- Additional Proxy Soliciting Materials - Non-Management (definitive) (DFAN14A)
12 Junio 2012 - 8:47AM
Edgar (US Regulatory)
UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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SCHEDULE 14A
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Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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CREDO PETROLEUM CORPORATION
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(Name of Registrant as Specified In Its Charter)
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FORESTAR GROUP INC.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Date Filed:
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Filed by Forestar Group Inc.
Pursuant to
Rule 14a-12 under the Securities
Exchange Act of
1934
Subject Company:
CREDO Petroleum Corporation
Commission File
No.: 001-34281
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Investor
Presentation June 2012 Recognizing and Responsibly Delivering the Greatest
Value From Every Acre and Growing Through Disciplined Investments
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This
presentation contains forward-looking statements within the meaning of the
federal securities laws. Forward-looking statements are typically identified
by words or phrases such as will, anticipate, estimate, expect,
project, intend, plan, believe, target, forecast, and other words
and terms of similar meaning. These statements reflect managements current
views with respect to future events and are subject to risk and
uncertainties. We note that a variety of factors and uncertainties could
cause our actual results to differ significantly from the results discussed
in the forward-looking statements, including the timing to consummate the
proposed merger, the risk that a condition to closing of the proposed merger
may not be satisfied; our ability to achieve the synergies and value creation
contemplated by the proposed merger; our ability to promptly and effectively
integrate Credos businesses, and the diversion of management time on
merger-related matters. Other factors and uncertainties that might cause such
differences include, but are not limited to: general economic, market, or
business conditions; changes in commodity prices; the opportunities (or lack thereof)
that may be presented to us and that we may pursue; fluctuations in costs and
expenses including development costs; demand for new housing, including
impacts from mortgage credit availability; lengthy and uncertain entitlement
processes; cyclicality of our businesses; accuracy of accounting assumptions;
competitive actions by other companies; changes in laws or regulations; and
other factors, many of which are beyond our control. Except as required by
law, we expressly disclaim any obligation to publicly revise any
forward-looking statements contained in this presentation to reflect the
occurrence of events after the date of this presentation. Important
Additional Information and Where to Find It Credo intends to file with the
SEC and mail to its stockholders a Proxy Statement on Schedule 14A pursuant
to Section 14(a) of the Exchange Act in connection with the merger. This
document will contain important information about Forestar, Credo, the merger
and other related matters. Credos investors and security holders are urged
to read this document carefully when it is available. Credos investors and
security holders will be able to obtain free copies of the Proxy Statement
and other documents to be filed with the SEC by Credo through the web site
maintained by the SEC at www.sec.gov. Credos investors and security holders
may also obtain these documents, free of charge, from Credos website
(www.credopetroleum.com) under the tab Corporate Governance and then under
the heading SEC Filings or by contacting Credos Investor Relations
Department at 303-297-2200. Credo and its directors and executive officers
may be deemed to be participants in the solicitation of proxies in respect of
the transactions contemplated by the merger agreement. Information regarding
the persons who may, under the rules of the SEC, be deemed participants in
the solicitation of Credo stockholders in connection with the merger will be
set forth in the proxy statement when it is filed with the SEC. Credos
investors and security holders can find information about Credos executive
officers and directors in its definitive proxy statement filed with the SEC
