~~Three~~ Use ~~months~~these ~~Nine~~links ~~months~~to ~~July~~rapidly 1,review ~~2000~~the ~~ended~~document ~~ended~~TABLE ~~(inception)~~OF through September 30, September 30, September 30, MILLIONS 2001 2000 2001 2000 -------- ----------------------------- --------------- -------------------- Revenue Net sales $ 1,367 $ 1,785 $ 4,713 $ 1,785 Equity in income (loss) of affiliates (5) 1 (11) 1 Other income 12 23 191 23 ------- ------- ------- ------- Total revenue 1,374 1,809 4,893 1,809 ------- ------- ------- ------- Costs and Expenses Cost of goods sold 1,355 1,596 4,557 1,596 Selling, general and administrative 60 134 378 134 Asset impairments 42 -- 42 -- Research and development 18 13 46 13 ------- ------- ------- ------- Total costs and expenses 1,475 1,743 5,023 1,743 ------- ------- ------- ------- Income (Loss) Before Interest and Taxes (101) 66 (130) 66 Interest income 2 4 7 4 Interest expense (23) (32) (84) (32) ------- ------- ------- ------- Income (Loss) Before Taxes (122) 38 (207) 38 Income tax benefit (expense) (45) 9 (48) 9 ------- ------- ------- ------- Net Income (Loss) $ (167) $ 47 $ (255) $ 47 ======= ======= ======= =======CONTENTS

~~ASSETS~~UNITED ~~September~~STATES SECURITIES 30, December 31, MILLIONS 2001 2000 -------- --------------- -------------- Current assets Cash and cash equivalents $ 101 $ 156 Accounts receivable 947 1,011 Inventories 642 878 Other current assets 31 20 ------- ------- Total current assets 1,721 2,065 Property, plant and equipment, net 4,073 4,129 Investment in affiliates 301 336 Other assets and deferred charges 73 143 ------- ------- Total Assets $ 6,168 $ 6,673 ======= ======= LIABILITIES AND ~~MEMBERS'~~EXCHANGE CAPITAL Current liabilities Accounts payable $ 497 $ 795 Accrued income and other taxes 57 43 Secured borrowings 220 -- Note payable to member -- 50 Other current liabilities 110 22 ------- ------- Total current liabilities 884 910 Long-term debt 1COMMISSION Washington,~~541~~ ~~1,784~~D.C. Other liabilities and deferred credits 156 136 ------- ------- Total liabilities 2,581 2,830 Members' capital 3,597 3,849 Accumulated other comprehensive loss (10) (6) ------- ------- Total Liabilities and Members' Capital $ 6,168 $ 6,673 ======= =======20549

~~Nine~~FORM ~~months July 1, 2000 ended (inception) through September 30, September 30, 2001 2000~~ 10---------------- --------------------- MILLIONS -------- Cash Flows From Operating Activities Net income (loss) $ (255) $ 47 Adjustments to reconcile net income (loss) to net cash flows provided by operating activities Depreciation, amortization and retirements 211 72 Asset impairments 42 -- Deferred income taxes 44 (9) Undistributed equity in losses (earnings) of affiliates, net 13 (1) Changes in operating working capital 94 38 Other operating cash flow activity 71 (9) ------- ------- Net cash provided by operating activities 220 138 ------- ------- Cash Flows From Investing Activities Capital expenditures (200) (45) Decrease in investments 19 -- Other 1 -- ------- ------- Net cash flows used in investing activities (180) (45) ------- ------- Cash Flows From Financing Activities Increase (decrease) in commercial paper, net (747) 1,748 Proceeds from the issuance of other long-term debt 509 -- Increase in secured borrowings, net 220 -- Decrease in note payable to member, net (50) -- Advance from member -- 70 Contributions from members 6 -- Distributions to members (20) (1,670) Post-closing adjustments to members (13) (75) ------- ------- Net cash flows provided by (used in) financing activities (95) 73 ------- ------- Net Increase (Decrease) in Cash and Cash Equivalents (55) 166 Cash and Cash Equivalents at Beginning of Period 156 75 ------- ------- Cash and Cash Equivalents at End of Period $ 101 $ 241 ======= =======Q

~~Three~~ý ~~months~~QUARTERLY ~~Nine~~REPORT ~~months~~PURSUANT ~~July~~TO 1,SECTION ~~2000~~13 ~~ended~~OR ~~ended~~ 15(~~inception~~d) ~~through~~OF ~~September~~THE ~~30,~~SECURITIES ~~September~~EXCHANGE ~~30,~~ACT ~~September~~OF 30, MILLIONS 2001 2000 2001 2000 -------- ------------------------- -------------- -------------------- Net income (loss) $ (167) $ 47 $ (255) $ 47 Foreign currency translation adjustments 9 (9) (4) (9) ------ ----- ------ ---- Comprehensive income (loss) $ (158) $ 38 $ (259) $ 38 ====== ===== ====== ====1934

~~Three~~For ~~months~~the ~~Nine~~quarterly ~~months~~period ~~July 1, 2000~~ ended ~~ended (inception) through September~~ June 30, September 30, September 30, MILLIONS 2001 2000 2001 2000 -------- ------------------- ------------------ ---------------------- Revenues $ 44 $ 64 $ 142 $ 64 Loss before income taxes (8) (10) (29) (10) Net loss (8) (10) (29) (10)2002

~~Three~~ months Nine months July 1, 2000 ended ended (inception) through September 30, September 30, September 30, MILLIONS 2001 2000 2001 2000 -------- --------------------- ----------------- --------------------- Revenues $ 145 $ 208 $ 478 $ 208 Income (loss) before income taxes (2) 25 (1) 25 Net income (loss) (3) 24 (5) 24or

~~SPECIALTY~~o ~~CORPORATE,~~TRANSITION ~~OLEFINS~~REPORT &PURSUANT ~~CHEMICALS~~TO ~~OTHER~~SECTION & MILLIONS POLYOLEFINS AROMATICS & PLASTICS ELIMINATIONS TOTAL -------- ------------- ------------ ------------- -------------- ---------- THREE MONTHS ENDED SEPT. 30, 2001 Net sales - external $ 778 $ 316 $ 273 $ -- $ 1,367 Net sales - inter-segment 99 62 7 (168) -- Income (loss) before interest & taxes (32) (70) 6 (5) (101) THREE MONTHS ENDED SEPT. 30, 2000 Net sales - external 1,009 516 260 -- 1,785 Net sales - inter-segment 119 62 6 (187) -- Income (loss) before interest & taxes 76 (9) 13 ~~(14)~~OR ~~66 NINE MONTHS ENDED SEPT. 30, 2001 Net sales - external 2,766 1,112 835 -- 4,713 Net sales - inter-segment 337 212 23 (572) -- Income (loss) before interest & taxes (63) (167) 115 (~~15) (~~130~~d) ~~JULY~~OF 1,THE ~~2000~~SECURITIES ~~(INCEPTION)~~EXCHANGE ~~THROUGH~~ACT ~~SEPT.~~OF 30, 2000 Net sales - external 1,009 516 260 -- 1,785 Net sales - inter-segment 119 62 6 (187) -- Income (loss) before interest & taxes 76 (9) 13 (14) 66 Total assets - SEPTEMBER 30, 2001 3,381 1,120 1,481 186 6,168 Total assets - DECEMBER 31, 2000 3,568 1,355 1,529 221 6,6731934

~~OTHER~~For ~~MILLIONS~~the ~~LLC~~transition LPperiod ENTITIES ELIMINATIONS TOTAL -------- ---------- ---------- ----------- -------------- ----------- Revenue Net sales $ -- $ 1,236 $ 185 $ (54) $ 1,367 Equity in income (loss) of affiliates (149) 18 (73) 199 (5) Other income -- 22 48 (58) 12 ------ ------- ------ ----- ------- Total revenue (149) 1,276 160 87 1,374 ------ ------- ------ ----- ------- Costs and Expenses Cost of goods sold -- 1,182 222 (49) 1,355 Selling, general and administrative -- 146 (23) (63) 60 Asset impairments -- -- 42 -- 42 Research and development -- 18 -- -- 18 ------ ------- ------ ----- ------- Total costs and expenses -- 1,346 241 (112) 1,475 ------ ------- ------ ----- ------- Loss Before Interest and Taxes (149) (70) (81) 199 (101) Interest income 2 1 1 (2) 2 Interest expense (20) (2) (3) 2 (23) ------ ------- ------ ----- ------- Loss Before Taxes (167) (71) (83) 199 (122) Income taxes -- (1) (44) -- (45) ------ ------- ------ ----- ------- Net Loss $ (167) $ (72) $ (127) $ 199 $ (167) ====== ======= ====== ===== =======from to

