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Forestar Group Inc. Reports Full Year And Fourth Quarter 2011 Results

Forestar Group Inc. (NYSE: FOR):

Building Momentum by Increasing Oil Production, Proven Reserves and Residential Lot Sales

“We are well positioned to accelerate value realization of our oil and gas resources by growing production and reserves, a key driver of future earnings and cash flow. Executing our strategy to drive exploration and production is clearly demonstrated in Louisiana given the significant growth in production and proven reserves. In addition, our increased residential lot sales reflect our ability to grow market share despite depressed housing starts. Residential real estate conditions in the major markets of Texas continue to experience declining finished lot inventories and minimal new development activity, which should benefit Forestar given our well positioned portfolio of over 50 active communities and significant experience in these markets,” said Jim DeCosmo, president and chief executive officer of Forestar Group Inc.

Full Year 2011 Significant Highlights

Minerals – Oil & Gas
  • Oil production up over 32% compared with 2010
  • Year-end 2011 proven reserves of 17.9 Bcfe, up 26% compared with 2010
  • Year-end 2011 PV-10 proven reserves * up 81% or $36.7 million compared with 2010
  • 36 additional oil and gas wells completed; 530 total producing wells at year-end
  • Exercised working interest options in three oil wells in Louisiana
  • 68,000 net mineral acres put in play through leases, seismic and exploration agreements

Real Estate
  • Sold 1,117 developed residential lots, a 39% increase compared with 2010 – over 1,350 lots under option contracts at year-end
  • Received $8.7 million from Cibolo Canyons Special Improvement District
  • Sold over 17,100 acres of undeveloped land for $40.5 million through our retail sales program
  • Invested $63 million in segment; investments expected to exceed return criteria and deliver near-term cash flow and earnings
  • Initiated construction of 289-unit multifamily residential community in Austin, Texas

* These are Non-GAAP financial measures. The reconciliation between GAAP and Non-GAAP measures is provided in the tables following this press release, and on the investor relations section of the company’s website.

Strategic Initiatives
  • Sold 57,000 acres of timberland in Georgia, Alabama and Texas for $87 million, effectively completing our timberland sales initiatives
  • Repurchased almost one million shares of our common stock

Strategic Acquisition

On February 20, 2012, we entered into definitive agreements to acquire for a net investment of $23.5 million, the entire interest in certain assets from the CL Realty and TEMCO ventures, two ongoing ventures with Cousins Properties. The acquisition price for these real estate assets is approximately 50% of the ventures’ book basis prior to the sale. After this purchase we will own 100% of the ventures’ interest in 17 residential and mixed-use real estate projects. These communities include over 1,200 fully developed lots, almost 4,900 planned lots, and over 475 commercial acres. Over 70% of these residential lots and commercial acres are located in the major markets of Texas, relatively speaking, some of the healthiest markets in the U.S. During 2011, these projects generated sales of 456 residential lots and 20 commercial acres for $19.8 million. Our share of CL Realty and TEMCO pre-tax loss was ($32.5) million in 2011, and was principally due to non-cash asset impairment charges associated with entering into agreements to acquire certain assets from these ventures in first quarter 2012.

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