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; 18,016,143and 17,436,825shares issued and outstandingas 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 commodityprice 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 flowsprovided by (used in) operating activities: Net loss $(12,777,299) $(11,533,686) Adjustments to reconcile net loss to net cash (used in) provided byoperating 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) convertibledebentures 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 cashprovided by (used in)operating (2,747,079) 1,315,070 activities Cash flows used ininvesting 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: oRecovery 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; oThe financial performance of the company's assets and valuation of the entity, without regard to financing methods, capital structure or historical cost basis; oRecovery Energy's ability to generate cash sufficient to pay interest costs, support its indebtedness; and oThe 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 Recovery Energy Logo
Recovery Energy Reports Third Quarter Financial Results and Provides Operations Update
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