8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

August 4, 2014

APPROACH RESOURCES INC.

(Exact name of registrant as specified in its charter)

Delaware	001-33801	51-0424817
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

One Ridgmar Centre 6500 West Freeway, Suite 800 Fort Worth, Texas	76116
(Address of principal executive offices)	(Zip Code)

(817) 989-9000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report.)

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 (see General Instruction A.2. below):

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

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

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

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

Item 2.02 Results of Operations and Financial Condition.

On August 4, 2014, the Company issued a press release announcing financial and operational results for the three and six months ended June 30, 2014 (the “Earnings Release”). The Earnings Release contains certain non-GAAP financial information. The reconciliation of such non-GAAP financial information to GAAP financial measures is included in the Earnings Release and in the “Investor Relations – Non-GAAP Financials” section of the Company’s website at www.approachresources.com. A copy of the Earnings Release is furnished herewith as Exhibit 99.1.

Item 7.01 Regulation FD Disclosure.

On August 4, 2014, the Company issued the Earnings Release discussed above in Item 2.02 of this current report on Form 8-K. The Earnings Release contains certain non-GAAP financial information. The reconciliation of such non-GAAP financial information to GAAP financial measures is included in the Earnings Release and in the “Investor Relations – Non-GAAP Financials” section of the Company’s website at www.approachresources.com. A copy of the Earnings Release is furnished herewith as Exhibit 99.1.

On August 4, 2014, the Company posted a new presentation titled “Approach Resources Inc. – Second Quarter 2014 Results” under the “Investor Relations – Presentations” section of the Company’s website, www.approachresources.com. For the benefit of all investors, the presentation is attached hereto as Exhibit 99.2.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	Earnings Release dated August 4, 2014.
99.2	Corporate presentation titled, “Approach Resources Inc. – Second Quarter 2014 Results.”

In accordance with General Instruction B.2 of Form 8-K, the information in Items 2.02 and 7.01, including the attached Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other filing under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise expressly stated in such filing.

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SIGNATURES

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

APPROACH RESOURCES INC.
By:	/s/ J. Curtis Henderson
	J. Curtis Henderson
	Chief Administrative Officer

Date: August 4, 2014

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EXHIBIT INDEX

Exhibit No.	Description
99.1	Earnings Release dated August 4, 2014.
99.2	Corporate presentation titled, “Approach Resources Inc. – Second Quarter 2014 Results.”

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EX-99.1

Exhibit 99.1

For Immediate Release

August 4, 2014

Approach Resources Inc.

Reports Second Quarter 2014 Results

Fort Worth, Texas, August 4, 2014 – Approach Resources Inc. (NASDAQ: AREX) today reported results for second quarter 2014. Highlights for second quarter 2014 include:

• Production was 1,286 MBoe, or 14.1 MBoe/d, a 58% increase over the prior-year quarter and a 19% increase over first quarter 2014

• Revenues were $73.4 million, a 74% increase over the prior-year quarter

• Net income was $3.8 million, or $0.10 per diluted share

• Adjusted net income was $8.7 million, or $0.22 per diluted share

• EBITDAX was a quarterly record of $50.6 million, or $1.29 per diluted share, and up 65% over the prior-year quarter

• Production outlook for 2014 increased to 4,950 MBoe

Adjusted net income and EBITDAX are non-GAAP measures. See “Supplemental Non-GAAP Financial and Other Measures” below for our definitions and reconciliations of adjusted net income and EBITDAX to net income.

Management Comment

J. Ross Craft, Approach’s President and Chief Executive Officer, commented, “In the second quarter of 2014, Approach reported record production, revenue and our sixth consecutive quarter of record EBITDAX. Notably, since the first quarter of 2014, our average daily oil volumes grew by 15%, in line with our expectations, while our average daily gas and NGL volumes grew by 20% and 24%, respectively, exceeding our expectations. As a result, we have increased our production guidance for 2014. In addition, our cash expense metrics declined on a quarter-over-quarter basis. With a strong focus on execution, we are achieving lower costs, improved margins and sharply higher production.”

Second Quarter 2014 Results

Production for second quarter 2014 totaled 1,286 MBoe (14.1 MBoe/d), compared to production of 817 MBoe (9 MBoe/d) in second quarter 2013, a 58% increase. Second quarter 2014 production increased 19%, compared to first quarter 2014 production of 1,067 MBoe (11.9 MBoe/d). Oil production for second quarter 2014 totaled 525 MBbls (5.8 MBbls/d), up 52% from the prior-year period and 15% from first quarter 2014. Production for second quarter 2014 was 70% liquids and 30% natural gas.

Net income for second quarter 2014 was $3.8 million, or $0.10 per diluted share, on revenues of $73.4 million. This compares to a net income for second quarter 2013 of $7.8 million, or $0.20 per diluted share, on revenues of $42.3 million. Second quarter 2014 revenues increased $31.1 million due to an increase in production ($26 million) and an increase in average realized price ($5.1 million). Net income for second quarter 2014 included an unrealized loss on commodity derivatives of $7.7 million and a realized loss on commodity derivatives of $3.3 million.

