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JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc.

Approach Resources, Inc. · Dec 1, 2011 · 33 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. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 1
    J.P. Morgan 10th Annual SMid Cap Conference December 1, 2011
  2. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 2
    Company overview AREX overview Asset overview Enterprise value 982 MM High quality reserve base 66.8 MMBoe proved reserves 97% Permian Basin 55% Oil & NGLs Permian core operating area 160,600 gross (142,000 net) acres 500+ MMBoe…
  3. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 3
    Key investor highlights Concentrated geographic footprint focused on West Texas Midland Basin oil/liquids-rich play 142,000+ net, primarily contiguous acres, 100% operated More than 575 wells drilled since 2004, with a 93%+ success…
  4. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 4
    Strong Track Record of Reserve and Production Growth RESERVE GROWTH PRODUCTION GROWTH 80 60% 8.0 60% 70 7.0 50% 50% 60 6.0 40% proved reserves (mmboe) 40% 50 5.0 production (mboe/d) 40 30% 4.0 30% 30 3.0 20% 20% 20…
  5. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 5
    Low-Cost Operator Across Crude-Oil Weighted Peers 3Q11 LIFTING COSTS (/BOE) 3-YEAR AVERAGE F&D COSTS (/BOE) 25 25 20.95 20.96 20 20 17.88 16.95 17.22 15.69 15.60 15 15 13.32 13.29 12.60 12.21 9.73 10 10 8.78 8.14 5…
  6. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 6
    AREX Has Delivered On Its Objectives Since Last Year Then November 2010 Now 2011 accomplishments 46.4 MMBoe proved reserves 66.8 MMBoe proved reserves (+44% YoY) Growth 4.5 MBoe/d daily production 6.7 MBoe/d daily production (+46%…
  7. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 7
    AREX Acreage Position Favorably Located in the Permian Basin Winkler Coke Midland Ector Sterling Glasscock Midland Basin Upton Eastern Delaware Ward Shelf Basin Crane Tom Green Irion Reagan Central Basin Platform…
  8. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 8
    AREX Wolffork Oil Shale Resource Play Large, primarily contiguous acreage position REAGAN IRION UPTON EP 160,600 gross (142,000 net) acres (76% 5,580 / AC NRI) 120th UT Lease Sale EOG SAMSON COP HK 4,200 / AC Low acreage cost…
  9. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 9
    AREX Wolffork Oil Shale Resource Play Activity Map Reagan Irion Pangea West Crockett Schleicher 18,000 gross acres 3-D seismic acquisition completed Begin horizontal drilling 1Q 2012 54-2 1 45 C 803H ST 45 A 702H 54-9 1 45 D…
  10. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 10
    Wolfcamp Shale Name Convention Southern Midland Basin Wolfcamp shale name conventions are based on investor presentations of AREX (10/18/2010), EP (5/24/2011) and PXD (9/7/2011). APPROACH RESOURCES 11
  11. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 11
    Wolffork Hydrocarbon Column Over 2,500 Thick AREX Baker A 112 LLD OHMM DPHI BVW 0.2 20 200 2,000 0.3 -0.1 0.2 0 GR API MSFL OHMM NPHI Free Hydrocarbon 0 200 0.2 20 200 2,000 0.3 -0.1 0.2 0 LLD OHMM DPHI BVW 0.2 20 200 2,000 0.3…
  12. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 12
    Vertical Wolffork Economics VERTICAL WOLFFORK BTAX IRR SENSITIVITIES 40 Play Type Wolffork Avg. EUR 110 MBoe 30 IRR (%) Avg. Well Cost 1.2 MM 20 F&D 10.91/Boe 10 Potential Locations 1,825 0 Gross Resource Potential 200+ MMBoe…
  13. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 13
    Vertical Wolffork Recompletion Economics VERTICAL WOLFFORK RECOMPLETIONS BTAX IRR SENSITIVITIES 80 Play Type Wolffork Recompletions 70 60 Avg. EUR 93 MBoe 50 IRR (%) 40 Avg. Well Cost 750 M 30 F&D 8.06/Boe 20 10 Potential…
  14. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 14
    Vertical Wolffork Well Profile 80 IP Profile 58 BO, 11 Bbls NGLs, 64 Mcf gas 70 Avg. EUR 110 MBoe 60 Gross Daily Production 50 40 30 20 10 0 Annual 0 1 2 3 4 5 6 7 8 9 10 62% 29% 20% 15% 12% 10% 9% 8% 7%…
  15. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 15
    Vertical Canyon Wolffork Economics VERTICAL CANYON WOLFFORK BTAX IRR SENSITIVITIES 60 Play Type Canyon Wolffork 50 Avg. EUR 193 MBoe 40 IRR (%) Avg. Well Cost 1.5 MM 30 F&D 7.77/Boe 20 10 Potential Locations 440 0 Gross…
  16. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 16
    Vertical Canyon Wolffork Well Profile 300 IP Profile 66 BO, 52 Bbls NGLs, 315 Mcf gas 250 Avg. EUR 193 MBoe 200 Gross Daily Production 150 100 50 0 0 1 2 3 4 5 6 7 8 9 10 Annual 68% 32% 21% 16% 12% 10% 9%…