on February 28, 2012. Notice to Investors 2
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Strategically
located in key growth regions and active oil and gas basins Focused strategy
to deliver the greatest value from real estate and natural resources
Experienced management team with proven ability to deliver Strong balance
sheet Disciplined investment approach; well positioned to capitalize on
growth opportunities The Forestar Difference 3
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Forestar is a
real estate and natural resources company with a strategy focused on
maximizing the value of its assets by: Recognizing and responsibly delivering
the greatest value from every acre Growing through strategic and disciplined
investments 5 7 4 Our Strategy The Dimensional Land Model TM
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594,000 net
mineral acres principally located in 5 basins and 7 states 1,600,000 acres of
water interest* 17,800 acres of groundwater leases in central Texas 146,000
acres of low-basis land 130,000 real estate acres generating fiber growth and
sales 89 projects residential and mixed-used communities in 7 states and 11
markets 4 significant commercial and income producing assets 3 Multifamily
Properties (Austin - 2, Houston - 1) Radisson Hotel (Austin, TX) Note:
Information as of Q1 2012 and includes ventures. 5 Delivering The Greatest
Value From Every Acre * Includes a 45% non-participating royalty interest
from approximately 1.4 million acres in TX, LA, GA & AL
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Forestar
Minerals - Oil and Gas 6 Building Momentum By Driving Leasing and Exploration
to Increase Production and Reserves 6
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Minerals
Greatest Value Pipeline (Acres) 1 Terms Activity Financials 32,000 20% -
27% Royalty and Working Interest 534 Wells 2 Cash Flow = $134mm3 49,000 3 5
year term Delay rentals Drilling requirements $250 - $1,500 per acre lease
rate 58,000 Seismic, Ventures and Prospects Up to $100 per acre Knowledge
gain 455,000 Market and promote through multiple channels Low Basis Low Cost
594,000 Total Net Mineral Acres Production - Reserves Lease - Bonus Explore
Market - Promote 1 Acres as of Q1 2012; includes ventures 2 Wells owned and
operated by third party lessees / operators as of Q1 2012 3 Undiscounted
future net cash flows before income taxes as of YE 2011 7 Delivering The
Greatest Value From Every Acre
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Forestars
Share of Quarterly Oil & Gas Production Q1 2011 Q1 2012 Growth in
Drilling Activity Well Count YE 2009 Q1 2012 Note: Includes ventures; wells
owned and operated by third party lessees / operators 534 8 Increased Oil
Production Driving Higher Royalties Well Count oil Produced (Bbls) Natural
Gas Produced (MMcf)
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Accelerating
Value Realization of Minerals Through Proven Reserve Growth Note: Includes
ventures ($ in millions) ($ in millions) Future Net Cash Flows * 9 *PV-10
represents present value of estimated future oil and gas revenues, net of
estimated direct expenses, discounted at an annual discount rate of 10%.
Future Net Cash flows represents an undiscounted value based upon estimate of
future net cash flows from proved developed reserves after deducting
estimated severance and ad valorem taxes, but before deducting estimates of
future income taxes These are Non-GAAP financial measures. The reconciliation
between GAAP and Non-GAAP financial measures is provided in the tables
following this presentation, and on the companys investor relations website.
$134 $57 74% Oil Significant Oil Exploration and Development Drives 246%
Reserve Replacement in 2011 Proven Reserves (Before Income Taxes) PV-10
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Target
Formations 2011-2012 Well Completions East Texas & Louisiana* 10 Acres
Leased Available for Lease Held by Production Acres with Option New Oil Wells
New Gas Wells * Map excludes six wells located in Barnett Shale in North
Texas and ten wells in Colorado completed in 2011 East Texas and Wells
Drilled Gulf Coast Basins Last 12 months Target
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Rodessa ~24,000
acres Oil / NGLs / Natural Gas Target Specific Zones and Formations For
Prospect Generation Pettet ~2,000 acres Oil / NGLs / Natural Gas Glen Rose
~33,000 acres Oil / NGLs / Natural Gas Bossier ~10,700 acres Natural Gas
