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Q3 2016 Results – Approach Resources, Inc.

Approach Resources, Inc. · Nov 3, 2016 · 32 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. Q3 2016 Results – Approach Resources, Inc. – slide 1
    Third Quarter 2016 Results NOVEMBER 2, 2016
  2. Q3 2016 Results – Approach Resources, Inc. – slide 2
    Company overview AREX OVERVIEW ASSET OVERVIEW Enterprise value 646MM High-quality reserve base 167 MMBoe proved reserves 63% Liquids, 33% oil 460 MM Standardized measure, 504 MM proved PV-10 (non-GAAP) 1 Permian core operating…
  3. Q3 2016 Results – Approach Resources, Inc. – slide 3
    3Q16 Operating highlights OPERATING HIGHLIGHTS Increased completion activity following continued price improvement during the quarter Continued Completion 3Q16 production averaged 12.1 MBoe/d, exceeding previous guidance of 11.9…
  4. Q3 2016 Results – Approach Resources, Inc. – slide 4
    3Q16 Financial highlights FINANCIAL HIGHLIGHTS 3Q16 Operating expenses of 32.2 MM, cash operating expenses (non-GAAP)1 totaled Continued focus 9.29/Boe, an 11% decrease compared to 3Q15 on cutting costs Net loss of 9.1 MM or 0.22 per…
  5. Q3 2016 Results – Approach Resources, Inc. – slide 5
    Debt-for-equity exchange highlights Large-scale strategic recapitalization anchored by a proven industry investor Reduces debt and interest expense, and increases operating liquidity and financing flexibility Positions Company to…
  6. Q3 2016 Results – Approach Resources, Inc. – slide 6
    Key transaction terms 1 Exchange agreement Agreement with largest holder of our 7.00% Senior Notes due 2021 (senior notes), to exchange 130,552,000 principal amount of senior notes for 39,165,600 shares of AREX common stock Exchanging…
  7. Q3 2016 Results – Approach Resources, Inc. – slide 7
    Pro forma leverage and ownership metrics 600.0 505.3 500.0 400.0 374.8 Total Debt (MM) 1 300.0 275.0 200.0 100.0 0.0 Current Pro forma Wilks exchange Pro forma fully subscribed follow-on exchange 1. Principal amount of…
  8. Q3 2016 Results – Approach Resources, Inc. – slide 8
    Right-sizing balance sheet, improving growth outlook, and enhancing strategic flexibility Reduces debt by 130 - 230 million and increases operating liquidity by 40 - 70 million (cash interest savings) Pro forma 9/30/16 LTM leverage…
  9. Q3 2016 Results – Approach Resources, Inc. – slide 9
    Significant debt reduction from August 2015 peak AREX has been focused on reducing leverage since our decision to suspend drilling in August 2015 550.00 1 Pro forma for Exchange 2 525.3 502.6 502.6 500.00 450.00 400.00 350.00…
  10. Q3 2016 Results – Approach Resources, Inc. – slide 10
    AREX continues to achieve one of the lowest cost structures in the Permian Basin AREX LOE Historical Track Record (/Boe) 2015 Permian Peer LOE (/Boe) 8.00 14.0 13.23 7.36 7.00 6.65 12.0 6.18 6.00 5.87 5.55 5.44 5.45 10.0 9.51 4.97…
  11. Q3 2016 Results – Approach Resources, Inc. – slide 11
    AREX has used the commodity price downturn to increase focus on cost reductions 18.00 LOE down 53% from 1Q14 Cash G&A down 27% from 1Q14 16.00 Production taxes down 54% from 1Q14 14.00 7.36 12.00 6.18 10.00 6.65 5.87 5.55…
  12. Q3 2016 Results – Approach Resources, Inc. – slide 12
    Record low LOE cost driven by water handling infrastructure and field-level operating efficiencies AREX LOE Historical Track Record (/Boe) 8.00 7.00 0.90 6.00 1.23 0.92 0.88 0.59 5.00 2.88 0.96 1.17 1.28 0.81 0.96…
  13. Q3 2016 Results – Approach Resources, Inc. – slide 13
    Balanced production mix allows AREX to benefit from commodity price appreciation across all product streams % Change in realized prices 9M16 Commodity Mix 140.0% Oil NGLs Natural Gas 120.0% 28% 38% 100.0% 80.0% 34% 60.0%…
  14. Q3 2016 Results – Approach Resources, Inc. – slide 14
    Cost reductions and improvement in commodity prices are translating into expanding profit margins Profit margin per Boe 25.00 21.96 Hedged Realized Price 20.76 Hedged Realized Price 21.26 20.00 Realized Price 18.12 Hedged…
  15. Q3 2016 Results – Approach Resources, Inc. – slide 15