  17. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 17
    Horizontal Wolfcamp Enhancing Wolfcamp Value Well EUR (Boe) Potential Oil Shale Play Uplift Vertical Horizontal Eagle Ford 49,500 323,813 6.5x Niobrara 40,000 290,000 7.3x Wolfcamp 80,000 450,000 5.6x Notes: Eagle Ford…
  18. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 18
    Horizontal Wolfcamp Economics HORIZONTAL WOLFCAMP BTAX IRR SENSITIVITIES 50 45 Play Type Horizontal Wolfcamp 40 35 Avg. EUR 450 MBoe 30 IRR (%) 25 Targeted Well Cost 5.5 MM 20 15 F&D 12.22/Boe 10 5 Potential Locations…
  19. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 19
    Horizontal Wolfcamp Well Performance RECENT HORIZONTAL WOLFCAMP RESULTS CONSISTENTLY IMPROVING WELL RESULTS University 45 C 803H 7,358 lateral, 23 frac stages 9/2011 Initial 24-hour flow rate 1,044 BOEPD, 95% liquids 1,200 (931 BO, 57…
  20. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 20
    Horizontal Wolfcamp Well Profile 350 IP Profile 230 BO, 47 Bbls NGLs, 285 Mcf gas 300 Avg. EUR 450 MBoe 250 Gross Daily Production 200 150 100 50 0 Annual 0 62% 1 31% 2 21% 3 16% 4 13% 5 11% 6 9% 7 8% 8 7%…
  21. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 21
    Summary AREX Total Resource Potential Gross Resource Avg. EUR F&D Potential Play Type Locations (MBoe) (/Boe) (MMBoe) Horizontal Wolfcamp 500 450 12.22 225 Vertical Wolffork 1,825 110 10.91 200 Vertical Canyon Wolffork 440 193…
  22. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 22
    Key Investor Highlights Concentrated geographic footprint focused on West Texas Midland Basin oil/liquids-rich play 142,000+ net, primarily contiguous acres, 100% operated More than 575 wells drilled since 2004, with a 93%+ success…
  23. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 23
    Financial Framework APPROACH RESOURCES
  24. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 24
    3Q 2011 Operating Highlights Three Months Ended Production in Project Pangea running as September 30, planned 2011 2010 Oil inventory build of 29 MBbls through 3Q 2011 Total production (MBoe) 612 418 Inventory build reduced…
  25. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 25
    3Q 2011 Financial Highlights Three Months Ended September 30, 2011 2010 Revenues (M) 27,958 14,916 Net income (M) 7,073 2,087 Net income per diluted share 0.25 0.10 Adjusted net income (non-GAAP) (M) 5,925 2,293 Adjusted net…
  26. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 26
    2011 Capital Budget 2011 PROGRAM 2 Vertical rigs Leasing Activity, Expect to drill 58 vertical wells targeting the Infrastructure, Permian Basin Other Projects - Drilling & Wolffork or Canyon Sands (13 ahead of 11% Completions…
  27. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 27
    2012 Capital Budget 2012 PROGRAM 2012 Capital budget 160 MM 2 Vertical rigs, 1 horizontal rig and 2 to 4 recompletions per month targeting the Wolffork oil shale Substantially same rig program as 2011 Targeting 20%+ production…
  28. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 28
    Hedge Position CURRENT HEDGE POSITION Natural gas (NYMEX Henry Hub) 2011 Price swaps contracted for 230,000 MMBtu/month at 4.86/MMBtu June 2011 December 2011 Price swaps contracted for 200,000 MMBtu/month at 4.74/MMBtu 65% of…
  29. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 29
    Appendix NON-GAAP RECONCILIATIONS APPROACH RESOURCES
  30. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 30
    Liquidity (unaudited) Liquidity is calculated by adding the net funds available under our revolving credit facility and cash and cash equivalents. We use liquidity as an indicator of the Companys ability to fund development and…
  31. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 31
    F&D costs reconciliation (unaudited) 1H 2011 Reserve summary (MBoe) 3-Year reserve summary (MBoe) We believe that providing measures of finding and development, or Balance 12/31/2010 50,715 Balance 12/31/2007 30,067 F&D, cost is useful…
  32. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 32
    Adjusted Net Income Reconciliation (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…
  33. JP Morgan 10th Annual SMid Cap Conference – Approach Resources, Inc. – slide 33
    EBITDAX Reconciliation (Unaudited) We define EBITDAX as net income, plus (1) exploration expense, (2) depletion, depreciation and amortization expense, (3) share-based compensation expense, (4) unrealized (gain) loss on commodity…

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