Tuscaloosa Marine Shale ~17,500 acres Oil / NGLs / Natural Gas
Bossier-Haynesville Shale ~22,000 acres Natural Gas Wilcox ~44,000 Acres Oil
/ NGLs / Natural Gas Austin Chalk ~9,400 acres Oil / NGLs 11 Targeting
160,000 Acres For Oil and Gas Prospects
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Vernon Rapides
Newton Allen Beauregard 12 12 TEXAS LOUISIANA Austin Chalk Drilling Activity
Increasing Masters Creek Trend Byerley A-32 Unit 2-1 Byerley A-32 Unit 2-2
Keaghey A-2 1 Blackstone A-90 1 Leased Available For Lease HBP FOR Interest
in Austin Chalk wells Brookeland Trend
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13 ($ in
millions) Estimated Ultimate Recoveries Well Completion Date FOR Net Royalty
Interest Condensate MB Natural Gas Liquids MB Dry Gas MMCF Total MMBOE
Forestar Blackstone A-90 Unit 1 Nov-09 7.6% 29 38 482 0.1 Forestar Keaghey
A-253 Unit 1 Jan-11 5.1% 13 15 172 0.1 Forestar Byerley A-32 Unit 1 Nov-11
14.4% 52 51 475 0.2 Forestar Byerley A-32 Unit 2 No 1 Apr-12 14.3% 43 45 472
0.2 Total 136 148 1,601 0.6 12-Month NYMEX Strip Pricing, $/bbl or $/mcf or
$/boe $97.46 $48.73* $3.08 $46.09 Potential Royalties to Forestar (Current
Pricing) $13.2 $7.2 $4.9 $25.4 Austin Chalk Drilling Activity Increasing *
Based upon 50% of NYMEX 12-month strip price as of May 9, 2012 Note: Wells
owned and operated by third-party lessees; EURs based upon internal
estimates, actual future results may vary
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Tuscaloosa
Marine Shale Prospect Generation Evaluating 17,500 acres for Drilling
Prospects 14
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Haynesville
Bossier Prospect Generation Evaluating 22,000 acres for Drilling Prospects 15
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Value
Components % of Well Economics Capital Wells Operating 50 - 75% Moderate --
Working Interest 10 50% Low 10 Royalties 20 25% None 534 Leases < 5%
None -- Total 100% 534* Value Creation & Realization Q1 2012 * FOR may
have a working interest and royalty interest in same well 16 Enhancing
Minerals Value Creation and Realization
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Minerals - Oil
and Gas Acquisition of Credo Petroleum Corporation Doubles Production and
Reserves, Provides Meaningful Ownership in Strategic Oil and Gas Basins,
Further Enhances Transparency and Disclosure, and Creates Solid Platform for
Additional Growth 17
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Credo
Acquisition Overview Acquisition of CREDO Petroleum (NASDAQ:CRED) for $14.50
per share Total equity value $146 million - all cash Consistent with Strategy
and Triple in FOR initiatives Accelerate value realization Optimize
transparency and disclosure Raise net asset value through strategic and
disciplined investments 18 Note: Acquisition price represents 34% premium
based on Credo pre-announcement closing price of $10.86 per share on June 1,
2012 Note: Credo is an oil and gas company based in Denver, CO which owns
leasehold interests in almost 125,000 net mineral acres, with operations in
the Bakken and Three Forks formations of North Dakota, the Lansing Kansas
City formation in Kansas and Nebraska, and the Tonkawa and Cleveland
formations in the Texas Panhandle.
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Acquisition
Benefits Doubles production and reserves, enhances disclosure Creates
meaningful scale, ownership and operations in strategic basins Maintains
solid financial position, enhanced by recurring cash flows Provides a strong
operating platform for growth and investment Exceeds return requirements and
drives additional shareholder value Operating option accelerates Forestar
Minerals value realization 19
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Attractive
Leasehold Interests In Prolific Basins CREDO Leasehold Interests Q1 2012
Market Net Acres Basins Formations North Dakota 6,000 Williston Bakken &
Three Forks Kansas 43,000 Central Uplift Lansing Kansas City Nebraska
41,000 Denver Julesburg Central Uplift Lansing Kansas City Oklahoma
17,000 Anadarko Morrow Texas 4,000 Anadarko Tonkawa & Cleveland Other*
14,000 Total 125,000 Q1 2012 Producing Wells Working Interest** 337 Royalty
Interest 1,180 Total Wells 1,517 Q1 2012 Leasehold Interest (Acres) Held By
Production 30,000 Undeveloped 95,000 Total Net Mineral Acres 125,000 *
Includes approximately 8,000 net mineral acres located in various states
