Slide 1: Fourth Quarter and Full Year 2011 Financial Results
Fourth Quarter and Full Year 2011 Financial Results February 22, 2012 Building Momentum By Increasing Oil Production, Proven Reserves and Residential Lot Sales
Slide 2: Notice to Investors
Notice to Investors This presentation contains “forward-looking statements” within the meaning of the federal securities laws. These statements reflect management’s current views with respect to future events and are subject to risk and uncertainties. We note that a variety of factors and uncertaint
Slide 3: Delivering Future Value Through Triple In FOR
Delivering Future Value Through Triple In FOR Focus on Accelerating Value Realization Optimize Transparency & Disclosure Raise NAV Through Strategic and Disciplined Investments 3 Forestar is committed to maximizing long-term shareholder value through the execution of these strategic initiatives
Slide 4: Accelerating Value Realization - Proving It Up
Accelerating Value Realization - Proving It Up Significant increase in proven reserves Higher oil production volumes and royalties Residential lot sales - growing market share despite depressed housing Promoting water interests to provide long-term solutions Investments expected to provide near-term
Slide 5: Strategic and Disciplined Investment: Kingwood
STRATEGIC AND DISCIPLINED INVESTMENT Kingwood Note: Following purchase, TEMCO and CL Realty will continue to own 5,800 acres of undeveloped land in Paulding County, GA, Bentwater Golf Course, 12-acre tract on Padre Island, TX and mineral lease at Summer Creek Ranch Acquisition Metrics: Acquiring 100
Slide 6: Fourth Quarter & Full Year 2011 Financial Results
Fourth Quarter & Full Year 2011 Financial Results 6 Building Momentum By Increasing Oil Production, Proven Reserves and Residential Lot Sales
Slide 7: Fourth Quarter & Full Year 2011 Financial Results
Fourth Quarter & Full Year 2011 Financial Results ($ in Millions, except per share data) 4th Qtr 2011 4th Qtr 2010 Full Year 2011 Full Year 2010 Net Income (Loss) ($22.9) $2.4 $7.2 $ 5.1 Earnings (Loss) Per Share ($0.65) $0.07 $0.20 $0.14 Non-cash asset impairment charges (after-tax) ($0.82) ($0.19)
Slide 8: 4th Qtr. and Full Year 2011 Segment Earnings (Loss)
4th Qtr. and Full Year 2011 Segment Earnings (Loss) ($ in Millions) 4th Qtr 2011 4th Qtr 2010 Full Year 2011 Full Year 2010 Mineral Resources $3.7 $6.1 $16.0 $22.8 Fiber Resources 0.1 1.2 1.9 5.0 Real Estate (25.0) (5.5) (25.7) (4.6) Total Segment Earnings (Loss) ($21.2) $1.8 ($7.8) $23.2 Real estat
Slide 9: Historical Single-Family Impairments Concentrated Outside Texas
Historical Single-Family Impairments Concentrated Outside Texas Almost 60% of Impairments of Single-Family Assets Located Outside of Texas 9 * Includes only single-family projects with development, excludes timberland, land in entitlement, raw entitled land and income producing projects **Total impa
Slide 10: Fourth Quarter & Full Year 2011 Operating Highlights
Fourth Quarter & Full Year 2011 Operating Highlights 10 Building Momentum By Increasing Oil Production, Proven Reserves and Residential Lot Sales
Slide 11: Building Momentum - FY 2011 Highlights
Building Momentum - FY 2011 Highlights Investments Expected to Exceed Return Criteria and Deliver Near-Term Cash Flow and Earnings PV-10* proven reserves up 81% or $36.7 million vs. YE 2010 Oil production up 32% vs. 2010; 36 additional wells completed 68,000 net mineral acres put in play in during 2
Slide 12: Building Momentum - Fourth Quarter Highlights
Building Momentum - Fourth Quarter Highlights Oil production up almost 80% vs. Q4 2010 20 additional wells completed – 530 total producing wells Received $6.6 million from Cibolo Canyons District Acquired multifamily development site in Denver, CO Sold 309 residential lots - up 65% vs. Q4 2010 Over
Slide 13: Fourth Quarter & Full Year 2011 Mineral Resources Highlights
Fourth Quarter & Full Year 2011 Mineral Resources Highlights 13 Building Momentum By Driving Leasing and Exploration to Increase Production and Reserves 13
Slide 14: Strong Oil Markets Driving Exploration & Production
Strong Oil Markets Driving Exploration & Production Oil prices remain firm due to demand growth from emerging markets and geopolitical risk Natural gas prices pressured by record inventory levels and mild temperatures Minimal lease activity related to natural gas; E&P companies principally focused o
