Investment Research Presentation

Month Day, 20XX

1

Halcon Resources NYSE: HK

Sector: EnergySenior Analysts: Robert Bonigli-Hinson Junior Analysts: Andrew Lambrecht, Christian Metzger, Nick Aubin

Spring 2018

2

Valuation Summary

REIT’s

Recommendation BUY

Target Price: $10.59

Target Price: $9.07

Key Drivers for Price Target:

Abundance of cash for growth Well poised to take advantage of positive

industry trends Strong performance from new land

acquisitions Increased emphasis on controlling costs

and improving margins

3

Agenda

REIT’s

Industry Definition & Breakdown

Company Overview

Revenue Generation Model

Industry & Company Trends

Risk Analysis

Comparables & DCF Valuation

Summary/Recommendation

4

Industry Definition

The Oil Drilling & Gas Extraction industry consists of companies that operate and develop oil and gas field properties, primarily concerned with the drilling and extraction of raw materials used for Gas and Oil products or services. - Some Services are contracted solely as drillers and work as intermediaries for Oil E&P

companies- Some others act as an integrated companies that both buy, extract, and sell the oil and

Natural Gas Liquids (NGLs) that they produce and refine from their wells

Sources: IBISWorld, CNBC

NYSE: REN

Market Cap: 807MNYSE: GPOR

Market Cap: 1.8BNYSE: ECR

Market Cap: 407M

NYSE: CPE

Market Cap: 2.5B

NYSE: FANG

Market Cap: 11BNYSE: SRCI

Market Cap: 2.5B

5

Industry Breakdown

REIT’sOil & Natural Gas breakdown by sales

Source: REIT.com, InvestSnips

Crude Oil & Lease

Condensate

Natural Gas Liquids

Dry Natural Gas

59.4%

Total Size: 255.7B

34.4%

6.2%

0 1 2 3 4 5 6 7 8 9 1011

Russia

Saudi Arabia

U.S

Iraq

China

Canada

Nigeria

Mexico

Venezuela

Production (Mb/d)

Oil Production by country

6

REIT’s

Supply cuts coupled with increasing demand allow the U.S to grab market share in Oil market. Increased efficiency allows them to stay in the oil market.

• Shift in production capabilities of drillers: - Increased efficiency of rigs in low periods of activity

- Declining Rig counts due to oil price buts led to higher emphasis on cost control and containment

- Aggregate number of rigs doubled last year while costs have increased only 3% on average the last 2 years

- In addition to rig efficiency land acquisitions have increased 13% while total deal value decreased 58%- signaling careful selection of oil rich wells

• Supply cuts & strong global demand:- OPEC Production cut agreements continue to reduce share of

supply

- OPEC & Non-OPEC countries agreement to cut production to stabilize prices has been extended past 2018

- Since production cuts U.S has increased Production on average 9.85% and is projected to increase production 14.5% from 2017-2018

- Increased Global Demand for Oil fuels growth

- Global Demand for oil has been steadily increasing at a rate of 1.2% and 1.7% annually for the years 2016 & 2017 respectively. Expectations for 2018 are 1.5%

Industry Trends: Shifts in production & supply create favorable environment for U.S oil

Source: Bloomberg.com, University of Michigan

0100200300400500600700800

0

100

200

300

400

500

600

700

Jan-1

5

Apr-

15

Jul-1

5

Oct-

15

Jan-1

6

Apr-

16

Jul-1

6

Oct-

16

Jan-1

7

Apr-

17

Jul-1

7

Oct-

17

Jan-1

8

Barr

els

/day

Rig

Co

un

t

Oil Rig Efficiency: Permian Basin

Rig Count Oil Production/Rig

-2

0

2

4

Jan-15 Jun-15 Nov-15 May-16 Oct-16 Apr-17 Sep-17

Mb/d

OPEC and Non-OPEC Oil SupplyChange Y-O-Y

OPEC Non-OPEC NGL Total

7

Company Overview

Halcon Resources

2016 2017

Revenue $418 million $378 million

Rig Count 3 4

Net Debt 1.1 Billion 409 million

Net Acreage 150,000+ net Acres 67,000 net Acres

Cash on hand $8 Million $424 Million

Halcon Resources is a Texas based energy company that drills, extracts, and refines its own oils and NGLs. It has been based in most of the south and west but has sold off assets and become a Delaware Basin Pure-Play; allowing an abundance of cash.

