Recovery Energy Reports Third Quarter Financial Results and Provides Operations Update Company-Operated Wattenberg Drilling Program Expected to Commence in Early 2014 DENVER, Nov. 14, 2013 (GLOBE NEWSWIRE) -- Recovery Energy, Inc. (Nasdaq:RECV), an oil and gas exploration and production company focused on development in the Wattenberg field and surrounding areas of the Denver-Julesburg (DJ) Basin where it holds 112,000 net acres, reported its financial results for the quarter ended September 30, 2013, and provided an operations update. "The third quarter brought beneficial executive management changes and a subsequent review of near-term oil E&P targets on our 112,000 net acre leasehold position in the DJ Basin. We were pleased to recently complete the Anderson 32-2 well remediation and Muddy 'J' formation workover in our Silo East Prospect, creating a proof-of-concept completion program that sets up several potential offsets to the Anderson well. We expect to drill two locations there by the end of the first quarter," said A. Bradley Gabbard, Chief Operating Officer and Chief Financial Officer. "Our new President, Avi Mirman, with 20 years of experience in the investment banking and securities industry including in the oil and gas sector, is focused on financing unconventional E&P development of our two primary Wattenberg prospects. Avi has brought a renewed excitement to the Board and the entire Recovery Energy team." "I am pleased to report forward momentum on both of our Wattenberg prospects, where we are in the good company of many fine operators that continue to report successful projects," said Mirman. Mirman also noted that "we are currently participating in the drilling of one horizontal well in our North Wattenberg Prospect that has been drilled to total depth, and is expected to be completed late this year. We expect that our North Wattenberg property will be fully developed by the end of 2014, and we are also planning on operating a 7 to 9 well program in our de-risked South Wattenberg Prospect and expect to commence the drilling of the first two horizontal wells in this program, targeting the Niobrara and Codell horizons, in the first quarter of 2014. "I commend the team on the substantial progress made this quarter, and look forward to gaining significant traction in both conventional and unconventional drilling activity for Recovery Energy in the DJ Basin in the months ahead," concluded Mirman. Operations Highlights: *Wattenberg North Prospect - Horizontal non-operated well participation in Richter #34M-203, immediately adjacent to the company's acreage, was drilled from a pad operated by leasehold neighbor, PDC Energy, and targets the Niobrara "B" Bench and Codell formations. The Richter 34M-203 was drilled to a total depth of 11,812 feet, and completion activities are scheduled to commence in late this year. *Wattenberg South Prospect - Increased net working interest participation in 320-acre South Wattenberg Prospect to 63%. The company also completed negotiations of a surface use agreement and commenced activities to permit the drilling of up to seven horizontal wells to test the Niobrara and Codell formations. *Silo East Prospect - Anderson 32-2 well remediation and workover has been successfully completed and sets up several potential offsets to the Anderson well, with two of up to a total of 12 field locations expected to be drilled by the end of the first quarter of 2014. Recovery Energy owns a 50% interest in the 1,200 acre Silo East Prospect area, including a 50% interest in the Anderson 32-2 well. *Northern Colorado Acreage - An assessment of operations following Northern Colorado regional flooding in September confirmed none of the company's producing properties were affected and only one of its properties, operated by a third party operator, had any substantial downtime. Recovery Energy did not have any resultant significant interruptions of its revenues or unexpected material expenses. Third Quarter Financial Results For the quarter ended September 30, 2013, the Company reported revenues from oil and gas operations of $1.09 million, as compared to $1.94 million for the quarter ended September 30, 2012, a decrease of $0.85 million, or 44.81%. Total costs and expenses for the quarter ended September 30, 2013 decreased to $2.17 million compared from $3.18 million for the quarter ended September 30, 2012. This resulted in a net loss for the same period in 2013 and 2012 of approximately $1.90 million and $2.84 million, respectively a decrease of $0.94 million, or a 33% decrease in net loss. Net cash used in operating activities was $1.56 million, compared to $2.75 million during the nine months ended September 30, 2012, a decrease of cash used in operating activities of $1.19 million or 43%. Net cash used in investing activities was $0.12 million, compared to net cash used in investing activity of $3.27 million during the nine months ended September 30, 2012, a decrease of cash used in investing activities of $3.15 million or 96%. Net cash provided in financing activities was $1.06 million, compared to net cash provided by financing activities of $4.01 million during the nine months ended September 30, 2012, a decrease of $2.95 million, or 74%. Net change in cash and cash equivalents for the nine months ended September 30, 2013 was a decrease in cash of $0.62 million compared to a decrease in cash and cash equivalent for the nine months ended September 30, 2012 of $2.01 million, a decrease of $1.39 million, or 69.15%. About Recovery Energy, Inc. Recovery Energy, Inc. ("Recovery Energy") is a Denver-based independent oil and gas exploration and production company that operates in the Denver-Julesburg (DJ) Basin where it holds approximately 125,000 gross, 112,000 net acres. Recovery Energy's near-term E&P focus is to grow reserves and production in its de-risked Wattenberg Field acreage targeting the Niobrara benches and Codell Sandstone. Forward Looking