Note 1—Organization and Presentation

Defined Terms

Unless the context clearly indicates otherwise, references in these unaudited condensed consolidated financial statements (“interim statements”) to “Arc Logistics” or the “Partnership” refer to Arc Logistics Partners LP and its subsidiaries. Unless the context clearly indicates otherwise, references to our “General Partner” refer to Arc Logistics GP LLC, the general partner of Arc Logistics. References to “Sponsor” or “Lightfoot” or “Lightfoot Entities” refer to Lightfoot Capital Partners, LP (“LCP LP”) and its general partner, Lightfoot Capital Partners GP LLC (“LCP GP”). References to “Center Oil” refer to GP&W, Inc., d.b.a. Center Oil, and affiliates, including Center Terminal Company-Cleveland, which contributed its limited partner interests in Arc Terminals LP, predecessor to Arc Logistics, to the Partnership upon the consummation of the Partnership’s initial public offering in November 2013 (“IPO”). References to “Gulf LNG Holdings” refer to Gulf LNG Holdings Group, LLC and its subsidiaries, which own a liquefied natural gas regasification and storage facility in Pascagoula, MS, which is referred to herein as the “LNG Facility.” The Partnership owns a 10.3% limited liability company interest in Gulf LNG Holdings, which is referred to herein as the “LNG Interest.”

Organization and Description of Business

The Partnership is a fee-based, growth-oriented Delaware limited partnership formed by Lightfoot in 2007 to own, operate, develop and acquire a diversified portfolio of complementary energy logistics assets. The Partnership is principally engaged in the terminalling, storage, throughput and transloading of crude oil, petroleum products and other liquids. The Partnership is focused on growing its business through the optimization, organic development and acquisition of terminalling, storage, rail, pipeline and other energy logistics assets that generate stable cash flows.

In November 2013, the Partnership completed its IPO by selling 6,786,869 common units (which includes 786,869 common units issued pursuant to the exercise of the underwriters’ over-allotment option) representing limited partner interests in the Partnership at a price to the public of $19.00 per common unit. In connection with the IPO, the Partnership amended and restated its $40.0 million revolving credit facility.

The Partnership’s energy logistics assets are strategically located in the East Coast, Gulf Coast, Midwest, Rocky Mountains and West Coast regions of the United States and supply a diverse group of third-party customers, including major oil companies, independent refiners, petroleum product and other liquid marketers, distributors and various industrial manufacturers. Depending upon the location, the Partnership’s facilities possess pipeline, rail, marine and truck loading and unloading capabilities allowing customers to receive and deliver product throughout North America. The Partnership’s asset platform allows customers to meet the specialized handling requirements that may be required by particular products. The Partnership’s combination of diverse geographic locations and logistics platforms gives it the flexibility to meet the evolving demands of existing customers and address those of prospective customers.

As of September 30, 2017, the Partnership’s assets consisted of:

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21 terminals in twelve states located in the East Coast, Gulf Coast, Midwest, Rocky Mountains and West Coast regions of the United States with approximately 7.8 million barrels of crude oil, petroleum product and other liquids storage capacity;

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four rail transloading facilities with approximately 126,000 bpd of throughput capacity; and

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the LNG Interest in connection with the LNG Facility, which has 320,000 M³ of LNG storage, 1.5 bcf/d natural gas sendout capacity and interconnects to major natural gas pipeline networks.

The Partnership interests included the following as of September 30, 2017:

19,545,944 common units representing limited partner interests (of which 5,242,775 common units are held by Lightfoot);

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a non-economic general partner interest (which is held by our General Partner, which is owned by Lightfoot); and

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incentive distribution rights (which are held by our General Partner, which is owned by Lightfoot).

Merger Transaction

On August 29, 2017, the Partnership, the General Partner (together with the Partnership, the “MLP Entities”), the Lightfoot Entities, Zenith Energy U.S., L.P., a Delaware limited partnership (“Parent”), Zenith Energy U.S. GP, LLC, a Delaware limited liability company and the general partner of Parent (“Parent GP”), Zenith Energy U.S. Logistics Holdings, LLC, a Delaware limited liability company and a subsidiary of Parent (“Holdings”), and Zenith Energy U.S. Logistics, LLC, a Delaware limited liability company and a subsidiary of Holdings (“Merger Sub” and, together with Parent, Parent GP and Holdings, the “Parent Entities”), entered into a Purchase Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which Merger Sub will, upon the terms and subject to the conditions thereof, merge with and into the Partnership (the “Merger”), with the Partnership surviving the Merger as a subsidiary of Parent, and LCP GP will transfer to Holdings 100% of the issued and outstanding membership interests in the General Partner, including all rights and obligations relating thereto and all economic and capital interest therein (the “GP Equity Transfer”).