Slide 15: Target Formations and 2011 Well Completions
Target Formations 2011 Well Completions East Texas & Louisiana* * Map excludes six wells located in Barnett Shale in North Texas and ten wells in Colorado completed in 2011 15 Acres Leased Available for Lease Held by Production Acres with Option New Oil Wells New Gas Wells
Slide 16: Increased Oil Production Driving Higher Royalties
Increased Oil Production Driving Higher Royalties Segment Earnings Reconciliation Q4 2010 vs. Q4 2011 Q4 2011 Highlights vs. Q4 2010: Oil production up almost 80% Royalties up 60% or $2.4 million 20 additional wells completed; 530 producing wells ** Costs associated with the development of our water
Slide 17: Drilling & Production Growth Accelerating
Drilling & Production Growth Accelerating 17 Note: Includes Forestar’s share of equity method ventures Growth in Drilling Activity & Well Count* Q4 2010 – Q4 2011 * Wells owned by third-party lessee / operator
Slide 18: Leverage Seismic Data to Generate Prospects, Leases and Exploration Activity
Note: Wells owned by third-party lessee / operator Seismic Agreements: 41,500 acres Over 26,000 acres of 3-D seismic data received to generate prospects Leasing: 8,100 acres - $279 / acre Exploration Agreements: 18,000 net mineral acres 2011 Activity Acres Leased Available for Lease Held by Producti
Slide 19: West Gordon Field - Wilcox Formation
WEST GORDON FIELD – WILCOX FORMATION SOUTHERN LOUISIANA 1 Average EUR based on internal estimates; EUR represents estimated ultimate recovery which is an approximation of the quantity of oil or gas that is potentially recoverable or has already been recovered from a well. 2 Forestar elected to take
Slide 20: Targeting 180,000 Acres For Oil & Gas Prospects
Targeting 180,000 Acres For Oil & Gas Prospects Rodessa ~24,000 acres Oil / NGL’s / Natural Gas Target Specific Zones and Formations For Prospect Generation Pettet ~2,000 acres Oil / NGL’s / Natural Gas Glen Rose ~33,000 acres Oil / NGL’s / Natural Gas Bossier ~10,700 acres Natural Gas Tuscaloosa Ma
Slide 21: Accelerating Realization of Minerals Through Proven Reserve Growth
Accelerating Realization of Minerals Through Proven Reserve Growth Note: Includes ventures ($ in millions) ($ in millions) Future Net Cash Flows * 21 Up 238% or $47MM since 2009 Up 233% or $76MM since 2009 *PV-10 represents present value of estimated future oil and gas revenues, net of estimated dir
Slide 22: Enhancing Minerals Value Creation and Realization
Enhancing Minerals Value Creation and Realization 22 Value Components % of Well Economics Capital Acres Wells Operating 50 - 75% Moderate -- -- Working Interest 10 – 50% Low 32,000 8 Royalties 20 – 25% None 48,000 530 Leases < 5% None 515,000 -- Total 100% 595,000 530* Value Creation & Realization Y
Slide 23: Fourth Quarter & Full Year 2011 Fiber Resources Highlights
Fourth Quarter & Full Year 2011 Fiber Resources Highlights Building Momentum Through Sustainable Harvests and Maximizing Recreational Lease Activity 23
Slide 24: Land Sales Impact Fiber Resources
Land Sales Impact Fiber Resources Segment Earnings Reconciliation Q4 2010 vs. Q4 2011 Fourth Quarter 2011 Highlights Sold over 49,000 tons of fiber 99% of land leased for recreation Segment Earnings Reconciliation FY 2010 vs. FY 2011 Full Year 2011 Highlights: Sold 323,000 tons of fiber Harvest down
Slide 25: Fourth Quarter & Full Year 2011 Real Estate Highlights
Fourth Quarter & Full Year 2011 Real Estate Highlights 25 Building Momentum By Increasing Residential Lot Sales
Slide 26: Texas Markets To Lead Housing Recovery
Texas Markets To Lead Housing Recovery Texas U.S. Avg. Job Growth (2011 vs. 2010) + 2.0% +1.3% Unemployment 7.8% 8.5% Negative Equity (% of Homes) 9.6% 22.5% Delinquency 4.7% 7.4% Real Estate Investment in Texas Markets $452 million*; 55 projects 74% of total real estate investment** Dallas Houston
Slide 27: Low Inventory Driving Demand For A Lots
Low Inventory Driving Demand For “A” Lots 27 Forestar Residential Lot Inventory* Residential Lot Inventory Texas real estate markets low on quality residential lot inventory Minimal residential lot development since 2007 Low levels of new home inventory in major markets of Texas Development constrai
Slide 28: Real Estate - Improving Underlying Results
