PRELIMINARY CONFIDENTIAL DRAFT FOR DISCUSSION PURPOSES ONLY Project Francis Conflicts Committee GP LLC Discussion Materials of the Board of Directors of Arkose May 1, 2018 PRIVATE AND CONFIDENTIAL. This document is being sent to you for your information only as an investment banking client of Goldman Sachs and should not be forwarded outside of your organization. This document has been prepared by the Investment Banking Division and is not a product of Goldman Sachs Global Investment Research. This document should not be used as a basis for trading in the securities or loans of the companies named herein or for any other investment decision. This document does not constitute an offer to sell the securities or loans of the companies named herein or a solicitation of proxies or votes and should not be construed as consisting of investment advice. Goldman Sachs does not provide accounting, tax, or legal advice.
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PRELIMINARY CONFIDENTIAL DRAFT FOR DISCUSSION PURPOSES ONLY Comparison of Series B Value Status Quo GP Share Count ($ in millions) Series B Value Calculation of Series B Value Management Presentation Conversion Mechanism Methodology 2026E Series B Dist. (/) Series B Take (+) Annual Series B Threshold $ 48 6.0 % $ 30 (-) Series B Dist. $(48) (-) G&A (-) Taxes (25.3%) (2) (199) DCF Coverage Ratio Total 2016E GP Dist. (Series A Dist.) Assumed Terminal Yield 1.0 x $ 586 10.0 % (-) $2.0bn Threshold (2,000) 2026E Series B Dist. Assumed Terminal Yield $ 48 10.0 % (x) Series B Take 6.0 % (/) 2026E Discount Factor (/) 2026E Discount Factor 1.77 1.84 Discounted Distributions Discounted Distributions $ 183 $ 183 Management @ 7.25% Discount Rate 10% Terminal Yield Comparative Calculation @ 7.25% Discount Rate 10% Terminal Yield PV of Distributions PV of Terminal Value Source: Arkose Projections, Wall Street research and Bloomberg market data as of 27-Apr-2018 Note: Series B value calculated as the PV of distributions through 2026 and the TV at year end 2026. Executive Summary 2 Management calculates terminal value using mid-year convention resulting a in discount factor of 1.77. Conversion Mechanism Methodology calculates terminal value using a year-end methodology resulting in a discount factor of 1.84 Total Series B Value$ 309 Total Series B Value$ 453 Series B Discounted TV$ 126 Series B Discounted TV$ 270 Implied 2026 Series B Value$ 232 Implied 2026 Series B Value$ 479 Equity Value Subject to Series B$ 3,861 Implied GP Market Cap in 2026$ 5,861 Total Implied 2026E GP DCF$ 586 Implied GP Cash Flow$ 787 $453 $309 $270 $126 $183 $183 Implied CF to IDR Holding LLC$ 835 Management used an implied terminal yield methodology on Series B cash flows instead of the conversion mechanic as per the agreement
