EX-99.1 2 exh991forreleaseq314.htm EX 99.1 EARNINGS RELEASE
Exhibit 99.1
NEWS
RELEASE
FOR IMMEDIATE RELEASE
CONTACT: Anna E. Torma
(512) 433-5312
FORESTAR GROUP INC. REPORTS THIRD QUARTER 2014 RESULTS
AUSTIN, TEXAS, November 5, 2014—Forestar Group Inc. (NYSE: FOR) today reported third quarter 2014 net income of approximately $5.2 million, or $0.12 per diluted share outstanding, compared with third quarter 2013 net income of approximately $11.8 million, or $0.33 per diluted share outstanding. Third quarter 2013 results include a previously unrecognized tax benefit of approximately $6.3 million, or $0.17 per share, related to qualified timber gains.
Subsequent Events

• | $46.5 MILLION RECEIVED FROM CIBOLO CANYONS SPECIAL IMPROVEMENT DISTRICT

• | PLANS TO REPURCHASE UP TO $55 MILLION IN STOCK UNDER EXISTING SHARE REPURCHASE PROGRAM

“On October 24, 2014 we received $46.5 million from the Cibolo Canyons Special Improvement District (CCSID). The proceeds from CCSID were associated with a $48.9 million Hotel Occupancy and Sales and Use Tax Revenue Bond issued by CCSID on October 24, 2014. Proceeds received from the CCSID, along with available liquidity, are expected to be used to repurchase up to $55 million in common stock, which today, represents almost 10% of the company's current market capitalization. The successful revenue bond issuance by CCSID is a reflection of the tremendous value that has been realized through the vision and execution of our Cibolo Canyons mixed-use development including the award-winning JW Marriott San Antonio Hill Country Resort and Spa. Following these share repurchases, we expect to have adequate liquidity to fund and deliver our Growing FORward strategic initiatives, focused on increasing total segment earnings, return on assets and opportunistically selling non-core assets,” said Jim DeCosmo, president and chief executive officer of Forestar Group.
Third Quarter 2014 Significant Highlights

• | Sold 323 developed residential lots, with average lot prices and profit per lot up over 30% compared with third quarter 2013

• | Acquired our partner's 75% interest in the Eleven multifamily venture in Austin for $21.5 million, resulting in a $7.6 million gain, reflecting the fair market value of the project on the date of acquisition

• | Increased working interest oil production over 55% compared with third quarter 2013

• | Added nine new Bakken/Three Forks gross wells with strong initial production, including one 19% working interest well with initial production of 4,128 barrels of oil equivalent per day, the highest production rate of any Bakken/Three Forks well we have participated in to date

Forestar manages its operations through three business segments: real estate, oil and gas and other natural resources.
1

REAL ESTATE
Third Quarter 2014 Significant Highlights (Includes Ventures)

• | Sold 323 developed residential lots; highest quarterly average lot price and profit per lot since becoming stand-alone public company

• | Acquired our partner's 75% interest in the Eleven multifamily venture in Austin for $21.5 million, resulting in a $7.6 million gain, reflecting the fair market value of the project on the date of acquisition

• | Sold four commercial acres for $589,200 per acre

• | Sold over 635 acres of undeveloped land for nearly $3,200 per acre

Segment Financial Results:

($ in millions) |  | 3Q 2014 |  | 3Q 2013 |  | 2Q 2014
Segment Revenues |  | $32.4 |  | $50.4 |  | $55.2
Segment Earnings |  | $16.0 |  | $13.2 |  | $27.3

Real estate segment earnings were up in third quarter 2014 compared with third quarter 2013 principally due to a $7.6 million gain associated with the acquisition of our partner's interest in the Eleven multifamily venture, which more than offset lower residential lot and undeveloped land sales. In third quarter 2014, average lot prices were over $73,650 per lot and average gross profit was almost $34,900 per lot, the highest average quarterly lot prices and margins reported, reflecting stable homebuilder demand in our markets. Real estate segment earnings decreased in third quarter 2014 compared with second quarter 2014 primarily due to a $10.5 million gain associated with the exchange of timber leases for undeveloped land from Ironstob venture and higher residential lot, tract and undeveloped land sales in second quarter 2014.
OIL AND GAS
Third Quarter 2014 Significant Highlights (Includes Ventures)

• | Increased oil production by nearly 39% compared with third quarter 2013, principally due to working interest investments in the Bakken/Three Forks and the Lansing-Kansas City formations

• | Generated gains of $3.3 million principally associated with the sale of leasehold interests in 348 net mineral acres in North Dakota and acquired 558 net mineral acres of leasehold interests in Bakken/Three Forks

• | Added nine Bakken/Three Forks gross wells; 23 Bakken/Three Forks gross wells waiting on completion at quarter-end

Segment Financial Results:

($ in millions) |  | 3Q 2014 |  | 3Q 2013 |  | 2Q 2014
Segment Revenues |  | $24.1 |  | $22.1 |  | $24.4
Segment Earnings |  | $6.0 |  | $8.5 |  | $9.5