~~OTHER~~ ~~MILLIONS~~Commission ~~LLC~~file ~~LP ENTITIES ELIMINATIONS TOTAL~~ no. 333-59054------- --------- ----------- ------------ -------------- ---------- Revenue Net sales $ -- $ 4,549 $ 911 $ (747) $ 4,713 Equity in income (loss) of affiliates (178) 7 (161) 321 (11) Other income -- 189 87 (85) 191 ------ ------- ------ ------ ------- Total revenue (178) 4,745 837 (511) 4,893 ------ ------- ------ ------ ------- Costs and Expenses Cost of goods sold -- 4,427 872 (742) 4,557 Selling, general and administrative -- 436 32 (90) 378 Asset impairments -- -- 42 -- 42 Research and development -- 46 -- -- 46 ------ ------- ------ ------ ------- Total costs and expenses -- 4,909 946 (832) 5,023 ------ ------- ------ ------ ------- Loss Before Interest and Taxes (178) (164) (109) 321 (130) Interest income 2 3 4 (2) 7 Interest expense (79) (3) (4) 2 (84) ------ ------- ------ ------ ------- Loss Before Taxes (255) (164) (109) 321 (207) Income taxes -- (1) (47) -- (48) ------ ------- ------ ------ ------- Net Loss $ (255) $ (165) $ (156) $ 321 $ (255) ====== ======= ====== ====== =======01

~~OTHER~~Chevron ~~MILLIONS~~Phillips ~~LLC~~Chemical LPCompany ~~ENTITIES ELIMINATIONS TOTAL -------- ---------- ----------- ----------- -------------- ----------- Revenue Net sales $ -- $ 1,787 $ 492 $~~ LLC (~~494)~~Exact $name ~~1,785 Equity in income (loss)~~ of ~~affiliates~~the 79Registrant ~~(5)~~as 44specified ~~(117)~~in 1its ~~Other income -- 20 12 (9~~charter) 23 ----- ------- ----- ------ ------- Total revenue 79 1,802 548 (620) 1,809 ----- ------- ----- ------ ------- Costs and Expenses Cost of goods sold -- 1,637 454 (495) 1,596 Selling, general and administrative -- 116 26 (8) 134 Research and development -- 13 -- -- 13 ----- ------- ----- ------ ------- Total costs and expenses -- 1,766 480 (503) 1,743 ----- ------- ----- ------ ------- Income Before Interest and Taxes 79 36 68 (117) 66 Interest income -- 2 2 -- 4 Interest expense (32) -- -- -- (32) ----- ------- ----- ------ ------- Income Before Taxes 47 38 70 (117) 38 Income tax benefit -- -- 9 -- 9 ----- ------- ----- ------ ------- Net Income $ 47 $ 38 $ 79 $ (117) $ 47 ===== ======= ===== ====== =======

~~OTHER~~Delaware MILLIONS LLC LP ENTITIES ELIMINATIONS TOTAL -------- ---------- --------- ---------- -------------- ----------- Current assets Cash and cash equivalents $ 4 $ 46 $ 51 $ -- $ 101 Accounts receivable 28 1,078 573 (~~732)~~State ~~947~~or ~~Inventories~~other --jurisdiction ~~532~~of ~~110~~incorporation --or ~~642 Other current assets -- 24 7 -- 31 ------- ------- ------- --------- ------- Total current assets 32 1,680 741 (732~~organization) ~~1,721 Property, plant and equipment, net -- 3,761 312 -- 4,073 Investment in affiliates 5,588 116 5,040 (10,443) 301 Other assets and deferred charges 5 47 21 --~~ 73 -~~------~~1590261 ~~------- ------- --------- ------- Total Assets $ 5,625 $ 5,604 $ 6,114 $~~ (~~11,175)~~I.R.S. $Employer ~~6,168~~Identification ~~======= ======= ======= ========= ======= Current liabilities Accounts payable $ 492 $ 508 $ 229 $ (732~~Number) $ 497 Secured borrowings -- -- 220 -- 220 Other current liabilities 1 146 20 -- 167 ------- ------- ------- --------- ------- Total current liabilities 493 654 469 (732) 884 Long-term debt 1,529 12 -- -- 1,541 Other liabilities and deferred credits 6 138 12 -- 156 ------- ------- ------- --------- ------- Total liabilities 2,028 804 481 (732) 2,581 Members' capital 3,597 4,800 5,643 (10,443) 3,597 Accumulated other comprehensive loss -- -- (10) -- (10) ------- ------- ------- --------- ------- Total Liabilities and Members' Capital $ 5,625 $ 5,604 $ 6,114 $ (11,175) $ 6,168 ======= ======= ======= ========= =======

~~OTHER~~10001 ~~MILLIONS~~Six ~~LLC~~Pines LPDrive The ~~ENTITIES ELIMINATIONS TOTAL -------- ----------- ---------- ----------- ---------------- ----------- Current assets Cash and cash equivalents $ -- $ 75 $ 81 $ -- $ 156 Accounts receivable 12 1~~Woodlands,~~017~~ ~~252~~TX ~~(270) 1,011 Inventories~~ 77380-~~- 736 142 -- 878 Other current assets 1 15 4 -- 20 ------- ------- ------- --------- ------- Total current assets 13 1,843 479~~ 1498 (~~270)~~Address ~~2,065~~of ~~Property,~~principal ~~plant~~executive ~~and equipment~~offices, ~~net~~including --zip ~~3,464 665 -- 4,129 Investment in affiliates 5,776 76 4,802 (10,318~~code) 336 Other assets and deferred charges 1 81 61 -- 143 ------- ------- ------- --------- ------- Total Assets $ 5,790 $ 5,464 $ 6,007 $ (10,588) $ 6,673 ======= ======= ======= ========= ======= Current liabilities Accounts and notes payable $ 72 $ 774 $ 219 $ (270) $ 795 Note payable to member 50 -- -- -- 50 Other current liabilities -- 62 3 -- 65 ------- ------- ------- --------- ------- Total current liabilities 122 836 222 (270) 910 Long-term debt 1,784 -- -- -- 1,784 Other liabilities and deferred credits 35 86 15 -- 136 ------- ------- ------- --------- ------- Total liabilities 1,941 922 237 (270) 2,830 Members' capital 3,849 4,542 5,776 (10,318) 3,849 Accumulated other comprehensive loss -- -- (6) -- (6) ------- ------- ------- --------- ------- Total Liabilities and Members' Capital $ 5,790 $ 5,464 $ 6,007 $ (10,588) $ 6,673 ======= ======= ======= ========= =======

