Slide 1: Third Quarter 2013 Financial Results
Third Quarter 2013 Financial Results November 6, 2013 Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value
Slide 2: Notice To Investors
Notice To Investors This presentation contains “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are typically identified by words or phrases such as “will,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,”
Slide 3: Increased Oil Production and Residential Lot Sales Driving Improved Operating Results
Increased Oil Production and Residential Lot Sales Driving Improved Operating Results 3 • 3rd Qtr. 2013 results include a previously unrecognized tax benefit of approximately $6.3 million, or $0.17 per share, related to qualified timber gains from sales in 2009 • 3rd Qtr. 2012 real estate segment re
Slide 4: Third Quarter 2013 Operating Highlights
Third Quarter 2013 Operating Highlights Q3 2013 Total Segment EBITDA = $28.5 million Invested over $50 million in strategic and disciplined growth opportunities Leasing at Eleven and 360°; Midtown Cedar Hill under construction Sold 547 developed residential lots, average margin up 28% vs. Q3 2012 So
Slide 5: Real Estate Third Quarter 2013 Highlights
Real Estate Third Quarter 2013 Highlights Building Momentum By Accelerating Real Estate Sales and Building a Solid Multifamily Pipeline 5
Slide 6: Texas Job Growth Bolstering Housing Recovery
Texas Job Growth Bolstering Housing Recovery FOR Well Positioned With Lot Inventory in Texas Markets Source: Metrostudy. Not seasonally adjusted. 6 Market Active Residential Projects Q3 13 Lot Sales Vacant Dev. Lots Lots Under Dev. Remaining Lots to be Developed Austin 12 60 150 - 2,236 DFW 13 184 5
Slide 7: Real Estate – Results Reflect Improving Demand and Forestar's Ability to Deliver
$12.7 $10.6 $2.4 ($10.2) ($2.3) $13.2 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 Q3 2012 Residential & Commercial Sales Undeveloped Land Sales Gain on Sale of Multifamily Assets Commercial & Income Producing Properties Q3 2013 Real Estate – Results Reflect Improving Demand and Forestar’s Ability to Deliver
Slide 8: Real Estate Capitalizing on Housing Recovery
8 Note: Includes ventures 2013 average lot margin reflects YTD Q3 2013 A n n u al Lo t Sal e s 500 1,000 1,500 2,000 Q 4 1 0 Q1 1 1 Q 2 1 1 Q3 1 1 Q4 1 1 Q1 1 2 Q2 1 2 Q3 1 2 Q4 1 2 Q1 1 3 Q2 1 3 Q3 1 3 R esi d en tial Lo ts Developed Lots Lots Under Development 2006 Peak Sales = 3,600 lots Resident
Slide 9: Multifamily Developments On Track
Multifamily Developments On Track 9 Now Pre- Leasing Key Metrics ($ in millions) Units 304 FOR Equity Commitment $3 % Complete ~50% Total Est. Project Costs $49 Est. Proforma Stabilized NOI $3.8 360° – Denver, CO Eleven – Austin, TX Key Metrics ($ in millions) Units 257 FOR Equity Commitment $4 % Co
Slide 10: Core Real Estate Business Strengthening
Note: Includes consolidated ventures. Excludes mitigation. Forestar Real Estate Revenues (Excluding Timberland & Multifamily Revenues) Core Real Estate Business Strengthening 10 Capitalizing on housing recovery and position Repositioning lower-earning assets Developing multifamily line of business R
Slide 11: Oil and Gas Third Quarter 2013 Highlights
Oil and Gas Third Quarter 2013 Highlights Building Momentum By Driving Leasing and Exploration to Increase Production and Reserves 11
Slide 12: Accelerating Value Creation Through Increased Investments
