Costs Incurred and Equity Investment

Preliminary, unaudited costs incurred during 2012 totaled $297.3 million, consisting of $240.8 million for horizontal and vertical drilling and completion activities and recompletions, $44.3 million for pipeline and infrastructure projects, $9.0 million for acreage acquisitions, and $3.2 million for 3-D seismic data acquisition. Also, as previously disclosed, in September 2012, we entered into a joint venture to build an oil pipeline in Crockett and Reagan Counties, Texas, which will be used to transport our oil to market. In October 2012, we made an initial capital contribution of $10 million to the joint venture for pipeline and facilities construction. Future capital contributions to the venture are discretionary.

Drilling Locations and Resource Potential

The Company made significant progress in the horizontal Wolfcamp shale play during 2012. Based on the Company’s results in the horizontal Wolfcamp play, the delineation of the Wolfcamp across approximately 107,000 gross acres, hundreds of vertical well control points and information from 3-D seismic, micro-seismic, core and log data, we have identified 2,096 horizontal locations, including 130 horizontal PUD locations. The Company’s horizontal drilling inventory is based on 120-acre spacing and multi-bench development. In the horizontal Wolfcamp shale play, estimated gross, unrisked resource potential increased over 300% to approximately 943 MMBoe gross (707.4 MMBoe net).

The following table summarizes the Company’s identified horizontal drilling locations as of December 31, 2012.
    Wolfcamp A     Wolfcamp B     Wolfcamp C     Total
North and Central Project Pangea 600 588 600 1,788
Pangea West 103 102 103 308
Total 703 690 703 2,096

Approach also has identified 727 vertical locations, made up of 329 locations targeting the Wolffork and 398 locations targeting the Canyon Wolffork, as well as 160 vertical Wolffork recompletions. Our horizontal and vertical drilling inventory does not include any locations in south Project Pangea.

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