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April 2017 DUG Permian Basin Conference – Approach Resources, Inc.

Approach Resources, Inc. · Apr 3, 2017 · 18 slides

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Slides

  1. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 1
    Water Recycling and Sustainability of Wolfcamp Development Qingming Yang, Ph.D. President and Chief Operating Officer Approach Resources Inc. DUG Permian Water Forum April 3, 2017
  2. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 2
    Company overview AREX OVERVIEW ASSET OVERVIEW Enterprise value 563 MM High-quality reserve base 156.4 MMBoe proved reserves 62% Liquids, 32% oil 730.2 MM PV-10 (non-GAAP) at NYMEX strip1 Available Oil Sales Outlets Cushing and…
  3. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 3
    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 0.96 0.59 5.00 2.88 1.28 1.17 0.89 0.81 0.96…
  4. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 4
    AREX continues to achieve one of the lowest cost structures in the Permian Basin AREX LOE Historical Track Record (/Boe) Q4 2016 Permian Peer LOE (/Boe) 8.0 9.0 7.36 8.36 8.0 7.85 7.0 6.65 6.18 5.87 7.0 6.42 6.0 5.55 5.44 5.45…
  5. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 5
    Midland Basin Wolfcamp shale largest discovery ever made in the U.S. 50 45.0 45 Wolfcamp is the largest oil discovery made in the Resource Potential (BBOE) 40 U.S. 35 Northern Approach is a pioneer in the Wolfcamp oil shale…
  6. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 6
    Permian The Most Active and Profitable Basin Mississippian Permian Basin Arkoma Woodford Barnett Ardmore Woodford 5 2 1 Fayetteville 13 9 7 Granite Wash Utica 22 DJ-Niobrara 25 Rig Count Haynesville 37 Williston…
  7. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 7
    One of the most important challenges in developing the Wolfcamp shale play availability of frac water A typical 7500 WFMP lateral in the Midland Basin uses more than 300,000 Bbls of water 20 billion barrels of water is required to…
  8. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 8
    Midland Basin Significant shortage of frac water supply 450 400 350 Mining Water Allocated (MMBbls) 300 Potential Water Needed for Wolfcamp Development Wolfcamp oil shale Water (MMBbls) development using 250 mining…
  9. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 9
    Midland Basin Significant cost for sourcing, transporting & disposing frac water Water Sourcing Well 4-5 per barrel 1,200,000 - 1,500,000 (2012 early 2015) Lease Road per well Road damage Local Highway Air pollution…
  10. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 10
    Produced / flowback water quality Can produced / flowback water be used for fracing after processing 4.0 Total dissolved solids (TDS) Relative Fluid Sensitivity for Wolfcamp Will not impede gelling hydration Well 1 - 20% Clay Well 2 -…
  11. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 11
    AREX flowback and produced water recycle facility Designed one of the highest industry KPI for water treatment Bacteria Sulfates Heavy metals Fines Best practice for water conservation and improving water use efficiency…
  12. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 12
    AREX flowback and produced water recycle facility Flowback / Produced Water 32,000 32,000 BBL 20 Treated Flowback & Produced Frac Water Supply Line BBL Treated Treated Water Water Tank Tank 8 Low Chloride Treated Frac…
  13. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 13
    AREX water recycling facility successfully implemented Started up in March 2015 Ramped up during April 2015 Recycled up to 100% of AREX daily flowback/produced water volumes More than 2.2 million barrels of water treated 30,000 More…
  14. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 14
    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 228HA Receipt 204HA Point PW…
  15. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 15
    Significant cost saving for using recycled water for fracing Cost for recycled water Flowback / Producing Well 0.50 - 0.80 per barrel Waste Water Cost saving for using recycled water & existing infrastructures 0.05 - 0.10 3.20 -…
  16. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 16
    Summary Wolfcamp oil shale play in the Midland Basin spreads more than 8 mm acres, contains estimated commercially recoverable reserves of 45 billion barrels of oil equivalent, and is the largest discovery ever made in the U.S. and…
  17. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 17
    Appendix
  18. April 2017 DUG Permian Basin Conference – Approach Resources, Inc. – slide 18
    PV-10 (unaudited) The present value of our proved reserves, discounted at 10% (PV-10), was estimated at 307.9 million at December 31, 2016, and was calculated based on the first-of-the- month, twelve-month average prices for oil, NGLs…

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