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CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc.

Approach Resources, Inc. · Oct 12, 2011 · 27 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. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 1
    Canaccord Genuity 5th Annual Global Energy Conference OCTOBER 12-13, 2011
  2. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 2
    Approach Resources Inc. AREX OVERVIEW ASSET OVERVIEW Enterprise value 614.7 MM High quality reserve base 66.8 MMBoe proved reserves 97% Permian Basin 55% Oil & NGLs Permian core operating area 158,700 gross (140,400 net) acres…
  3. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 3
    Track Record of Reserve and Production Growth RESERVE GROWTH PRODUCTION GROWTH 55% 80 55% 7.0 oil & ngls 2004-MY11 oil & ngls 2004-2011E 70 6.0 CAGR: 46% CAGR: 34% 60 5.0 50 proved reserves (mmboe) 4.0 40 production…
  4. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 4
    Permian Basin World Class Petroleum Basin PERMIAN BASIN 250 miles by 300 miles Northwest Shelf 1st commercial oil accumulation (Westbrook) discovered in 1921 Midland Over 30 billion barrels of oil produced over Basin last 90…
  5. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 5
    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…
  6. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 6
    AREX Acreage Position Permian Basin Large, primarily contiguous acreage position UPTON REAGAN IRION EP 158,700 gross (140,400 net) acres (76% NRI) 5,580 / AC Low acreage cost 350 per acre 120th UT Lease Sale SAMSON EOG COP HK…
  7. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 7
    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 8
  8. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 8
    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…
  9. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 9
    Wolffork Oil Shale Resource Play Reagan Irion Pangea West Crockett Schleicher 15,000 gross acres 3-D seismic underway Begin horizontal drilling 4Q 2011 45 C 803H ST 45 D 901H 54-2 1 54-13 1 45 E 1101H 45 A 701H 45 D 902H…
  10. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 10
    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+…
  11. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 11
    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…
  12. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 12
    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%…
  13. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 13
    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…
  14. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 14
    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%…
  15. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 15
    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…
  16. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 16
    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…
  17. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 17
    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…
  18. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 18
    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…
  19. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 19
    Key Takeaways Concentrated geographic footprint focused on West Texas Midland Basin oil/liquids-rich plays 140,400+ net, primarily contiguous acres, 100% operated More than 525 wells drilled by Approach since 2004, with a 93%+ success…
  20. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 20
    Financial Framework APPROACH RESOURCES
  21. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 21
    2Q 2011 Highlights AREX 2Q 2011 SUMMARY 2Q 2011 FINANCIAL HIGHLIGHTS 7th Consecutive quarter of production growth Three Months Ended June 30, 2Q11 production 6.7 MBoe/d 2011 2010 Proved reserves increase 32% to 66.8 MMBoe Revenues…
  22. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 22
    2Q 2011 Operating Highlights DELIVERING Q/Q PRODUCTION GROWTH OPERATING HIGHLIGHTS 7.5 56% oil & ngls Q211 production up 63% to 6.7 MBoe/d Oil & NGL production up 203% to 340 MBbls 6.0 Drilled 15 wells, completed 16 wells, and 5…
  23. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 23
    2011 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…
  24. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 24
    Appendix NON-GAAP RECONCILIATIONS APPROACH RESOURCES
  25. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 25
    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…
  26. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 26
    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…
  27. CANACCORD GENUITY 5TH ANNUAL GLOBAL ENERGY CONFERENCE – Approach Resources, Inc. – slide 27
    F&D Costs Reconciliation (Unaudited) Reserve Summary (MBoe) We believe that providing measures of finding and development, or F&D, cost is useful Balance 12/31/2010 50,715 to assist an evaluation of how much it costs the Company, on a…

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