Forestar Group Inc. Reports First Quarter 2013 Results Accelerating Value Realization through Higher Residential Lot Sales, Increased Oil Production and Capitalizing on Multifamily Opportunities Business Wire AUSTIN, Texas -- May 08, 2013 Forestar Group Inc. (NYSE: FOR) today reported first quarter 2013 net income of approximately $4.0 million, or $0.11 per diluted share, compared with first quarter 2012 net income of approximately $2.8 million, or $0.08 per diluted share outstanding. “During first quarter, increased residential lot sales activity continued to reflect positive momentum and signs of a sustainable housing recovery. Residential real estate markets in Texas continue to benefit from low finished lot inventories combined with a significant increase in housing starts. Multifamily market conditions also remain strong in our target markets, and during the quarter, we sold Promesa, a wholly-owned multifamily community we developed in Austin, for $41 million, generating earnings of $10.9 million. In addition, oil and gas revenues continued to gain momentum, with increased oil production in the Bakken and Three Forks formations in North Dakota and the Lansing-Kansas City formation in Kansas and Nebraska, principally due to our acquisition of Credo Petroleum. We are focused on executing and delivering our Triple in FOR strategic initiatives to accelerate value realization, optimize transparency and disclosure and grow net asset value through strategic and disciplined investments,” said Jim DeCosmo, president and chief executive officer of Forestar Group. First Quarter 2013 Significant Highlights *Sold Promesa, a wholly-owned multifamily community we developed in Austin for $41 million, generating earnings of $10.9 million *Sold 446 developed residential lots, a 56% increase compared with first quarter 2012 *Oil production up over 113% compared with first quarter 2012, principally due to the acquisition of Credo Petroleum Segment Reporting Change Forestar has realigned its reportable segments to better reflect the underlying market fundamentals and operating strategy of its core businesses. With this change, we have aggregated our fiber and water resources operating results in other natural resources. The company manages its operations through three business segments: real estate, oil and gas and other natural resources. REAL ESTATE First Quarter 2013 Significant Highlights *Sold Promesa, a wholly-owned multifamily community we developed in Austin for $41.0 million, generating earnings of $10.9 million *Sold 446 developed residential lots, a 56% increase compared with first quarter 2012 – Almost 1,800 lots under option contracts *Sold 919 acres of undeveloped land for over $2,900 per acre *Sold 3 commercial acres for over $382,000 per acre Segment Financial Results: ($ in millions) 1Q 2013 1Q 2012 4Q 2012 Segment Revenues $ 78.7 $ 17.9 $ 48.4 Segment Earnings $ 19.4 $ 11.6 $ 21.7 First quarter 2013 real estate segment earnings were higher compared with first quarter 2012 principally due to higher residential lot sales. Real estate segment earnings declined in first quarter 2013 compared with fourth quarter 2012 primarily due to lower undeveloped land sales. OIL AND GAS First Quarter 2013 Significant Highlights *Oil production up over 113% compared with first quarter 2012, principally due to the acquisition of Credo Petroleum *22 new productive oil and gas wells drilled; 965 producing wells at quarter-end, up from 534 wells in first quarter 2012, principally due to acquisition of Credo Petroleum Segment Financial Results: ($ in millions) 1Q 2013 1Q 2012 4Q 2012 Segment Revenues $ 15.5 $ 9.4 $ 17.2 Segment Earnings $ 5.1 $ 7.1 $ 7.1 Oil and gas segment earnings decreased in first quarter 2013 compared with first quarter 2012 principally due to reduced oil volumes associated with our owned mineral interests, lower oil prices, decreased delay rental revenues and incremental personnel costs, which were partially offset by increased oil production attributable to the acquisition of Credo Petroleum. Oil and gas segment earnings decreased in first quarter 2013 compared with fourth quarter 2012 primarily due to lower oil production, which was partially offset by higher oil prices. OTHER NATURAL RESOURCES First Quarter 2013 Significant Highlights *Sold over 191,000 tons of fiber for $15.65 per ton *Recreational leasing remains strong Segment Financial Results: ($ in millions) 1Q 2013 1Q 2012 4Q 2012 Segment Revenues $ 3.3 $ 0.7 $ 