Form 8-K Forestar Group Inc. For: Nov 05

November 5, 2014 6:03 AM

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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Form�8-K

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CURRENT REPORT

PURSUANT TO SECTION�13 OR 15(d)�OF THE

SECURITIES EXCHANGE ACT OF 1934

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Date of Report: November�5, 2014

(Date of earliest event reported)

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FORESTAR GROUP INC.

(Exact name of registrant as specified in its charter)

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Delaware	�	Commission File Number	�	26-1336998
(State or other jurisdiction of incorporation or organization)	�	001-33662	�	(I.R.S. Employer Identification No.)

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6300 Bee Cave Road, Building Two, Suite�500

Austin, Texas 78746

(Address of principal executive offices) (zip code)

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(512)�433-5200

(Registrants telephone number, including area code)

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Check the appropriate box below if the Form�8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:�

o�� Written communications pursuant to Rule�425 under the Securities Act (17 CFR 230.425)

o�� Soliciting material pursuant to Rule�14a-12 under the Exchange Act (17 CFR 240.14a-12)

o�� Pre-commencement communications pursuant to Rule�14d-2(b)�under the Exchange Act (17 CFR 240.14d-2(b))

o�� Pre-commencement communications pursuant to Rule�13e-4(c)�under the Exchange Act (17 CFR 240.13e-4(c))

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Item�2.02. Results of Operations and Financial Condition.

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On November�5, 2014, Forestar Group Inc. (the Company) issued a press release announcing the Companys results for the quarter ended September�30, 2014. A copy of the press release is furnished as Exhibit�99.1 of this report.

�Item�7.01. Regulation FD Disclosure

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On November�5, 2014, management of the Company will participate in a conference call discussing the Companys results for the quarter ended September�30, 2014. A copy of the presentation materials to be used by management is furnished as Exhibit 99.2 of this report.

Item�9.01. Financial Statements and Exhibits.

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(d)�Exhibits.

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Exhibit	�	Description
�	�	�
99.1	�	Press release issued by the Company on November 5, 2014, announcing the Companys results for the quarter ended September 30, 2014.
�	�	�
99.2	�	Presentation materials to be used by management in a conference call on November 5, 2014, discussing the Companys results for the quarter ended September 30, 2014.

SIGNATURE

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Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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�	�	�
�	�	FORESTAR GROUP INC.
�	�	�
�	�	�
Date:	November�5, 2014	By:	/s/ Christopher L. Nines
�	�	�	Name:	Christopher L. Nines
�	�	�	Title:	Chief Financial Officer and Treasurer

EXHIBIT�INDEX

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Exhibit	�	Description
�	�	�
99.1	�	Press release issued by the Company on November 5, 2014, announcing the Companys results for the quarter ended September 30, 2014.
�	�	�
99.2	�	Presentation materials to be used by management in a conference call on November 5, 2014, discussing the Companys results for the quarter ended September 30, 2014.

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, 2014Forestar 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.

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.

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 partners 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.

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 Forestars 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. Forestars 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 managements 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.

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.

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.

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.

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.

FORESTAR GROUP INC.

OIL AND GAS SEGMENT

MINERAL INTERESTS

MINERAL INTERESTS OWNED ^(a)�

Forestars 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

Forestars 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.

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.

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
Martins 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.