related to overriding royalty interests **Includes approximately 108 wells
operated by CREDO Note: Acres may vary 20
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Bakken Provides
Significant Value Creation Potential 6,000 net mineral acres in core of
Bakken & Three Forks Bakken Well Assumptions Avg. Well production (EUR)
>500 Mboe Average working interest 8.0% Units 50 Wells Completed* 16 Wells
Drilling* 9 Addl Wells Planned by YE 2012* 9 Total Potential Wells 400 *
Source: Credo Petroleum news release dated April 17, 2012 FORT BERTHOLD
RESERVATION PARSHALL FIELD Bakken / Three Forks Acres Locator Map Leasehold
Mineral Interests Locations Leasehold Interests Drilling Locations Units
Bakken Vertical Wells Historical Production Three Forks Vertical Well Bakken
Horizontal Well Three Forks Horizontal Well 21
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Acquisition
Provides Meaningful Scale and Solid Platform For Future Growth and Additional
Investment Acquisition Provides Meaningful Ownership in Strategic Oil and Gas
Basins Combined Mineral Interests Market Net Acres* Texas 256,000 Georgia
156,000 Louisiana 144,000 Kansas 43,000 Nebraska 41,000 Alabama 40,000
Oklahoma 17,000 North Dakota 6,000 Other** 16,000 Total 719,000 * Note: As of
first quarter 2012; includes both fee and leasehold interests ** Includes
approximately 8,000 net mineral acres located in various states related to
overriding royalty interests 22
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Compelling
Combination Value Drivers Combination creates meaningful scale through
production and reserve growth, additional ownership and operations in
strategic basins and improves transparency and disclosures Value Drivers 2011
Metrics* CRED FOR Combined Increased Scale / Doubles Production and Reserves
Meaningful Ownership and Operations in Prolific Basins Disclosure Benefits Additional
transparency on Forestar minerals FOR YE 2011 reserves 98% PDPs Yet to
report PUDs ($ in millions) Production (BOE) 301,000 422,200 723,200
Reserves (MMBOE) 4.1 3.0 7.1 % Oil 48% 35% 42% PV-10 $62 $81 $143 Future Net
Cash Flows $116 $134 $250 Net Mineral Acreage** 125,000 594,000 719,000
Basins 5 5 10 States 7 7 14 ** Note: Includes both fee and leasehold
interests; Forestar acres as of Q1 2012 *Note: Based on Credo Form 10-K for
the year ended 10/31/11 and Forestar Form 10-K for the year ended 12/31/11,
before income taxes 23
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Proved
Developed Proved Developed Non-Prod Proved Undeveloped Probable Possible
Resource Reserve reporting beyond proved developed requires the ability and
intent to drill 24 Proved Developed Reserves Represent Only One Component of
Reserve Value and Opportunity Acquisition Accelerates Value Realization of
Forestar Minerals Reserve Disclosures Forestar Forestar YE 2011 YE 2011
Reserves (MMBOE) Net Acres
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Acquisition
Analysis Credo Acquisition Price Per Share $14.50 Equity Purchase $146 +
Closing Costs* 7 Total Purchase Price $153 Financing** Committed Loan $75
Revolver Availability & Cash 78 $153 Leverage & Liquidity (Post
transaction) Total Debt / Total Capitalization 38% Available Liquidity
>$100 ($ in millions) Following the acquisition of Credo, Forestar will
have a solid balance sheet, improved cash flow profile and ample liquidity
*Excludes financing costs **Forestar intends to pursue amendments to its
existing credit facilities to fund a significant portion of the purchase
price. 25
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Credo
Acquisition Will Generate Scale, Create Platform for Growth and Investment,
and Accelerate Value Realization Q1 2012 Proforma Combined Portfolio of
Assets Acquisition Benefits Oil & Gas ($ in millions) Net Minerals Acres*
719,000 Increases exposure to Oil and NGLs Reserves (MMBOE) 7.1 Enhances
reserve reporting PV-10 Reserves $143 Meaningful scale; ownership in
strategic basins Future Net Cash Flows $250 Experienced team with proven
track record Proforma Investment $200 Accretive to earnings in first full
year Real Estate Acres 146,000 Projects 99 Acres in Entitlement 27,600
Commercial Properties 4 Investment $570 Maintain solid balance sheet and
ample liquidity Water Acres 1.6 million** *Includes both fee and leasehold mineral
acreage; Based on Credo Form 10-K for the year ended 10/31/11 and Forestar
Form 10-K for the year ended 12/31/11 ** Includes a 45% nonparticipating