• Currently operating about 3 rigs with 1 on standby and plan to increase with increase in drilling in new wells

• Delaware pure-play so primarily focused on wells in west Texas that have rich, dense oil

• After suffering losses (as most oil companies did in the last few years) Halcon has restructured itself to hedge against instability in price changes

Source: STAG 10k, Seeking Alpha

CEO: Floyd C. Wilson

VP: Stephen W. Herod

CFO: Mark J. Mize

Management Team

8

Revenue Generation Model

REIT’s

• Companies typically go to a specific basin and bid for or purchase the land that they believe is rich with good oilExplore/Site Purchase

• Drilling for Shale oil- Typically done through hydraulic fracturing. This is either done vertically or horizontally depending on the well type.

Drilling/

Extraction

• Maintaining oil Rig upkeep is an important part of the drilling company this includes things such as: Perforating, logging, fracturing, cementing, casing etc.

Maintenance

• Halcon may hold reserves, and may have a certain reserve requirement as inventory. They unload these reserves when demand creeps up and prices rise

Reserves

• The End Users are the companies who use the crude or shale oil for their everyday business operations these are typically construction companies, auto industries, and machinery industries

End Users

9

Company Trends Overview

REIT’s

Restructuring of Company

Increased emphasis on costs and

efficiency

10

Restructuring of company leading to greater liquidity to execute growth plans

Company restructuring and cash

abundance

Divestiture in both Eagle and Williston

wells have led to greater liquidity and

essentially a clearing of balance sheets

(678 M in liquidity)

With massive amounts of cash on hand

Halcon has been primarily focused on

increasing its footprint in the Delaware

Basin and deleveraging ( eliminating 60%

of debt)

Clearing of Balance sheets has allowed

restructuring of debt and allowing Halcon

to become more flexible in growth

strategies

Growth strategy and CapEx

Y-O-Y change in production capabilities is

expected to grow at a CAGR of 154% over

the next 3 years

Between $280-320 Million and $30 Million is

expected to be spent of drilling completion

(Land, Equipment) & Infrastructure

respectively

Price of oil can fall to $40 before limiting

growth plan

0

10000

20000

30000

40000

50000

2017 2018 E 2019 E 2020 E

Production Growth: Boe/d

$25.00

$35.00

$45.00

$55.00

$65.00

$75.00

8-Jan-16 8-Jan-17 8-Jan-18

Price of oil per barrel (WTI)

Ideal Lower level

price

Growth-limiting price

Key Takeaway:

Halcon’s restructuring allowed it do deleverage

and implement massive growth strategy. Because

of this restructuring of balance sheets it can

hedge itself against fluctuations in price of oil.

Sources: Capital-IQ, Halcon 10-k, Earnings Call, Seeking Alpha

11

Increased emphasis on efficient land acquisition: Higher cuts of oil

Emphasis on 3 new draw regions and

increased oil differentials

Divestiture in Eagle Ford and Willington

regions to focus on 3 draw regions (West

Quito, Momentum, & Hackberry)

These new draws have led to wells with

higher quality oil with differentials increasing

from 90% to 95%

The higher quality of wells has increased

recovery rate of oil by over 10% and strong

performance by each well most 30IP are

over 1400 Boe/d exceeding expectations

Land Acquisitions at cheap prices

▪ Cost inflation poses serious risk to Drilling

industry, Halcon has shifted focus on

controlling costs and improving EBITDA

Margins

▪ Halcon has been able to acquire land in

Delaware Basin for 17,000/ net acre where

as the average cost to other producers were

over 30,000/ne acre

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

2013 2014 2015 2016 2017

Halcon EBITDA Margins

Large increase in margins

due to high oil prices

Increased margins

likely due to price

stabilization

Sources: Capital-IQ, Halcon 10-k, Merrill Lynch Analyst,

SEC.gov

$40,571

$40,567

$34,884

$32,832

$32,019

$31,690

$27,372

$24,845

$22,319

$17,001

OXY

OAS

Silver Run

CPE

PE

NE

FANG

FANG 2

CRZO

HK

$ /Adjusted Acre

12

Risks

REIT’s

• Price fluctuations may pose one of the greatest risks. If OPEC nations do not comply then supply shocks will disrupt the price of oil and drag down to unsustainable levels. Halcon can withstand this but this does limit growth opportunities

Price Fluctuations

• Cost inflation seems to be a large problem in the very machinery heavy industry of oil production. Plus at this time in restructuring their company, Halcon needs to maintain costs in order to grow the way they need to.

Cost inflation

• Litigation surrounding the hydraulic fracturing methods to produce shale oil has become stringent but has been fought by the current administration. However with growing concerns about the climate, renewables have had a large push.