3.0 Segment Earnings (Loss) $ 1.3 ($0.9 ) $ 0.8 First quarter 2013 other natural resources segment earnings were higher compared with first quarter 2012 principally due to over 162,000 tons of additional fiber sales and a 35% increase in average pricing per ton. Other natural resources segment earnings increased in first quarter 2013 compared with fourth quarter 2012 primarily due to higher fiber sales. OUTLOOK “Housing markets continue to show solid signs of a sustainable recovery, with growing demand for residential lots and increased interest in residential and commercial tracts. Our backlog remains strong and we are well positioned to accelerate real estate sales during this housing recovery. Our multifamily team successfully developed, leased, and monetized our Promesa community in only 24 months, generating well above cost of capital returns for our business, reflections of the project quality, experience of our team and favorable multifamily market conditions. We continue to build a solid pipeline of multifamily development opportunities, with construction at our multifamily ventures in Austin and Denver on target to begin delivering units in 2013, and our sites in Dallas, Nashville and Charlotte should be under construction by year-end. We will continue to evaluate and acquire additional multifamily sites to further increase our pipeline of quality multifamily development opportunities. “We continue to generate positive momentum through our oil and gas initiatives to increase exploration activity, production and reserves. During first quarter, we experienced a significant increase in North Dakota drilling activity, with approximately twelve Bakken or Three Forks wells (5% average working interest) reaching total depth during the quarter. We anticipate drilling activity in the Bakken to accelerate in the second half of 2013. In addition, exploration and drilling activity in Kansas and Nebraska also ramped up during first quarter, with 19 wells (59% average working interest) reaching total depth, ten of which have been economic. Our exploration initiatives in Kansas and Nebraska are yielding favorable success rates and strong risk-adjusted returns, and we continue to lease additional acreage in this basin. During first quarter 2013, Forestar acquired leasehold interests in over 28,000 net mineral acres in new and existing prospects in Nebraska and Kansas. “We continue to increase our momentum toward delivering our Triple in FOR strategic initiatives, focused on accelerating value realization, increasing transparency and disclosure, and growing our net asset value through strategic and disciplined investments. We are off to a great start and we are well positioned for 2013,” concluded Mr. DeCosmo. The Company will host a conference call on May 8, 2013 at 10:00 am ET to discuss results of first quarter 2013. The meeting may be accessed through webcast or by conference call. The webcast may be accessed through Forestar’s Internet site at www.forestargroup.com. To access the conference call, listeners calling from North America should dial 1-877-280-4958 at least 15 minutes prior to the start of the meeting. Those wishing to access the call from outside North America should dial 1-857-244-7315. The password is Forestar. Replays of the call will be available for two weeks following the completion of the live call and can be accessed at 1-888-286-8010 in North America and at 1-617-801-6888 outside North America. The password for the replay is 95046996. About Forestar Group Forestar Group Inc. operates in three business segments: real estate, oil and gas and other natural resources. At the end of first quarter 2013, the real estate segment owns directly or through ventures almost 135,000 acres of real estate located in ten states and fourteen markets in the U.S. The real estate segment has 14 real estate projects representing approximately 25,980 acres currently in the entitlement process, and 72 entitled, developed and under development projects in eight states and twelve markets encompassing almost 14,400 acres, comprised of almost 23,600 planned residential lots and almost 2,400 commercial acres. The oil and gas segment includes approximately 792,000 net acres of oil and gas mineral interests, with approximately 590,000 acres of fee ownership located principally in Texas, Louisiana, Alabama, and Georgia and almost 202,000 net acres of leasehold interests principally located in Nebraska, Kansas, Oklahoma, North Dakota and