Accelerating Value Creation Through Increased Investments $7.3 $3.0 ($1.8) $8.5 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 Q3 2012 Oil & Gas Profit Margin Operating Expenses Q3 2013 Se gme n t Ea rn ing s Q3 2013 Highlights • Oil production up over 170% vs. Q3 2012, and up nearly 14% vs. Q2 2013 • 41 gros
Slide 13: Bakken / Three Forks Drilling Activity Accelerating
0 10 20 30 40 50 60 70 80 P rod u cing We ll s Bakken / Three Forks Drilling Activity Accelerating Investment and Value Realization Bakken / Three Forks Leasehold Interests 2013 Activity Gross Wells Producers at Q3 * 63 Drilling & Awaiting Frac at Q3 ** 26 Total Wells Planned 54 Average Working Inte
Slide 14: Third Quarter Wells with Initial Production: Showing Strong IP Rates
HALCON Ft. Berthold 13A-24-4H FOR : 12.19% IP : 1,808 BOEPD WPX George Evans 14-23HZ FOR : 1.13% IP : 857 BOEPD WPX George Evans 14-23HD FOR : 1.13% IP : 1,732 BOEPD WPX Good Bird 36-25HB FOR : 1.52% IP : 1,422 BOEPD WPX Spotted Rabbit 14-23HW FOR : 1.13% IP : 1,632 BOEPD North Dakota Bakken / Three
Slide 15: Bakken / Three Forks Drilling Activity Accelerating
0 2 4 6 8 10 12 14 16 18 20 Q4 2012 Q1 2013 Q2 2013 Q3 2013 We lls 18 Bakken / Three Forks Drilling Activity Accelerating 15 15 15 Bakken / Three Forks Wells Awaiting Completion 9 8 9 40,000 50,000 60,000 70,000 80,000 90,000 100,000 Q1 2013 Q2 2013 Q3 2013 Q4 2013E Bakken/Three Forks Production (BO
Slide 16: Bakken / Three Forks Drilling Activity Generating Solid Returns
0 20 40 60 80 100 120 140 160 180 2010 2011 2012 2013E 2014E P ro d u ci n g W e lls Actual Wells Planned Wells +41 Bakken / Three Forks Drilling Activity Generating Solid Returns 16 16 16 Bakken / Three Forks Proved Developed Producing Wells +4 +7 +24 * Assuming $90 oil and $3 natural gas average p
Slide 17: Kansas / Nebraska Drilling Activity Accelerating Production and Value Growth
0 20 40 60 80 100 120 140 160 2012 2013E 2014E P ro d u ci n g W e lls +37* Kansas / Nebraska Drilling Activity Accelerating Production and Value Growth 17 17 17 +19 Single-Well Economics (Illustrative) Risked Total Well Cost** $1.2 EUR (BOE) ~40,000 Total Well Revenues*** $2.0 Net Well Cash Flow $1
Slide 18: Accelerating Contribution from Acquisitions and Oil and Gas Investments
Accelerating Contribution from Acquisitions and Oil and Gas Investments 18 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 Q1 2013 Q2 2013 Q3 2013 Q4 2013E EBI TDAX ($ m ill io n s) E ar n in gs ($ m ill io n s) Earnings EBITDAX Investment and Produ
Slide 19: 2013 Oil & Gas Capital Investment Generating Production and Reserve Growth
2013 Oil & Gas Capital Investment Generating Production and Reserve Growth By Accelerating Capital Investments 19 $14 $21 $25 Q1 2013 Q2 2013 Q3 2013 Est. Q4 2013 Investment in Exploration, Drilling and Lease Acquisition ($ in millions)
Slide 20: Accelerating Value Realization and Growing Net Asset Value
Accelerating Value Realization and Growing Net Asset Value Building Momentum By Accelerating Value Realization and Growing Net Asset Value Capitalizing on investments to accelerate earnings and cash flow Increasing oil production and proven reserves Expected investment returns well above cost of cap
Slide 21: Other Natural Resources Third Quarter 2013 Highlights
Other Natural Resources Third Quarter 2013 Highlights Building Momentum Through Sustainable Harvests and Maximizing Recreational Lease Activity 21
Slide 22: Increased Harvest Activity Driving Improved Financial Results
