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2Q 2017 Earnings Update – Approach Resources, Inc.

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

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Slides

  1. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 1
    Second Quarter 2017 Results AUGUST 3, 2017
  2. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 2
    Solid Foundation for Long-Term Value AREX OVERVIEW ASSET OVERVIEW Enterprise value 661 MM1 High-quality reserve base2 156.4 MMBoe proved reserves 62% Liquids, 32% oil 730.2 MM PV-10 (non-GAAP) at NYMEX strip3 Available Oil Sales…
  3. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 3
    Execution Focused on Value Creation Resumed production growth Wells exceeding expectations Negotiated contracts mitigating OFS escalation Interest expense savings redeployed to asset Disciplined hedging program, capitalizing on…
  4. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 4
    Enhanced completion design drives outperformance On average 2nd quarter wells, normalized to 7500, tracking above 700Mboe curve Cumulative Production (BOE) Days Second Quarter 2017 Results August 3, 2017 5
  5. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 5
    Next generation completion design Utilized during the 2nd quarter science wells Increase sand concentration 1,800 2,000 lbs./ft. of completed lateral 60% 100 mesh sand Decrease stage…
  6. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 6
    Second quarter 2017 highlights OPERATION HIGHLIGHTS FINANCIAL HIGHLIGHTS Resumed production growth, total production of 11.9 Mboe, exceeding quarterly guidance Drilled 8 HZ wells, completed 5 HZ Revenue of 25 million, an…
  7. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 7
    LOE cost reductions driven by water handling infrastructure and field-level operating efficiencies AREX LOE Historical Track Record (/Boe) 7.00 6.48 6.00 0.99 5.24 5.00 0.95 1.69 4.24 4.06 3.92 4.00 0.79 0.62 0.68…
  8. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 8
    Strategic midstream asset Reduce D&C cost Reduce LOE Increase project profit margin Minimize fresh water use, truck traffic and surface disturbance Recycled water has a positive impact on well performance due to chemical…
  9. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 9
    Continuing to manage commodity price risk Our balanced commodity profile allows the company to hedge any combination of products to mitigate risk. We routinely monitor commodity prices for beneficial hedging opportunities. Based on…
  10. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 10
    Balance sheet detail AREX Liquidity and Capitalization At spring 2017 redetermination, our lenders reaffirmed the AREX Capitalization as of 6/30/2017 ( MM) borrowing base and commitment amount at 325 MM Cash 0.2 Liquidity of 37.9…
  11. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 11
    Appendix
  12. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 12
    Production and expense guidance 2017 Guidance Production Oil (MBbls) 1,200 1,300 NGLs (MBbls) 1,380 1,460 Natural Gas (MMcf) 9,500 10,160 Total (MBoe) 4,163 4,453 Cash operating costs (per Boe) Lease operating 4.00 - 5.00…
  13. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 13
    The business is anchored by long-lived, low-cost proved reserve base 12/31/2016 reserve summary prepared by DeGolyer and MacNaughton (D&M) Reserve replacement ratio of 350%1 PV-10 (Non-GAAP) of 730.2 million at NYMEX strip2 Total…
  14. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 14
    AREX Wolfcamp assets offer significant upside Approach assets deliver: Balanced production profile Shallow natural decline rate Meaningful cash flow generated from operations Stacked-pay zone - Wolfcamp A, B and C offering more…
  15. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 15
    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…
  16. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 16
    EBITDAX (unaudited) We define EBITDAX as net loss, plus (1) exploration expense, (2) depletion, depreciation and amortization expense, (3) share-based compensation expense, (4) unrealized (gain) loss on commodity derivatives, (5)…
  17. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 17
    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…
  18. 2Q 2017 Earnings Update – Approach Resources, Inc. – slide 18
    Unhedged cash margin (unaudited) We define unhedged cash margin as revenue, less cash operating expenses. We define cash operating expenses as operating expenses, excluding (1) exploration expense, (2) depletion, depreciation and…

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