PRELIMINARY CONFIDENTIAL DRAFT FOR DISCUSSION PURPOSES ONLY Cost of Equity Comparison Calculation Management Identified Comps GP Midstream Average EQGP TEGP WGP Levered Beta 1.22 1.26 0.95 0.96 1.02 0.87 Risk Free Rate 2.96 % 2.96 % 2.96 % 2.96 % 2.96 % 2.96 % Equity Risk Premium (Duff & Phelps) 6.90 6.90 6.90 6.90 6.90 6.90 Comparative Calculation (with KPMG Equity Risk Premium) Management Identified Comps GP Midstream Average EQGP TEGP WGP Levered Beta 1.22 1.26 0.95 0.96 1.02 0.87 Risk Free Rate 2.96 % 2.96 % 2.96 % 2.96 % 2.96 % 2.96 % Equity Risk Premium (KPMG) 5.75 5.75 % 5.75 % 5.75 % 5.75 % 5.75 % Growth Adjusted Yield 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E GP Share Price Distribution $ 17.31 0.54 $ 17.31 0.89 $ 17.31 1.34 $ 17.31 1.74 $ 17.31 2.22 $ 17.31 2.51 $ 17.31 2.83 $ 17.31 3.07 $ 17.31 3.15 Adjusted Equity Yield 3.1 % 5.1 % 7.7 % 10.1 % 12.8 % 14.5 % 16.3 % 17.8 % 18.2 % Source: Arkose Management Series B Valuation Analysis (26-Apr-2018), Axioma, Duff & Phelps and Bloomberg market data as of 27-Apr-2018 Note: Two year historical Levered Beta per Axioma. Risk Free Rate represents yield of 30-year U.S. Government Treasury Notes with 20 years remaining life. Equity Risk Premium per Duff & Phelps. Executive Summary 3 7 Yr Equity Yield Avg. 10.0 % 9 Yr Equity Yield Avg. 11.7 Cost of Equity 10.0 % 10.2 % 8.4 % 8.5 % 8.8 % 8.0 % Cost of Equity 11.4 % 11.6 % 9.5 % 9.6 % 10.0 % 9.0 %
PRELIMINARY CONFIDENTIAL DRAFT FOR DISCUSSION PURPOSES ONLY Comparison of Series Value Status Quo GP Share Count B Distribution on Terminal 11.5% Discount Rate 10.0% Discount Rate $299 $273 Comparative Calculation 8% Terminal Yield Comparative Calculation 10% Terminal Yield Comparative Calculation 12% Terminal Yield Comparative Calculation 8% Terminal Yield Comparative Calculation 10% Terminal Yield Comparative Calculation 12% Terminal Yield PV of Distributions PV of Terminal Value PV of Distributions PV of Terminal Value Status Quo Corresponding GP Share Price $25.56 $22.52 $20.50 $28.18 $24.76 $22.49 Source: Arkose Projections, Wall Street research and Bloomberg market data as of 27-Apr-2018 Note: Series B value calculated as the PV of distributions through 2026 and the TV at year end 2026. Executive Summary 4 $123 $239 $89 $217 $67 $150 $150 $150 $139 $261 $101 $236 $75 $161 $161 $161
PRELIMINARY CONFIDENTIAL DRAFT FOR DISCUSSION PURPOSES ONLY Illustrative Analysis at Various Implied GP Share Prices Pro Forma Arkose GP + Midstream | Illustrative 1.6x Exchange Ratio Median Analyst Implied Total Equity Value Market Implied Total Equity Value¹ 5% Equity Upside to Market Value² 10% Equity Upside to Market Value² 15% Equity Upside to Market Value² 20% Equity Upside to Market Value² 30% Equity Upside to Market Value² Premium to NBLX % Uplift from Current Equity Value $ Uplift from Current Equity Value Current GP Shares (+) Pro Forma Midstream Units (at 1.6 x Ech. Ratio) (+) Shares Issued to Series B Units @ 3.0 % PF Interest NA $ 0 186 301 11 5 % $417 186 301 12 10 % $875 186 301 12 15 % $1,374 186 301 12 20 % $1,916 186 301 12 30 % $2,999 186 301 12 42 % $4,237 186 301 12 62 % $7,355 186 301 13 Total Pro Forma Shares Outstanding 498 498 499 499 499 499 499 500 % Change From Current Share Price (3)% 1 % 6 % 11 % 16 % 25 % 37 % 56 % 2.5 % 9.4 9.6 9.7 9.8 9.9 10.1 10.3 10.6 3.0 11.4 11.5 11.7 11.8 12.0 12.2 12.5 12.8 3.5 13.3 13.5 13.7 13.9 14.0 14.3 14.6 15.0 4.0 