~~OTHER MILLIONS LLC LP ENTITIES ELIMINATIONS TOTAL -------- --------- --------- ----------- -------------- --------- Cash Flows From Operating Activities Net loss $~~ (~~255~~832) ~~$ (165) $ (156) $ 321 $ (255) Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities Depreciation, amortization and retirements~~ 813-~~- 181 30 -- 211 Asset impairments -- -- 42 -- 42 Deferred income taxes -- -- 44 -- 44 Undistributed equity in losses~~ 4100 (~~earnings)~~Registrant's oftelephone ~~affiliates~~number, ~~net~~including ~~178~~area (7code) 163 (321) 13 Changes in operating working capital 414 (55) (265) -- 94 Other operating cash flow activity 144 45 (118) -- 71 ------ ------ ------ ------ ------ Net cash provided by (used in) operating activities 481 (1) (260) -- 220 ------ ------ ------ ------ ------ Cash Flows From Investing Activities Capital expenditures -- (192) (8) -- (200) Decrease (increase) in investments in affiliates (149) (1) (133) 302 19 Other -- -- 1 -- 1 ------ ------ ------ ------ ------ Net cash used in operating activities (149) (193) (140) 302 (180) ------ ------ ------ ------ ------ Cash Flows From Financing Activities Decrease in commercial paper, net (747) -- -- -- (747) Proceeds from the issuance of other long-term debt 496 13 -- -- 509 Increase in secured borrowings, net -- -- 220 -- 220 Decrease in notes payable to member, net (50) -- -- -- (50) Contributions from parent / members 6 152 238 (390) 6 Distributions to parent / members (20) -- (88) 88 (20) Post-closing adjustments to members (13) -- -- -- (13) ------ ------ ------ ------ ------ Net cash provided by (used in) financing activities (328) 165 370 (302) (95) ------ ------ ------ ------ ------ Net Increase (Decrease) in Cash and Cash Equivalents 4 (29) (30) -- (55) Cash and Cash Equivalents at Beginning of Period -- 75 81 -- 156 ------ ------ ------ ------ ------ Cash and Cash Equivalents at End of Period $ 4 $ 46 $ 51 $ -- $ 101 ====== ====== ====== ====== ======

~~OTHER~~Chevron ~~MILLIONS~~Tower 1301 ~~LLC~~McKinney LP ENTITIES ELIMINATIONS TOTAL -------- --------- --------- ---------- ------------- --------- Cash Flows From Operating Activities Net income $ 47 $ 38 $ 79 $ (117) $ 47 Adjustments to reconcile net income to net cash flows provided by operating activities DepreciationStreet Houston, ~~amortization~~TX ~~and retirements~~ 77010-~~- 59 13 -- 72 Deferred income taxes -- --~~ 3030 (9)Former ~~-- (9) Undistributed equity in losses (earnings) of affiliates~~name, ~~net~~former ~~(79)~~address 5and ~~(44)~~former ~~117~~fiscal ~~(1)~~year ~~Changes~~if inchanged ~~operating~~since ~~working~~last ~~capital 43 32 (37~~report) -- 38 Other operating cash flow activity -- (10) 1 -- (9) ------- ----- ----- ------ ------- Net cash provided by operating activities 11 124 3 -- 138 ------- ----- ----- ------ ------- Cash Flows From Investing Activities Capital expenditures -- (39) (6) -- (45) Increase in investments in affiliates (83) -- (66) 149 -- ------- ----- ----- ------ ------- Net cash used in investing activities (83) (39) (72) 149 (45) ------- ----- ----- ------ ------- Cash Flows From Financing Activities Increase in commercial paper, net 1,748 -- -- -- 1,748 Advance from member 70 -- -- -- 70 Contributions from parent -- 66 83 (149) -- Distributions to members (1,670) -- -- -- (1,670) Post-closing adjustments to members (75) -- -- -- (75) ------- ----- ----- ------ ------- Net cash provided by financing activities 73 66 83 (149) 73 ------- ----- ----- ------ ------- Net Increase in Cash and Cash Equivalents 1 151 14 -- 166 Cash and Cash Equivalents at Beginning of Period -- 3 72 -- 75 ------- ----- ----- ------ ------- Cash and Cash Equivalents at End of Period $ 1 $ 154 $ 86 $ -- $ 241 ======= ===== ===== ====== =======

~~OPERATING~~ Indicate by ~~SEGMENTS~~check ~~--------------------------------------------~~mark ~~MILLIONS~~whether OFthe ~~DOLLARS~~registrant ~~SPECIALTY~~(1) has ~~OLEFINS~~filed &all ~~CHEMICALS~~reports ~~SIX~~required ~~MONTHS~~to ~~ENDED~~be ~~JUNE~~filed ~~30,~~by ~~2000~~Section 13 ~~POLYOLEFINS~~or &15(d) ~~PLASTICS~~of ~~AROMATICS~~the ~~OTHER~~Securities ~~CONSOLIDATED~~Exchange ~~------------------------------~~Act ~~------------~~of ~~--------------~~1934 ~~------------~~during ~~---------~~the preceding ~~-------------~~12 months ~~Sales~~(or ~~and~~for ~~Other~~such ~~Operating~~shorter ~~Revenues~~period ~~External~~that ~~customers~~the *registrant $was ~~1,600~~required ~~292~~to ~~346~~file --such 2reports),~~238~~ ~~=======~~and ~~====== ====== == ====== Net income~~ (~~loss~~2) has $been 79subject 22to ~~(15)~~such ~~(2)~~filing 84requirements ~~=======~~for ~~======~~the ~~======~~past ==90 days. ~~======~~

Three months Nine months July 1, 2000 CONSOLIDATED ended ended (inception) through September 30, September 30, September 30, MILLIONS 2001 2000 2001 2000 -------- ------------------------- -------------- ------------------- Income (loss) before interest & taxes $ (101) $ 66 $ (130) $ 66 Less special items (50)* (15) 14 * (15) ------ ----- ------ ----- Income (loss) before interest & taxes, as adjusted $ (51) $ 81 $ (144) $ 81 ====== ===== ====== ===== Yes ý No o

~~Three~~ Chevron ~~months~~Phillips ~~Nine~~Chemical ~~months~~Company ~~July~~LLC Index 1, 2000 OLEFINS AND POLYOLEFINS ended ended (inception) through September 30, September 30, September 30, MILLIONS 2001 2000 2001 2000 -------- -------------------------- ---------------- -------------------- Income (loss) before interest & taxes $ (32) $ 76 $ (63) $ 76 Less special items -- (7) (21) (7) ----- ---- ----- ---- Income (loss) before interest & taxes, as adjusted $ (32) $ 83 $ (42) $ 83 ===== ==== ===== ====

Three months Nine months July 1, 2000 AROMATICS ended ended (inception) through September 30, September 30, September 30, MILLIONS 2001 2000 2001 2000 -------- ------------------------- ---------------- ------------------ Loss before interest & taxes $ (70) $ (9) $ (167) $ (9) Less special items (42) (1) (48) (1) ----- ---- ------ ---- Loss before interest & taxes, as adjusted $ (28) $ (8) $ (119) $ (8) ===== ==== ====== ====



Part I.	Financial Information (Unaudited)
	Item 1.	Financial Statements
		Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2002 and 2001
		Condensed Consolidated Balance Sheet at June 30, 2002 and December 31, 2001
		Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2002 and 2001
		Notes to Condensed Consolidated Financial Statements
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk
Part II.	Other Information
	Item 6.	Exhibits and Reports on Form 8-K

~~Three~~PART I. ~~months~~FINANCIAL ~~Nine~~INFORMATION months July 1, 2000 SPECIALTY CHEMICALS AND PLASTICS ended ended (inception) through September 30, September 30, September 30, MILLIONS 2001 2000 2001 2000 -------- ---------------------- --------------- ------------------- Income before interest & taxes $ 6 $ 13 $ 115 $ 13 Less special items (8) (1) 84 (1) ---- ---- ----- ---- Income before interest & taxes, as adjusted $ 14 $ 14 $ 31 $ 14 ==== ==== ===== ====

~~Three~~ITEM ~~months Nine months July~~ 1,. ~~2000~~Financial CORPORATE AND OTHER ended ended (inception) through September 30, September 30, September 30, MILLIONS 2001 2000 2001 2000 -------- ------------------------ ---------------- ----------------------- Loss before interest & taxes $ (5) $ (14) $ (15) $ (14) Less special items -- (6) (1) (6) ---- ----- ----- ----- Loss before interest & taxes, as adjusted $ (5) $ (8) $ (14) $ (8) ==== ===== ===== =====Statements

Chevron Phillips Chemical Company LLC
Condensed Consolidated Statement of Operations
(Unaudited)

			Three months ended June 30,						Six months ended June 30,
Millions			Three months ended June 30,						Six months ended June 30,
Millions			2002			2001			2002			2001
Revenue
	Net sales		$	1,387		$	1,521		$	2,534		$	3,346
	Equity in income (loss) of affiliates, net			9			(3	)		8			(6	)
	Other income			13			147			27			179

		Total revenue		1,409			1,665			2,569			3,519

Costs and Expenses
	Cost of goods sold			1,272			1,431			2,335			3,231
	Selling, general and administrative			98			161			189			289
	Research and development			13			15			24			28

		Total costs and expenses		1,383			1,607			2,548			3,548

Income (Loss) Before Interest and Taxes				26			58			21			(29	)
	Interest income			2			2			4			5
	Interest expense			(14	)		(28	)		(32	)		(61	)

Income (Loss) Before Taxes				14			32			(7	)		(85	)
	Income taxes			(3	)		(2	)		(4	)		(3	)

Net Income (Loss)			$	11		$	30		$	(11	)	$	(88	)

See Notes to Condensed Consolidated Financial Statements.