Oil and gas segment earnings decreased in third quarter 2014 compared with third quarter 2013 and second quarter 2014 principally due to higher exploration costs associated with our working interest investments, lower oil prices, and lower production volumes related to our owned mineral interests, which were partially offset by $3.3 million in gains principally associated with the sale of 348 net acres of leasehold interest in the Bakken/Three Forks, and increased working interest oil production. Third quarter 2014 exploration costs include a $2.3 million dry hole charge associated with an exploratory well in Oklahoma. Second quarter 2014 oil and gas segment earnings include $5.7 million in gains associated with the sale of various oil and gas properties in Oklahoma and North Dakota.
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OTHER NATURAL RESOURCES
Third Quarter 2014 Significant Highlights (Includes Ventures)

• | Sold nearly 93,000 tons of fiber for $13.52 per ton

• | Generated $0.2 million in earnings related to previously announced groundwater reservation agreement

• | Sold water rights related to real estate project in Colorado, generating gain of almost $0.2 million

Segment Financial Results:

($ in millions) |  | 3Q 2014 |  | 3Q 2013 |  | 2Q 2014
Segment Revenues |  | $2.3 |  | $2.7 |  | $3.5
Segment Earnings |  | $0.7 |  | $0.5 |  | $2.1

Third quarter 2014 other natural resources segment results increased compared with third quarter 2013 principally due to $0.2 million in earnings associated with a groundwater reservation agreement and a $0.2 million gain associated with the sale of water rights related to a real estate project in Colorado.
OUTLOOK
Real Estate Markets Remain Stable
“We are well positioned to capitalize on the housing recovery through residential lot sales and commercial and residential tract sales. We anticipate residential lot sales in 2014 to be in the range of 2,200 - 2,300 lots from a pipeline of 38 well-located communities. In 2015, we expect 40 communities to generate sales to meet homebuilder demand. Our multifamily team continues to acquire and develop high-quality multifamily communities, with four multifamily projects currently under construction at end of third quarter and four future development sites in our pipeline. During third quarter we opportunistically acquired our partner’s 75% ownership in the Eleven venture, resulting in an attractive investment basis within a strong multifamily submarket in downtown Austin which has benefited from solid rent growth and high occupancy levels. Going forward, our 100% ownership of the Eleven multifamily community is expected to provide Forestar with multiple options to continue to realize the value we have created with this project. We plan to continue to evaluate and acquire additional well-located residential and multifamily sites going forward.
Production and Well Performance Increasing; Exploring Position in Prospective Resource Play
“We continue to invest in exploration and drilling, growing production, reserves and value. Drilling and completion activity continued in third quarter, with nine gross Bakken/Three Forks wells (10% average working interest) generating initial production and approximately 10 - 15 gross Bakken/Three Forks wells anticipated to begin production in fourth quarter 2014. Well performance in the Bakken/Three Forks in 2014 continues to improve and outperform underwriting expectations. Working interest production is expected to increase over 40% in 2014 compared with 2013, resulting in approximately 1.2 million BOE of total production in 2014, up 15% compared with 2013. However, lower oil pricing is expected to reduce fourth quarter 2014 segment earnings. In addition to our working interest investment opportunities in the Bakken/Three Forks and Lansing-Kansas City formations, we have secured leasehold positions in 24,000 net mineral acres in a prospective resource play in Oklahoma and commenced exploratory drilling.
Focused on Delivering Growing FORward Initiatives
“We remain focused on executing our Growing FORward strategic initiatives through disciplined investments in our real estate and oil and gas businesses. Stronger than expected cash flows and available liquidity, combined with $46.5 million in cash proceeds from the Cibolo Canyons Special Improvement District, are expected to be used to repurchase up to $55 million in common stock, which today, represents almost 10% of the company's current market capitalization. Repurchases will be made under the company's existing share repurchase program and will be accomplished from time to time through open market or privately negotiated transactions, subject to market conditions, legal requirements and other factors. Following these share repurchases, we anticipate maintaining sufficient available liquidity which is expected to adequately fund our Growing FORward strategic initiatives, which are focused on increasing total segment earnings, return on assets and opportunistically selling non-core assets,” concluded Mr. DeCosmo.
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The Company will host a conference call on November 5, 2014 at 10:00 am ET to discuss results of third quarter 2014. 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 1-877-299-4454 at least 15 minutes prior to the start of the meeting. Those wishing to access the call from outside North America should dial 1-617-597-5447. 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 23767820.
About Forestar Group
Forestar Group Inc. operates in three business segments: real estate, oil and gas and other natural resources. At third quarter-end 2014, the real estate segment owns directly or through ventures almost 120,000 acres of real estate located in ten states and 13 markets in the U.S. The real estate segment has 11 real estate projects representing approximately 24,400 acres currently in the entitlement process, and 73 entitled, developed and under development projects in eight states and 13 markets encompassing over 11,300 acres, comprised of almost 17,800 planned residential lots and approximately 2,000 commercial acres. The oil and gas segment includes approximately 948,000 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 approximately 358,000 net acres of leasehold interests principally located in Nebraska, Kansas, Oklahoma, North Dakota and Texas. These leasehold interests include about 8,000 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, 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 rates or availability; lengthy and uncertain entitlement processes; cyclically 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.
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FORESTAR GROUP INC.
(UNAUDITED)
Business Segments