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

�

Pinery West

Douglas

�

100

�

Stonebraker

Weld

�

100

�

603

�

Tennessee

�

Morgan Farms

Williamson

�

100

�

128

�

Weatherford Estates

Williamson

�

100

�

Texas

�

Arrowhead Ranch

Hays

�

100

�

387

�

Bar C Ranch

Tarrant

�

100

�

292

�

813

�

Barrington Kingwood

Harris

�

100

�

132

�

Cibolo Canyons

Bexar

�

100

�

867

�

851

�

130

�

Harbor Lakes

Hood

�

100

�

217

�

232

�

Hunters Crossing

Bastrop

�

100

�

483

�

La Conterra

Williamson

�

100

�

200

�

130

�

Lakes of Prosper

Collin

�

100

�

211

�

Lantana

Denton

�

100

�

1,065

�

697

�

Maxwell Creek

Collin

�

100

�

912

�

Oak Creek Estates

Comal

�

100

�

214

�

356

�

Parkside

Collin

�

100

�

200

�

Stoney Creek

Dallas

�

100

�

221

�

533

�

Summer Creek Ranch

Tarrant

�

100

�

963

�

311

�

Summer Lakes

Fort Bend

�

100

�

614

�

516

�

Summer Park

Fort Bend

�

100

�

129

�

The Colony

Bastrop

�

100

�

449

�

704

�

The Preserve at Pecan Creek

Denton

�

100

�

519

�

275

�

Village Park

Collin

�

100

�

753

�

Westside at Buttercup Creek

Williamson

�

100

�

1,496

�

Other projects (9)

Various

�

100

�

1,759

�

245

�

133

�

Georgia

�

Seven Hills

Paulding

�

100

�

753

�

337

�

113

The Villages at Burt Creek

Dawson

�

100

�

1,715

�

Other projects (18)

Various

�

100

�

268

�

2,825

�

705

Other

�

Other projects (3)

Various

�

100

�

526

�

426

�

13,205

�

13,355

�

596

�

1,589

�

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

�

1,311

�

458

�

115

Timber Creek

Collin

�

601

�

Willow Creek Farms II

Waller/Fort�Bend

�

160

�

Other projects (2)

Various

�

Various

�

198

�

Georgia

�

The Georgian

Paulding

�

535

�

1,946

�

1,417

�

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

�

821

�

Fannin Farms West

Tarrant

�

324

�

Harpers Preserve

Montgomery

�

315

�

1,378

�

Lantana - Rayzor Ranch

Denton

�

1,163

�

Long Meadow Farms

Fort Bend

�

1,332

�

470

�

187

�

116

Southern Trails

Brazoria

�

748

�

243

�

Stonewall Estates

Bexar

�

342

�

Other projects (2)

Various

�

Various

�

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

�

413�guest�rooms�and�suites

Eleven

�

Austin

�

100

�

Multifamily

�

257-unit luxury apartment

360� ^(b)

�

Denver

�

Multifamily

�

304-unit luxury apartment

Midtown Cedar Hill ^(b)

�

Dallas

�

100

�

Multifamily

�

354-unit luxury apartment

Acklen ^(b)

�

Nashville

�

Multifamily

�

320-unit luxury apartment

�_____________________


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


^(b)�	Construction in progress.

Third Quarter 2014 Financial Results November 5, 2014 Growing Forward Through Strategic and Disciplined Investment and Increasing Returns

�

Notice To Investors This presentation 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 managements 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 but 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; 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 presentation to reflect the occurrence of events after the date of this presentation. This presentation includes Non-GAAP nancial measures. The required reconciliation to GAAP nancial measures can be found as an exhibit to this presentation and on our website at www.forestargroup.com. 2

�

Real Estate Driving Segment Earnings 3 " 3rd quarter 2014 real estate segment results include a $7.6 million gain, pre-tax, associated with the purchase of our partners 75% interest in the Eleven venture, a multifamily project in Austin, reflecting the fair market value of the project on the date of acquisition. " 3rd quarter 2014 oil and gas segment results include $3.3 million in gains, pre-tax, principally associated with the sale of our leasehold interests in 348 net mineral acres in North Dakota, and $2.3 million dry hole expense, pre-tax, associated with a working interest investment in an exploratory well in Oklahoma. " 3rd quarter 2013 results include a previously unrecognized tax benefit of approximately $6.3 million, or $0.17 per share, related to qualified timber gains from sales in 2009 Note: Third Quarter 2014 weighted average diluted shares outstanding were 43.9 million ($ in millions, except per share data) 3rd Quarter 2014 3rd Quarter 2013 Income Before Taxes $8.0 $8.9 Net Income $5.2 $11.8 Earnings Per Share $0.12 $0.33 Segment Earnings: Real Estate $16.0 $13.2 Oil and Gas 6.0 8.5 Other Natural Resources 0.7 0.5 Total Segment Earnings $22.7 $22.2