Texas. These leasehold interests include almost 6,000 net mineral acres in the core of the prolific Bakken and Three Forks formations. The other natural resources segment includes sale of wood fiber and management of our recreational leases, and approximately 1.5 million acres of groundwater resources, including a 45% nonparticipating royalty interest in groundwater produced or withdrawn for commercial purposes from approximately 1.4 million acres in Texas, Louisiana, Georgia and Alabama and about 20,000 acres of groundwater leases in central Texas. Forestar’s address on the World Wide Web is www.forestargroup.com. Forward-Looking Statements This release 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 management’s 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 our ability to achieve synergies and value creation contemplated by the merger with Credo, and our ability to promptly and effectively integrate Credo’s businesses. 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; 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 news release to reflect the occurrence of events after the date of this news release. FORESTAR GROUP INC. (UNAUDITED) Business Segments First Quarter 2013 2012 (In thousands, except per share) Revenues Real estate $ 78,689 $ 17,922 Oil and gas 15,504 9,426 Other natural resources 3,278 744 Total revenues $ 97,471 $ 28,092 Segment earnings Real estate $ 19,446 $ 11,577 Oil and gas 5,127 7,128 Other natural resources 1,252 (863 ) Total segment earnings 25,825 17,842 Items not allocated to segments: General and administrative expense (4,958 ) (4,362 ) Share-based compensation expense (10,415 ) (5,231 ) Interest expense (4,539 ) (3,891 ) Other corporate non-operating income 31 64 Income before taxes 5,944 4,422 Income tax expense (1,993 ) (1,620 ) Net income attributable to Forestar Group Inc. $ 3,951 $ 2,802 Net income per common share: Basic $ 0.11 $ 0.08 Diluted $ 0.11 $ 0.08 Weighted average common shares outstanding: Basic 35.3 34.9 Diluted 35.7 35.2 First Quarter Supplemental Financial Information: 2013 2012 (In thousands) Cash and cash equivalents $ 86,653 $ 6,801 Borrowings under credit facility $ 200,000 $ 136,000 Convertible senior notes, net of discount (a) 97,593 - Other debt (b) 31,027 91,865 Total debt $ 328,620 $ 227,865 (a) Represents $125 million convertible senior notes issued February 2013, net of unamortized discount (b) Consists principally of consolidated venture non-recourse debt. FORESTAR GROUP INC. REAL ESTATE SEGMENT PERFORMANCE METRICS First Quarter REAL ESTATE 2013 2012 Owned, Consolidated & Equity Method Ventures: Residential Lots Sold 446 285 Revenue per Lot Sold $ 51,900 $ 53,000 Commercial Acres Sold 3 - Revenue per Commercial Acre Sold $ 382,700 - Undeveloped Acres Sold 919 455 Revenue per Acre Sold $ 2,900 $ 2,400 Owned & Consolidated Ventures: Residential Lots Sold 355 137 Revenue per Lot Sold $ 52,500 $ 62,000 Commercial Acres Sold 3 - Revenue per Commercial Acre Sold $ 382,700 - Undeveloped Acres Sold 919 320 Revenue per Acre Sold $ 2,900 $ 2,300 Ventures Accounted For Using the Equity Method: Residential Lots Sold 91 148 Revenue per Lot Sold $ 49,600 $ 44,600 Commercial Acres Sold - - Revenue per Commercial Acre Sold - - Undeveloped Acres Sold - 135 Revenue per Acre Sold - $ 2,600 FIRST QUARTER 2013 REAL ESTATE PIPELINE In Developed & Total Real Estate Undeveloped Entitlement Entitled Under Acres* Process Development Undeveloped Land Owned 87,543 94,444 Ventures 6,901 Residential Owned 23,272 9,005 821 35,277 Ventures 1,898 281 Commercial Owned 2,708 1,201 591 5,077 Ventures 387 190 Total Acres 94,444 25,980 12,491 1,883 134,798 Estimated Residential 20,500 3,063 23,563 Lots * In addition, Forestar owns a 58% interest in a venture which controls approximately 16,000 acres of undeveloped land in Georgia with minimal investment. Excludes acres associated with fully developed commercial and income producing properties. FORESTAR GROUP INC. OIL AND GAS SEGMENT PERFORMANCE METRICS First Quarter 2013 2012 Leasing Activity from Owned Mineral Interests Acres Leased 310 805 Average Bonus / Acre $ 316 $ 357 Delay Rentals Received $ 457,500 $ 1,114,900 Oil & Gas Production Royalty Interests^1 Gross Wells 543 534 Oil Production (Barrels) 48,200 67,700 Average Oil Price ($ / Barrel) $ 85.93 $ 98.10 Natural Gas Production (MMcf) 377.2 427.9 Average Natural Gas Price ($ / Mcf) $ 3.04 $ 3.20 BOE Production^2 111,100 139,000 Average Price ($ / BOE) $ 47.64 $ 57.61 Working