The conflicts committee (the “GP Conflicts Committee”), of the General Partner’s Board of Directors (the “Board”), after consultation with its independent legal and financial advisors, unanimously (i) determined that it is fair and reasonable and in the best interests of the Partnership and the holders of common units representing limited partner interests in the Partnership other than the Lightfoot Entities and their controlling affiliates to enter into the Merger Agreement and consummate the Merger, (ii) approved the Merger Agreement and the Merger, such approval constituting Special Approval pursuant to Section 7.9(d) of the Partnership’s partnership agreement, (iii) recommended approval of the Merger Agreement and the Merger by the Board, (iv) recommended that the Board direct the Merger Agreement to be submitted to a vote of the Partnership’s limited partners at a special meeting and (v) recommended that the Partnership’s limited partners approve the Merger Agreement and the Merger. The Board, acting based in part upon the recommendation of the GP Conflicts Committee, unanimously (i) determined that it is fair and reasonable and in the best interests of the Partnership and its common unitholders to enter into the Merger Agreement and consummate the Merger, (ii) approved the Merger Agreement and the Merger, (iii) directed the Merger Agreement to be submitted to a vote of the Partnership’s limited partners at a special meeting and (iv) determined to recommend that the Partnership’s limited partners approve the Merger Agreement and the Merger.

Upon the Merger and GP Equity Transfer becoming effective (the “Effective Time”), (a) each common unit representing a limited partner interest in the Partnership issued and outstanding immediately prior to the Effective Time (other than those common units owned by the Lightfoot Entities (the “Sponsor Units”)) will be converted into the right to receive an amount in cash equal to $16.50 per common unit, no longer be outstanding, automatically be cancelled and cease to exist, (b) each Sponsor Unit issued and outstanding immediately prior to the Effective Time will be converted into the right to receive an amount in cash equal to $14.50 per common unit, no longer be outstanding, automatically be cancelled and cease to exist, in each case, upon the terms and subject to the conditions set forth in the Merger Agreement and (c) Holdings will (or Parent will on Holdings’ behalf) pay to LCP GP $94,500,000 in cash in exchange for 100% of the membership interests in its General Partner acquired by Holdings in connection with the GP Equity Transfer.

Unless otherwise mutually agreed by the parties, including with the approval of the GP Conflicts Committee, the Merger will not be consummated earlier than November 30, 2017. The consummation of the Merger and the GP Equity Transfer is subject to the satisfaction or waiver of a number of conditions, including, among others: (i) receipt of the approval by the holders of a majority of the Partnership’s outstanding common units at a special meeting of its common unitholders of the Merger Agreement and the Merger (the “MLP Unitholder Approval”), (ii) expiration or termination of the waiting period applicable to the Transactions (as defined below) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (which termination was granted on September 22, 2017), (iii) the absence of certain legal impediments to the consummation of the Merger, (iv) the accuracy or waiver of the parties’ representations and warranties, (v) the performance of the parties’ obligations under the Merger Agreement, (vi) nothing has occurred (excluding, among other things, (a) developments generally affecting the prices of commodities, or (b) any changes in or effect upon the business or condition (financial or otherwise) of the MLP Entities and its subsidiaries or any adverse consequences upon or affecting Gulf LNG Holdings or its direct or indirect equityholders as a result of the outcome of that certain arbitration proceeding between Eni USA Gas Marketing L.L.C. and certain operating subsidiaries of Gulf LNG Holdings, as more fully described in Note 4 below) resulting in or reasonably expected to result in a material adverse effect on the business or financial results or condition of the MLP Entities, (vii) nothing has occurred that has a material adverse effect on the ability of the MLP Entities or the Lightfoot Entities to consummate the Transactions, (viii) the Partnership’s receipt of a legal opinion regarding certain tax matters, (ix) Holdings’ receipt of the written resignations of each member of the Board and each officer of the General Partner, dated to be effected as of the Effective Time, and (x) Parent GP’s receipt of the transition services agreement related thereto.

Additionally, the consummation of the Merger and the GP Equity Transfer is subject to the consummation or contemporaneous consummation of (a) the purchase by Holdings and the Lightfoot Entities of certain of the interests in Arc Terminals Joliet Holdings LLC, a Delaware limited liability company (“Joliet Holdings”), held by EFS Midstream Holdings LLC, a Delaware limited liability company (“GE EFS”) (such purchase, the “Joliet Purchase”), pursuant to the Purchase Agreement dated August 29, 2017, by and among Holdings, the Lightfoot Entities and GE EFS, and (b) the purchase by Holdings of a 5.51646% interest and, subject to certain conditions, an additional 4.16154% interest, in Gulf LNG Holdings from LCP LNG Holdings, LLC, a Delaware limited liability company and subsidiary of LCP LP (“LCP LNG”) (such purchase, the “Gulf LNG Purchase” and together with the Joliet Purchase, the Merger, the GP Equity Transfer and the other transactions contemplated by the Merger Agreement, the “Transactions”) pursuant to the Partially Conditional Purchase Agreement, dated August 29, 2017, by and among LCP LNG, the Lightfoot Entities, Parent, Parent GP, Holdings and, solely for the purposes of Section 1.1(d) of such agreement, the Partnership.