| Third Quarter |  | First Nine Months
| 2014 |  | 2013 |  | 2014 |  | 2013
| (In thousands)
Revenues: |  |  |  |  |  |  |
Real estate (a) | $ | 32,445 |  |  | $ | 50,356 |  |  | $ | 153,098 |  |  | $ | 170,264 |
Oil and gas | 24,145 |  |  | 22,095 |  |  | 66,076 |  |  | 53,430 |
Other natural resources | 2,250 |  |  | 2,656 |  |  | 7,284 |  |  | 8,963 |
Total revenues | $ | 58,840 |  |  | $ | 75,107 |  |  | $ | 226,458 |  |  | $ | 232,657 |
Segment earnings: |  |  |  |  |  |  |
Real estate | $ | 15,987 |  |  | $ | 13,197 |  |  | $ | 66,859 |  |  | $ | 40,747 |
Oil and gas | 6,002 |  |  | 8,499 |  |  | 16,331 |  |  | 17,869 |
Other natural resources | 669 |  |  | 549 |  |  | 2,220 |  |  | 2,792 |
Total segment earnings | 22,658 |  |  | 22,245 |  |  | 85,410 |  |  | 61,408 |
Items not allocated to segments: |  |  |  |  |  |  |
General and administrative expense | (5,190 | ) |  | (4,648 | ) |  | (15,924 | ) |  | (14,935 | )
Share-based compensation expense (b) | (991 | ) |  | (3,492 | ) |  | (4,523 | ) |  | (15,367 | )
Interest expense | (8,634 | ) |  | (5,231 | ) |  | (21,507 | ) |  | (14,892 | )
Other corporate non-operating income | 139 |  |  | 24 |  |  | 391 |  |  | 80 |
Income before taxes | 7,982 |  |  | 8,898 |  |  | 43,847 |  |  | 16,294 |
Income tax (expense) benefit | (2,755 | ) |  | 2,932 |  |  | (15,464 | ) |  | 28 |
Net income attributable to Forestar Group Inc. | $ | 5,227 |  |  | $ | 11,830 |  |  | $ | 28,383 |  |  | $ | 16,322 |
Net income per common share: |  |  |  |  |  |  |
Diluted | $ | 0.12 |  |  | $ | 0.33 |  |  | $ | 0.65 |  |  | $ | 0.45 |
Weighted average common shares outstanding (in millions): |  |  |  |  |  |  |
Diluted (c) | 43.9 |  |  | 36.1 |  |  | 43.8 |  |  | 35.9 |

|  | Third Quarter
Supplemental Financial Information: |  | 2014 |  | 2013
|  | (In thousands)
Cash and cash equivalents |  | $ | 170,606 |  |  | $ | 54,769 |
Borrowings under credit facility |  | — |  |  | 200,000 |
Secured senior notes |  | 250,000 |  |  | — |
Convertible senior notes, net of discount |  | 102,368 |  |  | 99,122 |
Tangible equity unit notes, net of discount |  | 19,192 |  |  | — |
Other debt (d) |  | 57,735 |  |  | 36,049 |
Total debt |  | $ | 429,295 |  |  | $ | 335,171 |
Net debt |  | $ | 258,689 |  |  | $ | 280,402 |

_____________________

(a) | First nine months 2013 real estate revenues include $41 million from the first quarter 2013 sale of Promesa, a wholly-owned multifamily community we developed in Austin.

(b) | First nine months 2014 share-based compensation expense decreased principally as result of a decrease in our stock price since year-end 2013, compared with an increase in our stock price in first nine months 2013 since year-end 2012, which impacted the value of vested cash-settled awards.

(c) | Third quarter and first nine months 2014 weighted average diluted shares outstanding includes 7.9 million associated with our tangible equity units issued during fourth quarter 2013.

(d) | Third quarter-end 2014 consists principally of $38 million of senior secured construction loans for two multifamily properties. Excludes approximately $91.2 million of unconsolidated venture debt and approximately $10.1 million of outstanding letters of credit.