Interests Gross Wells 431 9 Oil Production (Barrels) 99,600 1,500 Average Oil Price ($ / Barrel) $ 90.76 $ 73.68 Natural Gas Production (MMcf) 216.7 24.3 Average Natural Gas Price ($ / Mcf) $ 3.67 $ 3.75 BOE Production^2 135,800 5,500 Average Price ($ / BOE) $ 72.47 $ 36.32 Total Oil & Gas Interests Gross Wells^3 965 534 Oil Production (Barrels) 147,900 69,200 Average Oil Price ($ / Barrel) $ 89.19 $ 97.57 Natural Gas Production (MMcf) 593.9 452.2 Average Natural Gas Price ($ / Mcf) $ 3.27 $ 3.23 BOE Production^2 246,800 144,600 Average Price ($ / BOE) $ 61.30 $ 56.80 Well Activity Mineral Interests Owned ^3 Net Acres Held By Production 29,000 31,700 Gross Wells Drilled - 4 Productive Gross Wells 543 534 Mineral Interests Leased Net Acres Held By Production^4 30,000 - Gross Wells Drilled 22 - Productive Gross Wells^4 422 - Total Well Activity Net Acres Held By Production 59,000 31,700 Gross Wells Drilled 22 4 Productive Gross Wells 965 534 Includes our share of venture activity in which we own a 50% interest. ^1 Our share of natural gas production is 70 MMcf in first quarter 2013 and 90 MMcf in first quarter 2012 ^2 BOE – Barrels of oil equivalent (converting natural gas to oil at 6 Mcfe / Bbl) ^3 Includes wells operated by third-party lessees/operators. Represent wells in which we own a royalty or working interest in a producing well ^4 Excludes 8,000 net acres and 1,181 wells in which we have an overriding royalty interest FIRST QUARTER 2013 OIL AND GAS SEGMENT MINERAL INTERESTS MINERAL INTERESTS OWNED ^1 Forestar’s oil and gas segment includes approximately 590,000 owned net mineral acres principally located in Texas, Louisiana, Georgia and Alabama. State Unleased Leased Held by Total ^2 Production Texas 213,000 12,000 27,000 252,000 Louisiana 117,000 25,000 2,000 144,000 Georgia 152,000 - - 152,000 Alabama 40,000 - - 40,000 California 1,000 - - 1,000 Indiana 1,000 - - 1,000 Total 524,000 37,000 29,000 590,000 ^1 Represents net acres and includes ventures ^2 Excludes 477 net mineral acres located in Colorado, which includes 319 leased acres and 158 acres held by production MINERAL INTERESTS LEASED ^1 Forestar’s oil and gas segment includes approximately 202,000 net mineral acres of leasehold interests principally located in Nebraska, Kansas, Oklahoma, North Dakota and Texas, predominantly as a result of our September 28, 2012 acquisition of CREDO Petroleum. State Undeveloped Held by Total ^2 Production Nebraska 107,000 2,000 109,000 Kansas 40,000 3,000 43,000 Oklahoma - 17,000 17,000 North Dakota 3,000 3,000 6,000 Texas 6,000 2,000 8,000 Other 16,000 3,000 19,000 Total 172,000 30,000 202,000 ^1 Represents net acres ^2 Excludes approximately 8,000 net acres of overriding royalty interests FORESTAR GROUP INC. OTHER NATURAL RESOURCES SEGMENT PERFORMANCE METRICS First Quarter 2013 2012 Fiber Sales * Pulpwood Tons Sold 120,600 24,400 Average Pulpwood Price / Ton $ 11.70 $ 10.18 Sawtimber Tons Sold 70,900 4,400 Average Sawtimber Price / Ton $ 22.36 $ 19.48 Total Tons Sold 191,500 28,800 Average Price / Ton $ 15.65 $ 11.59 Recreational Activity Average Acres Leased 122,700 130,900 Average Lease Rate / Acre $ 9.15 $ 8.80 *The majority of our fiber sales were to International Paper at market prices. FORESTAR GROUP INC. PROJECTS IN ENTITLEMENT A summary of projects in the entitlement process ^(a) at first quarter-end 2013 follows: Project County Project Acres ^(b) California Hidden Creek Estates Los Angeles 700 Terrace at Hidden Hills Los Angeles 30 Georgia Ball Ground Cherokee 500 Crossing Coweta 230 Fincher Road Cherokee 3,890 Fox Hall Coweta 960 Garland Mountain Cherokee/Bartow 350 Martin’s Bridge Banks 970 Mill Creek Coweta 770 Serenity Carroll 440 Wolf Creek Carroll/Douglas 12,230 Yellow Creek Cherokee 1,060 Texas Lake Houston Harris/Liberty 3,700 San Jacinto Montgomery 150 Total 25,980 A project is deemed to be in the entitlement process when customary steps necessary for the preparation of an application for governmental land-use approvals, like conducting pre-application meetings or similar ^(a) discussions with governmental officials, have commenced, or an application has been filed. Projects listed may have significant steps remaining, and there is no assurance that entitlements ultimately will be received. Project acres, which are the total for the project regardless of our ^(b) ownership interest, are approximate. The actual number of acres entitled may vary. FORESTAR GROUP INC. REAL ESTATE PROJECTS A summary of our