15.3 15.5 15.7 15.9 16.1 16.4 16.8 17.2 4.5 17.2 17.5 17.8 18.0 18.2 18.5 18.9 19.4 2.5 % $ 158 $ 169 $ 179 $ 189 $ 200 $ 221 $ 247 $ 287 190 202 215 227 240 265 296 345 3.0 3.5 222 236 251 265 280 309 345 402 4.0 253 270 287 303 320 353 394 460 4.5 285 304 322 341 360 397 444 517 Source: Arkose Projections, Wall Street research and Bloomberg market data as of 27-Apr-2018 Note: Pro forma analysis assumes 1.1x coverage ratio in 2018 and 2019-2022 coverage ratios held constant to current standalone forecasts. 1 Assumes current market price and series B converts into SQ GP market cap. 2 Assumes pro forma GP trades at a 5%, 10%, 15%, 20% and 30% premium to current market valuation assuming Series B units convert into SQ GP market cap. Executive Summary 5 B Interest (Based on Pro Forma Series B Take Implied Value of Series Implied GP Share Price) Current Prices GP: $17.31 Midstream: $26.82 Pro Forma Series B Take Implied # of GP Share Issued for Series B Implied GP Share Price $ 16.72 $ 17.55 $ 18.38 $ 19.21 $ 20.04 $ 21.69 $ 23.75 $ 27.01 Implied Pro Forma Equity Value $ 8,330 $ 8,747 $ 9,163 $ 9,580 $ 9,996 $ 10,829 $ 11,861 $ 13,496
PRELIMINARY CONFIDENTIAL DRAFT FOR DISCUSSION PURPOSES ONLY Illustrative Analysis at Various Implied GP Share Prices (cont) Pro Forma Arkose GP + Midstream | Illustrative 1.8x Exchange Ratio Median Analyst Implied Total Equity Value Market Implied Total Equity Value¹ 5% Equity Upside to Market Value² 10% Equity Upside to Market Value² 15% Equity Upside to Market Value² 20% Equity Upside to Market Value² 30% Equity Upside to Market Value² Premium to NBLX % Uplift from Current Equity Value $ Uplift from Current Equity Value Current GP Shares (+) Pro Forma Midstream Units (at 1.8 x Ech. Ratio) (+) Shares Issued to Series B Units @ 3.0 % PF Interest NA $ 0 186 338 12 5 % $417 186 338 12 10 % $875 186 338 13 15 % $1,374 186 338 13 20 % $1,916 186 338 13 30 % $2,999 186 338 13 42 % $4,237 186 338 13 62 % $7,355 186 338 14 Total Pro Forma Shares Outstanding 537 537 537 537 537 538 538 538 % Change From Current Share Price (10)% (6)% (1)% 3 % 7 % 16 % 27 % 45 % 2.5 % 10.2 10.3 10.5 10.6 10.7 10.9 11.1 11.4 3.0 12.2 12.4 12.6 12.8 12.9 13.2 13.4 13.8 3.5 14.3 14.6 14.8 14.9 15.1 15.4 15.7 16.1 4.0 16.4 16.7 16.9 17.1 17.3 17.7 18.0 18.5 4.5 18.6 18.9 19.1 19.4 19.6 20.0 20.4 20.9 2.5 % $ 158 $ 169 $ 179 $ 189 $ 200 $ 221 $ 247 $ 287 190 202 215 227 240 265 296 345 3.0 3.5 222 236 251 265 280 309 345 402 4.0 253 270 287 303 320 353 394 460 4.5 285 304 322 341 360 397 444 517 Source: Arkose Projections, Wall Street research and Bloomberg market data as of 27-Apr-2018 Note: Pro forma analysis assumes 1.1x coverage ratio in 2018 and 2019-2022 coverage ratios held constant to current standalone forecasts. 1 Assumes current market price and series B converts into SQ GP market cap. 2 Assumes pro forma GP trades at a 5%, 10%, 15%, 20% and 30% premium to current market valuation assuming Series B units convert into SQ GP market cap. Executive Summary 6 B Interest (Based on Pro Forma Series B Take Implied Value of Series Implied GP Share Price) Current Prices GP: $17.31 Midstream: $26.82 Pro Forma Series B Take Implied # of GP Share Issued for Series B Implied GP Share Price $ 15.52 $ 16.29 $ 17.06 $ 17.83 $ 18.60 $ 20.14 $ 22.05 $ 25.07 Implied Pro Forma Equity Value $ 8,330 $ 8,747 $ 9,163 $ 9,580 $ 9,996 $ 10,829 $ 11,861 $ 13,496
