Forestar Investor Presentation

Forestar Investor Presentation IPAA OGIS New York April 2013 Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing Net Asset Value

Notice To Investors This presentation contains forward-looking statements within the meaning of the federal securities laws. These statements reflect management s 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. Factors and uncertainties that might cause such differences include but are not limited to general economic, market, or business conditions; the opportunities (or lack thereof) that may be presented to us and that we may pursue; fluctuations in commodity prices, particularly oil and gas, and in costs and expenses including development costs; demand for new housing, including impacts from mortgage credit 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 forwardlooking statements contained in this presentation to reflect the occurrence of events after the date of this presentation. This presentation includes Non-GAAP financial measures. The required reconciliation to GAAP financial measures can be found as an exhibit to this presentation and on our website at www.forestargroup.com. 2

Maximizing Long-Term Shareholder Value Focused on Value Creation and Realization OIL AND GAS STRATEGY Recognizing and responsibly delivering the greatest value from every acre REAL ESTATE Growing through strategic and disciplined investments 3 3

Execution of Initiatives and Strategic Acquisitions Positions Forestar With Stronger Portfolio of Assets Assets and Resources at YE 2012 Oil & Gas Fee and Leasehold Interests over 750,000 net acres * Producing Wells 936 ** Real Estate Land - 136,000 acres of low basis land Residential & Mixed Use Projects - 93 Significant Commercial Assets 4 Water Water Interests - 1.6 million acres *** Note: includes ventures * Includes 162,000 net acres of leasehold interest associated with the acquisition of Credo Petroleum ** Includes working interest and royalty interest wells; excludes 1,181 wells with overriding royalty interest *** Includes a 45% non-participating royalty interest in 1.38 million acres 4

Oil & Gas Building Momentum By Driving Leasing and Exploration to Increase Production and Reserves 5

Mineral Interests Located In Prolific Oil & Gas Basins Over 750,000 net mineral acres located in prolific oil and gas basins 162,000 acres of leasehold interests Bakken / Three Forks Central Kansas Uplift Denver Julesburg Basin Anadarko Basin Fort Worth Basin Williston (Bakken / Three Forks) Central Uplift Black Warrior East Texas Basin Appalachian Basin South Extension Appalachian Basin Texas, Louisiana, Mississippi Salt Basin 590,000 acres of fee ownership principally located in East Texas and Louisiana Significant recurring cash flows from royalty interests Gulf Coast Basin Leasehold Interests Fee Ownership Basins / Formations Net Mineral Interests * State Owned Leasehold Total Texas 252,000 3,000 255,000 Louisiana 144,000-144,000 6 Nebraska / Kansas - 122,000 122,000 North Dakota - 6,000 6,000 Georgia / Alabama 192,000-192,000 Other ** 2,000 31,000 33,000 Total 590,000 162,000 752,000 * Note: As of YE 2012; includes both fee and leasehold interests ** Includes approximately 8,000 net mineral acres located in various states related to overriding royalty interests Excludes approximately 15,000 net mineral acres leased in GA, AL & TX not related to our acquisition of Credo Petroleum. 6 6

Recognizing and Responsibly Delivering the Greatest Value From Our Mineral Resources Minerals Greatest Value Production - Reserves Acres 1 76,000 Terms Activity Working Interests Royalty Interests VALUE CREATION & REALIZATION Develop - Lease Explore Minerals & Leasehold 29,000 52,000 595,000 Lease: Bonus and Royalty Drilling Requirements Joint Ventures Exploration Agreements 2D-3D Seismic Subsurface Evaluation Develop Prospects 752,000 Total Net Mineral Acres 1. Acres as of YE 2012; includes approximately 162,000 net acres of leasehold mineral interests associated with acquisition of Credo Petroleum 7