Chevron Phillips Chemical Company LLC
Condensed Consolidated Balance Sheet
(Unaudited)

Millions			June 30, 2002		December 31, 2001
ASSETS
Current assets
	Cash and cash equivalents		$	90	$	111
	Accounts receivable, net			800		782
	Inventories			637		638
	Other current assets			12		20

		Total current assets		1,539		1,551
Property, plant and equipment, net				3,994		3,968
Investment in and advances to affiliates				417		259
Other assets and deferred charges				60		82

Total Assets			$	6,010	$	5,860

LIABILITIES AND MEMBERS' CAPITAL
Current liabilities
	Accounts payable		$	509	$	449
	Accrued income and other taxes			36		57
	Secured borrowings			300		199
	Other current liabilities			106		115

		Total current liabilities		951		820
Long-term debt				1,498		1,507
Other liabilities and deferred credits				102		99

		Total liabilities		2,551		2,426
Members' capital				3,458		3,450
Accumulated other comprehensive income (loss)				1		(16	)

Total Liabilities and Members' Capital			$	6,010	$	5,860

See Notes to Condensed Consolidated Financial Statements.

Chevron Phillips Chemical Company LLC
Condensed Consolidated Statement of Cash Flows
(Unaudited)

				Six months ended June 30,
Millions				Six months ended June 30,
Millions				2002			2001
Cash Flows From Operating Activities
	Net loss			$	(11	)	$	(88	)
	Adjustments to reconcile net loss to net cash flows provided by operating activities
		Depreciation, amortization and retirements			129			145
		Undistributed equity in losses (income) of affiliates, net			(1	)		7
		Changes in operating working capital			17			(126	)
		Other operating cash flow activity			18			70

			Net cash flows provided by operating activities		152			8

Cash Flows From Investing Activities
	Capital and investment expenditures				(176	)		(130	)
	Advances to Qatar Chemical Company Ltd. (Q-Chem)				(125	)		—
	Decrease in other investments				—			15

			Net cash flows used in investing activities		(301	)		(115	)

Cash Flows From Financing Activities
	Decrease in commercial paper, net				(501	)		(545	)
	Increase in secured borrowings, net				101			205
	Decrease in note payable to member, net				—			(50	)
	Proceeds from the issuance of other debt				502			509
	Contributions from members				19			—
	Post-closing adjustments from (to) members				7			(13	)

			Net cash flows provided by financing activities		128			106

Net Decrease in Cash and Cash Equivalents					(21	)		(1	)
Cash and Cash Equivalents at Beginning of Period					111			156

Cash and Cash Equivalents at End of Period				$	90		$	155

See Notes to Condensed Consolidated Financial Statements.

Chevron Phillips Chemical Company LLC
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 1. General Information

The company, through its subsidiaries, manufactures and markets a wide range of petrochemicals and plastics on a worldwide basis, with manufacturing facilities in existence or under construction in the United States, Puerto Rico, Singapore, China, South Korea, Saudi Arabia, Qatar, Mexico and Belgium. Chevron Phillips Chemical Company LLC is owned 50% each by ChevronTexaco Corporation (ChevronTexaco) and Phillips Petroleum Company (Phillips).

The unaudited condensed consolidated financial statements included herein include the accounts of Chevron Phillips Chemical Company LLC and its wholly-owned subsidiaries (collectively, "CPChem"), and should be read in conjunction with the consolidated financial statements included in CPChem's Annual Report on Form 10-K for the year ended December 31, 2001. The financial statements and accompanying Management's Discussion and Analysis of Financial Condition and Results of Operations have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Some information and footnote disclosures required by generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The financial statements include all normal recurring adjustments that CPChem considers necessary for a fair presentation. Certain amounts for prior periods have been reclassified in order to conform to the current reporting presentation.

Note 2. New Accounting Pronouncements

CPChem adopted Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," effective January 1, 2002. Implementation of this standard did not have a material effect on consolidated results of operations, financial position or liquidity.

In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which addresses the accounting and reporting requirements for legal obligations associated with the retirement of long-lived assets. This standard requires that a liability for an asset retirement obligation, measured at fair value, be recognized in the period in which it is incurred if a reasonable estimate of fair value is determinable. That initial fair value is capitalized as part of the carrying amount of the long-lived asset and subsequently depreciated. The liability is adjusted each year for accretion, with a charge to the statement of operations. SFAS No. 143 will become effective for CPChem beginning January 1, 2003. CPChem is currently reviewing the new standard to determine what impact, if any, implementation of this standard will have on consolidated results of operations and financial position.

Note 3. Comprehensive Income (Loss)

	Three months ended June 30,					Six months ended June 30,
Millions	Three months ended June 30,					Six months ended June 30,
Millions	2002		2001			2002			2001
Net income (loss)	$	11	$	30		$	(11	)	$	(88	)
Foreign currency translation adjustments		19		(5	)		17			(13	)

Comprehensive income (loss)	$	30	$	25		$	6		$	(101	)

Note 4. Business Interruption Insurance Settlement

In June 2001, agreement was reached among Phillips and various insurers to settle the business interruption insurance claim associated with the March 2000 incident at CPChem's (formerly Phillips') Houston Chemical Complex K-Resin® styrene-butadiene copolymer (SBC) plant. After adjusting for previously accrued claims, CPChem recognized $118 million in Other Income as a special item in the second quarter 2001 in connection with the settlement.

Note 5. Investments

CPChem advanced Qatar Chemical Company Ltd. (Q-Chem), a 49% owned equity investment, $125 million during the first six months of 2002 under a subordinated loan agreement. Funds received by Q-Chem under the agreement are used towards the cost of construction and start-up of the Qatar complex. Advances bear interest at market-based rates and, upon completion of the complex, are to be repaid from cash available after the payment of debt obligations on Q-Chem's $750 million senior bank debt, subject to certain financial tests. The loan is subordinate to Q-Chem's senior bank debt.

Summarized financial information for Phillips Sumika Polypropylene Company (Phillips Sumika) and Q-Chem, which are significant equity investments from time to

time as defined by the SEC, and for all other equity investments in the aggregate follows:

	Three months ended June 30,						Six months ended June 30,
Millions	Three months ended June 30,						Six months ended June 30,
Millions	2002			2001			2002			2001
Phillips Sumika
Revenues	$	56		$	48		$	98		$	98
Loss before income taxes		(6	)		(9	)		(13	)		(21	)
Net loss		(6	)		(9	)		(13	)		(21	)
Q-Chem
Revenues		—			—			—			—
Loss before income taxes		(5	)		(1	)		(10	)		(2	)
Net loss		(5	)		(1	)		(10	)		(2	)
Other equity investments
Revenues		188			172			336			333
Income before income taxes		30			6			39			3
Net income		29			4			36			—

Note 6. Debt

Long-term debt, net of applicable debt discounts, as shown on the condensed consolidated balance sheet follows:

Millions		June 30, 2002			December 31, 2001
Commercial paper		$	493		$	1,002
7% notes due 2011			500			500
5³/8% notes due 2007			500			—
Other			11			11

	Subtotal		1,504			1,513
Unamortized debt discount			(6	)		(6	)

	Total	$	1,498		$	1,507

On June 21, 2002, Chevron Phillips Chemical Company LLC and its wholly-owned subsidiary, Chevron Phillips Chemical Company LP, jointly and severally issued $500 million of senior unsecured 5³/8% notes in a private placement. The notes are due in June 2007 and interest is payable semiannually, with the first interest payment due December 15, 2002. The notes contain certain covenants such as limitations on liens, sale/leaseback transactions, sales of assets and business combinations that CPChem does not consider to be restrictive to normal operations. Proceeds from this debt issuance were used to retire a portion of outstanding commercial paper obligations and for general corporate purposes.