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FORESTAR GROUP INC.
REAL ESTATE SEGMENT
PERFORMANCE METRICS

| Third Quarter |  | First Nine Months
| 2014 |  | 2013 |  | 2014 |  | 2013
REAL ESTATE |  |  |  |  |  |  |
Owned, Consolidated & Equity Method Ventures: |  |  |  |  |  |  |
Residential Lots Sold | 323 |  |  | 547 |  |  | 1,834 |  |  | 1,353 |
Revenue per Lot Sold | $ | 73,653 |  |  | $ | 56,473 |  |  | $ | 54,354 |  |  | $ | 55,257 |
Commercial Acres Sold | 4 |  |  | 19 |  |  | 7 |  |  | 56 |
Revenue per Commercial Acre Sold | $ | 589,203 |  |  | $ | 257,548 |  |  | $ | 369,874 |  |  | $ | 169,725 |
Undeveloped Acres Sold | 637 |  |  | 1,340 |  |  | 13,174 |  |  | 3,301 |
Revenue per Acre Sold | $ | 3,179 |  |  | $ | 4,955 |  |  | $ | 2,249 |  |  | $ | 3,647 |
Owned & Consolidated Ventures: |  |  |  |  |  |  |
Residential Lots Sold | 286 |  |  | 414 |  |  | 1,603 |  |  | 1,028 |
Revenue per Lot Sold | $ | 72,352 |  |  | $ | 56,866 |  |  | $ | 52,052 |  |  | $ | 55,417 |
Commercial Acres Sold | — |  |  | 2 |  |  | 3 |  |  | 37 |
Revenue per Commercial Acre Sold | $ | — |  |  | $ | 426,554 |  |  | $ | 96,774 |  |  | $ | 115,892 |
Undeveloped Acres Sold | 637 |  |  | 1,314 |  |  | 12,916 |  |  | 3,233 |
Revenue per Acre Sold | $ | 3,179 |  |  | $ | 5,001 |  |  | $ | 2,248 |  |  | $ | 3,668 |
Ventures Accounted For Using the Equity Method: |  |  |  |  |  |  |
Residential Lots Sold | 37 |  |  | 133 |  |  | 231 |  |  | 325 |
Revenue per Lot Sold | $ | 83,711 |  |  | $ | 55,251 |  |  | $ | 70,325 |  |  | $ | 54,752 |
Commercial Acres Sold | 4 |  |  | 17 |  |  | 4 |  |  | 19 |
Revenue per Commercial Acre Sold | $ | 589,203 |  |  | $ | 239,710 |  |  | $ | 589,203 |  |  | $ | 277,739 |
Undeveloped Acres Sold | — |  |  | 26 |  |  | 258 |  |  | 68 |
Revenue per Acre Sold | $ | — |  |  | $ | 2,650 |  |  | $ | 2,306 |  |  | $ | 2,650 |

THIRD QUARTER 2014
REAL ESTATE PIPELINE

Real Estate |  | Undeveloped |  | In Entitlement Process |  | Entitled |  | Developed & Under Development |  | Total Acres (a)
Undeveloped Land |  |  |  |  |  |  |  |  |  |
Owned |  | 78,918 |  |  |  |  |  |  |  |  |
Ventures |  | 5,073 |  |  |  |  |  |  |  | 83,991 |
Residential |  |  |  |  |  |  |  |  |  |
Owned |  |  |  | 21,762 |  | 7,675 |  | 556 |  |  |
Ventures |  |  |  |  |  | 914 |  | 207 |  | 31,114 |
Commercial |  |  |  |  |  |  |  |  |  |
Owned |  |  |  | 2,668 |  | 1,065 |  | 524 |  |  |
Ventures |  |  |  |  |  | 247 |  | 122 |  | 4,626 |
Total Acres |  | 83,991 |  | 24,430 |  | 9,901 |  | 1,409 |  | 119,731 |
Estimated Residential Lots |  |  |  | 15,407 |  | 2,349 |  | 17,756 |

_____________________

(a) | In addition, at third quarter-end 2014, Forestar owns a 58% interest in a venture which controls approximately 2,000 acres of

undeveloped land in Georgia with minimal investment. Excludes acres associated with fully developed commercial and income producing properties.
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FORESTAR GROUP INC.
OIL AND GAS SEGMENT
PERFORMANCE METRICS

