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Recovery Energy Reports Third Quarter Financial Results and Provides Operations Update



Recovery Energy Reports Third Quarter Financial Results and Provides
Operations Update

Company-Operated Wattenberg Drilling Program Planned to Commence in 4Q12

DENVER, Nov. 12, 2012 (GLOBE NEWSWIRE) -- Recovery Energy, Inc. (Nasdaq:RECV),
an independent oil and gas exploration and production company with operations
and assets in the Denver-Julesburg (DJ) Basin, reported its financial results
for the quarter ended September 30, 2012, and provided an operations update.

Operations Highlights:

  * 50-percent production increase in 3^rd Quarter over 2^nd Quarter 2012, to
    approximately 350 Boep/d

    * Hanson 42-26: J Sand-Pine Bluffs Area, southeast Wyoming

    * Lukassen 44-7: Wykert Sand-Wilke Area, western Nebraska

    * Three non-operated, unconventional horizontal Niobrara wells, with 6.5%
      average working interest, in the Wattenberg, northern Colorado

  * 4Q12 conventional drilling program: five vertical wells in Wattenberg,
    targeting the Niobrara and Codell horizons, with drilling expected to
    begin in December. Additional conventional wells planned in several areas
     
  * Fourth unconventional horizontal Niobrara non-operated well participation
    proposed in Wattenberg: approximately 25% working interest, expected to
    spud in 2013. Multiple horizontal well proposals expected, targeting the
    Niobrara A, B, C, and Codell horizons
     
  * Seismic permits obtained to run additional 20 square miles in Stateline
    and Pine Bluffs areas, to assess potential of Niobrara, Codell, Greenhorn,
    "J" sandstone and Permo-Penn horizons

Third Quarter Financial Results

For the quarter ended September 30, 2012, the Company reported revenues from
oil and gas operations of $1.94 million, as compared to $1.81 million for the
quarter ended September 30, 2011, an increase of $.13 million, or 7.18%. Net
loss for the same period in 2012 and 2011 was approximately $2.84 million and
$3.03 million, respectively. EBITDAX for the third quarter of 2012 was $.50
million compared to $1.21 million in the third quarter of 2011.

The Company's production volume on a BOE basis was 33,618 for the quarter
ended September 30, 2012, a nominal change as compared to 33,698 for the
quarter ended September 30, 2011. This nominal decrease was affected by
increased production attributed to five new wells, but offset by normal
production declines on more mature properties. Average oil and gas prices
during the quarter increased slightly as compared to the prior year.

The Company's average oil price per equivalent barrel of oil increased to
$83.94 per barrel in the third quarter of 2012, compared to $81.94 per
equivalent barrel of oil in the second quarter of 2011, a 2% increase.

About Recovery Energy, Inc.

Recovery Energy, Inc. (RECV) is a Denver-based independent oil and gas
exploration and production company that operates in the Denver-Julesburg (DJ)
Basin where it holds approximately 140,000 gross, 125,000 net acres. Recovery
Energy's focus is to grow reserves and production through a combination of
acquisitions and conventional and unconventional drilling activity, targeting
the various oil-bearing formations that produce in the DJ Basin. 

The Recovery Energy logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=12588

This press release may include "forward-looking statements" as defined by the
Securities and Exchange Commission (the "SEC"), including statements, without
limitation, regarding the Company's expectations, beliefs, intentions or
strategies regarding the future. Such forward-looking statements relate to,
among other things the Company's: (1) proposed exploration and drilling
operations, (2) expected production and revenue, and (3) estimates regarding
the reserve potential of its properties. These statements are qualified by
important factors that could cause the Company's actual results to differ
materially from those reflected by the forward-looking statements. Such
factors include but are not limited to: (1) the Company's ability to finance
its continued exploration and drilling operations, (2) positive confirmation
of the reserves, production and operating expenses associated with the
Company's properties; and (3) the general risks associated with oil and gas
exploration and development, including those risks and factors described from
time to time in the Company's reports and registration statements filed with
the SEC. 

RECOVERY ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
                                                                   
                                                    September 30, December 31,
                                                    2012          2011
Assets                                                             
Current assets                                                     
 Cash                                                $698,276      $2,707,722
 Restricted cash                                     949,618       932,165
 Accounts receivable                                 1,217,181     2,227,466
 Prepaid assets                                      96,671        75,376
 Commodity price derivative receivable                370,000      --
Total current assets                                 3,331,746     5,942,729
                                                                     
Oil and gas properties (full cost method), at cost:                  
 Unevaluated properties                              43,541,930    45,697,481
 Evaluated properties                                40,460,933    32,113,143
 Wells in progress                                   3,986,919     6,425,509
Total oil and gas properties, at cost                87,989,782    84,236,133
                                                                     
Less accumulated depreciation, depletion             (18,174,968)  
,amortization, and impairment                                     (12,099,098)
Net oil and gas properties, at cost                  69,814,814    72,137,035
                                                                     