In accordance with obligations under the registration rights agreement entered into in connection with the private placement notes, the LLC and the LP filed a joint registration statement on Form S-4 with the SEC on August 6, 2002 to register $500 million of exchange notes. The exchange notes have terms substantially identical to the private placement notes, except that the exchange notes are freely tradeable. As of the date of this report, the registration statement has not been declared effective by the SEC.

In addition to the debt information presented in the preceding table, at June 30, 2002, CPChem had $300 million of borrowings outstanding under a trade receivables securitization agreement. These borrowings are classified as short-term and are secured by $445 million of trade receivables. At December 31, 2001, $199 million of borrowings were outstanding secured by $269 million of receivables. CPChem renewed its trade receivables securitization agreement on May 21, 2002 for an additional 364 days on terms similar to those of the agreement that expired during the month.

CPChem's $700 million 364-day credit facility expired on July 1, 2002 and its $900 million three-year credit facility expires on July 1, 2003. As of the date of this report, CPChem had received commitments from banks totaling $775 million towards an anticipated $800 million of new revolving credit facilities, consisting of a $400 million 364-day credit facility and a $400 million three-year credit facility. These credit facilities, which are expected to be in place by the end of the third quarter of 2002, will be on substantially the same terms as the $700 million and $900 million credit agreements. CPChem will terminate the existing three-year facility upon the closing of the new credit facilities.

Note 7. Termination Benefits

Accrued termination benefits payable totaled $6 million at December 31, 2001 and were paid in the first half of 2002.

Note 8. Contingencies

In the case of all known contingencies, CPChem records an undiscounted liability when the loss is probable and the amount is reasonably estimable. These liabilities are not reduced for potential insurance recoveries. If applicable, undiscounted receivables are recorded for probable insurance or other third-party recoveries. Based on currently available information, CPChem believes it is remote that future costs related to known contingent liabilities will exceed current accruals by an amount that would have a material adverse effect on consolidated results of operations, financial position or liquidity.

As facts concerning contingencies become known, CPChem reassesses its position both with respect to accrued liabilities and other potential exposures. Estimates that are particularly sensitive to future change include legal matters and contingent liabilities for environmental remediation. Estimated future environmental remediation costs are subject to change due to such factors as the unknown magnitude of cleanup costs, prospective changes in laws and regulations, the unknown timing and extent of remedial actions that may be required and the

determination of CPChem's liability in proportion to other responsible parties. Estimated future costs related to legal matters are subject to change as events occur and as additional information becomes available during the administrative and litigation process.

CPChem is a party to a number of legal proceedings pending in various courts or agencies for which, in some instances, no provision has been made. While the final outcome of these proceedings cannot be predicted with certainty, CPChem believes that none of these proceedings, when resolved, will have a material adverse effect on consolidated results of operations, financial position or liquidity.

Note 9. Segment Information

Effective January 1, 2002, CPChem restructured the composition of its operating segments as follows:

Olefins & Polyolefins—This segment gathers, buys, sells and fractionates natural gas liquids, and manufactures and markets olefins products such as ethylene and propylene. This segment also manufactures and markets normal alpha olefins and polyolefin products such as polyethylene, polypropylene and polyethylene pipe.

Aromatics & Styrenics—This segment manufactures and markets aromatics products such as benzene, styrene, paraxylene and cyclohexane. This segment also manufactures and markets polystyrene and SBC sold under the trademark K-Resin®.

Specialty Products—This segment manufactures and markets a variety of specialty products, including organosulfur chemicals and high-performance polyphenylene sulfide polymers and compounds sold under the trademark Ryton™.

Financial information by segment follows. Prior year information has been restated to conform to the current segment reporting presentation.

Millions	Olefins & Polyolefins			Aromatics & Styrenics			Specialty Products		Corporate, Other & Eliminations			Total
Three months ended June 30, 2002
Net sales—external	$	809		$	487		$	91	$	—		$	1,387
Net sales—inter-segment		74			36			1		(111	)		—
Income (loss) before interest & taxes		(9	)		32			14		(11	)		26
Three months ended June 30, 2001
Net sales—external		961			463			97		—			1,521
Net sales—inter-segment		56			28			—		(84	)		—
Income before interest & taxes		27			29			9		(7	)		58
Six months ended June 30, 2002
Net sales—external		1,490			868			176		—			2,534
Net sales—inter-segment		129			58			1		(188	)		—
Income (loss) before interest & taxes		(9	)		20			24		(14	)		21
Six months ended June 30, 2001
Net sales—external		2,165			984			197		—			3,346
Net sales—inter-segment		117			74			—		(191	)		—
Income (loss) before interest & taxes		(28	)		(8	)		17		(10	)		(29	)
Total assets—June 30, 2002		3,553			1,768			479		210			6,010
Total assets—December 31, 2001		3,465			1,679			467		249			5,860

Note 10. Condensed Consolidating Financial Statements

Condensed consolidating financial statements follow. This information is presented in accordance with SEC rules and regulations as they relate to the outstanding debt jointly and severally issued by Chevron Phillips Chemical Company LLC and Chevron Phillips Chemical Company LP.

The LLC is the non-operating parent holding company. The LP is the primary U.S. operating company. "Other Entities" is principally comprised of foreign operations and the holding companies that have direct ownership of the LP. These consolidating financial statements were prepared using the equity method of accounting for investments.

Chevron Phillips Chemical Company LLC
Condensed Consolidating Statement of Operations
For the three months ended June 30, 2002
(Unaudited)

Millions			LLC			LP			Other Entities			Eliminations			Total
Revenue
	Net sales		$	—		$	1,249		$	207		$	(69	)	$	1,387
	Equity in income (loss) of affiliates, net			25			(2	)		1			(15	)		9
	Other income			—			19			30			(36	)		13

		Total revenue		25			1,266			238			(120	)		1,409

Costs and Expenses
	Cost of goods sold			—			1,149			190			(67	)		1,272
	Selling, general and administrative			—			117			19			(38	)		98
	Research and development			—			13			—			—			13

		Total costs and expenses		—			1,279			209			(105	)		1,383

Income (Loss) Before Interest and Taxes				25			(13	)		29			(15	)		26
	Interest income			—			1			1			—			2
	Interest expense			(14	)		—			—			—			(14	)

Income (Loss) Before Taxes				11			(12	)		30			(15	)		14
	Income taxes			—			—			(3	)		—			(3	)

Net Income (Loss)			$	11		$	(12	)	$	27		$	(15	)	$	11

Note 10. Condensed Consolidating Financial Statements (Continued)

Chevron Phillips Chemical Company LLC
Condensed Consolidating Statement of Operations
For the three months ended June 30, 2001
(Unaudited)

Millions			LLC			LP			Other Entities			Eliminations			Total
Revenue
	Net sales		$	—		$	1,465		$	305		$	(249	)	$	1,521
	Equity in income (loss) of affiliates, net			57			(4	)		22			(78	)		(3	)
	Other income			—			140			24			(17	)		147

		Total revenue		57			1,601			351			(344	)		1,665

Costs and Expenses
	Cost of goods sold			—			1,423			257			(249	)		1,431
	Selling, general and administrative			—			142			36			(17	)		161
	Research and development			—			15			—			—			15

		Total costs and expenses		—			1,580			293			(266	)		1,607

Income Before Interest and Taxes				57			21			58			(78	)		58
	Interest income			—			1			1			—			2
	Interest expense			(27	)		(1	)		—			—			(28	)

Income Before Taxes				30			21			59			(78	)		32
	Income taxes			—			—			(2	)		—			(2	)

Net Income			$	30		$	21		$	57		$	(78	)	$	30

Note 10. Condensed Consolidating Financial Statements (Continued)

