Slide 1: Third Quarter 2014 Financial Results
Third Quarter 2014 Financial Results November 5, 2014 Growing Forward Through Strategic and Disciplined Investment and Increasing Returns
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: Real Estate Driving Segment Earnings
Real Estate Driving Segment Earnings 3 • 3rd quarter 2014 real estate segment results include a $7.6 million gain, pre-tax, associated with the purchase of our partner’s 75% interest in the Eleven venture, a multifamily project in Austin, reflecting the fair market value of the project on the date o
Slide 4: Cibolo Canyons - Accelerating Value Realization
Cibolo Canyons - Accelerating Value Realization 4 CCSID Annual Hotel Occupancy Tax & Sales Tax Collections Cibolo Canyons Special Improvement District (CCSID) Payments to Forestar ($ in millions) Investment Received Future 2014 – 2034 Infrastructure Reimbursement $66 $25 $41* HOT & Sales and Use Tax
Slide 5: Strategy and Strategic Initiatives
Strategy and Strategic Initiatives Focused on Maximizing Long-Term Shareholder Value 5 2014 Growing Forward • Growing segment earnings through strategic and disciplined investments • Focused on increasing returns • Repositioning non-core, non- performing assets 2012 Triple in FOR • Triple total segm
Slide 6: Real Estate Third Quarter 2014 Highlights
Real Estate Third Quarter 2014 Highlights Building Momentum By Accelerating Real Estate Sales and Building a Solid Multifamily Pipeline 6
Slide 7: Real Estate – Accelerating Value Realization from Multifamily
($3.8) ($2.2) $13.2 $7.6 $0.9 $0.3 $16.0 $0 $10 $20 $30 Q3 2013 Gain on Eleven Purchase Opex Income Producing Properties Residential & Commercial Sales Undeveloped Land Sales Q3 2014 Q3 2014 Highlights • Acquisition of partner’s 75% interest in Eleven venture • Gain of $7.6 million • Residential Lot
Slide 8: Real Estate Capitalizing on Well Located Communities, Low Inventories and Solid Job Growth
* Actual results may vary A n n u al Lo t Sal e s 2006 Peak Sales = 3,600 lots Annual Lot Sales & Avg. Lot Margin 8 Real Estate Capitalizing on Well Located Communities, Low Inventories and Solid Job Growth $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 0 500 1,000 1,500 2,000 2,500 2008 2009 201
Slide 9: Building Solid Pipeline of Multifamily Development Opportunities
Building Solid Pipeline of Multifamily Development Opportunities (Proforma) Proforma Project Cash Flows Expected Forestar Cash Flows Project Market % Complete Units FOR Ownership Total Development Cost Expected Project NOI FOR Cash Contribution FOR Cash Distribution* Cash Multiple** Eleven Austin 10
Slide 10: Capitalizing on Well Located Communities, Low Inventories
Note: Includes consolidated ventures Forestar Real Estate Revenues (Excluding Timberland, Mitigation & Multifamily Revenues) Capitalizing on Well Located Communities, Low Inventories and Forestar’s Ability to Deliver 10 • Driving residential lot and tract sales in good locations and healthy markets
Slide 11: Other Natural Resources Third Quarter 2014 Highlights
Other Natural Resources Third Quarter 2014 Highlights Building Momentum Through Sustainable Harvests and Delivering Economic Water Solutions 11
Slide 12: Other Natural Resources Segment Results
Other Natural Resources Segment Results $0.5 $0.2 ($0.9) $0.7 $0.7 $0.2 $0.0 $1.0 $2.0 Se gm en t Ea rn in gs Q3 2014 Highlights • $0.2 million in earnings from groundwater reservation agreement • $0.2 million gain on sale of water rights associated with real estate project near Denver • Sold nearly
Slide 13: Oil and Gas Third Quarter 2014 Highlights
Oil and Gas Third Quarter 2014 Highlights Building Momentum By Driving Leasing and Exploration to Increase Production and Reserves 13
Slide 14: Investments and Asset Sales Drive Higher EBITDAX
$15.6 $6.0 $3.3 ($2.7) $0.2 $0.5 $19.1 ($3.8) $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 Q3 2013 DD&A and Exploration Gain on Sales Operating Expenses Working Interest Exploration Costs Legacy Minerals Q3 2014 Se gme n t EBIT D A X Investments and Asset Sales Drive Higher EBITDAX Q3 2014 Highlights • W