Excluding the unrealized loss on commodity derivatives and related income taxes, adjusted net income (non-GAAP) for second quarter 2014 was $8.7 million, or $0.22 per diluted share, compared to

INVESTOR CONTACT	APPROACH RESOURCES INC.
Sergei Krylov Executive Vice President & Chief Financial Officer ir@approachresources.com 817.989.9000	One Ridgmar Centre 6500 West Freeway, Suite 800 Fort Worth, Texas 76116 www.approachresources.com

$5 million, or $0.13 per diluted share, for second quarter 2013. EBITDAX (non-GAAP) for second quarter 2014 was $50.6 million, or $1.29 per diluted share, compared to $30.7 million, or $0.79 per diluted share, for second quarter 2013. See “Supplemental Non-GAAP Financial and Other Measures” below for our definitions and reconciliations of adjusted net income and EBITDAX to net income.

Our average realized commodity price for second quarter 2014, before the effect of commodity derivatives, was $57.06 per Boe. Our average realized price, including the effect of commodity derivatives, was $54.48 per Boe for second quarter 2014.

Lease operating expense (“LOE”) averaged $6.18 per Boe for second quarter 2014, down 16% from first quarter 2014. Production and ad valorem taxes averaged $3.83 per Boe, or 6.7% of oil, NGL and gas sales. Exploration costs were $1.53 per Boe. Cash general and administrative expense averaged $4.89 per Boe. Depletion, depreciation and amortization expense averaged $22.21 per Boe. Interest expense totaled $5.4 million.

Operations Update

During second quarter 2014, we drilled and completed 16 horizontal wells, including one well targeting the Wolfcamp A, seven wells targeting the Wolfcamp B and eight wells targeting the Wolfcamp C. The average initial 24-hour rate for wells completed since first quarter 2014 was 556 Boe/d (65% oil), excluding one short-lateral well and two wells in the early stages of flowback.

Capital expenditures incurred during second quarter 2014 totaled $92.3 million, and included $85.8 million for drilling and completion activities, $3.8 million for infrastructure projects and equipment and $2.7 million for acreage acquisitions and extensions.

2014 Outlook

We have increased our estimated 2014 production from 4,790 MBoe to 4,950 MBoe. This updated estimate is 70% liquids and includes oil production of 2,050 MBbls to 2,200 MBbls. The guidance is forward-looking information that is subject to a number of risks and uncertainties, many of which are beyond the Company’s control.

Liquidity Update

At June 30, 2014, we had a $1 billion revolving credit facility with a $450 million borrowing base and $46 million of outstanding borrowings. At June 30, 2014, our liquidity and long-term debt-to-capital ratio were approximately $404 million and 29.1%, respectively.

We enter into commodity derivatives positions to manage our exposure to commodity price fluctuations. Please refer to the “Unaudited Commodity Derivatives Information” table below for a detailed summary of our derivatives positions at June 30, 2014.

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Conference Call Information and Summary Presentation

The Company will host a conference call on Tuesday, August 5, 2014, at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss financial and operational results for second quarter 2014. The conference call may be accessed via the Company’s website at www.approachresources.com or by phone:

Dial in:	(877) 201-0168
Intl. dial in:	(647) 788-4901
Passcode:	Approach / 71190396

A replay of the call will be available on the Company’s website or by dialing (855) 859-2056 (passcode: 71190396).

In addition, a second quarter 2014 summary presentation is available on the Company’s website.

Participation in Upcoming Conference

The Company will participate in EnerCom’s The Oil & Gas Conference® 19. The Company is scheduled to present on Tuesday, August 19, 2014, at 10:55 AM MT. The live presentation will be webcast and will be accessible through the Investor Relations section of the Company’s website at www.approachresources.com. The slide presentation for this event will also be available through the website.

About Approach Resources

Approach Resources Inc. is an independent energy company focused on the exploration, development, production and acquisition of unconventional oil and gas reserves in the Midland Basin of the greater Permian Basin in West Texas. For more information about the Company, please visit www.approachresources.com. Please note that the Company routinely posts important information about the Company under the Investor Relations section of its website.

Forward-Looking and Cautionary Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include expectations of anticipated financial and operating results. These statements are based on certain assumptions made by the Company based on management’s experience, perception of historical trends and technical analyses, current conditions, anticipated future developments and other factors believed to be appropriate and reasonable by management. When used in this press release, the words “will,” “potential,” “believe,” “estimate,” “intend,” “expect,” “may,” “should,” “anticipate,” “could,” “plan,” “predict,” “project,” “profile,” “model” or their negatives, other similar expressions or the statements that include those words, are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. Further information on such assumptions, risks and

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uncertainties is available in the Company’s Securities and Exchange Commission (“SEC”) filings. The Company’s SEC filings are available on the Company’s website at www.approachresources.com. Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

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UNAUDITED RESULTS OF OPERATIONS