| Third Quarter |  | First Nine Months
| 2014 |  | 2013 |  | 2014 |  | 2013
Leasing Activity from Owned Mineral Interests |  |  |  |  |  |  |
Acres Leased | 744 |  |  | 7,530 |  |  | 3,865 |  |  | 8,355 |
Average Bonus / Acre | $ | 205 |  |  | $ | 260 |  |  | $ | 320 |  |  | $ | 270 |
Delay Rentals Received | $ | — |  |  | $ | 98,000 |  |  | $ | 14,000 |  |  | $ | 562,000 |
Oil & Gas Production |  |  |  |  |  |  |
Royalty Interests (a) |  |  |  |  |  |  |
Gross Wells | 547 |  |  | 543 |  |  | 547 |  |  | 543 |
Oil Production (Barrels) (b) | 32,900 |  |  | 41,800 |  |  | 96,000 |  |  | 130,700 |
Average Oil Price ($ / Barrel) | $ | 91.08 |  |  | $ | 86.38 |  |  | $ | 89.34 |  |  | $ | 84.47 |
Gas Production (MMcf) | 273.5 |  |  | 304.9 |  |  | 792.0 |  |  | 1,004.3 |
Average Gas Price ($ / Mcf) | $ | 4.35 |  |  | $ | 3.69 |  |  | $ | 4.18 |  |  | $ | 3.29 |
BOE Production (c) | 78,500 |  |  | 92,700 |  |  | 228,000 |  |  | 298,100 |
Average Price ($ / BOE) | $ | 53.30 |  |  | $ | 51.15 |  |  | $ | 52.15 |  |  | $ | 48.10 |
Working Interests |  |  |  |  |  |  |
Gross Wells | 423 |  |  | 458 |  |  | 423 |  |  | 458 |
Oil Production (Barrels) (b) | 229,100 |  |  | 147,100 |  |  | 575,300 |  |  | 371,900 |
Average Oil Price ($ / Barrel) | $ | 83.17 |  |  | $ | 98.67 |  |  | $ | 87.74 |  |  | $ | 92.66 |
Gas Production (MMcf) | 226.2 |  |  | 236.5 |  |  | 654.1 |  |  | 636.2 |
Average Gas Price ($ / Mcf) | $ | 4.12 |  |  | $ | 3.71 |  |  | $ | 4.59 |  |  | $ | 3.60 |
BOE Production (c) | 266,900 |  |  | 186,400 |  |  | 684,400 |  |  | 477,900 |
Average Price ($ / BOE) | $ | 74.91 |  |  | $ | 82.52 |  |  | $ | 78.15 |  |  | $ | 76.89 |
Total Oil & Gas Interests |  |  |  |  |  |  |
Gross Wells (d) | 961 |  |  | 992 |  |  | 961 |  |  | 992 |
Oil Production (Barrels) | 250,500 |  |  | 177,500 |  |  | 632,800 |  |  | 463,600 |
Average Oil Price ($ / Barrel) | $ | 86.13 |  |  | $ | 100.13 |  |  | $ | 90.73 |  |  | $ | 95.64 |
NGL Production (Barrels) | 11,500 |  |  | 11,400 |  |  | 38,500 |  |  | 39,000 |
Average NGL Price ($ / Barrel) | $ | 41.12 |  |  | $ | 30.46 |  |  | $ | 42.56 |  |  | $ | 29.68 |
Total Oil Production (Barrels) | 262,000 |  |  | 188,900 |  |  | 671,300 |  |  | 502,600 |
Average Total Oil Price ($ / Barrel) | $ | 84.16 |  |  | $ | 95.95 |  |  | $ | 87.97 |  |  | $ | 90.53 |
Gas Production (MMcf) | 499.7 |  |  | 541.4 |  |  | 1,446.1 |  |  | 1,640.5 |
Average Gas Price ($ / Mcf) | $ | 4.24 |  |  | $ | 3.70 |  |  | $ | 4.37 |  |  | $ | 3.41 |
BOE Production (c) | 345,400 |  |  | 279,100 |  |  | 912,400 |  |  | 776,000 |
Average Price ($ / BOE) | $ | 70.00 |  |  | $ | 72.11 |  |  | $ | 71.65 |  |  | $ | 65.83 |
Average Daily Production |  |  |  |  |  |  |
BOE per Day |  |  |  |  |  |  |
Royalty Interests | 853 |  |  | 1,008 |  |  | 835 |  |  | 1,092 |
Working Interests | 2,901 |  |  | 2,026 |  |  | 2,507 |  |  | 1,750 |
Total | 3,754 |  |  | 3,034 |  |  | 3,342 |  |  | 2,842 |
Working Interests BOE per Day |  |  |  |  |  |  |
North Dakota | 1,664 |  |  | 795 |  |  | 1,347 |  |  | 711 |
Kansas/Nebraska | 707 |  |  | 535 |  |  | 610 |  |  | 404 |
Texas, Louisiana and Other | 530 |  |  | 696 |  |  | 550 |  |  | 635 |
Total | 2,901 |  |  | 2,026 |  |  | 2,507 |  |  | 1,750 |

_____________________

(a) | Includes our share of venture activity in which we own a 50% interest. Our share of natural gas production is 49.1 MMcf and 152.3 MMcf in third quarter and first nine months 2014, and 60.9 MMcf and 188.9 MMcf in third quarter and first nine months 2013.

(b) | Oil production includes natural gas liquids (NGLs).

(c) | BOE – Barrels of oil equivalent (converting natural gas to oil at 6 Mcfe / Bbl).

(d) | Includes wells operated by third-party lessees/operators. Represent wells in which we own a royalty or working interest in a producing well. Excludes nine working interest wells in third quarter 2014 and 2013 as we also own a royalty interest in these wells.

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FORESTAR GROUP INC.
OIL AND GAS SEGMENT

| Third Quarter |  | First Nine Months
| 2014 |  | 2013 |  | 2014 |  | 2013
Well Activity |  |  |  |  |  |  |
Mineral Interests Owned (a) |  |  |  |  |  |  |
Net Acres Held By Production | 36,000 |  |  | 35,000 |  |  | 36,000 |  |  | 35,000 |
Gross Wells Drilled | — |  |  | — |  |  | — |  |  | — |
Productive Gross Wells | 547 |  |  | 543 |  |  | 547 |  |  | 543 |
Mineral Interests Leased |  |  |  |  |  |  |
Net Acres Held By Production (b) | 46,000 |  |  | 35,000 |  |  | 46,000 |  |  | 35,000 |
Gross Wells Drilled | 31 |  |  | 31 |  |  | 97 |  |  | 70 |
Productive Gross Wells (c) | 414 |  |  | 449 |  |  | 414 |  |  | 449 |
Total Well Activity |  |  |  |  |  |  |
Net Acres Held By Production | 82,000 |  |  | 70,000 |  |  | 82,000 |  |  | 70,000 |
Gross Wells Drilled | 31 |  |  | 31 |  |  | 97 |  |  | 70 |
Productive Gross Wells | 961 |  |  | 992 |  |  | 961 |  |  | 992 |

_____________________

(a) | Includes wells operated by third-party lessees/operators. Represent wells in which we own a royalty or working interest in a producing well. Excludes nine working interest wells at third quarter-end 2014 and 2013 as we also own a royalty interest in these wells.