�

Cibolo Canyons - Accelerating Value Realization 4 CCSID Annual Hotel Occupancy Tax & Sales Tax Collections Cibolo Canyons Special Improvement District (CCSID) Payments to Forestar ($ in millions) Investment Received Future 2014 2034 Infrastructure Reimbursement $66 $25 $41* HOT & Sales and Use Tax** 43 66 >35 Total $109 $91 >$76 ($ in m il lio n s) *Excludes interest **Assumes no growth in HOT and Sales and Use tax collections through 2034 ***Represents annualized nine month actuals $1.0 $3.0 $5.0 $7.0 2010 2011 2012 2013 2014 Est. Hotel Occupancy Tax Sales & Use Tax Forestar received $46.5 million from Cibolo Canyons Special Improvement District (CCSID) on October 24, 2014 Forestar entitled to receive additional Hotel Occupancy (HOT) and Sales and Use taxes above CCSID debt service requirements through 2034 ***

�

Strategy and Strategic Initiatives Focused on Maximizing Long-Term Shareholder Value 5 2014 Growing Forward " Growing segment earnings through strategic and disciplined investments " Focused on increasing returns " Repositioning non-core, non- performing assets 2012 Triple in FOR " Triple total segment EBITDA, oil and gas production and lot sales 2009 Strategic Initiatives " Monetize 175,000 acres of timberland and reduce debt $150 million Delivering Value Through Execution of Strategic Initiatives

�

Real Estate Third Quarter 2014 Highlights Building Momentum By Accelerating Real Estate Sales and Building a Solid Multifamily Pipeline 6

�

($3.8) ($2.2) $13.2 $7.6 $0.9 $0.3 $16.0 $0 $10 $20 $30 Q3 2013 Gain on Eleven Purchase Opex Income Producing Properties Residential & Commercial Sales Undeveloped Land Sales Q3 2014 Q3 2014 Highlights " Acquisition of partners 75% interest in Eleven venture " Gain of $7.6 million " Residential Lots 323 lots " Avg. price $73,700 per lot, 30% higher vs Q3 2013 " Avg. margin $34,900 per lot, 35% higher vs Q3 2013 " Commercial Tracts 4 acres " Average $589,200 per acre " Undeveloped Land 637 acres " Average $3,200 per acre " Real Estate segment EBITDA*: " Q3 2014 - $16.7 million Segment Earnings Reconciliation Q3 2013 vs. Q3 2014 ($ in millions) 7 Note: includes ventures Real Estate Accelerating Value Realization from Multifamily * EBITDA = segment earnings before interest and taxes plus depreciation and amortization. EBITDA is a non-GAAP financial measure. The reconciliation between GAAP and Non-GAAP financial measures is included in the appendix to this presentation. i Acquisition of Partners Interest in Eleven Venture

�

* Actual results may vary A n n u al Lo t Sal e s 2006 Peak Sales = 3,600 lots Annual Lot Sales & Avg. Lot Margin 8 Real Estate Capitalizing on Well Located Communities, Low Inventories and Solid Job Growth $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 0 500 1,000 1,500 2,000 2,500 2008 2009 2010 2011 2012 2013 2014E* Lot Sales Average Lot Margin 1,365 804 642 A ve ra ge Lo t M ar gi n 1,883 1,060 1,117 Note: Includes ventures YTD Q3 1,834 Planned Lot Sales ** Texas Markets represent Dallas, Houston, San Antonio and Austin Source: Metrostudy Texas Lot Supply 4 Major Markets** Rank MSA Annual Job Gains Percent Change (YOY) 2 Houston-The Woodlands-Sugar Land, TX 120,700 4.3% 16 Austin-Round Rock, TX 32,300 3.7% 3 Dallas-Fort Worth-Arlington, TX 107,000 3.4% 24 San Antonio-New Braunfels, TX 20,200 2.2% Texas Major Markets 280,200 3.6% US Average 2,635,000 1.9% Top Job Growth MSAs - September 2014 0 10 20 30 40 50 60 0 50,000 100,000 150,000 200,000 250,000 4 Q 0 0 3 Q 0 1 2 Q 0 2 1 Q 0 3 4 Q 0 3 3 Q 0 4 2 Q 0 5 1 Q 0 6 4 Q 0 6 3 Q 0 7 2 Q 0 8 1 Q 0 9 4 Q 0 9 3 Q 1 0 2 Q 1 1 1 Q 1 2 4 Q 1 2 3 Q 1 3 2 Q 1 4 M o S TEXAS Lots TEXAS MoS Equilibrium Va ca n t D ev el o p ed L o ts