PRELIMINARY CONFIDENTIAL DRAFT FOR DISCUSSION PURPOSES ONLY Appendix A: Additional Reference Materials
PRELIMINARY CONFIDENTIAL DRAFT FOR DISCUSSION PURPOSES ONLY Illustrative Conversion Calculation For Series B Units of Arkose IDR LLC Management Case Conversion into Pro Forma Market Cap Series B Conversion Into Status Quo GP Shares 20 Trading-Day GP VWAP (Current) (x) Common Shares Outstanding $ 16.25 186 GP Share Price1 (x) Common Shares Outstanding $ 19.63 487 GP Market Cap (-) $2.0bn Threshold $ 3,026 (2,000) Pro Forma GP Market Cap (-) $2.0bn Threshold $ 9,559 (2,000) (x) Series B Take 6.0 % (x) Series B Take (Illustrative Assumption) 3.0 % (x) Units Outstanding (x) Percent Vested 100 % 100 % (x) Units Outstanding (x) Percent Vested 100 % 100 % (/) Vested Units Outstanding 98.6 (/) Vested Units Outstanding 98.6 (x) Vested Units Redeemed (/) 20 Day GP VWAP (Current) 98.6 $ 16.25 (x) Vested Units Redeemed (/) 20 Day GP VWAP 98.6 $ 19.63 Pro Forma Share Count (Illustrative) Common GP Shares Outstanding Midstream Units Outstanding Exchange Ratio (Illustrative) Shares Issued to Midstream 186.2 188.0 1.60 x 300.8 GP Buys Midstream Transaction Source: GP 424 B4 filing dated 05-May-2017 and GP IDR Holdings LLC Limited Liability Company Agreement dated 31-Dec-2016; Bloomberg market data as of 27-Apr-2018 1 $19.63 20-trading day VWAP actual observed 20-day VWAP for 1-Sep-2017 29-Sep-2017. Additional Reference Materials 8 Total Pro Forma Shares Outstanding487.0 Conversion - Common Shares Issued12 Conversion - Common Shares Issued 4 Per Vested B Unit Entitlement$ 2.30 Per Vested B Unit Entitlement $ 0.62 Total Entitlement$ 227 Total Entitlement $ 62 Memo: illustrative assumption Class B Share$ 227 Class B Share $ 62 Equity Value Subject to Series B Take$ 7,559 Equity Value Subject to Series B Take $ 1,026
PRELIMINARY CONFIDENTIAL DRAFT FOR DISCUSSION PURPOSES ONLY Illustrative Implied Series B Value Dividend Discount Model Through Series B Redemption in 2026 | ($ in millions) Management Case Replication Status Quo Series B Dividend Discount Model Management Forecast Illustrative Extension of Projections 2018E1 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E Midstream LP DPU Midstream LP DPU Y.o.Y. Growth Discount Period | Distributions Discount Factor | Distributions Discount Period | TV Discount Factor | TV GP DPS Y.o.Y. Growth Terminal Yield $ 1.33 $ 2.21 29 % 1.25 0.92 1.75 0.88 $ 0.89 107 % $ 2.85 29 % 2.25 0.85 2.75 0.82 $ 1.34 51 % $ 3.42 20 % 3.25 0.80 3.75 0.77 $ 1.74 30 % $ 4.10 20 % 4.25 0.74 4.75 0.72 $ 2.22 28 % $ 4.51 10 % 5.25 0.69 5.75 0.67 $ 2.51 13 % $ 4.96 10 % 6.25 0.65 6.75 0.62 $ 2.83 13 % $ 5.31 7 % 7.25 0.60 7.75 0.58 $ 3.07 9 % $ 5.41 2 % 8.25 0.56 8.75 0.54 $ 3.15 2 % 10.0 % 0.38 0.97 0.88 0.94 $ 0.43 Implied Future Market Cap Discount Rate $ 5,861 7.3 % Series B Cash Flows Memo: MGMT Series B CF Y.o.Y. Growth $ 2 2 $ 9 9 325 % $ 23 23 165 % $ 25 25 9 % $ 34 34 37 % $ 38 38 14 % $ 43 43 13 % $ 47 47 9 % $ 48 48 3 % Implied Shares Issued to Series B 7.4 Source: Arkose Projections, Wall Street research and Bloomberg market data as of 27-Apr-2018 Note: Assumes transaction date of 1-Jan-2018. Assumes mid-year convention starting Q2 2018. 