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Recovery Energy Reports First Quarter Financial Results And Provides Operations Update

About Recovery Energy, Inc.

Recovery Energy, Inc. (OTCBB: RECV) is a Denver-based independent oil and gas exploration and production company focused on the Denver-Julesburg (DJ) Basin where it holds 156,000 gross, 134,000 net acres and management has more than 80 years’ experience. Recovery Energy’s primary focus is on growing revenue, cash-flow and reserves through its conventional drilling program on low-risk, low-cost, in-field targets, as well as through an unconventional drilling program targeting the various prospective oil shale horizons on its land. In addition to being prospective for the Niobrara oil shale formation, the Company’s asset base is comprised of current production and reserves from the “J” sand along with extensive leasehold prospective for other hydrocarbon-bearing formations such as the Pierre Shale, Codell, Greenhorn and Paleozoic horizons.

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 the 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.

March 31, December 31,
2011 2010
Current Assets
Cash $ 2,111,340 $ 5,528,744
Restricted cash 1,998,821 1,150,541
Accounts receivable 1,645,985 857,554
Prepaid assets   167,682   27,772
Total current assets   5,923,828   7,564,611
Oil and gas properties (full cost method), at cost:
Undeveloped properties 48,530,863 33,605,594
Developed properties 27,779,396 26,307,975
Wells in progress   2,041,787   1,219,397
Total oil and gas properties 78,352,046 61,132,966
Less accumulated depreciation, depletion and amortization   (6,062,443 )   (5,008,606 )
Net oil and gas properties   72,289,603   56,124,360
Other assets
Office equipment, net 57,517 56,236
Prepaid advisory fees 878,127 979,449
Deferred financing costs, net 4,485,429 3,211,566
Restricted cash and deposits   185,776   185,707
Total other assets   5,606,849   4,432,958
TOTAL ASSETS $ 83,820,280 $ 68,121,929
March 31, December 31,
2011 2010
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 1,095,247 $ 968,295
Liabilities from price risk management 876,752 398,840
Related party payable 12,955 11,638
Accrued expenses 1,370,857 1,540,592
Short term note payable   270,410   208,881
Total current liabilities   3,626,221   3,128,246
Asset retirement obligation 529,506 507,280
Term note payable 19,773,173 20,229,801
Convertible notes payable, net of discount 5,712,057 -
Derivative liability   2,783,000   -
Total long term liabilities   28,797,736   20,737,081
Total liabilities   32,423,957   23,865,327
Commitments and Contingencies – Note 7
Common Stock Subject to Redemption Rights, $0.0001 par value; 0 and 42,500 shares issued and outstanding as of - 86,258
March 31, 2011 and December 31, 2010, respectively
Shareholders’ Equity

Common stock, $0.0001 par value: 100,000,000 shares authorized; 62,483,758 and 57,814,369 shares issued and outstanding (excluding 0 and 42,500 shares subject to redemption) as of March 31, 2011 and December 31, 2010, respectively

6,248 5,781
Additional paid in capital 101,830,226 90,861,527
Accumulated deficit   (50,440,151 )   (46,696,964 )
Total other shareholders' equity   51,396,323   44,170,344

Three Months Ended March 31,

2011   2010
Oil sales $ 1,801,814 $ 622,595
Gas sales 108,829 -
Operating fees 8,228 1,125
Realized loss on hedges (167,284 ) -
Price risk management activities   (477,912 )   (133,369 )
Total revenues   1,273,675   490,351
Costs and expenses
Production costs 446,985 121,877
Production taxes 202,299 35,488
General and administrative (includes non-cash expense of $0.7 million and $1.9 million , respectively) 1,600,594 2,343,321
Depreciation, depletion, amortization and accretion   1,075,930   231,917
Total costs and expenses   3,325,808   2,732,603
Loss from operations (2,052,133 ) (2,242,252 )
Unrealized gain on lock-up 1,115 15,209
Interest expense and financing costs (includes non-cash expense of $0.8 million and $0.5 million, respectively)   (1,692,169 )   (593,672 )
Net loss $ (3,743,187 ) $ (2,820,715 )
Net loss per common share
Basic and diluted $ (0.06 ) $ (0.24 )
Weighted average shares outstanding:
Basic and diluted   59,112,825   11,711,037
Three Months Ended

March 31,

2011       2010
Cash flows from operating activities:
Net loss $ (3,743,187 ) $ (2,820,714 )
Adjustments to reconcile net loss to net cash used in operating activities:
Stock issued for services 126,483 -
Stock based compensation 546,530 1,106,437
Changes in the fair value of derivatives 477,912 133,369
Compensation expense recognized for assignment of overrides - 826,510
Amortization of deferred financing costs 837,376 466,174
Depreciation, depletion, amortization and accretion 1,075,930 231,917
Changes in operating assets and liabilities:
Accounts receivable (788,431 ) (326,561 )
Other assets (83,072 ) 9,908
Accounts payable 117,271 208,314
Restricted cash (848,280 ) (18,561 )
Related party payable 10,998 (56,214 )
Accrued expenses   (169,735)   44,089
Net cash used in operating activities   (2,440,205)   (195,332)
Cash flows from investing activities:
Additions of producing properties and equipment (net of purchase price adjustments) - (48,421 )
Acquisition of undeveloped properties (8,416,874 ) (10,313,184 )
Drilling capital expenditures (2,281,487 ) -
Additions of office equipment (13,472 ) (501 )
Investment in operating bonds   (69 )   (165 )
Net cash used in investing activities   (10,711,902 )   (10,362,271 )
Cash flows from financing activities:
Proceeds from sale of common stock, units and exercise of warrants 2,129,801 300,000
Proceeds from debt 8,000,000 10,500,000
Repayment of debt   (395,098 )   (178,750 )
Net cash provided by financing activities   9,734,703   10,621,250
Change in cash and cash equivalents (3,417,404 ) 63,647
Cash and cash equivalents at beginning of period   5,528,744   108,400

Non-GAAP Financial Measures


EBITDAX represents net income (loss) before income tax expense (benefit), interest expense and financing costs, net, depreciation, depletion and amortization expense, stock based compensation, gain and loss on sale of oil and gas properties and other investments, net, unrealized gains and losses on derivative contracts and exploration and impairment and dry hole costs. EBITDAX is presented as a supplemental financial measurement in the evaluation of the Company's business. Recovery Energy believes that it provides additional information regarding its ability to meet future debt service, capital expenditures and working capital requirements. This measure is widely used by investors and rating agencies in the valuation, comparison, rating and investment recommendations of companies. EBITDAX is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income, income from operations, or cash flow provided by (used in) operating activities prepared in accordance with GAAP.

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