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Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc.

Approach Resources, Inc. · Mar 21, 2016 · 24 slides

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Slides

  1. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 1
    Scotia Howard Weil 44th Annual Energy Conference MARCH 2016
  2. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 2
    Company overview AREX OVERVIEW ASSET OVERVIEW Enterprise value 560MM High-quality reserve base 167 MMBoe proved reserves 63% Liquids, 33% oil 504 MM proved PV-10 (non-GAAP) Permian core operating area 138,000 gross (126,000 net)…
  3. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 3
    Fourth quarter and full-year 2015 operating highlights FY 2015 Q4 2015 Drilled 20 HZ wells and completed 28 HZ No D&C activity during the quarter given wells sustained low commodity prices Solid execution Total production 5,532 MBoe…
  4. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 4
    The business is anchored by long-lived, low-cost proved reserve base 12/31/2015 reserve summary prepared by DeGolyer and MacNaughton (D&M) Replaced 603% of produced reserves at a drill-bit F&D cost (non-GAAP) of 4.32 per Boe1 Total…
  5. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 5
    Fourth quarter and full-year 2015 financial highlights FY 2015 Q4 2015 Revenues of 131.3 MM Revenues of 25.5 MM LOE of 5.24/Boe, a 19% reduction over LOE of 5.44/Boe, 18% reduction over prior year prior year Maximizing Cash G&A of…
  6. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 6
    Balance sheet detail At 12/31/2015 we had a 1 billion senior secured revolving AREX Liquidity and Capitalization credit facility in place, with aggregate lender commitments AREX Capitalization as of 12/31/2015 ( MM) and borrowing…
  7. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 7
    Lowest cost structure in the Permian Basin AREX LOE Historical Track Record (/Boe) 2015 Permian Peer LOE (/Boe) 8.00 14.0 7.36 12.99 7.00 6.65 12.0 6.18 5.87 6.00 5.55 5.44 10.0 9.51 4.97 5.04 8.84 5.00 7.83 7.71 8.0 7.46 7.34…
  8. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 8
    Strong track record of reserve and production growth RESERVE GROWTH PRODUCTION GROWTH MMBoe MBoe/d 180 16.0 160 14.0 140 12.0 120 10.0 100 8.0 80 60 6.0 40 4.0 20 2.0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012…
  9. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 9
    AREX Wolfcamp A Bench wells and locations PDP PDNP PUD Pangea West Production Corridor PROB/POSS/RES PDP Project Pangea PUD Production Corridor PROB/POSS/RES Potential 10,000 laterals Potential 10,000 laterals Production…
  10. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 10
    AREX Wolfcamp B Bench wells and locations PDP Pangea West PUD Production Corridor PUD PDP Project Pangea Production Corridor PROB/POSS/RES PROB/POSS/RES Potential 10,000 laterals Potential 10,000 laterals Production…
  11. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 11
    AREX Wolfcamp C Bench wells and locations PDP PUD Pangea West Production Corridor PDP PROB/POSS/RES PUD Project Pangea Production Corridor PROB/POSS/RES Potential 10,000 laterals Potential 10,000 laterals Production…
  12. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 12
    Established infrastructure in place is critical to low cost structure Over 500 miles of pipelines in place More than 100 MMcfg/d gathering and gas lifting capacity Expandable up to 500 MMcfg/d One Centralized Super Water Recycle…
  13. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 13
    Enhanced completion design drives outperformance from 2015 wells 120,000 100,000 2015 Wolfcamp B&C bench completions Average completed lateral length = 6886' Cumulative Production (Boe) 80,000 60,000 40,000…
  14. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 14
    D&C Cost reductions have significantly improved profitability despite lower commodity prices 70% 3.5MM D&C 60% 4.0MM D&C 4.5MM D&C 50% 40% IRR (%) 30% 20% 10% 0% 30 40 50 60 70 80 Realized Oil Price…
  15. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 15
    Key investment highlights Low-Risk, Oil-Rich Asset Base in Midland Basin Drilled over 170 HZ Wolfcamp wells, acreage derisked and type curve exceeded by actual results Recent wells achieving 15% IRR at current NYMEX strip prices…
  16. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 16
    Current hedge position Based on the midpoint of current 2016 guidance, approximately 51% of forecasted oil production and 65% of forecasted natural gas production are hedged at weighted average prices of 49.67/Bbl and 2.60/MMBtu,…
  17. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 17
    Production and expense guidance 2016 Guidance Production Oil (MBbls) 1,300 1,400 NGLs (MBbls) 1,440 1,540 Natural Gas (MMcf) 9,600 10,100 Total (MBoe) 4,340 4,625 Cash operating costs (per Boe) Lease operating 5.00 - 6.00…
  18. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 18
    AREX Wolfcamp acreage is offset by large operators APA REAGAN PXD ENDEAVOR PXD DVN APA BROADOAK IRION UPTON EAP EOG / EAP EOG HENRY ELEVATION SCHLEICHER DVN AREX AREX EP ENERGY Pangea West DVN AREX AREX EOG APA EP…
  19. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 19
    AREX Flowback and produced water recycle facility 32,000 32,000 2.2 MM Bbls flowback and BBL produced water recycled since 20 Treated Flowback & Produced Frac Water Supply Line BBL Treated Treated Water Water inception Tank…
  20. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 20
    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. We believe adjusted net (loss)…
  21. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 21
    EBITDAX (unaudited) We define EBITDAX as net (loss) income, plus (1) exploration expense, (2) depletion, depreciation and amortization expense, (3) share-based compensation expense, (4) impairment of oil and gas properties, (5)…
  22. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 22
    Cash operating expenses (unaudited) Cash operating expenses We define cash operating expenses as operating expenses, excluding (1) exploration expense, (2) depletion, depreciation and amortization expense, (3) share-based compensation…
  23. Scotia Howard Weil 44th Annual Energy Conference – 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. Scotia Howard Weil 44th Annual Energy Conference – Approach Resources, Inc. – slide 24
    PV-10 (unaudited) The present value of our proved reserves, discounted at 10% (PV-10), was estimated at 504 million at December 31, 2015, and was calculated based on the first-of-the-month, twelve-month average prices for oil, NGLs and…

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