(b) | Excludes approximately 8,000 net acres in which we have an overriding royalty interest.

(c) | Excludes approximately 1,200 wells in which we have an overriding royalty and nine working interest wells as we also own a royalty interest in these wells.

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FORESTAR GROUP INC.
OIL AND GAS SEGMENT
MINERAL INTERESTS
MINERAL INTERESTS OWNED (a)
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 Production |  | Total
|  |  | (Net acres)
Texas | 208,000 |  |  | 17,000 |  |  | 27,000 |  |  | 252,000 |
Louisiana | 132,000 |  |  | 3,000 |  |  | 9,000 |  |  | 144,000 |
Georgia | 152,000 |  |  | — |  |  | — |  |  | 152,000 |
Alabama | 40,000 |  |  | — |  |  | — |  |  | 40,000 |
California | 1,000 |  |  | — |  |  | — |  |  | 1,000 |
Indiana | 1,000 |  |  | — |  |  | — |  |  | 1,000 |
| 534,000 |  |  | 20,000 |  |  | 36,000 |  |  | 590,000 |

_____________________

(a) | Represents net acres and includes ventures.

MINERAL INTERESTS LEASED
Forestar’s oil and gas segment includes approximately 358,000 net mineral acres of leasehold interests principally located in Nebraska, Kansas, Oklahoma, Texas and North Dakota.

State | Undeveloped |  | Held By Production (a) |  | Total
Nebraska | 237,000 |  |  | 10,000 |  |  | 247,000 |
Kansas | 19,000 |  |  | 8,000 |  |  | 27,000 |
Oklahoma | 22,000 |  |  | 18,000 |  |  | 40,000 |
Alabama | 8,000 |  |  | — |  |  | 8,000 |
Texas | 11,000 |  |  | 2,000 |  |  | 13,000 |
North Dakota | 4,000 |  |  | 4,000 |  |  | 8,000 |
Other | 11,000 |  |  | 4,000 |  |  | 15,000 |
| 312,000 |  |  | 46,000 |  |  | 358,000 |

_____________________

(a) | Excludes approximately 8,000 net acres of overriding royalty interests.

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FORESTAR GROUP INC.
OTHER NATURAL RESOURCES SEGMENT
PERFORMANCE METRICS

| Third Quarter |  | First Nine Months
| 2014 |  | 2013 |  | 2014 |  | 2013
Fiber Sales |  |  |  |  |  |  |
Pulpwood tons sold | 71,500 |  |  | 65,700 |  |  | 157,900 |  |  | 314,400 |
Average pulpwood price per ton | $ | 11.18 |  |  | $ | 8.85 |  |  | $ | 11.00 |  |  | $ | 9.12 |
Sawtimber tons sold | 21,500 |  |  | 74,900 |  |  | 100,000 |  |  | 202,700 |
Average sawtimber price per ton | $ | 21.31 |  |  | $ | 21.52 |  |  | $ | 22.38 |  |  | $ | 22.47 |
Total tons sold | 93,000 |  |  | 140,600 |  |  | 257,900 |  |  | 517,100 |
Average stumpage price per ton (a) | $ | 13.52 |  |  | $ | 15.60 |  |  | $ | 15.41 |  |  | $ | 14.36 |
Recreational Activity |  |  |  |  |  |  |
Average recreational acres leased | 107,800 |  |  | 118,700 |  |  | 111,400 |  |  | 120,900 |
Average price per leased acre | $ | 8.66 |  |  | $ | 8.63 |  |  | $ | 9.17 |  |  | $ | 9.08 |

_____________________

(a) | Average stumpage price per ton is based on gross revenues less cut and haul costs.

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FORESTAR GROUP INC.
PROJECTS IN ENTITLEMENT
A summary of our real estate projects in the entitlement process (a) at third quarter-end 2014 follows:

Project | County |  | Market |  | Project Acres (b)
California |  |  |  |  |
Hidden Creek Estates | Los Angeles |  | Los Angeles |  | 700 |
Terrace at Hidden Hills | Los Angeles |  | Los Angeles |  | 30 |
Georgia |  |  |  |  |
Ball Ground | Cherokee |  | Atlanta |  | 500 |
Crossing | Coweta |  | Atlanta |  | 230 |
Fincher Road | Cherokee |  | Atlanta |  | 3,890 |
Garland Mountain | Cherokee/Bartow |  | Atlanta |  | 350 |
Martin’s Bridge | Banks |  | Atlanta |  | 970 |
Mill Creek | Coweta |  | Atlanta |  | 770 |
Wolf Creek | Carroll/Douglas |  | Atlanta |  | 12,230 |
Yellow Creek | Cherokee |  | Atlanta |  | 1,060 |
Texas |  |  |  |  |
Lake Houston | Harris/Liberty |  | Houston |  | 3,700 |
Total |  |  |  |  | 24,430 |

_____________________

(a) | 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 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.