1 2018E adjusted for Q1 distributions paid. Additional Reference Materials 9 Implied PV of Distributions$ 183 Implied PV of Terminal Value126 Implied Series B Value309 Discounted Distributions$ 2$ 8$ 19$ 20$ 25$ 26$ 28$ 28$ 27 Discounted Terminal Value126 Terminal Value Based on DDM-Implied Future GP Market Cap$ 232 Implied GP Share Price$29.65 Discounted Distributions$ 0.42$ 0.81$ 1.14$ 1.39$ 1.65$ 1.74$ 1.83$ 1.85$ 1.77 Discounted Terminal Value17.06 Terminal Value$ 31.48 GP Shares outstanding: 186
PRELIMINARY CONFIDENTIAL DRAFT FOR DISCUSSION PURPOSES ONLY Illustrative Implied Series B Value (Contd) Series B & GP Dividend Discount Model | ($ in millions) PV of Distributions PV of Terminal Value Total Value 8.0 % 10.0 % 12.0 % 8.0 % 10.0 % 12.0 % 8.0 % 10.0 % 12.0 % 7.25 % $ 126 $ 126 $ 94 $ 309 $ 309 $ 277 9.00 150 109 81 319 277 250 10.00 139 101 75 299 261 236 11.50 123 89 67 273 239 217 12.50 114 83 62 257 226 205 DDM Implied GP Share Price 8.0 % 10.0 % 12.0 % 7.25 % 9.00 10.00 11.50 12.50 Source: Arkose Projections, Wall Street research and Bloomberg market data as of 27-Apr-2018 Additional Reference Materials 10 $ 33.92$ 29.65$ 26.81 30.1226.4223.95 28.1824.7622.49 25.5622.5220.50 23.9821.1719.30 Cost of Equity Corresponding GP Illustrative Implied Terminal Yield $ 183$ 183$ 183 168168168 161161161 150150150 143143143 Cost of Equity Series B Illustrative Implied Terminal Yield Illustrative Implied Terminal Yield Illustrative Implied Terminal Yield
PRELIMINARY CONFIDENTIAL DRAFT FOR DISCUSSION PURPOSES ONLY Reconciliation from Series B Distributions to GP DPS ($ in millions) | Management Case Replication Reconciliation from Series B Distributions to GP DPS 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E Series B Dist Payable Incremental Series B Dist Declared $ 2 5 $ 9 4 $ 23 (3) $ 25 1 $ 34 0 $ 38 0 $ 43 0 $ 47 0 $ 48 0 Total Series B Value $ 7 $ 12 $ 20 $ 26 $ 34 $ 38 $ 43 $ 47 $ 48 (/) Series B Take (+) Annual Series B Threshold 6.0 % $ 30 6.0 % $ 30 6.0 % $ 30 6.0 % $ 30 6.0 % $ 30 6.0 % $ 30 6.0 % $ 30 6.0 % $ 30 6.0 % $ 30 (-) Series B Dist. (2) (9) (23) (25) (34) (38) (43) (47) (48) (-) G&A (-) Taxes (2) (34) (2) (56) (2) (85) (2) (110) (2) (140) (2) (158) (2) (179) (2) (194) (2) (199) GP Shares Outstanding 186 186 186 186 186 186 186 186 186 Source: Arkose Projections, Wall Street research and Bloomberg market data as of 27-Apr-2018 Additional Reference Materials 11 Implied GP DPS$ 0.56$ 0.91$ 1.32$ 1.75$ 2.22$ 2.51$ 2.83$ 3.07$ 3.15 Total Implied 2026E GP DCF$ 105$ 169$ 246$ 326$ 413$ 467$ 527$ 572$ 586 Implied GP Cash Flow$ 141$ 227$ 333$ 437$ 556$ 628$ 707$ 768$ 787 Implied CF to IDR Holding LLC$ 143$ 236$ 355$ 462$ 589$ 666$ 750$ 815$ 835