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenues (in thousands):
Oil	$	51,570		$	30,381		$	93,315		$	55,842
NGLs		11,560			6,214			21,858			12,451
Gas		10,278			5,677			20,162			10,248
Total oil, NGL and gas sales		73,408			42,272			135,335			78,541
Realized loss on commodity derivatives		(3,320	)		(714	)		(4,659	)		(407	)
Total oil, NGL and gas sales including derivative impact	$	70,088		$	41,558		$	130,676		$	78,134
Production:
Oil (MBbls)		525			344			975			655
NGLs (MBbls)		370			227			665			440
Gas (MMcf)		2,348			1,477			4,282			2,855
Total (MBoe)		1,286			817			2,353			1,571
Total (MBoe/d)		14.1			9.0			13.0			8.7
Average prices:
Oil (per Bbl)	$	98.28		$	88.25		$	95.73		$	85.29
NGLs (per Bbl)		31.21			27.43			32.87			28.27
Gas (per Mcf)		4.38			3.84			4.71			3.59
Total (per Boe)	$	57.06		$	51.74		$	57.51		$	49.99
Realized loss on commodity derivatives (per Boe)		(2.58	)		(0.87	)		(1.99	)		(0.26	)
Total including derivative impact (per Boe)	$	54.48		$	50.87		$	55.52		$	49.73
Costs and expenses (per Boe):
Lease operating	$	6.18		$	4.89		$	6.71		$	5.97
Production and ad valorem taxes		3.83			3.76			3.86			3.58
Exploration		1.53			0.68			1.15			0.52
General and administrative(1)		5.75			6.40			6.77			7.41
Depletion, depreciation and amortization		22.21			22.62			22.17			22.62
(1)    Below is a summary of general and administrative expense:
General and administrative – cash component	$	4.89		$	4.52		$	5.17		$	5.00
General and administrative – noncash component		0.86			1.88			1.60			2.41

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APPROACH RESOURCES INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except shares and per-share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
REVENUES:
Oil, NGL and gas sales	$	73,408		$	42,272		$	135,335		$	78,541
EXPENSES:
Lease operating		7,946			3,993			15,797			9,376
Production and ad valorem taxes		4,925			3,068			9,094			5,624
Exploration		1,966			557			2,704			817
General and administrative		7,402			5,229			15,937			11,639
Depletion, depreciation and amortization		28,573			18,482			52,179			35,538
Total expenses		50,812			31,329			95,711			62,994
OPERATING INCOME		22,596			10,943			39,624			15,547
OTHER:
Interest expense, net		(5,357	)		(2,451	)		(10,494	)		(3,680	)
Equity in losses of investee		(186	)		(64	)		(186	)		(180	)
Realized loss on commodity derivatives		(3,320	)		(714	)		(4,659	)		(407	)
Unrealized (loss) gain on commodity derivatives		(7,678	)		4,290			(13,604	)		190
Other expense		(109	)		—			(109	)		—
INCOME BEFORE INCOME TAX PROVISION		5,946			12,004			10,572			11,470
INCOME TAX PROVISION		2,153			4,217			3,834			4,030
NET INCOME	$	3,793		$	7,787		$	6,738		$	7,440
EARNINGS PER SHARE:
Basic	$	0.10		$	0.20		$	0.17		$	0.19
Diluted	$	0.10		$	0.20		$	0.17		$	0.19
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		39,368,606			39,007,361			39,306,296			38,965,811
Diluted		39,384,613			39,029,203			39,322,392			38,976,732

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UNAUDITED SELECTED FINANCIAL DATA

Unaudited Consolidated Balance Sheet Data	June 30,		December 31,
(in thousands)	2014		2013
Cash and cash equivalents	$	444	$	58,761
Restricted cash		—		7,350
Other current assets		30,283		24,302
Property and equipment, net, successful efforts method		1,187,529		1,047,030
Other assets		9,579		8,041
Total assets	$	1,227,835	$	1,145,484
Current liabilities	$	99,683	$	84,441
Long-term debt(1)		296,000		250,000
Other long-term liabilities		111,401		100,548
Stockholders’ equity		720,751		710,495
Total liabilities and stockholders’ equity	$	1,227,835	$	1,145,484

(1) Long-term debt at June 30, 2014, and December 31, 2013, includes $250 million in 7% senior notes. In addition, we had $46 million in outstanding borrowings under our revolving credit facility as of June 30, 2014.

Unaudited Consolidated Cash Flow Data	Six Months Ended June 30,
(in thousands)	2014			2013
Net cash provided (used) by:
Operating activities	$	85,688		$	44,839
Investing activities	$	(187,778	)	$	(126,183	)
Financing activities	$	43,773		$	135,855

UNAUDITED COMMODITY DERIVATIVES INFORMATION

AS OF JUNE 30, 2014

Commodity and Period	Contract Type	Volume Transacted	Contract Price
Crude Oil
July 2014 – December 2014	Collar	550 Bbls/d	$90.00/Bbl - $105.50/Bbl
July 2014 – December 2014	Collar	950 Bbls/d	$85.05/Bbl - $95.05/Bbl
July 2014 – December 2014	Collar	2,000 Bbls/d	$89.00/Bbl - $98.85/Bbl
July 2014 – March 2015	Collar	1,500 Bbls/d	$85.00/Bbl - $95.30/Bbl
January 2015 – December 2015	Collar	2,600 Bbls/d	$84.00/Bbl - $91.00/Bbl
Natural Gas Liquids
Propane
July 2014 – December 2014	Swap	500 Bbls/d	$41.16/Bbl
Natural Gasoline
July 2014 – December 2014	Swap	175 Bbls/d	$83.37/Bbl
Natural Gas
July 2014 – December 2014	Swap	360,000 MMBtu/month	$4.18/MMBtu
July 2014 – December 2014	Swap	35,000 MMBtu/month	$4.29/MMBtu
July 2014 – December 2014	Swap	160,000 MMBtu/month	$4.40/MMBtu
September 2014 – June 2015	Collar	80,000 MMBtu/month	$4.00/MMBtu - $4.74/MMBtu
January 2015 – December 2015	Swap	200,000 MMBtu/month	$4.10/MMBtu
January 2015 – December 2015	Collar	130,000 MMBtu/month	$4.00/MMBtu - $4.25/MMBtu