(b) | Project acres, which are the total for the project regardless of our ownership interest, are approximate. The actual number of acres entitled may vary.

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FORESTAR GROUP INC.
REAL ESTATE PROJECTS
A summary of activity within our projects in the development process, which includes entitled (a), developed and under development real estate projects, at third quarter-end 2014 follows:

|  |  |  |  | Residential Lots (c) |  | Commercial Acres (d)
Project | County |  | Interest Owned (b) |  | Lots Sold Since Inception |  | Lots Remaining |  | Acres Sold Since Inception |  | Acres Remaining (e)
Projects we own |  |  |  |  |  |  |  |  |  |  |
California |  |  |  |  |  |  |  |  |  |  |
San Joaquin River | Contra Costa/Sacramento |  | 100 | % |  | — |  |  | — |  |  | — |  |  | 288 |
Colorado |  |  |  |  |  |  |  |  |  |  |
Buffalo Highlands | Weld |  | 100 | % |  | — |  |  | 164 |  |  | — |  |  | — |
Johnstown Farms | Weld |  | 100 | % |  | 269 |  |  | 343 |  |  | 2 |  |  | 7 |
Pinery West | Douglas |  | 100 | % |  | 45 |  |  | 41 |  |  | 20 |  |  | 94 |
Stonebraker | Weld |  | 100 | % |  | — |  |  | 603 |  |  | — |  |  | — |
Tennessee |  |  |  |  |  |  |  |  |  |  |
Morgan Farms | Williamson |  | 100 | % |  | 45 |  |  | 128 |  |  | — |  |  | — |
Weatherford Estates | Williamson |  | 100 | % |  | — |  |  | 17 |  |  | — |  |  | — |
Texas |  |  |  |  |  |  |  |  |  |  |
Arrowhead Ranch | Hays |  | 100 | % |  | — |  |  | 387 |  |  | — |  |  | 6 |
Bar C Ranch | Tarrant |  | 100 | % |  | 292 |  |  | 813 |  |  | — |  |  | — |
Barrington Kingwood | Harris |  | 100 | % |  | 132 |  |  | 48 |  |  | — |  |  | — |
Cibolo Canyons | Bexar |  | 100 | % |  | 867 |  |  | 851 |  |  | 130 |  |  | 20 |
Harbor Lakes | Hood |  | 100 | % |  | 217 |  |  | 232 |  |  | 2 |  |  | 19 |
Hunter’s Crossing | Bastrop |  | 100 | % |  | 483 |  |  | 27 |  |  | 41 |  |  | 62 |
La Conterra | Williamson |  | 100 | % |  | 200 |  |  | 130 |  |  | — |  |  | 58 |
Lakes of Prosper | Collin |  | 100 | % |  | 74 |  |  | 211 |  |  | — |  |  | 4 |
Lantana | Denton |  | 100 | % |  | 1,065 |  |  | 697 |  |  | 9 |  |  | 3 |
Maxwell Creek | Collin |  | 100 | % |  | 912 |  |  | 87 |  |  | 10 |  |  | — |
Oak Creek Estates | Comal |  | 100 | % |  | 214 |  |  | 356 |  |  | 13 |  |  | — |
Parkside | Collin |  | 100 | % |  | — |  |  | 200 |  |  | — |  |  | — |
Stoney Creek | Dallas |  | 100 | % |  | 221 |  |  | 533 |  |  | — |  |  | — |
Summer Creek Ranch | Tarrant |  | 100 | % |  | 963 |  |  | 311 |  |  | 35 |  |  | 44 |
Summer Lakes | Fort Bend |  | 100 | % |  | 614 |  |  | 516 |  |  | 56 |  |  | — |
Summer Park | Fort Bend |  | 100 | % |  | 69 |  |  | 129 |  |  | 28 |  |  | 62 |
The Colony | Bastrop |  | 100 | % |  | 449 |  |  | 704 |  |  | 22 |  |  | 31 |
The Preserve at Pecan Creek | Denton |  | 100 | % |  | 519 |  |  | 275 |  |  | — |  |  | 7 |
Village Park | Collin |  | 100 | % |  | 753 |  |  | 3 |  |  | 3 |  |  | 2 |
Westside at Buttercup Creek | Williamson |  | 100 | % |  | 1,496 |  |  | 1 |  |  | 66 |  |  | — |
Other projects (9) | Various |  | 100 | % |  | 1,759 |  |  | 245 |  |  | 133 |  |  | 7 |
Georgia |  |  |  |  |  |  |  |  |  |  |
Seven Hills | Paulding |  | 100 | % |  | 753 |  |  | 337 |  |  | 26 |  |  | 113 |
The Villages at Burt Creek | Dawson |  | 100 | % |  | — |  |  | 1,715 |  |  | — |  |  | 57 |
Other projects (18) | Various |  | 100 | % |  | 268 |  |  | 2,825 |  |  | — |  |  | 705 |
Other |  |  |  |  |  |  |  |  |  |  |
Other projects (3) | Various |  | 100 | % |  | 526 |  |  | 426 |  |  | — |  |  | — |
|  |  |  |  | 13,205 |  |  | 13,355 |  |  | 596 |  |  | 1,589 |