Litigation/Renewables

With the current climate of political standing and the ability of oil companies to contain costs, Halcon is poised to do very well. However, though Halcon has done well to hedge against these risks they do pose a long term concern.

Key Takeaway

13

Comparable Analysis

REIT’s

Comparable Company Analysis

LTM data ( MM-DD-YYYY )

Company Ticker EV Market Cap Revenue EBITDA Net Income P/E EV/EBITDA EV/Revenue

Halcon Resources HK 744.4 759.3 378.0 30.10% 141.70% 1.4x 6.5x 2.0x

Resolute Energy REN 1,354.0 807.1 303.5 45.10% (4.00%) 9.9x 4.5x

Gulfport Energy GPOR 3,779.6 1,840.4 1,085.5 84.50% 40.10% 4.2x 4.1x 3.5x

Eclipse Resources ECR 885.2 407.4 383.7 53.60% 15.10% 7.0x 4.3x 2.3x

Callon Petroleum CPE 3,189.3 2,597.0 366.6 66.80% 33.00% 21.5x 13.0x 8.7x

High 21.5x 13.0x 8.7x

Mean 10.9x 7.8x 4.7x

Median 7.0x 7.1x 4.0x

Low 4.2x 4.1x 2.3x

14

DCF Valuation

REIT’s

15

Recommendation Summary

Recommendation BUY

Key Takeaways Summary:

Halcon is able to differentiate itself from

other oil drillers through:

• Its unique and rapid growth plans

• Improved and strongly performing

wells

• Increased liquidity

• Strong emphasis on cost efficiency in

operations and in land acquisition

16

Thank You

17

Appendix

18

Income Statement

Historical Forecasted

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Revenue 1,000.0 1,093.0 549.8 395.3 415.3 225.4 597.9 955.1 1,088.7 1,222.6

% growth 9.3% -49.7% -28.1% 5.1% -45.7% 165.2% 59.8% 14.0% 12.3%

COGS (excl. D&A) (245.8) (279.4) (213.7) (186.0) (155.0) (72.5) (199.7) (286.5) (299.4) (317.9)

% of Revenue 24.58% 25.56% 38.87% 47.05% 37.32% 32.16% 33.40% 30.00% 27.50% 26.00%

Gross Profit 754.2 813.6 336.1 209.3 260.3 152.9 398.2 668.6 789.3 904.8

% Margin 75.4% 74.4% 61.1% 52.9% 62.7% 67.8% 66.6% 70.0% 72.5% 74.0%

SG&A (132.4) (116.5) (87.8) (125.0) (110.4) -44.21872902 (117.3) (187.3) (213.5) (239.8)

% of Revenue 13.24% 10.66% 15.97% 31.62% 26.58% 19.61% 19.61% 19.61% 19.61% 19.61%

EBITDA 621.8 697.1 248.3 84.3 149.9 108.7 280.9 481.2 575.7 664.9

% Margin 62.2% 63.8% 45.2% 21.3% 36.1% 48.2% 47.0% 50.4% 52.9% 54.4%

Depreciation (463.7) (534.4) (364.2) (167.5) (110.2) (50.4) (133.7) (213.6) (243.5) (273.5)

Amort. of Intangibles - - - - - - - - - -

Total D&A (463.7) (534.4) (364.2) (167.5) (110.2) (50.4) (133.7) (213.6) (243.5) (273.5)

Other Operating Expenses (31.2) 519.0 310.3 (45.7) 1.3 150.7 150.7 150.7 150.7 150.7

Total Operating Expenses (627.3) (131.9) (141.7) (338.2) (219.3) 56.1 (100.3) (250.3) (306.3) (362.6)

Operating Income (EBIT) 126.9 681.7 194.4 (128.9) 41.0 209.0 297.9 418.3 483.0 542.2

% Margin 12.7% 62.4% 35.4% -32.6% 9.9% 92.7% 49.8% 43.8% 44.4% 44.3%

Interest Expense (55.2) (148.8) (224.6) (156.1) (71.1) (25.8) (25.8) (25.8) (25.8) (25.8)

Interest Income - - - - - - - - - -

Net Interest Inc. (Exp) (55.2) (148.8) (224.6) (156.1) (71.1) (25.8) (25.8) (25.8) (25.8) (25.8)

Other Non-Operating Income (3.0) 3.1 (8.3) 5.0 - - - - - -

EBT Excl. Unusual Items 68.7 536.0 (38.5) (280.0) (30.1) 183.3 272.1 392.6 457.2 516.4