entitled,^(a) developed & under development projects at first quarter-end 2013 follows: Residential Lots ^(c) Commercial Acres ^(d) Lots Sold Acres Interest Since Lots Sold Acres Project County Owned^(b) Remaining Since Remaining^(f) Inception Inception California Contra San Joaquin Costa/ 100% - - - 288 River Sacramento Colorado Buffalo Weld 100% - 164 - - Highlands Johnstown Weld 100% 170 443 2 7 Farms Pinery West Douglas 100% - - - 111 Stonebraker Weld 100% - 603 - - Tennessee Azalea Park Williamson 100% - 173 - - Texas Arrowhead Hays 100% - 259 - 6 Ranch Bar C Ranch Tarrant 100% 292 907 - - Barrington Harris 100% 61 119 - - Kingwood Cibolo Bexar 100% 753 722 96 54 Canyons Harbor Hood 100% 205 244 2 19 Lakes Hunter’s Bastrop 100% 411 79 38 71 Crossing La Conterra Williamson 100% 127 373 - 58 Lakes of Collin 100% 5 280 - - Prosper Maxwell Collin 100% 820 179 10 - Creek Oak Creek Comal 100% 141 506 13 - Estates Stoney Dallas 90% 149 605 - - Creek Summer Tarrant 100% 834 440 35 44 Creek Ranch Summer Fort Bend 100% 484 646 56 - Lakes Summer Park Fort Bend 100% - 210 28 62 ^(g) The Colony Bastrop 100% 441 708 22 31 The Preserve at Denton 100% 399 395 - 7 Pecan Creek Village Collin 100% 516 244 3 2 Park Westside at Buttercup Williamson 100% 1,428 68 66 - Creek Other projects Various 100% 2,085 171 218 36 (10) Georgia Seven Hills Paulding 100% 666 420 26 113 Villages of Dawson 100% - 1,715 - 57 Burt Creek Towne West Bartow 100% - 2,674 - 121 Other projects Various 100% 72 3,021 - 705 (17) Florida Other projects Various 100% 301 87 - - (2) Missouri and Utah Other projects Various 100% 499 55 - - (2) 10,859 16,510 615 1,792 Projects in entities we consolidate Texas City Park Harris 75% 1,218 93 50 115 Lantana Denton 55% ^(e) 774 1,276 - 12 Timber Collin 88% - 614 - - Creek Willow Walter/Fort Creek Farms Bend 90% 40 191 - - II Other projects Various Various 7 202 - 129 (2) Georgia The Paulding 75% 289 1,052 - - Georgian 2,328 3,428 50 256 Total owned and 13,187 19,938 665 2,048 consolidated Projects in ventures that we account for using the equity method Texas Entrada Travis 50% - 821 - - Fannin Tarrant 50% 324 24 - 12 Farms West Harper’s Montgomery 50% 244 1,481 - 72 Preserve Lantana Denton Various ^(e) 1,163 62 16 42 Long Meadow Fort Bend 37% 1,025 774 119 180 Farms Southern Brazoria 80% 603 380 - - Trails Stonewall Bexar 50% 305 83 - - Estates Other projects Nueces 50% - - - 15 (1) Total in 3,664 3,625 135 321 ventures Combined 16,851 23,563 800 2,369 Total A project is deemed entitled when all major discretionary governmental ^(a) land-use approvals have been received. Some projects may require additional permits and/or non-governmental authorizations for development. Interest owned reflects our net equity interest in the project, whether owned directly or indirectly. There are some projects that have ^(b) multiple ownership structures within them. Accordingly, portions of these projects may appear as owned, consolidated and/or accounted for using the equity method. Lots are for the total project, regardless of our ownership interest. ^(c) Lots remaining represent vacant developed lots, lots under development and future planned lots and are subject to change based on business plan revisions. Commercial acres are for the total project, regardless of our ownership ^(d) interest and are net developable acres, which may be fewer than the gross acres available in the project. The Lantana project consists of a series of 22 partnerships in which ^(e) our voting interests range from 25% to 55%. We account for two of these partnerships using the equity method and we consolidate the remaining partnerships. ^(f) Excludes acres associated with commercial and income producing properties. ^(g) Formerly Waterford Park A summary of our significant commercial and income producing properties at first quarter-end 2013 follows: Interest Project County Market Owned Type Acres Description ^(a) Radisson 413 guest Hotel Travis Austin 100% Hotel 2 rooms and suites 257 unit Eleven Travis Austin 25% Multifamily 3 luxury apartment ^(b) 304 unit 360^° Arapahoe Denver 20% Multifamily 4 luxury apartment ^(b) ^(a) Interest owned reflects our total equity interest in the project, whether owned directly or indirectly. ^(b) Construction in progress Contact: Forestar Group Inc. Anna E. Torma, 512-433-5312
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Forestar Group Inc. Reports First Quarter 2013 Results
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