Chevron Phillips Chemical Company LLC
Condensed Consolidating Statement of Operations
For the six months ended June 30, 2002
(Unaudited)

Millions			LLC			LP			Other Entities			Eliminations			Total
Revenue
	Net sales		$	—		$	2,271		$	390		$	(127	)	$	2,534
	Equity in income (loss) of affiliates, net			20			(17	)		(13	)		18			8
	Other income			—			49			53			(75	)		27

		Total revenue		20			2,303			430			(184	)		2,569

Costs and Expenses
	Cost of goods sold			—			2,095			364			(124	)		2,335
	Selling, general and administrative			—			215			52			(78	)		189
	Research and development			—			24			—			—			24

		Total costs and expenses		—			2,334			416			(202	)		2,548

Income (Loss) Before Interest and Taxes				20			(31	)		14			18			21
	Interest income			—			2			2			—			4
	Interest expense			(31	)		—			(1	)		—			(32	)

Income (Loss) Before Taxes				(11	)		(29	)		15			18			(7	)
	Income taxes			—			—			(4	)		—			(4	)

Net Income (Loss)			$	(11	)	$	(29	)	$	11		$	18		$	(11	)

Note 10. Condensed Consolidating Financial Statements (Continued)

Chevron Phillips Chemical Company LLC
Condensed Consolidating Statement of Operations
For the six months ended June 30, 2001
(Unaudited)

Millions			LLC			LP			Other Entities			Eliminations			Total
Revenue
	Net sales		$	—		$	3,313		$	726		$	(693	)	$	3,346
	Equity in loss of affiliates, net			(29	)		(11	)		(88	)		122			(6	)
	Other income			—			167			39			(27	)		179

		Total revenue		(29	)		3,469			677			(598	)		3,519

Costs and Expenses
	Cost of goods sold			—			3,274			650			(693	)		3,231
	Selling, general and administrative			—			261			55			(27	)		289
	Research and development			—			28			—			—			28

		Total costs and expenses		—			3,563			705			(720	)		3,548

Loss Before Interest and Taxes				(29	)		(94	)		(28	)		122			(29	)
	Interest income			—			2			3			—			5
	Interest expense			(59	)		(1	)		(1	)		—			(61	)

Loss Before Taxes				(88	)		(93	)		(26	)		122			(85	)
	Income taxes			—			—			(3	)		—			(3	)

Net Loss			$	(88	)	$	(93	)	$	(29	)	$	122		$	(88	)

Note 10. Condensed Consolidating Financial Statements (Continued)

Chevron Phillips Chemical Company LLC
Condensed Consolidating Balance Sheet
June 30, 2002
(Unaudited)

Millions			LLC		LP		Other Entities		Eliminations			Total
Current assets
	Cash and cash equivalents		$	4	$	50	$	36	$	—		$	90
	Accounts receivable, net			35		994		692		(921	)		800
	Inventories			—		531		106		—			637
	Other current assets			1		6		5		—			12

		Total current assets		40		1,581		839		(921	)		1,539
Property, plant and equipment, net				—		3,707		287		—			3,994
Investment in and advances to affiliates				5,546		88		5,032		(10,249	)		417
Other assets and deferred charges				6		41		13		—			60

Total Assets			$	5,592	$	5,417	$	6,171	$	(11,170	)	$	6,010

Current liabilities
	Accounts payable		$	636	$	544	$	250	$	(921	)	$	509
	Secured borrowings			—		—		300		—			300
	Other current liabilities			11		110		21		—			142

		Total current liabilities		647		654		571		(921	)		951
Long-term debt				1,487		11		—		—			1,498
Other liabilities and deferred credits				—		89		13		—			102

		Total liabilities		2,134		754		584		(921	)		2,551
Members' capital				3,458		4,663		5,586		(10,249	)		3,458
Accumulated other comprehensive income				—		—		1		—			1

Total Liabilities and Members' Capital			$	5,592	$	5,417	$	6,171	$	(11,170	)	$	6,010

Note 10. Condensed Consolidating Financial Statements (Continued)

Chevron Phillips Chemical Company LLC
Condensed Consolidating Balance Sheet
December 31, 2001

Millions			LLC		LP		Other Entities			Eliminations			Total
Current assets
	Cash and cash equivalents		$	—	$	71	$	40		$	—		$	111
	Accounts receivable, net			37		944		543			(742	)		782
	Inventories			—		541		97			—			638
	Other current assets			—		17		3			—			20

		Total current assets		37		1,573		683			(742	)		1,551
Property, plant and equipment, net				—		3,681		287			—			3,968
Investment in and advances to affiliates				5,430		86		4,916			(10,173	)		259
Other assets and deferred charges				5		60		17			—			82

Total Assets			$	5,472	$	5,400	$	5,903		$	(10,915	)	$	5,860

Current liabilities
	Accounts and notes payable		$	516	$	472	$	203		$	(742	)	$	449
	Secured borrowings			—		—		199			—			199
	Other current liabilities			10		142		20			—			172

		Total current liabilities		526		614		422			(742	)		820
Long-term debt				1,496		11		—			—			1,507
Other liabilities and deferred credits				—		87		12			—			99

		Total liabilities		2,022		712		434			(742	)		2,426
Members' capital				3,450		4,688		5,485			(10,173	)		3,450
Accumulated other comprehensive loss				—		—		(16	)		—			(16	)

Total Liabilities and Members' Capital			$	5,472	$	5,400	$	5,903		$	(10,915	)	$	5,860

Note 10. Condensed Consolidating Financial Statements (Continued)

Chevron Phillips Chemical Company LLC
Condensed Consolidating Statement of Cash Flows
For the six months ended June 30, 2002
(Unaudited)

Millions				LLC			LP			Other Entities			Eliminations			Total
Cash Flows From Operating Activities
	Net income (loss)			$	(11	)	$	(29	)	$	11		$	18		$	(11	)
	Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities
		Depreciation, amortization and retirements			—			121			8			—			129
		Undistributed equity in loss (income) of affiliates, net			13			23			20			(57	)		(1	)
		Changes in operating working capital			114			11			(108	)		—			17
		Other operating cash flow activity			(6	)		25			(1	)		—			18

			Net cash flows provided by (used in) operating activities		110			151			(70	)		(39	)		152

Cash Flows From Investing Activities
	Capital and investment expenditures				—			(171	)		(5	)		—			(176	)
	Advances to Qatar Chemical Company Ltd. (Q-Chem)				—			—			(125	)		—			(125	)
	Increase in other investments				(129	)		—			—			129			—

			Net cash flows used in investing activities		(129	)		(171	)		(130	)		129			(301	)

Cash Flows From Financing Activities
	Decrease in commercial paper, net				(501	)		—			—			—			(501	)
	Increase in secured borrowings, net				—			—			101			—			101
	Increase (decrease) in other debt				498			(1	)		5			—			502
	Contributions from members				19			—			129			(129	)		19
	Distributions to members				—			—			(39	)		39			—
	Post-closing adjustments from members				7			—			—			—			7

			Net cash flows provided by (used in) financing activities		23			(1	)		196			(90	)		128

Net Increase (Decrease) in Cash and Cash Equivalents					4			(21	)		(4	)		—			(21	)
Cash and Cash Equivalents at Beginning of Period					—			71			40			—			111

Cash and Cash Equivalents at End of Period				$	4		$	50		$	36		$	—		$	90

Note 10. Condensed Consolidating Financial Statements (Continued)

Chevron Phillips Chemical Company LLC
Condensed Consolidating Statement of Cash Flows
For the six months ended June 30, 2001
(Unaudited)

Millions				LLC			LP			Other Entities			Eliminations			Total
Cash Flows From Operating Activities
	Net loss			$	(88	)	$	(93	)	$	(29	)	$	122		$	(88	)
	Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities
		Depreciation, amortization and retirements			—			121			24			—			145
		Undistributed equity in loss of affiliates, net			82			12			88			(175	)		7
		Changes in operating working capital			51			37			(214	)		—			(126	)
		Other operating cash flow activity			146			39			(115	)		—			70

			Net cash flows provided by (used in) operating activities		191			116			(246	)		(53	)		8