Other assets:                                                        
 Office equipment, net                               95,980        106,286
 Prepaid advisory fees                               304,402       574,160
 Deferred financing costs, net                       1,026,192     2,341,595
 Restricted cash and deposits                        186,240       186,055
Total other assets                                   1,612,814     3,208,096
                                                                     
Total assets                                        $74,759,374    $81,287,860

 
RECOVERY ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
                                                                  
                                                   September 30, December 31,
                                                   2012          2011
Liabilities and Shareholders' Equity                              
Current liabilities                                               
 Accounts payable                                   $1,183,415    $2,050,768
 Commodity price derivative liability               --             75,609
 Related party payable                              --            16,475
 Accrued expenses                                   2,183,053     1,354,204
 Short term loans payable                           873,142       1,150,967
Total current liabilities                           4,239,610     4,648,023
                                                                    
Long term liabilities                                             
 Asset retirement obligation                        893,754       612,874
 Term loans payable                                 19,419,197    20,129,670
 Convertible debentures payable, net of discount    9,595,053     4,929,068
 Convertible debentures conversion derivative       1,300,000    1,300,000
liability
Total long-term liabilities                         31,208,004    26,971,612
                                                                    
Total liabilities                                  35,447,614     31,619,635
                                                                    
 Shareholders' equity                                               
 Preferred stock, 10,000,000 authorized, none
issued and outstanding as of September 30 ,2012       --            --
and December 31, 2011.
                                                                    
 Common stock, $0.0001 par value: 100,000,000
shares authorized;  18,016,143 and
17,436,825 shares issued and outstanding as of       1,801        1,744
September 30, 2012 and December 31, 2011,
respectively 
 Additional paid in capital                         120,566,897   118,146,119
 Accumulated deficit                                (81,256,938)  (68,479,638)
Total shareholders' equity                          39,311,760    49,668,225
                                                                    
Total liabilities and shareholders' equity          $74,759,374   $81,287,860

RECOVERY ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
                                                   
                     Three months ended September Nine months ended September
                     30,                          30,
                     2012            2011         2012           2011
Revenue                                                           
Oil sales             $1,775,383     $1,650,702    $4,685,713    $5,534,325
Gas sales             168,897         161,029      397,298        446,386
Operating fees        42,853          85,372       132,362        110,282
Realized gain on
commodity price       37,341          733,830      49,729         402,256
derivatives
Unrealized gains
(losses) on          (130,000)         --          445,609        222,788
commodity price
derivatives
Total Revenues        1,894,474      2,630,933     5,710,711      6,716,037
                                                                  
Costs and expenses                                                
Production costs      397,793         344,927      1,033,635      1,114,220
Production taxes      198,781         191,364      561,278        630,718
General and           1,515,868       1,981,026    5,099,932      8,837,802
administrative
Depreciation,
depletion and         1,069,068       1,052,946    2,897,156      3,194,301
amortization
Impairment of         --              --           3,274,718      --
evaluated properties
Total costs and      3,181,510        3,570,263    12,866,719     13,777,041
expenses
                                                                  
Loss from operations  (1,287,036)     (939,330)    (7,156,008)   (7,061,004)
                                                                  
Other income          333             62,000       (372)          63,115
(expense)
Convertible
debenture conversion  600,000         (13,338)     700,000        1,587,699
derivative gain
(losses)
Interest expense      (2,149,931)    (2,136,950)   (6,320,919)   (6,123,496)
                                                                  
Net Loss              $ (2,836,634)  $(3,027,68)  $ (12,777,299) $(11,533,686)
Net loss per common                                               
share
Basic and diluted     $ (0.16)         $(0.19)     $ (0.72)        $(0.75)
Weighted average                                                  
shares outstanding:
Basic and diluted     17,833,466     15,775,135   17,732,304      15,388,772

 
RECOVERY ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
                                                
                                               Nine months ended September 30,
                                               2012            2011
Cash flows provided by (used in) operating                      
activities:
 Net loss                                      $(12,777,299)   $(11,533,686)
 Adjustments to reconcile net loss to net cash                    
(used in) provided by operating activities:
 Amortization of stock issued for services     707,504          373,234
 Share based compensation                       1,066,154       5,592,638
 Impairment of evaluated properties             3,274,718       --
 Change in fair value of commodity price        (445,609)      (398,840)
derivatives
 Change in fair value of                        (700,000)      (1,587,699)
convertible debentures conversion derivative
 Amortization of deferred financing costs,
issuance of stock for convertible debentures   3,843,457        3,701,373
interest, and accretion of debt discount
 Depreciation, depletion, amortization and     2,897,156        3,194,301
accretion
                                                                  
Changes in operating assets and liabilities:                      
 Accounts receivable                            (433,567)       (891,076)
 Other assets                                   (21,294)        (19,674)
 Accounts payable and other accruals            (867,353)       2,428,101
 Restricted cash                                (17,453)        144,001
 Related party payable                          (16,475)        15,067
 Accrued expenses                               742,982         297,330
Net cash provided by (used in) operating        (2,747,079)     1,315,070
activities
                                                                  