8 Targeting Over 290,000 Acres For Oil and Natural Gas Prospects Rodessa ~24,000 acres Oil / NGL s / Natural Gas Bossier ~15,000 acres Natural Gas Pettet ~2,000 acres Oil / NGL s / Natural Gas Bossier-Haynesville Shale Natural Gas Bossier-Haynesville Shale ~50,000 acres James and James Lime Lime Oil ~22,000 / NGL s acres / Natural Gas ~22,000 Natural Gas acres Target Specific Zones and Formations For Prospect Generation Austin Chalk ~50,000 acres Oil / NGL s Tuscaloosa Marine Shale ~17,500 acres Oil / NGL s / Natural Gas Glen Rose ~33,000 acres Oil / NGL s / Natural Gas Wilcox ~80,000 Acres Oil / NGL s / Natural Gas

FELINE2013\2013\Roadshow\Feb 2013 ForestarRoadshow v13.pptx Bakken Provides Significant Value Creation Potential 6,000 net mineral acres in core of Bakken & Three Forks Bakken / Three Forks Fort Berthold Reservation Bakken / Three Forks Leasehold Net mineral acres leased ~6,000 Average working interest 8.0% Units 50 McKenzie Total potential wells up to 400 Bakken Operators * Dunn Leasehold Interests Units Historical Production Bakken Horizontal Well Drilling Locations Bakken Vertical Wells Three Forks Vertical Well Three Forks Horizontal Well *Major operators in Fort Berthold Indian reservation 9

Bakken / Three Forks Drilling Activity Accelerating Production and Reserve Growth Bakken / Three Forks Leasehold Net Mineral Acres ~6,000 Average working interest 8.0% Potential Units 50 Total Potential Gross Wells 400 Avg. Well EUR * Assumption YE 2012 >500 Mboe Gross Wells Producing 35 Producing Wells 80 70 60 50 40 30 20 10 Bakken / Three Forks Proved Developed Producing Wells ** 4 7 24 43 Gross Wells Drilling 15 0 * EUR represents estimated ultimate economic recoveries per well ** Represents proved developed producing wells 10 10

Bakken / Three Forks Production and Type Curves Cumulative Mbo Produced 300,000 250,000 200,000 150,000 100,000 Cumulative Well Production From 35 Proved Developed Producing Wells Average Type Curve EUR (Mbo) Well Level IRR 600 57% 500 40% 400 24% 50,000 0 Credo acquisition underwriting and returns based on 500 Mbo per well 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Months Note: Chart represents actual production curves for initial 35 proved developing producing wells in Bakken / Three Forks formation in North Dakota, including the average production for these wells over the first 36 months compared to the estimated ultimate recoveries (EUR s) type curves for a 400 Mbo, 500 Mbo and 600 Mbo well. No assurance can be provided regarding actual EUR s of the 35 wells illustrated above over the lives of the wells. 11

Kansas and Nebraska Represent Scalable Exploration Model with Solid Returns Kansas & Nebraska Highlights 122,000 net acres of leasehold interest Target formation: Lansing - Kansas City Drilling costs: ~$500,000 / well Attractive exploration success rate: ~40% Meaningful reserves: 40,000-50,000+ BOE / well Scalable exploration model Single-Well Economics Risked Completed Well Cost * $0.8 Well Production (BOE) 40,000-50,000 Total Well Revenues ** $3.1 Net Well Cash Flow $1.6 PV-10 $1.1 Returns > 100% Rate of Return 400% 350% 300% 250% 200% 150% 100% 50% 0% Well Returns at Various Oil Prices $50 $60 $70 $80 $90 $100 $110 $120 Kansas & Nebraska Activity 62 Producing Wells 4 Wells Being Drilled Oil Price ($ / Bbl) 86 Additional Well Locations Single Well Cost = $0.8MM 41 MBoe EUR * Represents 1.5 dry hole costs @ $200,000 + 1.0 completed well cost at $500,000 for a 40% success rate ** Revenues assume $88 average oil price over life of the well Note: Actual results may vary from illustrations 12

Drilling & Production Growth Accelerating Wells Drilled Growth in Drilling Activity & Well Count * 25 20 15 10 5 Q1 2011 Q4 2012 936 541 496 1,000 900 800 700 600 500 Total Wells Oil Production (Bbls) FOR Share of Quarterly Oil Production * Q1 2011 Q4 2012 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 0 400 20,000 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Total Gross Wells Gross Wells Drilled Oil production from acquisition of Credo Petroleum Note: Includes Forestar s share of equity method ventures 13 * Royalty interest wells owned by third-party lessee / operator 13