�

Building Solid Pipeline of Multifamily Development Opportunities (Proforma) Proforma Project Cash Flows Expected Forestar Cash Flows Project Market % Complete Units FOR Ownership Total Development Cost Expected Project NOI FOR Cash Contribution FOR Cash Distribution* Cash Multiple** Eleven Austin 100% 257 100% $40 $2.8 - 3.4 $25 $36 - 38 1.4 - 1.5x Midtown Dallas 85% 354 100% 35 - 40 2.8 - 3.2 10 20 - 28 2.0 - 2.8x 360� Denver 80% 304 20% 50 - 55 3.8 - 4.4 4 11 - 12 2.8 - 3.0x Acklen Nashville 35% 320 30% 55 - 60 4.1 - 4.2 6 14 - 17 2.3 - 2.8x HiLine Denver 5% 385 25% 70 - 75 5.1 - 5.3 6 16 - 20 2.6 - 3.3x 1,620 55% $250 - 270 $18.6 - 20.4 $51 $97 - 115 2.2 - 2.7x * Return projections are based on exit cap rates ranging from 4.75% - 6.5%, depending on property type and location. Ranges presented to reflect variations due to timing of exit and changes in market conditions. ** Cash multiples include fees *** FOR will be limited partner and not developer of this project 9 Site Pipeline Expected Ownership Proforma Units Houston, TX Cinco Ranch *** 90% 360 Charlotte, NC Dilworth 25 - 100% 379 Nashville, TN Music Row Venture 230 Austin, TX Downtown Edge Venture 275 Austin, TX West Austin Venture 200 ($ in millions) Note: Eleven 75% partner interest in venture was purchased for $21.5 million in 3rd quarter 2014. Expected cash distribution and multiples reflect post acquisition ownership.

�

Note: Includes consolidated ventures Forestar Real Estate Revenues (Excluding Timberland, Mitigation & Multifamily Revenues) Capitalizing on Well Located Communities, Low Inventories and Forestars Ability to Deliver 10 " Driving residential lot and tract sales in good locations and healthy markets " Opportunistically monetizing undeveloped land and stabilized multifamily communities " Acquiring community development and multifamily sites in A locations Accelerating Value Realization $0 $10 $20 $30 $0 $20 $40 $60 $80 $100 $120 YTD 2010 YTD2011 YTD 2012 YTD 2013 YTD 2014 A ve ra ge Lo t M ar gi n ($ in t h o u sa n d s) To tal R e ve n u e s ($ in m ill io n s) Residential Lots Residential Tracts Commercial Tracts Income Producing Average Lot Margin Average Lot Margin (Excluding Bulk Sales)

�

Other Natural Resources Third Quarter 2014 Highlights Building Momentum Through Sustainable Harvests and Delivering Economic Water Solutions 11

�

Other Natural Resources Segment Results $0.5 $0.2 ($0.9) $0.7 $0.7 $0.2 $0.0 $1.0 $2.0 Se gm en t Ea rn in gs Q3 2014 Highlights " $0.2 million in earnings from groundwater reservation agreement " $0.2 million gain on sale of water rights associated with real estate project near Denver " Sold nearly 93,000 tons of fiber " Average fiber pricing $13.52 per ton, down over 13% vs. Q3 2013 due to increased mix of pulpwood Segment Earnings Reconciliation Q3 2013 vs. Q3 2014 ($ in millions) 12 Q3 2013 Q3 2014 Operating Expenses Groundwater Reservation Agreement Earnings Gain on Sale of Water Rights Fiber Sales

