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Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc.

Approach Resources, Inc. · Feb 25, 2015 · 29 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. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 1
    Fourth Quarter & Full-Year 2014 Results FEBRUARY 25, 2015
  2. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 2
    Company overview AREX OVERVIEW ASSET OVERVIEW Enterprise value 740MM High-quality reserve base 146 MMBoe proved reserves 66% Liquids, 38% oil 1.4 BN proved PV-10 Permian core operating area 155,000 gross (136,000 net) acres 1+…
  3. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 3
    Fourth quarter and full-year 2014 financial highlights FY 2014 Q4 2014 Revenues of 258.5 MM (up 43% YoY) Revenues of 55.1 MM (down 6% YoY Net income of 56.2 MM, or 1.42 per despite 25% YoY drop in oil prices) Record revenue diluted…
  4. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 4
    Strong, simple balance sheet Following the Fall 2014 redetermination, the borrowing base AREX Liquidity and Capitalization under our 1 billion revolving credit facility was increased to AREX Capitalization as of 12/31/2014 ( MM) 600…
  5. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 5
    Valuation and leverage well supported by proved reserve base 12/31/2014 reserve summary prepared by DeGolyer and MacNaughton (D&M) Replaced 819% of produced reserves at a drill-bit F&D cost of 8.94 per Boe1 Total proved reserves up…
  6. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 6
    Fourth quarter and full-year 2014 operating highlights FY 2014 Q4 2014 Completed 64 HZ wells Completed 13 HZ wells Total production 5,049 MBoe vs early Total production 1,390 MBoe Solid execution guidance of 4,790 MBoe 4Q14 oil…
  7. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 7
    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 Capital budget of 160 MM is flexible No significant drilling or service contract…
  8. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 8
    Strong track record of reserve growth RESERVE GROWTH OIL RESERVE GROWTH MMBoe MMBbls 160 60 55.3 140 50 46.1 120 100 40 37.3 80 30 60 20 18.1 40 20 10 5.0 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013…
  9. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 9
    Strong track record of production growth PRODUCTION GROWTH OIL PRODUCTION GROWTH MBoe/d MBbls 16.0 2,500 14.0 2,024 2,000 12.0 10.0 1,500 1,444 8.0 6.0 1,000 969 4.0 482 500 2.0 246 0.0 0 2004 2005 2006 2007 2008…
  10. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 10
    Outperformance in gas/NGL volumes achieves higher reserve recovery and drives production growth Horizontal Wolfcamp Production by Commodity Mboe 1,200 159% growth in HZ Wolfcamp 1,108 production since 3Q13 1,004 1,000 957…
  11. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 11
    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…
  12. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 12
    Probability Distribution of AREX 93 Type Curve Wells at Year- end 2014 13
  13. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 13
    Midland Basin - Wolfcamp Horizontal Well Activity 18.3% Northern Midland Basin Northern Midland Basin 81.7% Southern Midland Basin Southern Midland Basin Source: DrillingInfo and IHS Fourth Quarter 2014 Results…
  14. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 14
    Midland Basin - IP and Drilling & Completion Cost 5% with 18% with IP 1,500 IP 1,000 BOE BOE Entire Midland Basin Average IP 689 BOE Southern Northern Midland Midland Basin Basin 12 Actual Cost 10 Target Cost 8…
  15. Fourth Quarter And Full Year 2014 Results – 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 15% 20% 5.0 reduction…
  16. Fourth Quarter And Full Year 2014 Results – 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. Fourth Quarter And Full Year 2014 Results – 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. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 18
    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…
  19. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 19
    AREX Horizontal Wolfcamp activity PANGEA WEST 19,000 gross acres Pad drilling with AB and AC stacked wellbores 18 horizontal wells drilled to date NORTH & CENTRAL PANGEA 89,000 gross acres Pad drilling with AC and BC…
  20. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 20
    Baker 122HC and Elliott 129HC drilled in 2014 have validated significant upside potential of AREXs portfolio 2014 HZ Wolfcamp activity Elliott 129HC IP: 806 Boe/d IP oil: 63% Baker 122HC IP: 827 Boe/d IP oil: 70% Over 40,000…
  21. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 21
    Current hedge position Based on the midpoint of current 2015 guidance, approximately 64% of forecasted oil production and 44% of forecasted natural gas production are hedged at weighted average floor prices of 80.59/Bbl and…
  22. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 22
    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 -…
  23. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 23
    Appendix
  24. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 24
    AREX Wolfcamp acreage is offset by large operators APA REAGAN APA PXD REAGAN ENDEAVOR PXD PXD BROADOAK IRION DVN APA ENDEAVOR PXD DVN APA BROADOAK IRION UPTON AEP UPTON EOG / AEP EOG AEP EOG / COP EOG SAMSONAEP SCHLEICHER…
  25. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 25
    Adjusted net income (unaudited) The amounts included in the calculation of adjusted net income and adjusted net income per diluted share below were computed in accordance with GAAP. We believe adjusted net income and adjusted net income…
  26. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 26
    EBITDAX (unaudited) We define EBITDAX as net income (loss), plus (1) exploration expense, (2) gain on the sale of our equity method investment, (3) depletion, depreciation and amortization expense, (4) share-based compensation expense,…
  27. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 27
    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…
  28. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 28
    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…
  29. Fourth Quarter And Full Year 2014 Results – Approach Resources, Inc. – slide 29
    Contact information SERGEI KRYLOV Executive Vice President & Chief Financial Officer 817.989.9000 irapproachresources.com www.approachresources.com

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