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Subsequent to June 30, 2014, we entered into two oil collars covering a total of 1,000 Bbls per day for 2015 at a floor price of $90.00/Bbl and a ceiling price of $102.50/Bbl.

Supplemental Non-GAAP Financial and Other Measures

This release contains certain financial measures that are non-GAAP measures. We have provided reconciliations below of the non-GAAP financial measures to the most directly comparable GAAP financial measures and on the Non-GAAP Financials page in the Investor Relations section of our website at www.approachresources.com.

Adjusted Net Income

This release contains the non-GAAP financial measures adjusted net income and adjusted net income per diluted share, which excludes an unrealized loss (gain) on commodity derivatives and related income tax effect. The amounts included in the calculation of adjusted net income and adjusted net income per diluted share below were computed in accordance with GAAP. We believe adjusted net income and adjusted net income per diluted share are useful to investors because they provide readers with a more meaningful measure of our profitability before recording certain items whose timing or amount cannot be reasonably determined. However, these measures are provided in addition to, and not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP (including the notes), included in our SEC filings and posted on our website.

The table below provides a reconciliation of adjusted net income and adjusted net income per diluted share to net income for the three and six months ended June 30, 2014 and 2013 (in thousands, except per-share amounts).

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net income	$	3,793		$	7,787		$	6,738		$	7,440
Adjustments for certain items:
Unrealized loss (gain) on commodity derivatives		7,678			(4,290	)		13,604			(190	)
Related income tax effect		(2,780	)		1,459			(4,934	)		65
Adjusted net income	$	8,691		$	4,956			15,408			7,315
Adjusted net income per diluted share	$	0.22		$	0.13		$	0.39		$	0.19

EBITDAX

We define EBITDAX as net income, plus (1) exploration expense, (2) depletion, depreciation and amortization expense, (3) share-based compensation expense, (4) unrealized loss (gain) on commodity derivatives, (5) interest expense, net, and (6) income tax provision. EBITDAX is not a measure of net income or cash flow as determined by GAAP. The amounts included in the calculation of EBITDAX were computed in accordance with GAAP. EBITDAX is presented herein and reconciled to the GAAP measure of net income because of its wide acceptance by the investment community as a financial indicator of a company’s ability to internally fund development and exploration activities. This measure is provided in addition to, and not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP (including the notes), included in our SEC filings and posted on our website.

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The table below provides a reconciliation of EBITDAX and EBITDAX per diluted share to net income for the three and six months ended June 30, 2014 and 2013 (in thousands, except per-share amounts).

	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014		2013
Net income	$	3,793	$	7,787		$	6,738	$	7,440
Exploration		1,966		557			2,704		817
Depletion, depreciation and amortization		28,573		18,482			52,179		35,538
Share-based compensation		1,107		1,533			3,761		3,790
Unrealized loss (gain) on commodity derivatives		7,678		(4,290	)		13,604		(190	)
Interest expense, net		5,357		2,451			10,494		3,680
Income tax provision		2,153		4,217			3,834		4,030
EBITDAX	$	50,627	$	30,737			93,314		55,105
EBITDAX per diluted share	$	1.29	$	0.79		$	2.37	$	1.41

Liquidity

Liquidity is calculated by adding the net funds available under our revolving credit facility and cash and cash equivalents. We use liquidity as an indicator of the Company’s ability to fund development and exploration activities. However, this measurement has limitations. This measurement can vary from year-to-year for the Company and can vary among companies based on what is or is not included in the measurement on a company’s financial statements. This measurement is provided in addition to, and not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP (including the notes), included in our SEC filings and posted on our website.

The table below summarizes our liquidity at June 30, 2014 (in thousands).

	Liquidity at June 30, 2014
Borrowing base	$	450,000
Cash and cash equivalents		444
Credit facility – outstanding borrowings		(46,000	)
Outstanding letters of credit		(325	)
Liquidity	$	404,119

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Long-Term Debt-to-Capital

Long-term debt-to-capital ratio is calculated by dividing long-term debt (GAAP) by the sum of total stockholders’ equity (GAAP) and long-term debt (GAAP). We use the long-term debt-to-capital ratio as a measurement of our overall financial leverage. However, this ratio has limitations. This ratio can vary from year-to-year for the Company and can vary among companies based on what is or is not included in the ratio on a company’s financial statements. This ratio is provided in addition to, and not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP (including the notes), included in our SEC filings and posted on our website.

The table below summarizes our long-term debt-to-capital ratio at June 30, 2014, and December 31, 2013 (in thousands).