�

Oil and Gas Third Quarter 2014 Highlights Building Momentum By Driving Leasing and Exploration to Increase Production and Reserves 13

�

$15.6 $6.0 $3.3 ($2.7) $0.2 $0.5 $19.1 ($3.8) $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 Q3 2013 DD&A and Exploration Gain on Sales Operating Expenses Working Interest Exploration Costs Legacy Minerals Q3 2014 Se gme n t EBIT D A X Investments and Asset Sales Drive Higher EBITDAX Q3 2014 Highlights " Working interest volume up 43% vs. Q3 2013 " Avg. oil price down over 15% vs. Q3 2013 " Royalty interest volume down 15% vs. Q3 2013 " $3.3 million in gains principally associated with sale of leasehold interest in 348 net mineral acres in Bakken/Three Forks " 744 fee mineral acres leased to third parties for $205/acre " Acquired leasehold interest in approximately 560 net mineral acres in the Bakken/Three Forks for about $3.0 million and nearly 20,000 net mineral acres in Lansing-Kansas City for $0.8 million ($ in millions) 14 ($ in millions) Note: EBITDAX = segment earnings before interest and taxes, plus depreciation, depletion, amortization, geological, geophysical, seismic and dry hole costs. EBITDAX is a Non-GAAP financial measure. The reconciliation between GAAP and Non-GAAP financial measures is included in the appendix to this presentation and provided on the companys investor relations website. $8.5 $0.5 $0.2 $3.3 ($3.8) ($2.7) $6.0 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 Q3 2013 Gain on Sales Operating Expenses Working Interest Exploration Costs Legacy Minerals Q3 2014 Se gme n t Ea rning s Segment Earnings Reconciliation Q3 2013 vs. Q3 2014 Segment EBITDAX Reconciliation Q3 2013 vs. Q3 2014 3rd quarter 2014 oil and gas segment results include $3.3 million in gains principally associated with the sale of our leasehold interests in 348 net mineral acres in North Dakota and $3.8 million in dry hole expenses, including $2.3 million associated with our working interest in an exploratory well in Oklahoma and $1.5 million in Kansas, Nebraska and Texas.

�

HALCON Ft. Berthold 148-94-30B-31-5H FOR : 18.88% IP : 3,631 BOEPD 2014 Bakken/Three Forks Wells Generating Strong Initial Production Rates and Improved Well Performance 15 * Represents highest initial production rates on a barrel of oil equivalent per day within the first 30 days of production Note: wells are non-operated Bakken Wells IP* (BOEPD) in Q3 2014 Operator Well I.P. FOR Interest Target Halcon 148-94-308-31-4H 4,128 18.88% Bakken Halcon 148-94-308-31-5H 3,631 18.88% Bakken Halcon 148-94-33C-28-3H 2,885 9.14% Bakken Slawson Jore Federal 2,592 9.83% Bakken Enerplus Pride 2,307 1.51% T. Forks Statoil Lloyd 1,488 18.75% Bakken Continental Salers Federal 1,371 2.67% Bakken Hess BW-Johnson 1003H-3 1,225 6.25% Bakken Hess BW-Johnson 1003H-2 1,127 6.25% Bakken Total 9 wells 2,306 10.24% Bakken / Three Forks Legend Forestar Bakken Well Forestar Three Forks Well Fort Berthold Reservation Boundary Forestar HBP Leases Forestar Undeveloped Leases Forestar Spacing Unit HALCON Ft. Berthold 148-94-30B-31-4H FOR : 18.88% IP : 4,128 BOEPD ENERPLUS Pride 150-94-06A-18HTF FOR : 1.51% IP : 2,307 BOEPD STATOIL Lloyd 34-3-3H FOR : 18.75% IP : 1,488 BOEPD Bakken / Three Forks Play Area Fort Berthold HESS BW-Johnson 149-99-1003H-3 FOR : 6.25% IP : 1,225 BOEPD HALCON Ft. Berthold 148-94-33C-28-3H FOR : 9.14% IP : 2,885 BOEPD SLAWSON Jore Federal 2-12H FOR : 9.83% IP : 2,592 BOEPD CONTINENTAL Salers Federal 3-27H FOR : 2.67% IP : 1,371 BOEPD Three Forks well Bakken well HESS BW-Johnson 149-99-1003H-2 FOR : 6.25% IP : 1,127 BOEPD

