OUTLOOK“We continue to build momentum through execution of our Triple in FOR strategic initiatives, focused on accelerating value realization, increasing transparency and disclosure and growing through strategic and disciplined investments. We have made great progress, but I believe Forestar is just beginning to realize its full potential,” said Jim DeCosmo, president and chief executive officer of Forestar Group. “Our preliminary year-end 2012 total proven reserves are approximately 5.6 million BOE (barrels of oil equivalent), up over 87% compared with year-end 2011, driven by the acquisition of CREDO Petroleum. Our oil and gas strategic initiatives are focused on increasing exploration, production and reserves, a key driver of future earnings and cash flow. In addition, we are committed to delivering the growth and returns associated with acquisition of CREDO Petroleum. We anticipate participating in over 50 non-operating working interest oil wells in the Bakken and Three Forks formations in 2013, and we are planning to drill or participate in over 80 additional oil wells in the Lansing-Kansas City formation in Kansas and Nebraska. These three formations offer lower-risk, repeatable drilling opportunities that we expect to significantly exceed our target returns. As a result, we expect 2013 capital expenditures for drilling and participation in working interests to exceed $70 million and anticipate our share of total production in 2013 to exceed one million barrels of oil equivalent, an over 50% increase compared with 2012. “Housing markets are experiencing solid signs of a long-term 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 increase sales, with a solid portfolio of over 50 active residential and mixed-use communities in the major markets of Texas. “We continue to build a solid pipeline of multifamily development properties, including the acquisition of a well-located multifamily development site in Charlotte, North Carolina for approximately $5.6 million during fourth quarter. We substantially completed construction of our Promesa multifamily community in 2012 and expect the project to reach stabilization and be positioned for sale during first half of 2013. In addition, we initiated construction of two multifamily projects: Eleven, in Austin and 360°, in Denver, both of which are held in ventures and remain on target for unit deliveries to begin in late 2013.