Cash Flows From Investing Activities
	Capital expenditures				—			(124	)		(6	)		—			(130	)
	Decrease (increase) in investments				(79	)		(1	)		15			80			15

			Net cash flows provided by (used in) investing activities		(79	)		(125	)		9			80			(115	)

Cash Flows From Financing Activities
	Decrease in commercial paper, net				(545	)		—			—			—			(545	)
	Increase in secured borrowings, net				—			—			205			—			205
	Decrease in notes payable to member, net				(50	)		—			—			—			(50	)
	Proceeds from the issuance of other debt				496			13			—			—			509
	Contributions from members				—			—			80			(80	)		—
	Distributions to members				—			—			(53	)		53			—
	Post-closing adjustments to members				(13	)		—			—			—			(13	)

			Net cash flows provided by (used in) financing activities		(112	)		13			232			(27	)		106

Net Increase (Decrease) in Cash and Cash Equivalents					—			4			(5	)		—			(1	)
Cash and Cash Equivalents at Beginning of Period					—			75			81			—			156

Cash and Cash Equivalents at End of Period				$	—		$	79		$	76		$	—		$	155

Note 11. Subsequent Event

On July 1, 2002, CPChem sold $250 million of Preferred LLC Interests, purchased 50% each by ChevronTexaco and Phillips. Preferred distributions are cumulative at 9% per annum and are payable quarterly from cash earnings, as defined in CPChem's Second Amended and Restated Limited Liability Company Agreement. The securities have no stated maturity date and are redeemable quarterly, in increments of $25 million, when CPChem's ratio of debt to total capitalization falls below a stated level. The Preferred LLC Interests are also redeemable at the sole option of CPChem at any time. Proceeds were used to retire a portion of outstanding commercial paper obligations.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This discussion should be read in conjunction with the condensed consolidated financial statements and notes which precede this discussion, and with Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes included in CPChem's Annual Report on Form 10-K for the year ended December 31, 2001.

Results of Operations

Consolidated

	Three months ended June 30,					Six months ended June 30,
Millions	Three months ended June 30,					Six months ended June 30,
Millions	2002		2001			2002			2001
Income (loss) before interest & taxes	$	26	$	58		$	21		$	(29	)
Less special items		—		81			(10	)		64

Income (loss) before interest & taxes, as adjusted	$	26	$	(23	)	$	31		$	(93	)

Income before interest and taxes for the three months ended June 30, 2002 was $26 million compared with $58 million during the same period in 2001. Income before interest and taxes for the first half of 2002 totaled $21 million compared with a loss before interest and taxes of $29 million for the first half of 2001. Results in 2002 included special items charges of $10 million recorded in the first quarter. Results in 2001 included a net benefit from special items of $81 million in the second quarter and $64 million in the first half. Excluding special items, income before interest and taxes was $26 million and $31 million for the three and six month periods in 2002, respectively, compared with losses of $23 million and $93 million, respectively, during the same periods in 2001.

Special items are nonrecurring or infrequently occurring transactions that CPChem does not consider representative of ongoing operations. Special items in 2002 consisted of a $6 million pension curtailment charge and $4 million of accelerated depreciation associated with the permanent shutdown in February 2002 of two polyethylene particle loop reactors at the Orange, Texas facility. Special items in 2001 included a $118 million benefit in the second quarter, recorded as Other Income, in connection with the settlement of a business interruption insurance claim associated with the March 2000 incident at the Houston Chemical Complex K-Resin plant. Special items in the first half of 2001 also included costs associated with the collapse of a styrene column at the St. James, Louisiana facility in February 2001.

Olefins & Polyolefins

	Three months ended June 30,						Six months ended June 30,
Millions	Three months ended June 30,						Six months ended June 30,
Millions	2002			2001			2002			2001
Income (loss) before interest & taxes	$	(9	)	$	27		$	(9	)	$	(28	)
Less special items		—			(10	)		(4	)		(21	)

Income (loss) before interest & taxes, as adjusted	$	(9	)	$	37		$	(5	)	$	(7	)

Excluding special items, loss before interest and taxes for Olefins & Polyolefins totaled $9 million in the second quarter of 2002 compared to income before interest and taxes of $37 million in the same period in 2001. Loss before interest and taxes totaled $5 million in the first half of 2002 and $7 million in the first half of 2001.

Comparing the two second-quarter periods, lower earnings from ethylene in the 2002 period more than offset improved results from polyethylene. Lower ethylene sales prices were partially offset by lower feedstock and energy prices. Polyethylene gross margins increased due to lower ethylene prices and lower energy costs, partially offset by lower sales prices.

Olefins & Polyolefins operating results improved $2 million in the first six months of 2002 compared with the same 2001 period. Increased polyethylene, normal alpha olefins (NAO) and natural gas liquids margins contributed to the improved results. Polyethylene and NAO margins increased due to lower ethylene prices and lower energy costs, partially offset by lower sales prices. Ethylene earnings were down in the 2002 period primarily due to lower margins and volumes. The margin impact was the results of lower sales prices partially offset by lower feedstock and energy prices.

Aromatics & Styrenics

	Three months ended June 30,					Six months ended June 30,
Millions	Three months ended June 30,					Six months ended June 30,
Millions	2002		2001			2002			2001
Income (loss) before interest & taxes	$	32	$	29		$	20		$	(8	)
Less special items		—		89			(6	)		84

Income (loss) before interest & taxes, as adjusted	$	32	$	(60	)	$	26		$	(92	)

Aromatics & Styrenics income before interest and taxes, excluding special items, was $32 million for the second quarter of 2002 compared to a $60 million loss in the corresponding period in 2001. Excluding special items, income before interest and taxes was $26 million for the first six months of 2002 compared to a $92 million loss in the first six months of 2001. Special items in 2002 consisted of a $6 million pension curtailment charge related to enhanced benefits granted to terminated employees at the Puerto Rico facility. Special items in 2001 included a $118 million benefit recorded in the second quarter in connection with the settlement of a business interruption insurance claim associated with the March 2000 incident at the Houston Chemical Complex K-Resin plant. Special items in the first half of 2001 also included costs associated with the collapse of the styrene column at the St. James facility.

Aromatics & Styrenics operating results benefited from higher styrene production and sales volumes, and improved gross margins in the second quarter of 2002, as styrene production at the St. James facility was restored in October 2001 following a shutdown in February 2001 due to the column

collapse. Earnings from benzene improved as a result of higher sales prices and lower operating costs in 2002. Paraxylene results also improved due to lower feedstock and operating expenses, partially offset by lower selling prices. Aromatics & Styrenics results also benefited in the second quarter of 2002 from lower depreciation due to the retirement of benzene and cyclohexane assets at the Puerto Rico facility in December 2001. Results in the second quarter of 2002 include the reversal of the remaining $14 million lower-of-cost-or-market inventory reserve initially established in 2001. The reserve was reversed as a result of improved market conditions and prices.

Operating results for Aromatics & Styrenics improved $118 million during the first half of 2002 compared with the first half of 2001. This improvement included the reversal of the full $25 million lower-of-cost-or-market inventory reserve established in 2001. Earnings from styrene were higher in 2002 despite lower average sales prices as production at the St. James facility was restored in October 2001 following the February 2001 shutdown due to the column collapse. Earnings from benzene in 2002 improved as a result of lower operating costs. This benefit was partially offset by lower average sales prices in 2002, although prices have improved steadily since the beginning of 2002. Aromatics & Styrenics results also benefited in 2002 from lower expenses associated with the cessation of benzene and cyclohexane operations at the Puerto Rico facility in the first quarter of 2001 and lower depreciation in 2002 due to the subsequent retirement of those assets in December 2001. The shutdown of the Puerto Rico motor fuels reformer in March 2001 also contributed to improved results. Paraxylene results increased due to lower operating expenses, partially offset by lower selling prices.

Following a successful phased-in start up, the force majeure status of CPChem's K-Resin SBC plant at the Houston Chemical Complex was lifted on May 1, 2002.