	June 30, 2014			December 31, 2013
Long-term debt(1)	$	296,000		$	250,000
Total stockholders’ equity		720,751			710,495
	$	1,016,751		$	960,495
Long-term debt-to-capital		29.1	%		26.0	%

(1) Long-term debt at June 30, 2014, and December 31, 2013, includes $250 million in 7% senior notes. In addition, we had $46 million in outstanding borrowings under our revolving credit facility as of June 30, 2014.

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EX-99.2

Second Quarter 2014 Results

AUGUST 4, 2014

Exhibit 99.2

Second Quarter 2014 Results – August 2014

Forward-looking statements

2

Cautionary statements regarding oil & gas quantities

This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange

Act of 1934. All statements, other than statements of historical facts, included in this presentation that address activities, events or developments that the Company

expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking

statements contained in this presentation specifically include the expectations of management regarding plans, strategies, objectives, anticipated financial and

operating results of the Company, including as to the Company’s Wolfcamp shale resource play, estimated resource potential and recoverability of the oil and gas,

estimated reserves and drilling locations, capital expenditures, typical well results and well profiles, type curve, and production and operating expenses guidance

included in the presentation. These statements are based on certain assumptions made by the Company based on management's experience and technical

analyses, current conditions, anticipated future developments and other factors believed to be appropriate and believed to be reasonable by management. When

used in this presentation, the words “will,” “potential,” “believe,” “intend,” “expect,” “may,” “should,” “anticipate,” “could,” “estimate,” “plan,” “predict,” “project,” “target,”

“profile,” “model” or their negatives, other similar expressions or the statements that include those words, are intended to identify forward-looking statements,

although not all forward-looking statements contain such identifying words. Such statements are subject to a number of assumptions, risks and uncertainties, many

of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking

statements. In particular, careful consideration should be given to the cautionary statements and risk factors described in the Company's most recent Annual Report

on Form 10-K and Quarterly Reports on Form 10-Q.  Any forward-looking statement speaks only as of the date on which such statement is made and the Company

undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required

by applicable law.

The Securities and Exchange Commission (“SEC”) permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible

reserves that meet the SEC’s definitions for such terms, and price and cost sensitivities for such reserves, and prohibits disclosure of resources that do not

constitute such reserves. The Company uses the terms “estimated ultimate recovery” or “EUR,” reserve or resource “potential,” and other descriptions of volumes of

reserves potentially recoverable through additional drilling or recovery techniques that the SEC’s rules may prohibit the Company from including in filings with the

SEC. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially

greater risk of being actually realized by the Company.

EUR estimates, identified drilling locations and resource potential estimates have not been risked by the Company.  Actual locations drilled and quantities that may

be ultimately recovered from the Company’s interest may differ substantially from the Company’s estimates.  There is no commitment by the Company to drill all of

the drilling locations that have been attributed these quantities.  Factors affecting ultimate recovery include the scope of the Company’s ongoing drilling program,

which will be directly affected by the availability of capital, drilling and production costs, availability of drilling and completion services and equipment, drilling results,

lease expirations, regulatory approval and actual drilling results, as well as geological and mechanical factors  Estimates of unproved reserves, type/decline curves,

per well EUR and resource potential may change significantly as development of the Company’s oil and gas assets provides additional data.

Type/decline curves, estimated EURs, resource potential, recovery factors and well costs represent Company estimates based on evaluation of petrophysical

analysis, core data and well logs, well performance from  limited drilling and recompletion results and seismic data, and have not been reviewed by independent

engineers. These are presented as hypothetical recoveries if assumptions and estimates regarding recoverable hydrocarbons, recovery factors and costs prove

correct. The Company has very limited production experience with these projects, and accordingly, such estimates may change significantly as results from more

wells are evaluated.  Estimates of resource potential and EURs do not constitute reserves, but constitute estimates of contingent resources which the SEC has

determined are too speculative to include in SEC filings. Unless otherwise noted, IRR estimates are before taxes and assume NYMEX forward-curve oil and gas

pricing and Company-generated EUR and decline curve estimates based on Company drilling and completion cost estimates that do not include land, seismic or

G&A costs.

Second Quarter 2014 Results – August 2014

Company overview

AREX OVERVIEW

ASSET OVERVIEW

Enterprise value $1.1 BN

High-quality reserve base

Permian core operating area

2014 Capital program of $400 MM

Notes:

Proved

reserves

and

acreage

as

of

12/31/2013

and

6/30/2014,

respectively.

All

Boe

and

Mcfe

calculations

are

based

on

a

6

to

1

conversion

ratio.

Enterprise

value

is

equal

to

market

capitalization

using

the

closing

share

price

of

$21.68

per

share

on

7/28/2014,

plus

net

debt

as

of

6/30/2014.

See

“PV-10

(unaudited)”

slide.