royalty interest in groundwater produced or withdrawn for commercial purposes
or sold from approximately 1.4 million acres in TX, LA, GA, and AL Note:
Reserve information before income taxes 26
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Real Estate -
Community Development Page Building Momentum by Increasing Residential Lot
Sales And Developing Exceptional Master Plan Communities 27
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Real Estate
Greatest Value Development Entitled Entitle Timberland Pipeline (Acres) 1
Activity Uses Financials 2 2,000 63 projects 1,348 acres 2,815 lots 498
commercial acres $50K per lot $90K per acre (avg sales price) 14,000 18
projects Approved uses, ready for development High Value Creation 28,000 16
projects Planned Lifestyle Communities (1st and 2nd move-up focus) Low Basis
Low Cost 102,000 Timberland Sales Fiber Sales Recreational Leases $2K per
acre (avg sales price) 146,000 Total Real Estate Acres - 97 Projects 1 Acres
as of Q1 2012; Includes ventures. 2 Based on historical sales activity. 28
Delivering The Greatest Value From Every Acre
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Note: MSA
performance based on Employment, Gross Metropolitan Product (GMP) and House
Price Index Source: Brookings Institute Salt Lake City 1 - $0.4 Oakland 1 -
$8.8 Strongest Quartile Weakest Quartile Los Angeles 2 - $14.4 Kansas City 1
- $2.9 Tampa 3 - $4.9 Atlanta 33 - $84.9 San Antonio 4 - $89.5 Denver 5 -
$31.3 Austin 16 - $116.1 Dallas/Ft. Worth 14 - $75.0 Gulf Coast 5 - $37.2
Houston 12 - $117.1 Projects and investment as of Q1 2012; includes ventures
Note: Excludes investment in Light Farms which was sold in April 2012;
includes $21 million note secured by Discovery at Springs Trail Project in
Houston, TX TEXAS 51 - $434.9 Texas Markets Represent 75% of our Investment
in Real Estate 29 Low Basis Assets Located in Stronger Markets
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Increased
Residential Lot Sales Reflect Stable Demand and Reduced Finished Lot
Inventories in Texas 30 * Represents developed and under development
residential lots Note: Includes ventures; excludes sale of undeveloped paper
lots Annual Lot Sales 1,117 642 1,060 2006 Peak Sales = 3,600 lots Annual Lot
Sales & Avg. Lot Margin Forestar Residential Lot Inventory*
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Real Estate
Pipeline Well Positioned For Recovery Note: Information as of Q1 2012;
includes ventures * Includes 4 significant commercial and income producing
properties. Real Estate Undeveloped In Entitlement Process Entitled Developed
and Under Development Total Acres Undeveloped Land Owned 95,360 102,261
Ventures 6,901 Residential Owned 24,867 9,669 734 38,811 Ventures --- 3,240
301 Commercial Owned 2,723 1,246 614 5,179 Ventures --- 399 197 Total Acres
102,261 27,590 14,554 1,846 146,251 Estimated Residential Lots 24,108 2,815
26,923 Projects 16 18 63* 97 In addition, Forestar owns a 58% interest in a
venture which controls over 16,000 acres of undeveloped land in Georgia with
minimal investment 31
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Triple in FOR
Strategic Initiatives 32 Building Momentum By Increasing Oil Production,
Proven Reserves and Residential Lot Sales
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Initiatives Historical Avg. (2008-2011)
Target Focus on Accelerating Value Realization Triple Residential Lot Sales
850 lots 2,500 lots Triple Oil & Gas Production (Mcfe) 2.3 Bcfe 6.7 Bcfe
Triple Total Segment Earnings $33 million > $100 million Optimize
Transparency & Disclosure Expand Reported Oil and Gas Resource Potential
PDPs Additional Reserve / Resource Categories Additional Transparency on
Water Interests Acres Sustainable Production Potential Report Corporate
Sustainability Results - Responsibly integrating economic, social, and
environmental resources Raise NAV Through Strategic and Disciplined
Investments Growth Opportunities which Prove Up Net Asset Value and Exceed Return
Requirements - Target 35% ROC (20-25% IRR) Maintain Financial Flexibility
Accelerate Participation in Oil & Gas Working Interests - Lower Risk
Proven Formations Target > 20% Return on Capital Develop Low-Capital,
High-Return Multifamily Business - Minimal Capital Investment (10-20% of
project equity) 33 Our Focus: Triple in FOR
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Kingwood 34
April 2012: Light Farms Sale FOR / RPG Land Company sold 800 acres from
