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Q1 2015 EARNINGS CALL – Approach Resources, Inc.

Approach Resources, Inc. · May 6, 2015 · 26 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 1
    First Quarter 2015 Results MAY 6, 2015
  2. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 2
    Company overview AREX OVERVIEW ASSET OVERVIEW Enterprise value 804MM High-quality reserve base 146 MMBoe proved reserves 66% Liquids, 38% oil 1.4 BN proved PV-10 Permian core operating area 147,000 gross (134,000 net) acres 1+…
  3. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 3
    1Q15 Key highlights 1Q15 HIGHLIGHTS 1Q15 SUMMARY RESULTS Drilled 8 and completed 13 HZ wells Production (MBoe/d) 14.3 % Oil 38% Continued improvement on already best- % Total liquids 67% in-class HZ well costs Average realized price…
  4. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 4
    Well prepared for commodity price cycle Key areas of focus in 2015 Plan to stay nimble in 2015 with key focus on financial discipline and returns No significant drilling or service contract obligations Plan to time and size the…
  5. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 5
    1Q15 Operating highlights OPERATING HIGHLIGHTS Total production 14.3 MBoe/d (up 21% YoY) Delivering Oil production 5.5 Mbbl/d (up 10% YoY) Production Growth Successfully implemented cost reduction initiatives, current HZ well…
  6. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 6
    1Q15 Financial highlights FINANCIAL HIGHLIGHTS Revenues (pre-hedge) of 33.3 MM, adjusted net loss (non-GAAP) of 1.3 MM, or 0.03 Heightened per diluted share focus on cutting Every per-unit cash cost metric has been improved since…
  7. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 7
    Winter storms and DCP plant turnaround impact 1H15 production by 120 160 MBoe 1H15 Daily Production Detail DCP Plant Winter storm maintenance DCP Plant 20,000 related downtime 25 MBoe turnaround 20 MBoe 75 115 MBoe 18,000…
  8. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 8
    AREX Flowback and Produced Water Recycle Facility 32,000 32,000 BBL 329,000 Bbl Capacity Facility 20 Treated Flowback & Produced Frac Water Supply Line BBL Treated Treated Water Water Reduce drilling and completion Tank…
  9. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 9
    Water recycling facility successfully started in March 2015 Recent Recycled Water Volumes The water recycling facility was ramped up during March 2015 and now successfully recycles up to 70+% of AREX daily flowback water volumes…
  10. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 10
    Strong, simple balance sheet At March 31, 2015, we had a 1 billion senior secured revolving credit facility in place, with aggregate lender AREX Liquidity and Capitalization commitments of 450 MM and borrowing base of 600 MM AREX…
  11. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 11
    Valuation and leverage well supported by proved reserve base 12/31/2014 reserve summary prepared by DeGolyer and MacNaughton Replaced 819% of produced reserves at a drill-bit F&D cost of 8.94 per Boe1 Total proved reserves up 27%…
  12. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 12
    Significant valuation upside potential from unproven resources and commodity price recovery Adjusted PV-10 vs Enterprise Value ( billion) Midland Basin Peer EV/2015E EBITDA 6 20.0x 1.4 1.4 18.2x 18.0x 1.2 16.0x 14.9x 13.9x…
  13. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 13
    AREX HZ Wolfcamp Well Performance AREX HZ WOLFCAMP (BOE/D) Average GOR = 5,000 6,000 Gas EUR = 1,271 MMCF Well EUR = 510 MBOE Oil EUR = 230 MBBL Average GOR Average Gas N = 93 Wells Average BOE AREX Wolfcamp Horizontal…
  14. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 14
    Probability Distribution of AREX 93 Type Curve Wells at Year- end 2014 First Quarter 2015 Results May 2015 15
  15. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 15
    Proven track record of delivering lowest D&C cost in the Midland Basin Approachs annual average horizontal well D&C cost MM 9.0 8.6 Demonstrated 35% 8.0 improvement 2011-2014 7.0 7.0 6.0 5.8 5.5 Achieved 16% 5.0 D&C…
  16. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 16
    D&C Cost reductions will significantly improve profitability 70% 4.1MM D&C 4.6MM D&C 60% 5.1MM D&C 5.5MM D&C IRR at NYMEX strip 50% pricing 40% IRR (%) 30% 20% 10% 0% 40 50 60 70 80 90 Realized Oil…
  17. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 17
    Established infrastructure in place is critical to low cost structure Reagan Irion Pangea Crockett Schleicher West Recently completed water recycling facility 329,000 Bbl Capacity North & Central Pangea South Benefits of…
  18. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 18
    Current hedge position Based on the midpoint of current 2015 guidance, approximately 56% of forecasted 2Q15-4Q15 oil production and 42% of forecasted natural gas production are hedged at weighted average floor prices of 79.83/Bbl and…
  19. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 19
    Production and expense guidance 2015 Guidance Production Oil (MBbls) 2,200 2,325 NGLs (MBbls) 1,575 1,625 Natural Gas (MMcf) 10,050 10,200 Total (MBoe) 5,450 5,650 Operating costs and expenses (per Boe) Lease operating 6.00 -…
  20. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 20
    Appendix
  21. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 21
    Adjusted net income (unaudited) ADJUSTED NET (LOSS) INCOME (UNAUDITED) The amounts included in the calculation of adjusted net (loss) income and adjusted net (loss) income per diluted share below were computed in accordance with GAAP.…
  22. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 22
    EBITDAX (unaudited) EBITDAX (UNAUDITED) The amounts included in the calculation of EBITDAX were computed in accordance with GAAP. EBITDAX is not a measure of net income or cash flow as determined by GAAP. EBITDAX is presented herein and…
  23. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 23
    F&D costs (unaudited) All-in finding and development (F&D) costs are calculated by dividing the sum of F&D Cost reconciliation property acquisition costs, exploration costs and development costs for the year by the sum of reserve…
  24. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 24
    PV-10 (unaudited) The present value of our proved reserves, discounted at 10% (PV-10), was estimated at 1.4 billion at December 31, 2014, and was calculated based on the first-of-the-month, twelve-month average prices for oil, NGLs and…
  25. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 25
    Cash operating expenses Cash operating expenses We define cash operating expenses as operating expenses, excluding (1) exploration expense, (2) depletion, depreciation and amortization expense and (3) share-based compensation expense.…
  26. Q1 2015 EARNINGS CALL – Approach Resources, Inc. – slide 26
    Contact information SERGEI KRYLOV Executive Vice President & Chief Financial Officer 817.989.9000 irapproachresources.com www.approachresources.com

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