3

Running 3 HZ rigs in the Wolfcamp shale play

to drill 70 wells during 2014

160,000 gross (138,000 net) acres

~1+ BnBoe gross, unrisked resource potential

~2,000+ Identified HZ drilling locations targeting

115 MMBoe proved reserves

$1.1 BN proved PV-10

99% Permian Basin

Wolfcamp A/B/C

Second Quarter 2014 Results – August 2014

2Q14 Key highlights

4

2Q14 HIGHLIGHTS

•

Drilled and completed 16 HZ wells

•

Maintained best-in-class HZ well costs,

while further de-risking stacked wellbore

development

•

Increased 2Q14 production 58% YoY to

14.1 MBoe/d

•

Delivered another record quarterly

EBITDAX

•

Solid financial position further

strengthened by borrowing base increase

•

Increased production outlook for 2014 to

4,950 MBoe

2Q14  SUMMARY RESULTS

Production (MBoe/d)

14.1

% Oil

41%

% Total liquids

70%

Average realized price ($/Boe)

Average realized price, excluding commodity derivatives impact

$

57.06

Average realized price, including commodity derivatives impact

54.48

Costs and expenses ($/Boe)

LOE

$

6.18

Production and ad valorem taxes

3.83

Exploration

1.53

General and administrative

5.75

G&A

–

cash

component

4.89

G&A

–

noncash

component

0.86

DD&A

22.21

Second Quarter 2014 Results – August 2014

2Q14 Operating highlights

OPERATING HIGHLIGHTS

Maximizing

Returns

•

Oil differential of $(4.79)/Bbl

•

HZ well costs continue to track $5.5 MM per well

•

LOE of $6.18/Boe, improved 16% QoQ

Tracking

Development

Plan

•

Drilled

16

HZ

wells

and

completed

16

HZ

wells

•

Wolfcamp

A

–

1

well,

Wolfcamp

B

–

7

wells

and

Wolfcamp

C

–

8

wells

•

2Q14 HZ Wolfcamp average IP 556 Boe/d (65% oil)

•

HZ well results continue to track at or above type curve

Delivering

Production

Growth

•

Total production 14.1 MBoe/d (up 19% QoQ)

•

Oil production 5.8 MBbl/d (up 15% QoQ)

5

Second Quarter 2014 Results – August 2014

AREX Wolfcamp activity

6

Note: Acreage as of 6/30/2014.

Schleicher

Crockett

Irion

Reagan

Sutton

NORTH & CENTRAL

PANGEA

PANGEA WEST

•

2Q14 Activity included:

Stacked A/C completion

Legend

•

2Q14 Activity included:

Stacked B/C completions in

North & Central Pangea

•

Vertical Producer

HZ Producer

HZ –

Waiting on Completion

HZ –

Drilling

STRATIGRAPHIC UNIT

Clearfork/Spraberry

Dean

Wolfcamp

A

B

C

Canyon

Strawn

Ellenburger

Second Quarter 2014 Results – August 2014

AREX HZ Wolfcamp Well Performance

7

AREX HZ WOLFCAMP (BOE/D)

Note: Daily production normalized for operational downtime.

Production Data from

AREX A Bench Wells (10)

450 MBoe Type Curve

Wolfcamp Shale Oil

Production Data from

AREX B Bench Wells (68)

Production Data from

AREX C Bench Wells (10)

Second Quarter 2014 Results – August 2014

Production and expense guidance

8

2014 Guidance

Production

Total (MBoe)

4,950

Oil (MBbls)

2,050

–

2,200

Percent total liquids

70%

Operating costs and expenses (per Boe)

Lease operating

$5.00

-

$6.00

Production and ad valorem taxes

7.25% of oil & gas revenues

Cash general and administrative

$4.50

-

$5.00

Exploration

$0.50

-

$1.00

Depletion, depreciation and amortization

$22.00

-

$24.00

Capital expenditures (in millions)

Approx. $400

Horizontal wells

70

Second Quarter 2014 Results – August 2014

2Q14 Financial highlights

FINANCIAL HIGHLIGHTS

Significant Cash

Flow

•

Record quarterly EBITDAX (non-GAAP) of $50.6 MM (up 65% YoY), or $1.29 per

diluted share (up 63% YoY)

•

Capital expenditures $92.3 MM ($85.8 MM for D&C)

Strong Financial

Position

•

Liquidity

of

$404

MM

at

June

30

th

•

Increased borrowing base to $450 MM in May 2014

Increasing

Revenues

•

Revenues of $73.4 MM (up 74% YoY)

•

Net income of $3.8 MM, or $0.10 per diluted share

•

Adjusted net income (non-GAAP) of $8.7 MM, or $0.22 per diluted share

Strong Balance Sheet and Liquidity to Develop

HZ Wolfcamp Shale

Note:

See

“Adjusted

Net

Income,”

“EBITDAX”

and

“Strong,

Simple

Balance

Sheet”

slides.

9

Second Quarter 2014 Results – August 2014

Strong, simple balance sheet

10

FINANCIAL RESULTS ($MM)

As of

June 30, 2014

Summary Balance Sheet

Cash and Cash Equivalents

$0.4

Credit Facility

46.0

Senior Notes

250.0

Total Long-Term Debt

$296.0

Shareholders’

Equity

720.8

Total Book Capitalization

$1,016.8

Liquidity

Borrowing Base

$450.0

Cash and Cash Equivalents

0.4

Long-term Debt under Credit Facility

(46.0)

Undrawn Letters of Credit

(0.3)

Liquidity

$404.1

Key Metrics

LTM EBITDAX

$166.0

Total Reserves (MMBoe)

114.7

Proved Developed Reserves (MMBoe)