�

0% 10% 20% 30% 40% 50% $70 Strip $90 IR R WTI Oil Price 16 6 Bakken / Three Forks Drilling Activity Investment and Value Realization Note: Based on current plans from operators, subject to change 0 20 40 60 80 100 120 140 2010 2011 2012 2013 2014E P ro d u ci n g W e lls Bakken/Three Forks Producing Wells** Actual Wells Planned Wells ** Gross wells Bakken/Three Forks PV10 and Pricing Sensitivity * $70 WTI Oil WTI Strip $90 WTI Oil EUR (MBOE) PV10 ($MM) PV10 ($MM) PV10 ($MM) 700 $0.3 $0.5 $0.8 600 $0.1 $0.3 $0.5 500 ($0.1) $0.1 $0.3 * Estimated Ultimate Recoveries (EURs)assuming $90, 10/30/14 strip (approximately $80), and $70 WTI oil and applying $6.42 well head differentials, and assuming $3 natural gas average price over life of well. Total costs includes land, drilling and completion, LOE and production severance taxes. Note: Actual results may vary from illustrations Bakken/Three Forks EUR and Oil Pricing Sensitivity * 700 MBOE EUR 600 MBOE EUR 500 MBOE EUR Target Return

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Kansas / Nebraska Working Interest Investment Return Sensitivity 17 17 0 20 40 60 80 100 120 140 2012 2013 2014E P ro d u ci n g W e lls Kansas/Nebraska Producing Wells** **Represents gross wells; and assumes 40% drilling success rate in 2014 * Includes 1.5 dry hole costs @ $230,000 + 1.0 completed well cost at $550,000 for a 40% success rate. Includes land, drilling and completion, LOE, production severance taxes and seismic costs. Assumes $90, 10/30/14 strip (approximately $80), and $70 WTI oil price, applying net $7 differentials over life of the well 0% 10% 20% 30% 40% 50% 60% 70% 80% $70 Strip $90 IR R WTI Oil Price Kansas/Nebraska EUR and Oil Pricing Sensitivity * Target Return Kansas/Nebraska PV10 and Pricing Sensitivity * $70 WTI Oil WTI Strip $90 WTI Oil EUR (MBOE) PV10 ($MM) PV10 ($MM) PV10 ($MM) 40 $0.2 $0.4 $0.6 35 $0.0 $0.2 $0.3 40 MBO EUR 35 MBO EUR

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Accelerating Value Realization and Growing Net Asset Value 18 0 100 200 300 400 500 600 700 800 900 1,000 $0 $10 $20 $30 $40 $50 $60 $70 YTD 2010 YTD 2011 YTD 2012 YTD 2013 YTD 2014 To tal P ro d u ctio n ( M b o e ) To tal R e ve n u e s Forestar Oil and Gas Revenues ($ in millions) Lease Bonus / Delay Rentals Royalties Working Interests Production (Mboe) *BOE = Barrels of oil equivalent (converting natural gas to oil at 6 Mcfe / Bbl) 1st Half 2014 2nd Half 2014E Working Interest Oil Production (MBO) 346 MBO Note: Actual results may vary Forestar Focused on Developing Best of Class Oil and Gas Business

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Strategic Initiatives Update Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value 19