Cash flows used in investing activities:                        
 Acquisition of undeveloped properties          (436,023)       (9,033,007)
 Sale of unevaluated properties                 1,443,852       --
 Investment in operating bonds                  (184)           (160)
 Drilling capital expenditures                  (4,278,785)      (6,876,232)
 Additions of office equipment                  (2,928)         (40,648)
Net cash used in investing activities           (3,274,068)     (15,950,047)
                                                                  
Cash flows provided by financing activities:                      
 Proceeds from sale of common stock, units and  --              2,129,801
exercise of warrants
 Net change in debts                            (988,299)       (377,498)
 Proceeds from debts                            5,000,000       8,000,000
Net cash provided by financing activities       4,011,701       9,752,303
                                                                  
Change in cash and cash equivalents             (2,009,446)     (4,882,674)
Cash and cash equivalents at beginning of       2,707,722       5,528,744
period
Cash and cash equivalents at end of period      $698,276        $646,070

EBITDAX

"EBITDAX" means, for any defined period, the sum of net income for the period
plus the following expenses, charges or income, in each case, to the extent
deducted from or added to net income in the period: interest, income taxes,
depreciation, depletion, amortization, accretion, unrealized losses from
financial derivatives, share based compensation, impairment of evaluated
properties and other similar non-cash charges, minus all non-cash income
(without limitation) income from unrealized financial derivatives, added to
net income. EBITDAX is used as a financial measure by Recovery Energy's
management team and by other users of its financial statements to analyze such
things as:

  o Recovery Energy's operating performance and return on capital in
    comparison to those of other companies in its industry, without regard to
    financial or capital structure;
  o The financial performance of the company's assets and valuation of the
    entity, without regard to financing methods, capital structure or
    historical cost basis;
  o Recovery Energy's ability to generate cash sufficient to pay interest
    costs, support its indebtedness; and
  o The viability of acquisitions and capital expenditure projects and the
    overall rates or return on alternative investment opportunities.

EBITDAX is not a calculation based on GAAP financial measures and should not
be considered as an alternative to net income (loss) in measuring the
Company's performance, nor used as an exclusive measure of cash flow, because
it does not consider the impact of working capital growth, capital
expenditures, debt principal reductions, and other sources and uses of cash,
which are disclosed in the company's statements of cash flows.

Recovery Energy has reported EBITDAX   because this measure is commonly
reported and widely used by investors as an indicator of a company's operating
performance and ability to incur and service debt. You should carefully
consider the specific items included in the Company's computations of EBITDAX.
While Recovery Energy has disclosed its EBITDAX to permit a more complete
comparative analysis of its operating performance and debt servicing ability
relative to other companies, you are cautioned that EBITDAX as reported by the
Company may not be comparable in all instances to EBITDAX as reported by other
companies. EBITDAX amounts may not be fully available for management's
discretionary use, due to requirements to conserve funds for capital
expenditures, debt service and other commitments.

Recovery Energy believes that EBITDAX assists its lenders and investors in
comparing a company's performance on a consistent basis without regard to
certain expenses, which can vary significantly depending upon accounting
methods. Because the Company may borrow money to finance its operations,
interest expense is a necessary element of its costs and ability to generate
cash available for distribution. Because Recovery Energy uses capital assets,
depreciation and amortization are also necessary elements of its costs.
Additionally, the company may, at some point, be required to pay federal and
state taxes, which are necessary elements of its costs. Therefore, any
measures that exclude these elements have material limitations.

To compensate for these limitations, Recovery Energy believes it is important
to consider both net income (loss) determined under GAAP and EBITDAX to
evaluate its performance.

The following table presents a reconciliation of the company's net (loss) to
its EBITDAX for the three month and nine month periods ended September 30,
2012 and 2011:

                        Three Months Ending         Nine Months Ending
                        September 30,               September 30,
                        2012          2011          2012         2011
Net Loss                  $(2,836,63)  $(3,027,618) $(12,777,29) $(11,533,686)
                                                                  
Interest expense         2,149,931     2,136,950     6,320,919    6,123,496
Depreciation,
depletion, amortization  1,069,068     1,052,946     2,897,156    3,194,301
and accretion
Changes in the fair
value of commodity       130,000       --            (445,609)    (222,788)
price derivatives
Change in fair value of
convertible notes        (600,000)     13,338        (700,000)    (1,587,699)
conversion derivative
Impairment of evaluated  --            --            3,274,718    -- 
properties
Amortization of stock
issued for services and  588,004       1,039,128     1,773,658    5,965,872
share based
compensation
EBITDAX                  $500,369      $1,214,744   $343,543     $1,939,496

CONTACT: MDC GROUP
         Investor Relations:
         David Castaneda
         262-377-2445
        
         Media Relations:
         Susan Roush
         818-222-8330

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