under the medical plan, there would have been no significant effect on either our benefit liability or net periodic cost.

The net periodic cost of pension benefits included in expense also is affected by the expected long-term rate of return on plan assets assumption. Investment returns that are recognized currently in net income represent the expected long-term rate of return on plan assets applied to a market-related value of plan assets which, for us, is defined as the market value of assets. The expected rate of return on plan assets is a longer-term rate, and is expected to change less frequently than the current assumed discount rate, reflecting long-term market expectations, rather than current fluctuations in market conditions.

The weighted average expected long-term rate of return on assets in our U.S. plans of 7.50% is based on the average level of earnings that our independent pension investment advisor had advised could be expected to be earned over time and 2.92%, for our non-U.S. plan assets is based on an expectation and asset allocation that varies by region. The asset allocations are summarized in Note 16 to the Consolidated Financial Statements. The actual returns in 2018 was a loss of 1.91% and gain of 0.89% for our U.S. and non-U.S. plan assets, respectively.

The actual rate of return on plan assets may differ from the expected rate due to the volatility normally experienced in capital markets. Management’s goal is to manage the investments over the long term to achieve optimal returns with an acceptable level of risk and volatility.

Net periodic pension cost recognized each year includes the expected asset earnings, rather than the actual earnings or loss. Along with other gains and losses, this unrecognized amount, to the extent it cumulatively exceeds 10% of the projected benefit obligation for the respective plan, is recognized as additional net periodic benefit cost over the average remaining service period of the participants in each plan.

The following table reflects the sensitivity of the benefit obligations and the net periodic benefit costs of our pension plans to changes in the actuarial assumptions:

	Effects on Benefit Obligations in 2018								Effects on Net Periodic Pension Costs in 2019
Millions of dollars	U.S.				Non-U.S.				U.S.				Non-U.S.
Projected benefit obligations at December 31, 2018	$	1,752			$	1,659			$	—			$	—
Projected net periodic pension costs in 2019									28				60
Discount rate increases by 100 basis points	(148		)		(183		)		(5		)		(8		)
Discount rate decreases by 100 basis points	179				221				6				12

The sensitivity of our postretirement benefit plans obligations and net periodic benefit costs to changes in actuarial assumptions are reflected in the following table:

	Effects on Benefit Obligations in 2018								Effects on Net Periodic Benefit Costs in 2019
Millions of dollars	U.S.				Non-U.S.				U.S.				Non-U.S.
Projected benefit obligations at December 31, 2018	$	234			$	59			$	—			$	—
Projected net periodic benefit costs in 2019									5				4
Discount rate increases by 100 basis points	(19		)		—				2				—
Discount rate decreases by 100 basis points	23				—				(2		)		—

Additional information on the key assumptions underlying these benefit costs appears in Note 16 to the Consolidated Financial Statements.

Accruals for Taxes Based on Income—The determination of our provision for income taxes and the calculation of our tax benefits and liabilities is subject to management’s estimates and judgments due to the complexity of the tax laws and regulations in the tax jurisdictions in which we operate. Uncertainties exist with respect to interpretation of these complex laws and regulations.

Deferred tax assets and liabilities are determined based on temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. At December 31, 2017, the measurement of our deferred tax balances was materially affected by the U.S. enactment of “H.R.1,” also known as the Tax Act, as explained in Note 18 to the Consolidated Financial Statements.

We recognize future tax benefits to the extent that the realization of these benefits is more likely than not. Our current provision for income taxes is impacted by the recognition and release of valuation allowances related to net deferred assets in certain jurisdictions. Further changes to these valuation allowances may impact our future provision for income taxes, which will include no tax benefit with respect to losses incurred and no tax expense with respect to income generated in these countries until the respective valuation allowance is eliminated.

We recognize the financial statement benefits with respect to an uncertain income tax position that we have taken or may take on an income tax return when we believe it is more likely than not that the position will be sustained with the tax authorities.

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.