45.2

% Proved Developed

39%

% Liquids

69%

Credit Statistics

Debt / Book Capital

29%

Debt / LTM EBITDAX

1.8x

LTM EBITDAX / LTM Interest

7.9x

Debt / Proved Reserves ($/Boe)

$2.58

Second Quarter 2014 Results – August 2014

Current hedge position

11

Commodity & Period

Contract Type

Volume

Contract Price

Crude Oil

July 2014 –

December 2014

Collar

550 Bbls/d

$90.00/Bbl -

$105.50/Bbl

July 2014 –

December 2014

Collar

950 Bbls/d

$85.05/Bbl -

$95.05/Bbl

July 2014 –

December 2014

Collar

2,000 Bbls/d

$89.00/Bbl -

$98.85/Bbl

July 2014 –

March 2015

Collar

1,500 Bbls/d

$85.00/Bbl -

$95.30/Bbl

January 2015 –

December 2015

Collar

2,600 Bbls/d

$84.00/Bbl -

$91.00/Bbl

January 2015 –

December 2015

Collar

1,000 Bbls/d

$90.00/Bbl -

$102.50/Bbl

Natural Gas Liquids

Propane

July 2014 –

December 2014

Swap

500 Bbls/d

$41.16/Bbl

Natural Gasoline

July 2014 –

December 2014

Swap

175 Bbls/d

$83.37/Bbl

Natural Gas

July 2014 –

December 2014

Swap

360,000 MMBtu/month

$4.18/MMBtu

July 2014 –

December 2014

Swap

35,000 MMBtu/month

$4.29/MMBtu

July 2014 –

December 2014

Swap

160,000 MMBtu/month

$4.40/MMBtu

September 2014 –

June 2015

Collar

80,000 MMBtu/month

$4.00/MMBtu -

$4.74/MMBtu

January 2015 –

December 2015

Swap

200,000 MMBtu/month

$4.10/MMBtu

January 2015 –

December 2015

Collar

130,000 MMBtu/month

$4.00/MMBtu -

$4.25/MMBtu

Appendix

Second Quarter 2014 Results – August 2014

AREX Wolfcamp shale oil resource play

13

PERMIAN CORE OPERATING AREA

Large, primarily contiguous acreage position

Oil-rich, multiple pay zones

160,000 gross (138,000 net) acres

Low acreage cost ~$500 per acre

~2,000 Identified HZ Wolfcamp locations

2014

OPERATIONS

~ 1BnBoe gross, unrisked HZ Wolfcamp

resource potential

Plan to drill ~70 HZ wells with 3 rigs

Testing “stacked-wellbore”

development and

optimizing well spacing and completion

design

Decreasing well costs and increasing

efficiencies

Field infrastructure systems contributing to

lower LOE/Boe and HZ D&C costs

Compressing spud-to-sales times

Focusing activity around field infrastructure

systems

Large, primarily contiguous acreage position

with

oil-rich,

multiple

pay

zones

Second Quarter 2014 Results – August 2014

Efficiency-driven transition to two-bench pad development

14

•

Reduces time between spud to

first sales

•

7 to 8 wells per section

•

Reduces surface footprint

•

Reduces rig mobilization costs

•

Completion optimization from

zipper fracs and frac cost savings

•

14 to 16 wells per section

2011

–

2013:

SINGLE-BENCH

DEVELOPMENT

CURRENT:  TWO-BENCH

DEVELOPMENT

TRANSITION FROM SINGLE-BENCH TO TWO-BENCH DEVELOPMENT

A

B

C

Map view

X-Section

view

~1200’

thick

Note: Target zones in X-Section view are illustrative.

OR

660’

660’

660’

Second Quarter 2014 Results – August 2014

AREX HZ Wolfcamp economics

15

Notes: Identified locations based on multi-bench development and 120-acre spacing for HZ Wolfcamp.  No locations assigned to south Project Pangea.

HZ

Wolfcamp

economics

assume

NYMEX

–

Henry

Hub

strip

and

NGL

price

based

on

40%

of

WTI.

Play Type

Horizontal

Wolfcamp

Avg. EUR (gross)

450 MBoe

Targeted Well Cost

$5.5 MM

Potential Locations

~2,000

Gross Resource

Potential

~1 Bn

Boe

BTAX IRR SENSITIVITIES

•

Horizontal drilling improves recoveries and

returns

•

Targeting Wolfcamp A / B / C

•

7,000’+ lateral length

•

~80% of EUR made up of oil and NGLs

0

10

20

30

40

50

60

70

80

350

400

450

500

550

Well EUR (MBoe)