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|  |  |  |  | Residential Lots (c) |  | Commercial Acres (d)
Project | County |  | Interest Owned (b) |  | Lots Sold Since Inception |  | Lots Remaining |  | Acres Sold Since Inception |  | Acres Remaining (e)
Projects in entities we consolidate |  |  |  |  |  |  |  |  |  |  |
Texas |  |  |  |  |  |  |  |  |  |  |
City Park | Harris |  | 75 | % |  | 1,311 |  |  | 458 |  |  | 50 |  |  | 115 |
Timber Creek | Collin |  | 88 | % |  | — |  |  | 601 |  |  | — |  |  | — |
Willow Creek Farms II | Waller/Fort Bend |  | 90 | % |  | 90 |  |  | 160 |  |  | — |  |  | — |
Other projects (2) | Various |  | Various |  |  | 10 |  |  | 198 |  |  | — |  |  | 18 |
Georgia |  |  |  |  |  |  |  |  |  |  |
The Georgian | Paulding |  | 75 | % |  | 535 |  |  | — |  |  | — |  |  | — |
|  |  |  |  | 1,946 |  |  | 1,417 |  |  | 50 |  |  | 133 |
Total owned and consolidated |  |  |  |  | 15,151 |  |  | 14,772 |  |  | 646 |  |  | 1,722 |
Projects in ventures that we account for using the equity method |  |  |  |  |  |  |  |  |  |
Texas |  |  |  |  |  |  |  |  |  |  |
Entrada | Travis |  | 50 | % |  | — |  |  | 821 |  |  | — |  |  | — |
Fannin Farms West | Tarrant |  | 50 | % |  | 324 |  |  | 24 |  |  | — |  |  | 12 |
Harper’s Preserve | Montgomery |  | 50 | % |  | 315 |  |  | 1,378 |  |  | 8 |  |  | 51 |
Lantana - Rayzor Ranch | Denton |  | 25 | % |  | 1,163 |  |  | — |  |  | 16 |  |  | 42 |
Long Meadow Farms | Fort Bend |  | 38 | % |  | 1,332 |  |  | 470 |  |  | 187 |  |  | 116 |
Southern Trails | Brazoria |  | 80 | % |  | 748 |  |  | 243 |  |  | — |  |  | — |
Stonewall Estates | Bexar |  | 50 | % |  | 342 |  |  | 48 |  |  | — |  |  | — |
Other projects (2) | Various |  | Various |  |  | — |  |  | — |  |  | — |  |  | 15 |
Total in ventures |  |  |  |  | 4,224 |  |  | 2,984 |  |  | 211 |  |  | 236 |
Combined total |  |  |  |  | 19,375 |  |  | 17,756 |  |  | 857 |  |  | 1,958 |

_____________________

(a) | A project is deemed entitled when all major discretionary governmental land-use approvals have been received. Some projects may require additional permits and/or non-governmental authorizations for development.

(b) | Interest owned reflects our net equity interest in the project, whether owned directly or indirectly. There are some projects that have multiple ownership structures within them. Accordingly, portions of these projects may appear as owned, consolidated or accounted for using the equity method.

(c) | Lots are for the total project, regardless of our ownership interest. Lots remaining represent vacant developed lots, lots under development and future planned lots and are subject to change based on business plan revisions.

(d) | Commercial acres are for the total project, regardless of our ownership interest, and are net developable acres, which may be fewer than the gross acres available in the project.

(e) | Excludes acres associated with commercial and income producing properties.

A summary of our significant commercial and income producing properties at third quarter-end 2014 follows:

Project |  | Market |  | Interest Owned (a) |  | Type |  | Acres |  | Description
Radisson Hotel |  | Austin |  | 100 | % |  | Hotel |  | 2 |  |  | 413 guest rooms and suites
Eleven |  | Austin |  | 100 | % |  | Multifamily |  | 3 |  |  | 257-unit luxury apartment
360° (b) |  | Denver |  | 20 | % |  | Multifamily |  | 4 |  |  | 304-unit luxury apartment
Midtown Cedar Hill (b) |  | Dallas |  | 100 | % |  | Multifamily |  | 13 |  |  | 354-unit luxury apartment
Acklen (b) |  | Nashville |  | 30 | % |  | Multifamily |  | 4 |  |  | 320-unit luxury apartment

_____________________

(a) | Interest owned reflects our total interest in the project, whether owned directly or indirectly.

(b) | Construction in progress.

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