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Recovery Energy Reports Second Quarter Financial Results And Provides Operations Update

Please replace the release dated Aug. 16, 2011 with the following corrected version as specified.

The corrected release reads:

RECOVERY ENERGY REPORTS SECOND QUARTER FINANCIAL RESULTS AND PROVIDES OPERATIONS UPDATE

Recovery Energy, Inc. (OTCBB: RECV), an independent oil and gas exploration and production company with operations and assets in the Denver-Julesburg (DJ) Basin, reported its financial and operational results for the quarter ended June 30, 2011. Highlights include:

  • The Company drilled and completed its first two horizontal Niobrara wells which are currently flowing back completion fluids and hydrocarbons
  • Production for the second quarter 2011 was up sequentially 7% over first quarter 2011
  • Significant progress identifying and confirming widespread prospectivity of the Niobrara, Codell and Greenhorn formations throughout Company leasehold

Chairman and CEO Roger A. Parker commented: “The Company drilled and completed the Tylosaurus 19-31H and the Platecarpus 27-24H wells in the second quarter. We are currently flowing back completion fluid and the results are still being evaluated. Our engineering data shows good formation characteristics and confirms the presence of hydrocarbons in both wells. Additionally, insight that we have gained from these two wells, coupled with other data, confirm the viability of the Chugwater area as a promising Niobrara prospect, and also shows interesting potential in the Greenhorn formation.

“We are very enthusiastic about our continuing geologic review, including confirmation of hydrocarbon maturity throughout Company leasehold as it relates to the Niobrara and other formations,” said Parker. “Additionally, we have made substantial progress in reworking various properties and stabilizing production. Production for the second quarter of 2011 was up 7% over the first quarter of 2011.”

2Q11 Financial Results

The Company has made a non-cash adjustment to its financial and operational results for the quarter ended June 30, 2011 from what was reported on August 16, 2011. The Company has determined that it is appropriate to expense in the quarter ended June 30, 2011 approximately $3,551,000 allocated to the value of Recovery common stock provided for in the separation agreement with its former chief financial officer in connection with his separation from the Company in April, 2011. As a result net loss for the quarter is $3,551,000 greater than previously reported. This increased non-cash charge does not change the previously reported oil and gas revenues or EBITDAX or other results.

For the three months ended June 30, 2011 the Company reported oil and gas revenues of $2,258,000 compared to $4,158,000 for the second quarter of 2010. Net loss for the period was $4,763,000 compared to a net loss of $3,197,000 for the same period in 2010. EBITDAX for the quarter ended June 30, 2011 was $548,917, up sequentially from the first quarter of 2011 by 312%. The net loss for the first quarter 2011 includes a one-time non-cash charge of $3,551,000 for non-cash stock based compensation related to shares issued to the Company's former chief financial officer in connection with his separation agreement, other stock based compensation of $577,803, non-cash charges of depreciation, depletion, amortization and accretion of $1,065,426, stock issued for services of $124,929, amortization of deferred financing costs of $1,366,258, cash interest expense of $928,119, and an unrealized gain on commodity hedges of $700,700. The net loss for the quarter also includes the effect of a non-cash gain of $1.6 million related to the mark to market adjustment of a derivative liability associated with the embedded conversion feature of the Company’s convertible debentures. The calculation of EBITDAX excludes these non-cash items and 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. A more detailed description of EBITDAX is included below.

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