    Established infrastructure in place is critical to low cost structure Receipt Point Reagan Irion PW Receipt Point Crockett Schleicher DCP Tap PW BLK 50 Receipt Point CS 1 Compressor 204HA Receipt NORTH & CENTRAL 228HA…
  16. Q3 2016 Results – Approach Resources, Inc. – slide 16
    D&C Cost reductions have significantly improved profitability despite lower commodity prices 100% 3.0MM D&C 90% 3.5MM D&C 4.0MM D&C 80% 70% 60% IRR (%) 50% 40% 30% 20% 10% 0% 30 40 50 60 70 80 Realized…
  17. Q3 2016 Results – Approach Resources, Inc. – slide 17
    Appendix
  18. Q3 2016 Results – Approach Resources, Inc. – slide 18
    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…
  19. Q3 2016 Results – Approach Resources, Inc. – slide 19
    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 of 4.32 per Boe1 Total proved…
  20. Q3 2016 Results – Approach Resources, Inc. – slide 20
    Balance sheet detail Fall 2016 borrowing base redetermination process currently underway AREX Liquidity and Capitalization Our lead bank has recommended no change to the current 325 MM AREX Capitalization as of 9/30/2016 ( MM)…
  21. Q3 2016 Results – Approach Resources, Inc. – slide 21
    Current hedge position Commodity & Period Contract Type Volume Contract Price Crude Oil October 2016 December 2016 Swap 750 Bbls/d 62.52/Bbl Natural Gas October 2016 December 2016 Swap 200,000 MMBtu/month 2.93/MMBtu October 2016…
  22. Q3 2016 Results – Approach Resources, Inc. – slide 22
    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…
  23. Q3 2016 Results – Approach Resources, Inc. – slide 23
    AREX Wolfcamp acreage is offset by large operators APA REAGAN ENDEAVOR PXD BROADOAK PXD APA IRION UPTON SEQUITUR AEP EOG / AEP AEP HENRY ELEVATION SEQUITUR SCHLEICHER AREX EP ENERGY CALLON AREX Undisclosed APA Frmly…
  24. Q3 2016 Results – Approach Resources, Inc. – slide 24
    Pro forma leverage ratio (unaudited) Leverage ratio is calculated by dividing total debt (principal amount) by EBITDAX for the trailing 12 months. We use the leverage ratio as a measurement of our overall financial leverage, which…
  25. Q3 2016 Results – Approach Resources, Inc. – slide 25
    Pro forma interest coverage ratio (unaudited) Interest coverage ratio is calculated by dividing EBITDAX for the trailing 12 months by cash interest expense for the trailing 12 months. We use the interest coverage ratio as a measurement…
  26. Q3 2016 Results – Approach Resources, Inc. – slide 26
    Adjusted net loss (unaudited) The amounts included in the calculation of adjusted net loss and adjusted net loss per diluted share below were computed in accordance with GAAP. We believe adjusted net loss and adjusted net loss per diluted…
  27. Q3 2016 Results – Approach Resources, Inc. – slide 27
    EBITDAX (unaudited) We define EBITDAX as net loss, plus (1) exploration expense, (2) depletion, depreciation and amortization expense, (3) share-based compensation expense, (4) impairment of oil and gas properties, (5) unrealized (gain)…
  28. Q3 2016 Results – Approach Resources, Inc. – slide 28
    Cash operating expenses (unaudited) We define cash operating expenses as operating expenses, excluding (1) exploration expense, (2) depletion, depreciation and amortization expense, (3) share- based compensation expense, (4) termination…
  29. Q3 2016 Results – Approach Resources, Inc. – slide 29
    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…
  30. Q3 2016 Results – Approach Resources, Inc. – slide 30
    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…
  31. Q3 2016 Results – Approach Resources, Inc. – slide 31
    Disclosure NO OFFER OR SOLICITATION THIS PRESENTATION IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION TO BUY ANY OF THE EXISTING SENIOR NOTES NOR IS IT A SOLICITATION FOR ACCEPTANCE OF THE EXCHANGE OFFER OR THE FOLLOW-ON EXCHANGE. THE…
  32. Q3 2016 Results – Approach Resources, Inc. – slide 32
    Contact information SUZANNE OGLE Vice President Investor Relations & Corporate Communications 817.989.9000 irapproachresources.com www.approachresources.com

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