Increased Harvest Activity Driving Improved Financial Results $0.5 $0.3 $0.6 ($0.4) $0.0 $0.5 $1.0 Q3 2012 Fiber Sales Operating Expenses Q2 2013 S e gm e n t E a rning s Q3 2013 Highlights • Sold over 140,000 tons of fiber, down 29% vs. Q3 2012 • Average fiber pricing $17.33 per ton, up nearly 50%
Slide 23: Third Quarter 2013 Triple in FOR Initiatives
Third Quarter 2013 Triple in FOR Initiatives Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value 23
Slide 24: Triple in FOR Initiatives
Triple in FOR Initiatives Focus on Accelerating Value Realization Optimize Transparency & Disclosure Raise NAV Through Strategic and Disciplined Investments 24 Triple Residential Lot Sales Triple Oil and Gas Production 0 500 1,000 1,500 2,000 2,500 2008-2011 Average 2012 2013 2014 Lo ts S o ld Tripl
Slide 25: Raising NAV Through Strategic and Disciplined Investments
Raising NAV Through Strategic and Disciplined Investments Investment Returns Expected to Exceed Cost of Capital Accelerating oil and gas investments Driving production, reserves and returns Real estate investments increasing with housing demand Forestar markets – tight inventories, solid job growth
Slide 26: For questions, please contact:
For questions, please contact: Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value 26 Anna Torma SVP Corporate Affairs Forestar Group Inc. 6300 Bee Cave Road Building Two, Suite 500 Austin, TX 78746 512-433-5312 annatorma@forestargroup.com
Slide 27: Appendix - Segment KPI's - Reconciliation of Non-GAAP Financial Measures
Third Quarter 2013 Appendix - Segment KPI’s - Reconciliation of Non-GAAP Financial Measures Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value 27
Slide 28: Real Estate Segment KPI's
Q3 2013 Q3 2012 YTD Q3 2013 YTD Q3 2012 Residential Lot Sales Lots Sold 547 269 1,353 981 Average Price / Lot $56,500 $54,100 $55,300 $49,700 Gross Profit / Lot $25,800 $20,100 $24,000 $18,000 Commercial Tract Sales Acres Sold 19 18 56 56 Average Price / Acre $257,500 $133,900 $169,700 $75,100 Land
Slide 29: Oil & Gas Segment KPI's
Q3 2013 Q3 2012 YTD Q3 2013 YTD Q3 2012 Leasing Activity Net Fee Acres Leased 7,540 3,124 8,355 3,930 Avg. Bonus / Acre $260 $1,130 $270 $975 Total Oil and Gas Interests* Oil Produced (Barrels) 188,900 69,100 502,600 199,800 Average Price / Barrel $95.95 $75.81 $90.53 $89.15 Natural Gas Produced (MM
Slide 30: Other Natural Resources Segment KPI's
30 Q3 2013 Q3 2012 YTD Q3 2013 YTD Q3 2012 Fiber Sales Pulpwood Tons Sold 65,700 160,000 314,400 265,200 Average Pulpwood Price / Ton $12.56 $9.54 $11.53 $9.51 Sawtimber Tons Sold 74,900 37,400 202,700 66,700 Average Sawtimber Price / Ton $21.52 $20.21 $22.47 $19.88 Total Tons Sold 140,600 197,400 5
Slide 31: Total Segment EBITDA Reconciliation
31 Forestar’s Total Segment EBITDA is a non-GAAP financial measure within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, U.S. Generally Accepted Accounting Principles (GAAP). The company believes pr
Slide 32: Oil and Gas Segment EBITDAX Reconciliation
32 Forestar’s Oil and Gas Segment EBITDAX is a non-GAAP financial measure within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, U.S. Generally Accepted Accounting Principles (GAAP). The company beli
Slide 33: For questions, please contact:
For questions, please contact: Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value Anna Torma SVP Corporate Affairs Forestar Group Inc. 6300 Bee Cave Road Building Two, Suite 500 Austin, TX 78746 512-433-5312 annatorma@forestargroup.com 33