Slide 15: 2014 Bakken/Three Forks Wells Generating Strong Initial Production Rates
HALCON Ft. Berthold 148-94-30B-31-5H FOR : 18.88% IP : 3,631 BOEPD 2014 Bakken/Three Forks Wells Generating Strong Initial Production Rates and Improved Well Performance 15 * Represents highest initial production rates on a barrel of oil equivalent per day within the first 30 days of production Note
Slide 16: Bakken / Three Forks Drilling Activity Investment and Value Realization
0% 10% 20% 30% 40% 50% $70 Strip $90 IR R WTI Oil Price 16 6 Bakken / Three Forks Drilling Activity Investment and Value Realization Note: Based on current plans from operators, subject to change 0 20 40 60 80 100 120 140 2010 2011 2012 2013 2014E P ro d u ci n g W e lls Bakken/Three Forks Producing
Slide 17: Kansas / Nebraska Working Interest Investment Return Sensitivity
Kansas / Nebraska Working Interest Investment Return Sensitivity 17 17 0 20 40 60 80 100 120 140 2012 2013 2014E P ro d u ci n g W e lls Kansas/Nebraska Producing Wells** **Represents gross wells; and assumes 40% drilling success rate in 2014 * Includes 1.5 dry hole costs @ $230,000 + 1.0 completed
Slide 18: Forestar Focused on Developing Best of Class Oil and Gas Business
Accelerating Value Realization and Growing Net Asset Value 18 0 100 200 300 400 500 600 700 800 900 1,000 $0 $10 $20 $30 $40 $50 $60 $70 YTD 2010 YTD 2011 YTD 2012 YTD 2013 YTD 2014 To tal P ro d u ctio n ( M b o e ) To tal R e ve n u e s Forestar Oil and Gas Revenues ($ in millions) Lease Bonus / D
Slide 19: Strategic Initiatives Update
Strategic Initiatives Update Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value 19
Slide 20: Growing FORward Initiatives
Growing FORward Initiatives Growing Long-Term Shareholder Value Growing Through Strategic and Disciplined Investment Increasing Returns 20 • Development of Existing Locations • Acquisitions and Extensions 2016 Targets: • Total Segment EBITDA of $200 million • Return on Assets of 10.0% • Reposition $
Slide 21: Third Quarter 2014 Financial Results – Contact
Third Quarter 2014 Financial Results For questions, please contact: 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 21
Slide 22: Third Quarter 2014 Appendix
Third Quarter 2014 Financial Results Third Quarter 2014 Appendix - Segment KPI’s - Earnings Reconciliations - Reconciliation of Non-GAAP Financial Measures 22
Slide 23: Real Estate Segment KPIs
Q3 2014 Q3 2013 YTD Q3 2014 YTD Q3 2013 Residential Lot Sales Lots Sold 323 547 1,834 1,353 Average Price / Lot $73,700 $56,500 $54,400 $55,300 Gross Profit / Lot $34,900 $25,800 $22,800 $24,000 Commercial Tract Sales Acres Sold 4 19 7 56 Average Price / Acre $589,200 $257,500 $369,900 $169,700 Land
Slide 24: Oil and Gas Segment KPI's
Q3 2014 Q3 2013 YTD Q3 2014 YTD Q3 2013 Fee Leasing Activity Net Fee Acres Leased 744 7,530 3,865 8,355 Avg. Bonus / Acre $205 $260 $320 $270 Total Oil and Gas Interests* Oil Produced (Barrels) 250,500 177,500 632,800 463,600 Average Price / Barrel $86.13 $100.13 $90.73 $95.64 NGL Produced (Barrels)
Slide 25: Other Natural Resources Segment KPI's
25 Q3 2014 Q3 2013 YTD Q3 2014 YTD Q3 2013 Fiber Sales Pulpwood Tons Sold 71,500 65,700 157,900 314,400 Average Pulpwood Price / Ton $11.18 $8.85 $11.00 $9.12 Sawtimber Tons Sold 21,500 74,900 100,000 202,700 Average Sawtimber Price / Ton $21.31 $21.52 $22.38 $22.47 Total Tons Sold 93,000 140,600 25
Slide 26: Reconciliation of Non-GAAP Financial Measures – Segment EBITDA
26 Forestar’s 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 presenti
Slide 27: Oil and Gas Segment EBITDAX Reconciliation
27 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 28: Third Quarter 2014 Financial Results – Contact
Third Quarter 2014 Financial Results For questions, please contact: 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 28