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Growing FORward Initiatives Growing Long-Term Shareholder Value Growing Through Strategic and Disciplined Investment Increasing Returns 20 " Development of Existing Locations " Acquisitions and Extensions 2016 Targets: " Total Segment EBITDA of $200 million " Return on Assets of 10.0% " Reposition $100 Million of Non-Core Assets Delivering Value Through Execution of Strategic Initiatives YTD Q3 2014 Results " Total segment EBITDA of $108.5 million up nearly 39% vs. YTD Q3 2013 " Sold $31 million in non-core assets " Invested $178 million in A locations and resource play " Available liquidity > $450 million " Cash flows and liquidity expected to adequately fund Growing FORward initiatives " Plans to repurchase up to $55 million in stock under existing share repurchase program

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Third Quarter 2014 Financial Results For questions, please contact: Anna Torma SVP Corporate Affairs Forestar Group Inc. 6300 Bee Cave Road Building Two, Suite 500 Austin, TX 78746 512-433-5312 [email protected] 21

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Third Quarter 2014 Financial Results Third Quarter 2014 Appendix - Segment KPIs - Earnings Reconciliations - Reconciliation of Non-GAAP Financial Measures 22

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Q3 2014 Q3 2013 YTD Q3 2014 YTD Q3 2013 Residential Lot Sales Lots Sold 323 547 1,834 1,353 Average Price / Lot $73,700 $56,500 $54,400 $55,300 Gross Profit / Lot $34,900 $25,800 $22,800 $24,000 Commercial Tract Sales Acres Sold 4 19 7 56 Average Price / Acre $589,200 $257,500 $369,900 $169,700 Land Sales Acres Sold 637 1,340 13,174 3,301 Average Price / Acre $3,200 $5,000 $2,200 $3,600 Segment Revenues ($ in millions) $32.4 $50.4 $153.1 $170.3 Segment Earnings ($ in millions) $16.0 $13.2 $66.9 $40.7 *3rd quarter 2014 results include a $7.6 million gain associated with the purchase of our partners 75% interest in Eleven, an Austin multifamily project. YTD 2014 real estate segment results also include a $10.5 million gain associated with the exchange of timber leases for 5,400 acres of undeveloped land and $2.3 million in charges associated with additional costs at two multifamily venture projects. **YTD 2013 real estate segment results include revenues of $41 million and earnings of $10.9 million associated with the sale of Promesa multifamily community we developed in Austin. . Note: Includes ventures 23 23 23 Real Estate Segment KPIs ** ** * * * *

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Q3 2014 Q3 2013 YTD Q3 2014 YTD Q3 2013 Fee Leasing Activity Net Fee Acres Leased 744 7,530 3,865 8,355 Avg. Bonus / Acre $205 $260 $320 $270 Total Oil and Gas Interests* Oil Produced (Barrels) 250,500 177,500 632,800 463,600 Average Price / Barrel $86.13 $100.13 $90.73 $95.64 NGL Produced (Barrels) 11,500 11,400 38,500 39,000 Average Price / Barrel $41.12 $30.46 $42.56 $29.68 Natural Gas Produced (MMCF) 499.7 541.4 1,446.1 1,640.5 Average Price / MCF $4.24 $3.70 $4.37 $3.41 Total BOE 345,400 279,100 912,400 776,000 Average Price / BOE $70.00 $72.11 $71.65 $65.83 Segment Revenues ($ in millions) $24.1 $22.1 $66.1 $53.4 Segment Earnings ($ in millions) $6.0 $8.5 $16.3 $17.9 Producing Wells (end of period) 961 992 961 992 24 24 Oil and Gas Segment KPIs * Includes our share of venture production: 49 MMCf in Q3 2014, 152 MMCf YTD Q3 2014, 61 MMCf in Q3 2013, and 189 MMCf YTD Q3 2013 ** 3rd quarter 2014 oil and gas segment results include $3.3 million in gains principally associated with the sale of 348 net acres of leasehold interest in North Dakota and a $2.3 million dry hole charge associated with an exploratory well in Oklahoma. YTD 2014 oil and gas segment results also include $9.0 million in gains, pre-tax, associated with the sale of various oil and gas properties in Oklahoma and North Dakota and $9.5 million in dry hole expenses. ** ** ** **