Forestar Oil & Gas Reserves Forestar Proven Reserves (MMBOE) Forestar Proven Reserves % Oil (MMBOE) 5.6 * MMBOE 2.4 3.0 25% 36% 75% 64% 57% 43% FY 2010 FY 2011 FY 2012 FY 2010 FY 2011 FY 2012 Natural Gas (BOE) Oil * Excludes 0.8 million BOE of Probable and Possible reserves Note: MMBOE = million barrels of oil equivalent YE 2012 proven reserves include the acquisition of Credo Petroleum 1 144

2013 Capital Investment Drilling Program ($ in millions) Type State Formation Operation Wells Capital North Dakota Bakken / Three Forks Non-Operated 54 $43.7 Exploration & Development Kansas & Nebraska Lansing Kansas City Operated & Non-Operated 82 14.5 Texas, Louisiana & Other Cleveland / Rodessa / Glenrose / James Lime Operated & Non-operated 18 12.9 Oklahoma Deese Sand Non-Operated 24 1.4 Total Drilling & Completion 178 $72.5 Generating Production and Reserve Growth By Accelerating Capital Investment Note: Exploration and production investment excludes lease acquisition and geological and geophysical expenses 15

Accelerating Value Realization Through Increased Oil Production Forestar s Share of Total Oil Production 2010 2013E Minerals Resources Initiatives Oil Production (Bbls) 1,000,000 750,000 500,000 250,000 Establish operating platform: Acquired Credo Petroleum - providing foundation for future growth and investment Improves ability to report additional reserve categories Grow production and reserves through increased working interest investments 0 2010 2011 2012 2013 Est Accelerate marketing and promotion of minerals through development of prospects 16

Real Estate Building Momentum By Accelerating Lot Sales and Growing Net Asset Value through Strategic and Disciplined Investments 17

Delivering The Greatest Value From Every Acre of Our Real Estate Real Estate Greatest Value Pipeline (Acres) 1 Activity Uses Financials 2 Development 2,000 53 projects 1,008 residential acres - 2,748 lots 782 commercial acres $50K per lot $90K per acre (avg sales price) CREATION REALIZATION Entitled Entitle Timberland 13,000 29 projects 26,000 15 projects 95,000 Approved uses, ready for development Planned Lifestyle Communities (1 st and 2 nd move-up focus) Timberland Sales Fiber Sales Recreational Leases High Value Creation Low Basis Low Cost $2K per acre (avg sales price) 136,000 Total Real Estate Acres - 97 Projects 1 Net acres as of YE 2012 as presented in real estate pipeline; Includes ventures. 2 Based on historical sales activity. 18

Texas Markets Represent Over 70% of our Investment in Real Estate Salt Lake City 1 - $1 Oakland 1 - $9 Kansas City 1 - $3 Nashville 1 - $12 Los Angeles 2 - $15 Charlotte 1 - $6 Denver 5 - $24 Atlanta 33 - $87 Tampa 3 - $3 Source: Brookings Institute- December 2012 Note: $ in millions Projects and investment as of Q4 2012; includes ventures Austin 15 - $118 Dallas/Ft. Worth 15 - $83 Gulf Coast 4 - $35 Houston 11 - $50 San Antonio 4 - $87 TEXAS 49 - $373 Note: MSA performance based on Employment, Gross Metropolitan Product (GMP) and House Price Index Strongest Quartile Weakest Quartile 19

Accelerating Value Realization Through Increased Residential Lot Sales Forestar Real Estate Sales Activity (Excluding Undeveloped Land Sales) ($ in millions) $101 Community Development Initiatives Continue increasing lot sales and margin $66 Execute opportunistic acquisitions and invest in well located communities $48 Reposition non-core real estate assets Developing long-term, sustainable business model to take advantage of multifamily markets 2010 2011 2012 Income Producing Residential Lots Residential Tracts Multifamily Commercial Tracts Avg. Lot Profit Note: Includes consolidated ventures 20