% Margin 6.9% 49.0% -7.0% -70.8% -7.2% 81.3% 45.5% 41.1% 42.0% 42.2%

Unusual Items (1,444.1) (275.0) (1,872.7) (210.7) 596.7 - - - - -

EBT Incl. Unusual Items (1,375.4) 261.0 (1,911.2) (490.7) 566.6 183.3 272.1 392.6 457.2 516.4

Income Tax Expense 157.7 1.1 (9.1) 3.9 5.0 -64.13865192 (95.2) (137.4) (160.0) (180.7)

Earnings from Cont. Ops (1,217.7) 262.1 (1,920.3) (486.8) 571.6 119.1 176.9 255.2 297.2 335.7

Earnings from Discounted Ops. - - - - - - - - - -

Extraord Item & Acct. Change - - - - - - - - - -

Net Income to Company (1,217.7) 262.1 (1,920.3) (486.8) 571.6 119.1 176.9 255.2 297.2 335.7

Minority Int. in Earnings - - - - - 0 0 0 0 0

Net Income (1,217.7) 262.1 (1,920.3) (486.8) 571.6 119.1 176.9 255.2 297.2 335.7

% Margin -121.8% 24.0% -349.3% -123.1% 137.6% 52.8% 29.6% 26.7% 27.3% 27.5%

EPS $ (511.83) $ 91.64 $ (572.74) $ (5.83) $ 3.52 $ 0.80 $ 1.19 $ 1.72 $ 2.00 $ 2.26

19

Balance Sheet

Historical Forecasted

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Cash And Equivalents 2.8 43.7 8.0 - 424.1 1,196.2 677.4 247.3 278.4 349.9

Accounts Receivable 300.3 244.7 122.8 126.3 26.4 51.0 135.2 216.0 246.2 276.5

Other Recievables 22.7 8.9 3.9 2.9 16.2 (1.2) (3.4) (4.8) (5.0) (5.4)

Total Receivables 323.0 253.6 126.7 129.2 42.6 49.8 131.8 211.1 241.1 271.1

Inventory 5.1 4.7 4.6 - 4.3 1.3 3.5 5.0 5.2 5.5

Prepaid Exp. 5.6 6.0 4.6 6.7 - 1.5 4.1 5.8 6.1 6.5

Other Current Assets 2.1 394.7 412.7 24.8 0.8 50.6 139.4 200.1 209.0 221.9

Total Current Assets 338.6 702.7 556.6 160.7 471.8 1,299.3 956.2 669.3 739.8 855.0

Gross Property, Plant & Equipment 7,114.3 8,347.4 8,832.2 1,624.1 1,744.4 1,075.5 1,954.1 2,882.3 3,392.8 3,934.3

Accumulated Depreciation (2,198.0) (2,967.8) (5,956.1) (467.0) (574.2) (624.6) (758.4) (972.0) (1,215.5) (1,489.0)

Net Property, Plant & Equipment 4,916.3 5,379.6 2,876.1 1,157.1 1,170.2 450.9 1,195.7 1,910.2 2,177.3 2,445.3

Long-term Investments 4.5 4.3 - - - - - -

Goodwill - - - - - - - -

Other Intangibles - - - - - - - -

Deferred Tax Assets, Current & LT 8.5 136.8 - - - - - -

Deferred Charges, LT 64.3 4.7 7.6 - - - - - -

Other Long-Term Assets 24.2 155.2 18.4 1.9 1.7 1.7 1.6 1.6 1.6 1.5

Total Assets 5,356.4 6,383.3 3,458.7 1,319.7 1,643.7 1,751.9 2,153.5 2,581.2 2,918.8 3,301.8

Accounts Payable 87.7 60.5 47.3 24.4 35.7 16.8 46.2 66.3 69.2 73.5

Accrued Exp. 106.3 115.8 111.4 48.7 22.8 32.4 85.9 137.2 156.4 175.6

Curr. Income Taxes Payable - - 9.2 - 13.0 19.3 27.8 32.4 36.5

ST Debt 9.9 136.8 -

Other Current Liabilities 460.5 431.6 127.5 134.5 91.8 77.3 212.9 305.5 319.2 338.9

Total Current Liabilities 664.4 744.7 295.4 207.6 150.3 139.4 364.2 536.7 577.1 624.6