proposed residential community near Dallas, TX for $56 million in total
consideration FOR received $25 million in cash proceeds and reduced
consolidated debt by $31 million Sale eliminated over $2 million in annual
carrying costs Gain on sale of $3.4 million in Q2 2012 ($ in millions) 1st
Quarter 2012 Pro forma Light Farms Sale Credit Facility Borrowings $136 $136
Other Consolidated Debt 92 61 Total Debt $228 $197 Total Debt/Capital 31% 28%
Cash $5 $30 Credit Availability 155 155 Total Liquidity $160 $185 Focused on
investments that provide near-term cash flow and earnings Increasing Our Financial
Flexibility Light Farms Venture Sold 800 Acres for $56 Million
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Accelerating
Value Realization Building momentum by increasing oil production and proven
reserves Growing lot sales and increasing market share Harvesting value from
stabilized commercial assets Capitalizing on growth opportunities and
investments to generate near-term cash flow and earnings, accelerate value
realization and raise NAV Building Momentum By Accelerating Value
Realization, Optimizing Transparency and Growing NAV 35
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Appendix 36
Recognizing and Responsibly Delivering the Greatest Value From Every Acre and
Growing Through Disciplined Investments
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1st Quarter
2012 1st Quarter 2011 Full Year 2011 Full Year 2010 Leasing Activity Net
Acres Leased 800 4,900 8,100 16,900 Avg. Bonus / Acre $360 $340 $279 $457
Royalties* Oil Produced (Barrels) 69,200 32,000 151,900 115,400 Average Price
/ Barrel $97.57 $82.49 $96.84 $73.09 Natural Gas Produced (MMCF) 452.2 466.8
1,622.0 1,796.4 Average Price / MCF $3.23 $3.72 $3.95 $4.26 Total MMcfe 867.4
658.6 2,533.4 2,489.1 Average Price / Mcfe $9.47 $6.64 $8.34 $6.46 Segment
Revenues ($ in Millions) $9.4 $7.3 $24.6 $24.8 Segment Earnings ($ in
Millions)** $5.9 $5.6 $16.0 $22.8 Producing Wells* (end of period) 534 496
530 494 * Includes our share of venture production: 1st Qtr. 2012 = 90 MMCf;
1st Qtr. 2011 = 159 MMCf; FY 2011 = 493 MMcf; FY 2010 = 573 MMcf ** Note:
Segment results include costs associated with the development of our water
initiatives: $1.3 million in Q1 2012; $1.1 million in Q1 2011; and $3.9
million in FY 2011. 37 Mineral Resources Segment KPIs
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1st Quarter
2012 1st Quarter 2011 Full Year 2011 Full Year 2010 Residential Lot Sales *
Lots Sold 285 214 1,117 804 Average Price / Lot $53,000 $48,200 $47,400
$49,500 Gross Profit / Lot $20,800 $18,500 $17,500 $16,600 Commercial Tract
Sales * Acres Sold - 20 26.4 17.8 Average Price / Acre - $152,500 $193,700
$90,100 Land Sales * Acres Sold 455 2,630 17,100 5,800 Average Price / Acre
$2,400 $2,300 $2,400 $3,500 Segment Revenues ($ in Millions) $17.9 $21.1
$106.2 $68.3 Segment Earnings (Loss) ($ in Millions) $11.5 $2.6 ($25.7)
($4.6) ** Q1 2012 results include $11.7 million gain on sale of interest in
Palisades West * Includes ventures 38 ** **** Real Estate Segment KPIs ****
KPIs include venture activity; but 2010 excludes sale of 625 acres for about
$20 million at Summer Creek venture located near Fort Worth, TX *** Note:
Full year 2011 real estate segment earnings include pre-tax non-cash asset
impairment charges of $45.2 million ***
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1st Quarter
2012 1st Quarter 2011 Full Year 2011 Full Year 2010 Fiber Sales Pulpwood Tons
Sold 24,400 65,600 266,200 392,900 Average Pulpwood Price / Ton $10.18 $9.18
$8.69 $9.93 Sawtimber Tons Sold 4,400 15,500 56,800 144,300 Average Sawtimber
Price / Ton $19.48 $16.98 $16.13 $17.94 Total Tons Sold 28,800 81,100 323,000
537,200 Average Price / Ton $11.59 $10.67 $10.00 $12.08 Recreational Leases
Average Acres Leased 131,000 200,000 174,500 208,100 Average Lease Rate /
Acre $8.80 $8.91 $8.80 $8.32 Segment Revenues ($ in Millions) $0.7 $1.4 $4.8
$8.3 Segment Earnings ($ in Millions) $0.4 $0.6 $1.9* $5.1 * Includes $0.2
million gain on termination of timber lease in connection with the Ironstob
venture Note: Fiber resources segment earnings negatively impacted by sale of
over 74,000 acres of timberland during 2011. 39 Fiber Resources Segment KPIs
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($ in millions)
2011 2010 % Change Proved Developed Reserves 1 Oil Reserves MBBL 1,053.7
608.7 73% Gas Reserves BCF 11.4 10.5 9% Future Net Revenues* $132.7 $77.5 71%
