Slide 1: Forestar Investor Presentation June 2014
Forestar Investor Presentation June 2014 Growing Forward Through Strategic and Disciplined Investments 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: Maximizing Long-Term Shareholder Value
Maximizing Long-Term Shareholder Value 3 Maximizing Long-Term Shareholder Value Through the Development of Best of Class Real Estate and Oil and Gas and Businesses
Slide 4: Execution of Initiatives and Strategic Acquisitions Positions Forestar with Stronger Portfolio of Assets
Execution of Initiatives and Strategic Acquisitions Positions Forestar with Stronger Portfolio of Assets 4 Real Estate • Land - 119,000 acres, principally low basis land • Projects - 92 (10 states and 13 markets) • Significant Commercial Properties – 5 Oil and Gas • Fee and Leasehold Interests - 863
Slide 5: Triple in FOR Initiatives Focus on Accelerating Value Realization
Triple in FOR Initiatives Focus on Accelerating Value Realization Optimize Transparency & Disclosure Raise NAV Through Strategic and Disciplined Investments 5 Triple Residential Lot Sales Triple Oil and Gas Production 0 500 1,000 1,500 2,000 2,500 2008-2011 Average 2012 2013 Lo ts S o ld Triple in F
Slide 6: Growing FORward Through Disciplined Investments Focused on Increasing Returns
Growing FORward Through Disciplined Investments Focused on Increasing Returns 1) Real Estate Acquisition and Development 2) Oil and Gas Exploration and Development 3) Strategic Investments 6 Increasing Return on Assets Growing Real Estate Segment EBITDA ($ in millions) Growing Oil and Gas Segment EB
Slide 7: Real Estate
Real Estate Building Momentum By Accelerating Real Estate Sales and Building a Solid Multifamily Pipeline 7
Slide 8: Delivering The Greatest Value From Every Acre of Our Real Estate Pipeline
8 Delivering The Greatest Value From Every Acre of Our Real Estate Pipeline (Acres) 1 Activity – Uses Financials 2 2,000 819 residential acres - 2,512 lots 682 commercial acres $55K per lot $170K per acre (avg sales price) 10,000 Approved uses, ready for Development - 16,280 lots High Value Creation
Slide 9: Real Estate Assets Located in Stronger Residential Markets
Note: MSA performance based on Employment, Gross Metropolitan Product (GMP) and House Price Index Source: Brookings Institute Salt Lake City 1 - $1 Oakland 1 - $9 Strongest Quartile Weakest Quartile Los Angeles 2 - $21 Kansas City 1 - $3 Atlanta 29 - $81 San Antonio 4 - $88 Projects and investment a
Slide 10: Real Estate Capitalizing on Housing Recovery
10 * 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 10 Real Estate Capitalizing on Housing Recovery 1,365 804 642 A ve ra ge Lo t M ar gi n 1,883 1,060 1,117 Note: Includes consolidated ventures 2010 2011 2012 2013 Lot Sales Gross Prof
Slide 11: Texas Markets Driving Lot Sales and Margins
Texas Markets Driving Lot Sales and Margins FOR Well Positioned With Lot Inventory in Texas Markets 11 Active Residential Projects Q1 14 Lot Sales Vacant Dev. Lots Lots Under Dev. Remaining Lots to be Developed 42 517 1,389 662 10,051 Forestar Texas Lot Sales & Inventory – Q1 2014 • 2013 total lot g
Slide 12: 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 Equity FOR Total Cash Cash Multiple* Eleven Austin 98% 257 25% $40 – 45 $
Slide 13: Core Real Estate Business Strengthening
Note: Includes consolidated ventures. Core Real Estate Business Strengthening 13 Capitalizing on housing recovery by driving residential lot and tract sales Selling commercial tracts - reflects broadening real estate recovery Acquiring attractive community development and multifamily sites Real Esta
Slide 14: Oil and Gas
Oil and Gas Building Momentum By Driving Leasing and Exploration to Increase Production and Reserves 14
Slide 15: Recognizing and Responsibly Delivering the Greatest Value From Our Oil and Gas Resources
Recognizing and Responsibly Delivering the Greatest Value From Our Oil and Gas Resources 1. Acres as of Q1 2014. Includes approximately 590,000 owned net mineral acres and 273,000 net acres of leasehold mineral interests 15 V A L U E C R E A T I O N & R E A L I Z A T I O N Minerals Greatest Value Ac
Slide 16: Mineral Interests Located In Prolific Oil & Gas Basins
Williston (Bakken / Three Forks) Denver – Julesburg Basin Central Uplift Appalachian Basin Black Warrior Anadarko Basin Fort Worth Basin East Texas Basin Gulf Coast Basin Texas, Louisiana, Mississippi Salt Basin South Extension Appalachian Basin 16 Mineral Interests Located In Prolific Oil & Gas Bas
Slide 17: Located In Prolific Oil & Gas Basins
Located In Prolific Oil & Gas Basins 17 Net Mineral Interests* State Owned Leasehold Total Texas 252,000 12,000 264,000 Louisiana 144,000 5,000 149,000 Nebraska / Kansas - 195,000 195,000 North Dakota - 8,000 8,000 Georgia / Alabama 192,000 9,000 201,000 Other** 2,000 44,000 46,000 Total 590,000 273
Slide 18: Production Growth Driven by Bakken / Three Forks