Long Term Debt 3,183.0 3,695.5 2,873.6 964.7 409.2 409.2 409.2 409.2 409.2 409.2

Capital Leases & Current Portion - - - - - - - -

Unearned Revenue, Non-Current - - - - - - - -

Def. Tax Liability, Non-Curr. - - - - - - - -

Other Non-Current Liabilities 60.7 53.7 53.4 34.8 12.1 12.1 12.1 12.1 12.1 12.1

Total Liabilities 3,908.1 4,493.9 3,222.4 1,207.1 571.6 560.7 785.5 958.0 998.4 1,045.9

Common Stock - - - - - - - -

Additional Paid In Capital 2,953.8 2,995.4 3,283.1 592.7 1,016.3 1,016.3 1,016.3 1,016.3 1,016.3 1,016.3

Retained Earnings (1,506.2) (1,223.3) (3,230.7) (480.0) 55.7 174.8 351.7 606.9 904.0 1,239.7

Treasury Stock - - - - - - - -

Comprehensive Inc. and Other - - - - - - - -

Total Common Equity 1,447.6 1,772.1 52.4 112.7 1,072.0 1,191.1 1,368.0 1,623.2 1,920.3 2,256.0

Minority Interest - 117.2 184.0 - - - - - -

Total Equity 1,447.6 1,889.3 236.4 112.7 1,072.0 1,191.1 1,368.0 1,623.2 1,920.3 2,256.0

Total Liabilities and Equity 5,355.7 6,383.2 3,458.8 1,319.8 1,643.6 1,751.8 2,153.5 2,581.2 2,918.8 3,301.9

Balance Check OK OK OK OK OK OK OK OK OK OK

20

Revenue Estimates

Segment I

Historical Forecasted

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Volume 890.0 939.0 474.0 330.7 340.7 140.0 500.0 843.0 960.2 1,075.4

Price 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0

Total 890.0 939.0 474.0 330.7 340.7 140.0 500.0 843.0 960.2 1,075.4

% Growth 5.5% -49.5% -30.2% 3.0% -58.9% 257.1% 68.6% 13.9% 12.0%

Volume Growth 5.5% -49.5% -30.2% 3.0% -58.9% 257.1% 68.6% 13.9% 12.0%

Price Growth 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Segment II

Historical Forecasted

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Volume 24.6 37.5 13.6 13.9 19.0 22.0 25.6 29.7 34.4 39.9

Price 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0

Total 24.6 37.5 13.6 13.9 19.0 22.0 25.6 29.7 34.4 39.9

% Growth 52.4% -63.7% 2.2% 36.7% 16.0% 16.0% 16.0% 16.0% 16.0%

Volume Growth 52.4% -63.7% 2.2% 36.7% 16.0% 16.0% 16.0% 16.0% 16.0%

Price Growth 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Segment III

Historical Forecasted

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Volume 30.4 39.5 24.3 18.4 18.3 20.7 23.4 26.4 29.8 33.7

Price 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0

Total 30.4 39.5 24.3 18.4 18.3 20.7 23.4 26.4 29.8 33.7

% Growth 29.9% -38.5% -24.3% -0.5% 13.0% 13.0% 13.0% 13.0% 13.0%

Volume Growth 29.9% -38.5% -24.3% -0.5% 13.0% 13.0% 13.0% 13.0% 13.0%

Price Growth 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total Revenues

Historical Forecasted

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Segment I 945.0 1,016.0 511.9 363.0 378.0 182.7 548.9 899.1 1,024.4 1,149.0

Segment II 24.6 37.5 13.6 13.9 19.0 22.0 25.6 29.7 34.4 39.9

Segment III 30.4 39.5 24.3 18.4 18.3 20.7 23.4 26.4 29.8 33.7

Total 1,000.0 1,093.0 549.8 395.3 415.3 225.4 597.9 955.1 1,088.7 1,222.6

-45.72% 165.20% 59.76% 13.98% 12.31%

Cost of Goods Sold Estimates (excl. D&A)

Total COGS

Historical Forecasted

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Segment I (11.7) (26.7) (40.3) (14.7) (40.8) (16.91) (38.86) (52.53) (59.88) (61.13)

Segment II (139.2) (130.2) (103.6) (22.4) (61.7) (29.31) (85.50) (128.94) (130.64) (146.72)

Segment III (94.9) (122.5) (69.8) (148.9) (52.5) (26.3) (75.3) (105.1) (108.9) (110.0)

Total COGS (245.8) (279.4) (213.7) (186.0) (155.0) (72.5) (199.7) (286.5) (299.4) (317.9)