$100 / bbl

$90 / bbl

$80 / bbl

$70 / bbl

Second Quarter 2014 Results – August 2014

Infrastructure for large-scale development

16

•

Reducing D&C cost

•

Reducing LOE

•

Increasing project profit margin

•

Minimizing truck traffic and surface

disturbance

Pangea

West

South

Pangea

Schleicher

Crockett

Irion

Reagan

Sutton

50-Mile Oil Pipeline

100,000 Bbls/d

Capacity

North & Central Pangea

Second Quarter 2014 Results – August 2014

Key field infrastructure & equipment systems

17

•

Safely and securely transport water across Project Pangea and Pangea West

•

Reduce time and money spent on water hauling and disposal; also reduces

truck traffic

•

Replace rental equipment and contractors with Company-owned and operated

equipment and personnel

•

Reduce money spent on flowback operations

•

Facilitate large-scale field development

•

Reduce fresh water use and water costs

Water transfer equipment

SWD wells

Gas lift system and flowback

equipment

Non-potable water source wells

Water recycling systems

BENEFITS

Infrastructure and equipment systems are key to large-scale field development

and to reducing D&C costs and LOE/Boe cost

INFRASTRUCTURE

•

First-mover oil pipeline system in the southern Midland Basin

•

50-mile pipeline with 100 MBoe/d throughput capacity

•

Sold in October 2013 for 6x ROI

•

Maintain competitive oil transportation fee and firm takeaway

Oil pipeline and marketing

agreements

Second Quarter 2014 Results – August 2014

Adjusted net income (unaudited)

18

(in thousands, except per-share amounts)

Three Months Ended

June 30,

2014

2013

Net income

$

3,793

$

7,787

Adjustments for certain items:

Unrealized loss (gain) on commodity derivatives

7,678

(4,290)

Related income tax effect

(2,780)

1,459

Adjusted net income

$

8,691

$

4,956

Adjusted net income per diluted share

$

0.22

$

0.13

The amounts included in the calculation of adjusted net income and adjusted net income per diluted share below were computed in accordance

with GAAP.  We believe adjusted net income and adjusted net income per diluted share are useful to investors because they provide readers with a

more meaningful measure of our profitability before recording certain items whose timing or amount cannot be reasonably determined.  However,

these measures are provided in addition to, and not as an alternative for, and should be read in conjunction with, the information contained in our

financial

statements

prepared

in

accordance

with

GAAP

(including

the

notes),

included

in

our

SEC

filings

and

posted

on

our

website. 

The following table provides a reconciliation of adjusted net income to net income for the three months ended June 30, 2014 and 2013.

ADJUSTED NET INCOME (UNAUDITED)

Second Quarter 2014 Results – August 2014

EBITDAX (unaudited)

19

The

amounts

included

in

the

calculation

of

EBITDAX

were

computed

in

accordance

with

GAAP.

EBITDAX

is

not

a

measure

of

net

income

or

cash

flow as determined by GAAP. EBITDAX is presented herein and reconciled to the GAAP measure of net income because of its wide acceptance by

the

investment

community

as

a

financial

indicator

of

a

company's

ability

to

internally

fund

development

and

exploration

activities.

This

measure

is

provided

in

addition

to,

and

not

as

an

alternative

for,

and

should

be

read

in

conjunction

with,

the

information

contained

in

our

financial

statements

prepared

in

accordance

with

GAAP

(including

the

notes),

included

in

our

SEC

filings

and

posted

on

our

website. 

The following table provides a reconciliation of EBITDAX to net income for the three months ended June 30, 2014 and 2013.

(in thousands, except per-share amounts)

Three Months Ended

June 30,

2014

2013

Net income

$

3,793

$

7,787

Exploration

1,966

557

Depletion, depreciation and amortization

28,573

18,482

Share-based compensation

1,107

1,533

Unrealized loss (gain) on commodity derivatives

7,678

(4,290)

Interest expense, net

5,357

2,451

Income tax provision

2,153

4,217

EBITDAX

$

50,627

$

30,737

EBITDAX per diluted share

$

1.29

$

0.79

EBITDAX (UNAUDITED)

Second Quarter 2014 Results – August 2014

PV-10 (unaudited)

20

(in millions)

December 31,

2013

PV-10

$

1,132

Less income taxes:

Undiscounted future income taxes

(919)

10% discount factor

463

Future discounted income taxes

(456)

Standardized measure of discounted future net cash flows

$

676

The present value of our proved reserves, discounted at 10% (“PV-10”), was estimated at $1.1 billion at December 31, 2013, and was calculated based on the

first-of-the-month, twelve-month average prices for oil, NGLs and gas, of $97.28 per Bbl of oil, $30.16 per Bbl of NGLs and $3.66 per MMBtu of natural gas.  

PV-10 is our estimate of the present value of future net revenues from proved oil and gas reserves after deducting estimated production and ad valorem taxes,

future capital costs and operating expenses, but before deducting any estimates of future income taxes. The estimated future net revenues are discounted at

an annual rate of 10% to determine their “present value.” We believe PV-10 to be an important measure for evaluating the relative significance of our oil and

gas properties and that the presentation of the non-GAAP financial measure of PV-10 provides useful information to investors because it is widely used by

professional analysts and investors in evaluating oil and gas companies. Because there are many unique factors that can impact an individual company when

estimating the amount of future income taxes to be paid, we believe the use of a pre-tax measure is valuable for evaluating the Company. We believe that 

PV-10 is a financial measure routinely used and calculated similarly by other companies in the oil and gas industry.

The following table reconciles PV-10 to our standardized measure of discounted future net cash flows, the most directly comparable measure calculated and 

presented in accordance with GAAP.  PV-10 should not be considered as an alternative to the standardized measure as computed under GAAP.

PV-10 (UNAUDITED)

Contact information

SERGEI KRYLOV

Executive Vice President & Chief Financial Officer

817.989.9000

ir@approachresources.com

www.approachresources.com