0 500 1,000 1,500 2,000 2011 2012 2013 B o e / D a y North Dakota Kansas/Nebraska Texas/Louisiana/Other Production Growth Driven by Bakken / Three Forks 18 18 Average Daily Production Working Interests 0 500 1,000 1,500 2,000 2,500 3,000 2011 2012 2013 Boe / D ay Working Interests Royalty Average Da
Slide 19: Core Bakken Locations Provide Significant Value Creation Potential
Core Bakken Locations Provide Significant Value Creation Potential 7,600 net mineral acres - Bakken / Three Forks *Major operators in Core Acreage Position 19 Bakken Operators* *Wells and acreage are approximate Bakken / Three Forks Percentile Ranked Production (60-90 Days) Bakken / Three Forks Leas
Slide 20: Bakken / Three Forks Drilling Activity Accelerating
0 200 400 600 800 1,000 1,200 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014E Bakken/Three Forks Production (Boe/Day) 20 20 Bakken / Three Forks Leasehold Interests 2013 Gross Wells Producers Added During 2013 44 Producers at YE 2013 * 80 Q1 2014 Producers Added During Q1 2014 3 Average WI Q1 2014 3.13% Dr
Slide 21: Kansas/Nebraska: Central Kansas Uplift & Western Kansas Plays
Kansas/Nebraska: Central Kansas Uplift & Western Kansas Plays Shallow Conventional Statistical Play 21 *Wells and acreage are approximate Kansas/Nebraska Acreage Position Kansas / Nebraska Leasehold Interests Key Metrics Net Mineral Acres Leased as of Q1 2014 195,000 Net Mineral Acres Leased in Apri
Slide 22: Kansas / Nebraska Drilling Activity Achieves 40% Success Rates
Kansas / Nebraska Drilling Activity Achieves 40% Success Rates 22 22 Kansas / Nebraska Leasehold Interests Activity Gross Wells Producers Added During 2013 36 Producers at YE 2013**** 97 Producers Added Q1 2014 *** 12 Total Wells Planned for Drilling in 2014 90 Key Metrics Success Rate FY 2013 47% S
Slide 23: Increased Cash Flow through Proved Reserve Growth in Bakken / Three Forks
Increased Cash Flow through Proved Reserve Growth in Bakken / Three Forks 23 Proved Reserves (MMBoe): Average Annual Growth of 54% Reserves Growth Production Replaced Net Reserves Increase % Oil2 Investment3 2013 8.5 4.0 1.1 2.9 69% $99 2012 5.6 3.3 0.7 2.6 57% $1733 2011 3.0 1.0 0.4 0.6 36% $4 2010
Slide 24: 2014 Capital Investment Plan Generating Production and Reserve Growth
2014 Capital Investment Plan Generating Production and Reserve Growth By Accelerating Investment 24 Total Oil & Gas 2014 Capital Investment: ~ $125 - $135 million Capital Allocation by Activity and Region Drilling & Completion Proforma Returns *** * Based on March, 2014 strip prices ** Includes diff
Slide 25: 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 above cost of capital
Slide 26: Strategic Initiatives Update
Strategic Initiatives Update Growing Forward Through Strategic and Disciplined Investments and Increasing Returns
Slide 27: Strategic Initiative: Growing FORward
Strategic Initiative: Growing FORward Growing Long-Term Shareholder Value Growing Through Strategic and Disciplined Investment Increasing Returns 27 * Excludes gains from strategic timberland sales • Development of Existing Locations • Acquisitions and Extensions 2016 Targets: • Total Segment EBITDA
Slide 28: Delivering Shareholder Value Through Execution of Strategic Initiatives
Delivering Shareholder Value Through Execution of Strategic Initiatives 2009 Strategic Initiatives • Monetize 175,000 acres of timberland and reduce debt $150 million 2012 Triple in FOR • Triple total segment EBITDA, oil and gas production and lot sales 2014 Growing Forward • Growing segment earning
Slide 29: Forestar
Forestar Investor Presentation 29
Slide 30: Financial Tools and Additional Disclosures Available on our Website
30 Financial Tools and Additional Disclosures Available on our Website • Historical Financials • Segment Disclosures • At-A-Glance • Corporate • Oil and Gas • Real Estate • Multifamily • Water • Videos • 101 Learning Tools 2008-Q 2 2013 2008-Q 2 2013 Assets State Market Ownership Total Remaining Acr
Slide 31: Total Segment EBITDA Reconciliation
31 Forestar’s Total Segment EBITDA is a non-GAAP financial measure within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, U.S. Generally Accepted Accounting Principles (GAAP). The company believes pr
Slide 32: Segment EBITDA Reconciliation
32 Forestar’s Segment EBITDA is a non-GAAP financial measure within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, U.S. Generally Accepted Accounting Principles (GAAP). The company believes presenti
Slide 33: Oil and Gas Segment EBITDAX Reconciliation
33 Forestar’s Oil and Gas Segment EBITDAX is a non-GAAP financial measure within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, U.S. Generally Accepted Accounting Principles (GAAP). The company beli
Slide 34: Reconciliation of Non-GAAP Financial Measures
($ in 000’s) Est. YE 2013* Actual YE 2012* Actual YE 2011* Undiscounted future net cash flows before income taxes $316,550 $222,231 $133,729 Less: undiscounted future income taxes (78,977) (52,088) (41,835) Undiscounted future net cash flows after income taxes $237,573 $170,143 $91,894 Reconciliatio
Slide 35: Forestar Contact
Forestar Investor Presentation 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 35