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25 Q3 2014 Q3 2013 YTD Q3 2014 YTD Q3 2013 Fiber Sales Pulpwood Tons Sold 71,500 65,700 157,900 314,400 Average Pulpwood Price / Ton $11.18 $8.85 $11.00 $9.12 Sawtimber Tons Sold 21,500 74,900 100,000 202,700 Average Sawtimber Price / Ton $21.31 $21.52 $22.38 $22.47 Total Tons Sold 93,000 140,600 257,900 517,100 Average Price / Ton $13.52 $15.60 $15.41 $14.36 Recreational Leases Average Acres Leased 107,800 118,700 111,400 120,900 Average Lease Rate / Acre $8.66 $8.63 $9.17 $9.08 Segment Revenues ($ in millions) $2.3 $2.7 $7.3 $9.0 Segment Earnings ($ in millions) * $0.7 $0.5 $2.2 $2.8 25 25 Other Natural Resources Segment KPIs * Segment earnings include losses associated with the development of our water initiatives of $0.1 million in Q3 2014, $1.4 million YTD Q3 2014 , $1.1 million in Q3 2013 and $3.0 million YTD Q3 2013

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26 Forestars Segment EBITDA is a non-GAAP financial measure within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, U.S. Generally Accepted Accounting Principles (GAAP). The company believes presenting non-GAAP Segment EBITDA is helpful to analyze financial performance without the impact of items that may obscure trends in the companys underlying performance. A detailed reconciliation is provided below outlining the differences between these non-GAAP measures and the directly related GAAP measures. Reconciliation of Non-GAAP Financial Measures (Unaudited) Quarter YTD ($ in millions) Q3 2014 Q3 2013 YTD Q3 2014 YTD Q3 2013 Real Estate Segment Earnings in accordance with GAAP $16.0 $13.2 $66.9 $40.7 Depreciation, Depletion & Amortization 0.7 0.7 2.1 2.5 EBITDA $16.7 $13.9 $68.9 $43.2 Oil & Gas Segment Earnings in accordance with GAAP $6.0 $8.5 $16.3 $17.9 Depreciation, Depletion & Amortization 8.4 5.4 20.7 13.8 EBITDA $14.4 $13.9 $37.0 $31.7 Other Natural Resources Segment Earnings in accordance with GAAP $0.7 $0.5 $2.2 $2.8 Depreciation, Depletion & Amortization 0.1 0.2 0.4 0.5 EBITDA $0.8 $0.7 $2.6 $3.3 Total Segment Total Segment Earnings in accordance with GAAP $22.7 $22.2 $85.4 $61.4 Depreciation, Depletion & Amortization 9.2 6.3 23.1 16.8 EBITDA $31.9 $28.5 $108.5 $78.2

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27 Forestars Oil and Gas Segment EBITDAX is a non-GAAP financial measure within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, U.S. Generally Accepted Accounting Principles (GAAP). The company believes presenting non-GAAP Oil and Gas Segment EBITDAX is helpful to analyze financial performance without the impact of items that may obscure trends in the companys underlying performance. A detailed reconciliation is provided below outlining the differences between these non-GAAP measures and the directly related GAAP measures. Quarter YTD ($ in millions) Q3 2014 Q3 2013 YTD Q3 2014 YTD Q3 2013 Oil and Gas Segment Earnings, in accordance with GAAP $6.0 $8.5 $16.3 $17.9 EBITDAX adjustments, pre-tax Depreciation, Depletion & Amortization 8.4 5.4 20.7 13.8 Geological, Geophysical, Seismic and Dry Hole Costs 4.7 1.7 14.1 5.1 Total Oil and Gas Segment EBITDAX $19.1 $15.6 $51.1 $36.8 Reconciliation of Non-GAAP Financial Measures (Unaudited)

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Form 8-K Forestar Group Inc. For: Nov 05

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