FELINE2013\2013\Roadshow\Feb 2013 ForestarRoadshow v13.pptx Well Positioned To Accelerate Value Realization, Optimize Transparency and Grow NAV $140 Historical First Four Years Target Second Four Years Forestar Strategic Initiatives $120 Increasing oil production and reserves Total Segment EBITDA ($ in millions) $100 $80 $60 $40 $20 $0 ($20) EBITDA Average = $36 million 2008 2009 2010 2011 + Oil Production + Residential Lot Sales + Commercial Tract Sales + Multifamily Sales + Income Producing Assets + Fiber Sales Growing lot sales and margin Realizing value from stabilized commercial assets Capitalizing on growth opportunities to generate near-term cash flow and earnings Building Momentum By Accelerating Value Realization, Optimizing Transparency and Growing NAV Total Segment EBITDA is a Non-GAAP financial measure. The reconciliation between GAAP and Non-GAAP financial measures is included in the appendix to this presentation. Note: EBITDA = Total segment earnings (loss) + depreciation + depletion and amortization. No assurance can be provided that Target will be achieved. 21

Forestar Investor Presentation 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 annatorma@forestargroup.com 22

Maintain Financial Strength and Ample Liquidity While Managing Growth Maintain balance sheet strength and financial flexibility Reposition non-core real estate assets for reinvestment and debt reduction Maintain sufficient liquidity for growth and investment Issued $125 million in convertible notes in Feb. 2013 at 3.75% due in 2020 No significant near-term debt maturities ($ in Millions) Forestar Leverage & Liquidity YE 2011 YE 2012 YE 2012 Pro-forma Credit Facility Borrowings $130 $244 $200 New Convertible Debt - 125 Other Consolidated Debt 2 92 50 50 Total Debt $222 $294 $375 Total Debt / Total Capital 30% 36% 41% Available Liquidity 3 $156 $159 $279 Forestar Debt Maturity Schedule *** $202 $125 $12 $17 $17 $2 2013 2014 2015 2016 2017 2018 2019 2020 ¹ Includes issuance of $125 million of convertible notes due 2020 and repayment of $44 million in YE 2012 revolver borrowings ² Other consolidated debt principally non-recourse to Forestar 3 Includes cash plus available revolver, and assumes convertible offering net proceeds of $120mm after $5mm in fees and expenses 23

Non-GAAP Reconciliation Introduction Segment Financial Results in Accordance with GAAP $ millions 2012 2011 2010 2009 2008 Segment Revenue Real Estate $ 120.1 $ 106.2 $ 68.3 $ 94.4 $ 98.8 Mineral Resources 44.2 24.6 24.8 36.3 47.7 Fiber Resources 8.3 4.8 8.3 15.6 13.2 Total Revenue $ 172.6 $ 135.6 $ 101.4 $ 146.3 $ 159.7 Segment Earnings Real Estate $ 53.6 $(25.7) $(4.6) $ 3.2 $ 9.1 Mineral Resources 21.6 16.0 22.8 32.4 44.1 Fiber Resources 5.0 1.9 5.0 9.6 8.8 Total Segment Earnings (Loss) $ 80.2 $(7.8) $ 23.2 $ 45.2 $ 62.0 Reconciliation of Selected Non-GAAP Measures (Unaudited) $ millions 2012 2011 2010 2009 2008 Segment EBITDA Total Segment Earnings (Loss) $ 80.2 $(7.8) $ 23.2 $ 45.2 $ 62.0 Segment Depreciation, Depletion and Amortization* 10.6 7.1 5.0 5.5 5.1 Total Segment EBITDA $ 90.8 $(0.7) $ 28.2 $ 50.7 $ 67.1 Note: Forestar s Total Segment EBITDA for the years 2008 through 2012 are non-gaap financial measures 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 Total Segment EBITDA is helpful to analyze financial performance without the impact of items that may obscure trends in the company s underlying performance. A detailed reconciliation is provided above outlining the differences between these non- GAAP measures and the directly related GAAP measures. * Includes cost of timber cut 24