Statements This press release may include or incorporate by reference "forward-looking statements" as defined by 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 investments, production and revenue, and (3) the Company's growth plans 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, 2013 2012 Assets Current assets: Cash $ 353,934 $ 970,035 Restricted cash 584,746 671,382 Accounts receivable (net of allowance of $50,000 and $50,000 at September 30, 2013 and December 31, 482,115 934,591 2012, respectively) Prepaid assets 351,542 13,458 Total current assets 1,772,337 2,589,466 Oil and gas properties (full cost method), at cost: Developed properties 58,223,296 58,610,095 Undeveloped acreage, excluded from amortization 28,258,138 28,067,005 Wells in progress, excluded from amortization 180,153 193,515 Total oil and gas properties, at cost 86,661,587 86,870,615 Less accumulated depreciation, depletion, (44,989,495) (43,187,962) amortization, and impairment Total oil and gas properties, net 41,672,092 43,682,653 Other assets: Office equipment, net 95,006 90,630 Deferred financing costs, net 443,116 974,856 Restricted cash and deposits 215,541 215,435 Total other assets 753,663 1,280,921 Total assets $ 44,198,092 $ 47,553,040 RECOVERY ENERGY, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) September 30, December 31, 2013 2012 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 771,275 $ 1,831,590 Commodity price derivative liability 40,955 -- Accrued expenses 1,684,030 1,411,016 Short term loans payable 18,967,191 388,351 Convertible notes payable, net of discount 13,128,936 -- Convertible notes conversion derivative 1,150,000 -- liability Total current liabilities 35,742,387 3,630,957 Long term liabilities: Asset retirement obligation 1,028,831 911,546 Term loans payable -- 18,947,963 Convertible notes payable, net of discount -- 10,300,361 Convertible notes conversion derivative -- 1,680,000 liability Total long-term liabilities 1,028,831 31,839,870 Total liabilities 36,771,218 35,470,827 Commitments and contingencies Shareholders' equity: Preferred stock, 10,000,000 authorized, none -- -- issued and outstanding Common stock, $0.0001 par value:100,000,000 shares authorized;19,477,337 and 18,394,401 1,948 1,839 shares issued and outstandingas of September 30, 2013 and December 31, 2012, respectively Additional paid in capital 120,836,115 118,296,679 Accumulated deficit (113,411,189) (106,216,305) Total shareholders' equity 7,426,874 12,082,213 Total liabilities and shareholders' equity $ 44,198,092 $ 47,553,040 RECOVERY ENERGY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three months ended September Nine months ended September 30, 30, 2013 2012 2013 2012 Revenues Oil sales $1,003,745 $1,775,383 $ 3,320,083 $ 4,685,713 Gas sales 82,651 168,897 227,853 397,298 Operating fees 28,331 42,853 118,853 132,362 Realized gain (loss) oncommodityprice (43,551) 37,341 (23,661) 49,729 derivatives Unrealized gain (loss)on commodity (20,000) (130,000) (20,000) 445,609 price derivatives Total revenues 1,051,176 1,894,474 3,623,128 5,710,711 Costs and expenses Production costs 318,322 397,793 877,623 1,033,635 Production taxes 102,919 198,781 380,958 561,278 General and 1,207,123 1,515,868 3,559,358 5,099,932 administrative Depreciation, depletion and 539,079 1,069,068 1,879,908 2,897,156 amortization Impairment of -- -- -- 3,274,718 evaluated properties Total costs and 2,167,443 3,181,510 6,697,847 12,866,719 expenses Loss from operations (1,116,267) (1,287,036) (3,074,719) (7,156,008) Other income 143 333 535 (372) (expense) Convertible notes conversion derivative 700,000 600,000 670,000 700,000 gain (loss) Interest expense (1,485,022) (2,149,931) (4,790,700) (6,320,919) Net loss $ (1,901,146) $ (2,836,634) $ (7,194,884) $ (12,777,299) Net loss per common share Basic and $(0.09) $(0.16) $ (0.38) $ (0.72) diluted Weighted average shares outstanding: 19,254,329 17,833,466 18,786,598 17,732,304 Basic and diluted RECOVERY ENERGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine months ended September 30, 2013 2012 Cash flows from operating activities: Net loss $ (7,194,884) $(12,777,299) Adjustments to reconcile net loss to net cash used in operating activities: Impairment provision, developed leases -- 3,274,718 Common stock issued for convertible note 830,660 686,934 interest Common stock for services and compensation 1,293,315 1,773,658 Changes in the fair value of commodity price 20,000 (445,609) derivatives Amortization of deferred financing costs 531,739 1,504,751 Change in fair value of convertible notes (670,000) (700,000) conversion derivative Accretion of debt discount 1,809,175 1,651,772 Depreciation, depletion, amortization and 1,873,002 2,897,156 accretion of asset retirement obligation Changes in operating assets and liabilities: Accounts receivable 452,476 (433,567) Restricted cash 86,636 (17,453) Other assets 77,486 (21,294) Accounts payable and other accrued expenses (667,912) (140,846) Net cash used in operating activities (1,558,307) (2,747,079) Cash flows from investing activities: Sale of oil and gas properties 640,000 1,443,852 Additions to oil and gas properties (303,814) (436,023) Drilling capital expenditures (429,678) (4,278,785) Other investing activities (25,081) (3,112) Net cash used in investing activities (118,573) (3,274,068) Cash flows from financing activities: Proceeds from issuance of debt 1,429,902 5,000,000 Repayment of debt (369,123) (988,299) Net cash provided by financing activities 1,060,779 4,011,701 Change in cash and cash equivalents (616,101) (2,009,446) Cash and cash equivalents at beginning of 970,035 2,707,722 period Cash and cash equivalents at end of period $ 353,934 $ 698,276 CONTACT: MDC GROUP Investor Relations: David Castaneda 414.351.9758 Media Relations: Susan Roush 747.222.7012
Recovery Energy Reports Third Quarter Financial Results and Provides Operations Update
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