The Merger Agreement contains certain termination rights including, among others, (i) by mutual agreement of Parent GP and our General Partner, (ii) by either the General Partner or Parent GP, in the event that (a) a court issues a final, non-appealable order or injunction prohibiting the Merger, (b) after final adjournment of the special meeting of the Partnership’s limited partners, MLP Unitholder Approval has not been obtained, or (c) the Merger has not been consummated on or before February 7, 2018, subject to extension at Parent GP’s election to March 1, 2018, in certain circumstances as specified in the Merger Agreement (the “Outside Date”), (iii) by the General Partner, in the event (a) the GP Conflicts Committee withdraws its recommendation that the Partnership’s limited partners approve the Merger and Merger Agreement due to a superior proposal, the Board authorizes the MLP Entities to enter into an agreement with respect to such superior proposal and, concurrently with the termination of the Merger Agreement, the MLP Entities enter into such agreement, (b) any Parent Entity has breached any of its representations or warranties or has failed to perform any of its covenants or agreements which such breach or failure would prevent the satisfaction of a condition to the consummation of the Merger or is incapable of being cured within a specified time or (c) the Parent Entities fail to close within a specified time after receiving notice from the MLP Entities that all conditions to closing have been satisfied or waived and the MLP Entities stand ready, willing and able to close and (iv) by Parent GP, in the event that (a) any MLP Entity or any Lightfoot Entity has breached the non-solicit obligations under the Merger Agreement, (b) any MLP Entity or any Lightfoot Entity has breached any of its representations or warranties or has failed to perform any of its covenants or agreements which such breach or failure would prevent the satisfaction of a condition to the consummation of the Merger or is incapable of being cured within a specified time or (c) prior to final adjournment of the special meeting the Partnership’s limited partners, the Board withdraws its recommendation that the Partnership’s limited partners approve the Merger and Merger Agreement. Upon termination of the Merger Agreement under specific circumstances, the Partnership will be required to pay Parent a termination fee of $11,487,696 (the “MLP Termination Fee”). If the Merger Agreement is terminated (A) (i) due to the passing of the Outside Date, (ii) failure to obtain MLP Unitholder Approval or (iii) due to any Lightfoot Entity or MLP Entity’s failure to perform any covenant or agreement or the failure of any of the representations and warranties of any Lightfoot Entity or MLP Entity to be true and correct as of the date of the Merger Agreement and (B) any MLP Entity or Lightfoot Entity or affiliate thereof enters into an alternative acquisition within 12 months of such termination, the MLP Termination Fee is payable. The MLP Termination Fee is also payable in the event, among other things, that Parent terminates the Merger Agreement due to any MLP Entity or Lightfoot Entity’s breach of the non-solicit provisions in the Merger Agreement, excluding breaches that do not adversely affect the Parent Entities or the Transactions in any material respect, or if the Board withdraws its recommendation that the Partnership’s limited partners approve the Merger and the Merger Agreement due to a superior proposal, the Board authorizes the MLP Entities to enter into an agreement with respect to such superior proposal and, concurrently with the termination of the Merger Agreement, the MLP Entities enter into such agreement. The Merger Agreement also provides that Parent will be required to pay the Partnership a termination fee of $24,616,491 if the Merger Agreement is terminated under certain circumstances.

From the date of the Merger Agreement until the Effective Time, the Partnership plans to declare and pay quarterly distributions in the ordinary course of business and consistent with past practices. Assuming that the Merger has not closed by January 26, 2018, the Partnership expects that it would declare a distribution associated with the quarter ended December 31, 2017 on or about January 26, 2018, to be paid on or about February 15, 2018 to the Partnership’s common unitholders of record as of February 8, 2018. If, as anticipated, the Merger closes prior to the record date for the distribution associated with the fourth quarter of 2017, then the holders of the Partnership’s common units as of immediately prior to the closing of the Merger will not receive any distribution associated with the fourth quarter of 2017. If, alternatively, the Merger does not close by the record date for the distribution associated with the fourth quarter of 2017, then the Partnership plans to pay the fourth quarter distribution, on or around February 15, 2018, to the Partnership’s common unitholders of record as of the record date applicable to such distribution, irrespective of whether the Merger closes thereafter or whether the General Partner or Parent GP terminates the Merger Agreement after the Outside Date.

The Merger is targeted to close on or about December 21, 2017 and is subject to the right that each of the General Partner and Parent GP has to terminate the Merger Agreement if the Merger has not been consummated on or before the Outside Date. Additional information regarding the proposed transaction and the terms and conditions of the Merger Agreement are set forth in the Partnership’s definitive proxy statement for the special meeting of the Partnership’s common unitholders to consider and vote on the Merger Agreement and the Merger, filed on October 30, 2017.