Specialty Products

	Three months ended June 30,				Six months ended June 30,
Millions	Three months ended June 30,				Six months ended June 30,
Millions	2002		2001		2002		2001
Income before interest & taxes	$	14	$	9	$	24	$	17
Less special items		—		2		—		2

Income before interest & taxes, as adjusted	$	14	$	7	$	24	$	15

Income before interest and taxes for Specialty Products was $14 million in the second quarter of 2002 compared with $7 million in the prior year period, and $24 million in the first half of 2002 compared with $15 million in the first half of 2001. Improved earnings for Ryton™ polyphenylene sulfide polymers and compounds was the primary reason for the increases.

Corporate and Other

	Three months ended June 30,						Six months ended June 30,
Millions	Three months ended June 30,						Six months ended June 30,
Millions	2002			2001			2002			2001
Loss before interest & taxes	$	(11	)	$	(7	)	$	(14	)	$	(10	)
Less special items		—			—			—			(1	)

Loss before interest & taxes, as adjusted	$	(11	)	$	(7	)	$	(14	)	$	(9	)

Interest expense. Interest expense was $14 million and $32 million, respectively, for the three and six month periods ended June 30, 2002, compared with $28 million and $61 million for the same periods in 2001. The decreases resulted from lower average debt balances and lower rates on outstanding variable-rate debt, primarily the commercial paper program.

Outlook

Excess manufacturing capacity in many sectors of the chemicals market and the weakened U.S. economy continue to negatively impact CPChem, generally resulting in lower margins and reduced product demand in most business lines. Partially offsetting this, the recent decline in the U.S. dollar relative to other currencies has improved CPChem's export competitiveness. Although CPChem expects existing industry and market conditions to be a challenge for the near term, CPChem is continuing to focus on reducing costs, improving efficiencies and ensuring safe and reliable operations.

Liquidity and Capital Resources

Cash balances decreased $21 million during the first six months of 2002. Cash used for capital and investment expenditures, including advances to Q-Chem, was slightly higher than cash provided by operating activities combined with cash proceeds from higher net levels of outstanding debt.

Operating Activities

Cash provided by operating activities totaled $152 million during the first half of 2002 compared with $8 million during the first half of 2001. The change was primarily due to improved operating results and an increase in accounts payable in the 2002 period, compared with a $231 million decrease in accounts payable during the six month period in 2001.

Investing Activities

Capital and investment expenditures totaled $176 million during the first half of 2002 compared with $130 million in the prior year period. Approximately $112 million of 2002 expenditures were invested in Olefins & Polyolefins, $50 million in Aromatics & Styrenics, $9 million in Specialty Products and the remaining $5 million in corporate-level expenditures. In addition, CPChem advanced $125 million to Q-Chem in the first six months of 2002 under a subordinated loan agreement. See Note 5 of Notes to Condensed Consolidated Financial Statements for further discussion of the advances to Q-Chem.

CPChem expects to invest a total of approximately $325 million for capital projects and investments in 2002, and in addition, to advance Q-Chem approximately $240 million under the subordinated loan agreement.

CPChem announced plans in 2002 for a 50%-owned joint venture project at Al Jubail, Saudi Arabia. The project, expected to cost approximately $1 billion, will produce benzene, ethylbenzene, styrene and propylene. The project will be constructed on a site adjacent to the existing aromatics complex owned by Saudi Chevron Phillips Company (Saudi Chevron Phillips), a 50%-owned CPChem joint venture. Final approval of the project is anticipated in early 2004, with start-up expected in 2006. In addition, Saudi Chevron Phillips is increasing its cyclohexane capacity at the existing facility to 620 million pounds per year. The additional capacity is expected to be operational by the first quarter of 2003. CPChem will continue to market the products that are exported from the region.

In June 2002, CPChem and Qatar Petroleum amended the Q-Chem II joint venture agreement signed in June 2001 to provide for the construction of a larger ethane cracker than was previously planned. The amended agreement also provides that the ethane cracker will be developed jointly with QATOFIN, a joint venture of Atofina SA and QAPCO. In connection with this change in the project scope, CPChem and Qatar Petroleum entered into a joint venture agreement in June 2002 with Atofina SA and QAPCO to jointly develop the ethane cracker.

Financing Activities

Cash provided by financing activities totaled $128 million in the first six months of 2002 compared with $106 million in the prior year period. The increase was primarily due to contributions in 2002 from Phillips related to productivity levels at the K-Resin plant and cash received in 2002 from post-closing adjustments from the members.

On June 21, 2002, Chevron Phillips Chemical Company LLC and Chevron Phillips Chemical Company LP, jointly and severally issued $500 million of senior unsecured 5³/8% notes in a private placement. Proceeds from this debt issuance were used to retire a portion of outstanding commercial paper obligations and for general corporate purposes. See Note 6 of Notes to Condensed Consolidated Financial Statements for further discussion.

In March 2001, CPChem issued $500 million of senior unsecured 7% notes in a private placement. Proceeds were used to repay a $100 million note payable to ChevronTexaco, to retire a portion of outstanding commercial paper obligations and for general corporate purposes. Almost all of the holders of the private placement notes subsequently tendered their notes for registered exchange notes with terms substantially identical to the private placement notes, except that the exchange notes are freely tradeable.

CPChem renewed its trade receivables securitization agreement on May 21, 2002 for an additional 364 days on terms similar to those of the agreement that expired during the month. Net additional funds received during the first six months of 2002 under CPChem's trade receivables securitization program totaled $101 million compared with $205 million during the 2001 period.

On July 1, 2002, CPChem sold $250 million of Preferred LLC Interests, purchased 50% each by ChevronTexaco and Phillips. Proceeds were used to retire a portion of outstanding commercial paper obligations. See Note 11 of Notes to Condensed Consolidated Financial Statements for further discussion.

Other

Contingencies. See Note 8 of Notes to Condensed Consolidated Financial Statements for a discussion of contingencies.

New Accounting Pronouncements. See Note 2 of Notes to Condensed Consolidated Financial Statements for a discussion of new accounting pronouncements.

CAUTIONARY STATEMENTS REGARDING FORWARD LOOKING INFORMATION

This Management's Discussion and Analysis of Financial Condition and Results of Operations contains "forward-looking statements" within the meaning of the federal securities laws. Such statements can generally be identified with words and phrases such as "believes," "expects," "anticipates," "should," "estimates," "foresees" or other words and phrases of similar meaning. Where CPChem expresses an expectation or belief as to future results, there can be no assurance that the expectation or belief will result, be achieved or be accomplished. Where any such forward-looking statement includes a statement of the assumptions or bases underlying such forward-looking statement, CPChem believes such assumptions or bases to be reasonable and to be made in good faith. Assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material, depending on the circumstances. The more significant factors that, if erroneous, could cause actual results to differ materially from those expressed include, among others: the timing and duration of periods of expansion and contraction within the chemicals business, plans for the construction, modernization or de-bottlenecking of domestic and foreign chemical plants, prices of feedstocks and products, force majeure events, accidents, labor relations, political risks, changes in foreign and domestic laws, rules and regulations and the interpretation and enforcement thereof, regulatory decisions relating to taxes, the environment and human resources, the U.S. economy, results of financing efforts and overall financial market conditions. All forward-looking statements in this Form 10-Q are qualified in their entirety by the cautionary statements contained in this section. CPChem does not undertake to update, revise or correct any of the forward-looking information.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

CPChem's exposure to market risk is described in Item 7a of its Annual Report on Form 10-K for the year ended December 31, 2001. CPChem believes its exposure to market risk has not changed materially at June 30, 2002.

PART II. OTHER INFORMATION

ITEM 6. Exhibits and Reports on Form 8-K

(a) Exhibits

99.1 Certification of Chief Executive Officer of CPChem

99.2 Certification of Chief Financial Officer of CPChem

(b) Reports on Form 8-K

A Current Report on Form 8-K was filed by CPChem on June 17, 2002 to report the renewal of CPChem's accounts receivable securitization agreement and the statuses of its revolving credit facilities and bond offering.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CHEVRON PHILLIPS CHEMICAL COMPANY LLC
Date: August 7, 2002				/s/ GREG G. MAXWELL Greg G. Maxwell Vice President and Controller (Chief Accounting Officer)

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