Segment I % COGS 1.17% 2.44% 7.33% 3.72% 9.82% 7.50% 6.50% 5.50% 5.50% 5.00%

Segment II % COGS 13.92% 11.91% 18.84% 5.67% 14.86% 13.00% 14.30% 13.50% 12.00% 12.00%

Segment III % COGS 9.49% 11.21% 12.70% 37.67% 12.64% 11.66% 12.60% 11.00% 10.00% 9.00%

21

Statement of Cash Flows

Historical Forecasted

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Net Income (1,217.7) 262.1 (1,920.3) (486.8) 571.6 119.1 176.9 255.2 297.2 335.7

Add: Depreciation & Amortization 463.7 534.4 364.2 167.5 110.2 50.4 133.7 213.6 243.5 273.5

Less: Change in Net Working Capital - (242.9) (338.9) 300.1 55.7 (66.3) 49.1 29.3 1.0 3.8

Less: Capital Expenditures - - - - - 668.9 (878.6) (928.2) (510.6) (541.5)

Operating Cash Flow (754.0) 553.6 (1,895.0) (19.2) 737.5 772.1 (518.9) (430.1) 31.1 71.5

Initial Cash Balance - 2.8 43.7 8.0 - 424.1 1,196.2 677.4 247.3 278.4

Cash Available for Investors (754.0) 556.4 (1,851.3) (11.2) 737.5 1,196.2 677.4 247.3 278.4 349.9

Debt Additions (Repayments) - - - - - - - - - -

Dividend Payments 10.7 33.0 84.3 45.5 48.0 - - - - -

Equity Additions (Share Repurchase) - - - - - - - - - -

Historical Cash Adjustment 746.1 (545.7) 1,775.0 (34.3) (361.4) - - - - -

Ending Cash Balance 2.8 43.7 8.0 - 424.1 1,196.2 677.4 247.3 278.4 349.9

22

Capital Asset Pricing Model Notes

Beta 2.21 Regression Beta (5Y, Weekly) from Internet: Use Google Finance, Reuters, Bloomberg, or CapIQ

Risk-free Rate 2.77% Use most recent yield on 10-Year U.S. Treasuries (http://data.cnbc.com/quotes/US10Y)

Base Risk Premium 1.77% Use historical equity risk premium from Ibbotson Associates

Market Cap 772.72$

Size Premium 1.77%

CAPM 8.45%

Cost of Debt

You can use morningstar.com or bloomberg to find bonds and yield of companies

Debt Tranche Type of Debt Value % of Total Coupon Yield Maturity Seniority Callable Convertible Currency

1 Senior Secured Notes 409 100% 6.8% 6.30% Feb-17-2025 Senior No No USD

2 0%

3 0%

4 0%

5 0%

Total Value of Debt 409.2

Cost of Debt 6.30% Weighted average of the different yields

23

Discounted Cash Flow Analysis

Key Statistics: Perpetuity Growth Method Exit Multiple Method

Current Trading Price (04-17-2018) 5.20$ Growth Rate 2.00% EBITDA Multiple 6.50x

Market Cap 772.72$ Undiscounted TEV 1,821.7$ Undiscounted TEV 4,322.1$

Net Debt (14.93)$ Discounted TEV 1,302.3$ Discounted TEV 3,089.8$

Beta 2.21 DCF Value 1,362.7$ DCF Value 3,150.2$

Shares Outstanding 148.60 Equity Value 1,377.7$ Equity Value 3,165.1$

Marginal Tax Rate 35.00% Share Price 9.27$ Share Price 21.30$

Implied Exit Multple 2.74 Implied Growth Rate 4.80%

Growth Rate Sens. Ref 2.00% Exit Mutliple Sens. Ref 6.50x

Forecasted

WACC Calculation: 2018 2019 2020 2021 2022

Cost of Debt 4.10% EBIT 209.03$ 297.92$ 418.33$ 482.96$ 542.19$

% Weight 35% - Taxes -73.16 -104.27 -146.42 -169.04 -189.77

135.87$ 193.64$ 271.92$ 313.93$ 352.42$

Cost of Equity 8.45% + D&A 50.43 133.74 213.65 243.52 273.49

% Weight 65% - CAPEX 668.90 (878.59) (928.16) (510.58) (541.47)

- Δ in NWC (66.30) 49.12 29.28 0.99 3.84

WACC 6.94% Unlevered FCF 788.89$ (502.10)$ (413.32)$ 47.85$ 88.29$

WACC Sens. Ref. 6.94% Net Present Value $60.43

Risks - Sensitivity Analysis [Hidden]