Real Estate – Improving Underlying Results Fourth Quarter 2011 Highlights Sold 309 residential lots, up 65% vs. Q4 2010 Sold 13,200 acres of undeveloped land for $30.4 million Acquired multifamily development site in Denver Segment Earnings (Loss) Reconciliation Q4 2010 vs. Q4 2011 Full Year 2011 Hi
Slide 29: Residential Lot Sales Building Momentum
RESIDENTIAL LOT SALES BUILDING MOMENTUM 29 Note: Includes ventures Annual Lot Sales 1,117 642 1,060 2006 Peak Sales = 3,600 lots Residential Lots Under Option Contracts YE 2010 – YE 2011 Annual Lot Sales & Avg. Lot Margin
Slide 30: Cash Flows Stabilizing From Resort To Cibolo Canyons Special Improvement District
Cash Flows Stabilizing From Resort To Cibolo Canyons Special Improvement District Cibolo Canyons Special Improvement District Payments to Forestar Total Receipts ($ in millions) 2010 $1.5 2011* 8.7 $10.2 Note: Forestar Investment in Resort = $35.4 million at YE 2011 (excluding interest) * 2011 Proce
Slide 31: Fourth Quarter & Full Year 2011 Triple in FOR Initiatives
Fourth Quarter & Full Year 2011 Triple in FOR Initiatives 31 Accelerating Value Realization, Optimizing Transparency and Raising NAV Through Disciplined Investments
Slide 32: Our Focus: Triple In FOR Initiatives
Our Focus: Triple In FOR Initiatives Historical Avg. (2008-2011) Target Focus on Accelerating Value Realization Triple Residential Lot Sales 850 lots 2,500 lots Triple Oil & Gas Production (Mcfe) 2.3 Bcfe 6.7 Bcfe Triple Total Segment Earnings $33 million > $100 million Optimize Transparency & Discl
Slide 33: Accelerating Value Realization from Sale of Palisades West
ACCELERATING VALUE REALIZATION FROM SALE OF OWNERSHIP INTEREST IN PALISADES WEST Sale of Palisades West Ownership Office venture: Cousins Properties - 50% Dimensional Fund Advisors - 25% Forestar - 25% 375k sq. ft. office project in Austin, TX 99% Leased at YE 2011 Accelerating Value Realization of
Slide 34: Accelerating Value Realization
Accelerating Value Realization Building momentum by increasing oil production and proven reserves Growing lot sales and increasing market share Investing to provide near-term cash flow and earnings Building Momentum By Increasing Oil Production, Proven Reserves and Residential Lot Sales 34
Slide 35: Anna Torma, SVP Corporate Affairs
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 35
Slide 36: Appendix - Segment KPI's - Proven Reserves - Non-GAAP Reconciliation
Fourth Quarter & Full Year 2011 Appendix - Segment KPI’s - Proven Reserves - Non-GAAP Reconciliation 36
Slide 37: Mineral Resources Segment KPI's
37 MINERAL RESOURCES SEGMENT KPI'S 4th Qtr 2011 4th Qtr 2010 Full Year 2011 Full Year 2010 Leasing Activity Net Acres Leased 320 5,200 8,100 16,900 Avg. Bonus / Acre $57 $371 $279 $457 Royalties* Natural Gas Produced (MMCF) 373.6 504.8 1,622.0 1,796.4 Average Price / MCF $3.93 $3.94 $3.95 $4.26 Oil
Slide 38: Fiber Resources Segment KPI's
38 FIBER RESOURCES SEGMENT KPI'S 4th Qtr 2011 4th Qtr 2010 Full Year 2011 Full Year 2010 Fiber Sales Pulpwood Tons Sold 44,100 97,300 266,200 392,900 Average Pulpwood Price / Ton $9.31 $8.77 $8.69 $9.93 Sawtimber Tons Sold 5,600 53,400 56,800 144,300 Average Sawtimber Price / Ton $22.17 $15.75 $16.1
Slide 39: Real Estate Segment KPI's
39 REAL ESTATE SEGMENT KPI'S 4th Qtr 2011 4th Qtr 2010** Full Year 2011 Full Year 2010 Residential Lot Sales * Lots Sold 309 187 1,117 804 Average Price / Lot $43,300 $49,100 $47,400 $49,500 Gross Profit / Lot $15,200 $19,700 $17,500 $16,600 Commercial Tract Sales * Acres Sold 2.4 1.1 26.4 17.8 Aver
Slide 40: YE 2011 Proven Reserves
YE 2011 Proven Reserves ($ in millions) 2011 2010 % Change Proved Developed Reserves 1 Oil Reserves MBBL 1,053.7 608.7 73% Gas Reserves BCF 11.4 10.5 9% Future Net Revenues* $132.7 $77.5 71% PV-10 3* $81.0 $45.3 79% Proved Developed Non-Producing1 Oil Reserves MBBL 10.7 - nm Gas Reserves BCF 0.1 - n
Slide 41: Reconciliation of Non-GAAP Financial Measures (Unaudited)
41 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) In our full year and fourth quarter 2011 earnings release and conference call presentation materials furnished to the Securities and Exchange Commission on Form 8-K on February 22, 2012, we used certain non-GAAP financial measures. The non
Slide 42: Anna Torma, SVP Corporate Affairs
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 42