PV-10 3* $81.0 $45.3 79% Proved Developed Non-Producing1 Oil Reserves MBBL
10.7 - nm Gas Reserves BCF 0.1 - nm Future Net Revenues* $1.0 - nm PV-10 3*
$0.9 - nm Total Proven Reserves1 Oil Reserves MBBL 1,064.4 608.7 75% Gas Reserves
BCF 11.5 10.5 10% Reserves Bcfe2 17.9 14.2 26% Future Net Revenues* $133.7
$77.5 73% PV-10 3* $81.9 $45.3 81% Note: PV-10 analysis based on 2011 average
benchmark prices of $92.71 for oil and $4.12 for natural gas; compared with
2010 average benchmark prices of $75.96 for oil and $4.38 for natural gas for
2010. 1 Includes Forestars share of equity method ventures 2 Bcfe Billion
Cubic Feet Equivalent (converting oil to natural gas at 6 Mcf / Bbl) 3 PV-10
Present Value at 10% (before income taxes) 40 *These are Non-GAAP financial
measures. The reconciliation between GAAP and Non-GAAP financial measures is
provided in the tables following this presentation, and on the companys
investor relations website. YE 2011 Proven Reserves
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In our full
year and fourth quarter 2011 earnings release and conference call
presentation materials furnished to the Securities and Exchange Commission on
Form 8-K on February 22, 2012, we used certain non-GAAP financial measures.
The non-GAAP financial measures should not be relied upon to the exclusion of
GAAP financial measures. These non-GAAP financial measures reflect an
additional way of viewing aspects of our operations that, when viewed with
our GAAP financial statements and the accompanying reconciliations to corresponding
GAAP financial measures, may provide a more complete understanding of our
business. We strongly encourage investors to review our consolidated
financial statements and publicly filed reports in their entirety.
Reconciliation of Non-GAAP Financial Measures (Unaudited) The following table
shows a reconciliation of PV-10 (discounted future net cash flows before
income taxes) to the standardized measure of discounted future net cash flows
(the most directly comparable measure calculated and presented in accordance
with generally accepted accounting principles, or GAAP). PV-10 is an estimate
of the present value of future net cash flows from proved developed reserves
after deducting estimated severance and ad valorem taxes, but before
deducting any estimates of future income taxes. The estimated future net cash
flows are discounted at an annual rate of 10%. A reconciliation of PV-10 to
the standardized measure of discounted future net cash flows as computed
under GAAP is illustrated below: ($ in 000s) Year-End 2011* Year-End 2010*
PV 10 (discounted future net cash flows before income taxes) $81,919
$45,267 Less: discounted future income taxes (effective tax rate of 38%)
(25,713) (14,130) Standardized measure of discounted future net cash flows
$56,206 $31,137 The undiscounted value represents an estimate of future net
cash flows from proved developed reserves after deducting estimated severance
and ad valorem taxes, but before deducting estimates of future income taxes.
A reconciliation of undiscounted future net cash flows before income taxes to
the undiscounted future net cash flows after income taxes is illustrated
below: ($ in 000s) Year-End 2011* Year-End 2010* Undiscounted future net
cash flows before income taxes $133,729 $77,464 Less: undiscounted future
income taxes (effective tax rate of 38%) (41,835) (24,112) Undiscounted
future net cash flows after income taxes $91,894 $53,352 We believe both
PV-10 and undiscounted values are important for evaluating the relative
significance of our oil and gas interests and that the presentation of the
non-GAAP financial measures provides useful information to investors because
they are widely used by professional analysts and sophisticated investors in
evaluating oil and gas companies. Because there are many unique factors that
can impact an individual company when estimating the amount of future income
taxes to be paid, we believe the use of a pre-tax measure is valuable for
evaluating our mineral assets. * Includes our share of proved developed
reserves in equity-method ventures Reconciliation of Non-GAAP Financial
Measures (Unaudited) 41
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Anna Torma SVP
Corporate Affairs Forestar Group Inc. 6300 Bee Cave Road Building Two, Suite
500 Austin, TX 78746 512-433-5312 annatorma@forestargroup.com 42 Forestar A
Vision for Every Acre For questions, please contact:
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