This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning future production, reserves or other resource development opportunities, any projected well performance or economics, or potential joint ventures or strategic partnerships; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words "may," "should," "could," "estimate," "intend," "plan," "project," "continue," "believe," "expect" or "anticipate" or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this presentation. Except as required by law, we do not intend, and undertake no obligation, to update any forward-looking statement.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties that, among other things, could cause actual results to differ materially from those contained in the forward-looking statements, including without limitation the Risk Factors set forth in our amended Annual Report on Form 10-K/A for the year ended December 31, 2011.

The factors impacting these risks and uncertainties include, but are not limited to:

• estimated quantities and quality of oil and natural gas reserves;
• exploration, exploitation and development results;
• fluctuations in the price of oil and natural gas, including reductions in prices that would adversely affect our revenue, cash flow, liquidity and access to capital;
• availability of capital on an economic basis, or at all, to fund our capital needs;
• availability of, or delays related to, drilling, completion and production, personnel, supplies and equipment;
• the timing and amount of future production of oil and gas;
• the completion, timing and success of our drilling activity;
• the inability of management to effectively implement our strategies and business plans;
• potential default under our secured obligations or material debt agreements;
• lower oil and natural gas prices negatively affecting our ability to borrow or raise capital, or enter into joint venture arrangements;
• declines in the values of our natural gas and oil properties resulting in write-downs;
• inability to hire or retain sufficient qualified operating field personnel;
• increases in interest rates or our cost of borrowing;
• deterioration in general or regional (especially Rocky Mountain) economic conditions;
• the strength and financial resources of our competitors;
• the occurrence of natural disasters, unforeseen weather conditions, or other events or circumstances that could impact our operations or could impact the operations of companies or contractors we depend upon in our operations;
• inability to acquire or maintain mineral leases at a favorable economic value that will allow us to expand our development efforts;
• delays, denials or other problems relating to our receipt of operational consents and approvals from governmental entities and other parties;
• unanticipated recovery or production problems, including cratering, explosions, fires and uncontrollable flows of oil, gas or well fluids;
• environmental liabilities;
• loss of senior management or technical personnel;
• adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
• changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate; and
• other factors, many of which are beyond our control.

Many of these factors are beyond our ability to control or predict. These factors are not intended to represent a complete list of the general or specific factors that may affect us.

For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, we urge you to carefully review and consider the disclosures made in the "Risk Factors" sections of our SEC filings, available free of charge at the SEC's website (www.sec.gov).

We also may make material acquisitions or divestitures or enter into financing transactions. None of these events can be predicted with certainty and the possibility of their occurring is not taken into consideration in the forward-looking statements.

New factors that could cause actual results to differ materially from those described in forward-looking statements emerge from time to time, and it is not possible for us to predict all such factors, or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any forward-looking statement. We assume no obligation to update publicly any such forward -looking statements, whether as a result of new information, future events, or otherwise.

Overview

Recovery Energy Inc. is a Denver based independent oil and gas company engaged in the acquisition, drilling and production of oil and natural gas properties and prospects within the Denver-Julesburg ("DJ") Basin. Our business strategy is designed to create maximum shareholder value by leveraging the knowledge, expertise and experience of our management team and via the future exploration and development of the approximate 123,000 net acres of developed and undeveloped leases that are currently held by the Company, primarily in the northern DJ Basin.

Recent Developments

In February 2011, we issued in a private placement $8.4 million aggregate principal amount of three year 8% senior secured convertible debentures with a group of accredited investors. In March 2012, some investors in the convertible debenture agreed to purchase up to $5.0 million of additional convertible debentures. The additional capital (up to $5 million) to be provided by the expansion of the Convertible Debentures has been and is expected to be used to partially fund the 2012 Capital Budget, and specifically for the drilling and development of certain proven undeveloped and other properties held by the Company, and for general corporate purposes. The initial funding under the March 2012 Agreement occurred in March and continued through June 2012 in the amount of $2.8 million. These proceeds were used to fund the drilling and development of six new wells, resulting in a total investment of $3.8 million. Five of these wells resulted in commercial production, and one well was plugged and abandoned.

In August 2012, the Company restructured the terms of the Supplemental Debenture offering and concluded the offering by issuing an additional $2.2 million of convertible debentures (see Note 11- Subsequent Events.)

In February 2012, the Company completed the sale of its Grover Prospect acreage.

In March 2012, Hexagon agreed to extend the maturity of its term notes to June 30, 2013, and in connection there with, we agreed to make minimum monthly note payments of $0.33 million, effective immediately. In July 2012, Hexagon agreed to extend the maturity of its term notes to September 30, 2013.

In April, 2012, we made the decision to temporarily abandon one of our unconventional Niobrara wells that was categorized as a well in progress as of December 31, 2011. In conjunction with that decision, all capitalized drilling, completion and allocable lease costs related to this well in the amount of $4.8 million were transferred to developed properties. This transfer of costs contributed to a $3.3 impairment charge of developed properties derived from the ceiling test completed as of March 31, 2012.

Results of Operations

Three Months Ended June 30, 2012 compared to the Three Months Ended June 30,
2011

The Company reported a net loss for the three months ended June 30, 2012 of
approximately $2,813,000 compared to a net loss of approximately $4,763,000 for
the three months ended June 30, 2011.
                                                             Three months ended June 30,
                                                                2012               2011
Revenues and other income:
 Oil sales                                                 $     1,362,566     $  2,081,809
 Gas sales                                                          98,725          176,528
 Realized (losses) on commodity hedges                              73,301         (164,290 )
 Unrealized (losses) on commodity price derivatives                680,000          700,700
 Other                                                              45,676           16,682
Total revenues and other income                                  2,260,268        2,811,429
Expenses:
 Production costs                                                  268,315          322,308
 Production taxes                                                  169,639          237,055
 General and administrative                                      1,561,800        5,256,182
 Depreciation, depletion and amortization                          843,999        1,065,425
Total expenses                                                   2,843,753        6,880,970
 Loss from continuing operations                                  (583,485 )     (4,069,541 )
 Interest expense                                               (2,038,082 )     (2,294,377 )
 Other                                                              (1,123 )              -
 Conversion note derivative gain                                  (190,163 )      1,601,037
Net loss                                                   $    (2,812,853 )   $ (4,762,881 )

Oil and Gas Revenues and Production
Oil and gas revenues were $1.46 million for the three months ended June 30, 2012, as compared to $2.26 million for the three months ended June 30, 2011, a decrease of $.80 million, or 31%. Our production volume on a BOE basis was 20,858 for the three months ended June 30, 2012, as compared to 27,083 for the three months ended June 30, 2012 a decrease of 6,225 BOE, or 23%. This decrease is primarily attributable to decline curves related to our Palm and State Line field wells, but partially offset by production from wells drilled during the three months ended June 30, 2012. The total decrease in revenue was caused by both a decrease in production volumes and a decrease in prices during the three months ended June 30, 2012. Oil price realization decreased by 21% from $94.05 to $74.70 per barrel from the three months ended June 30, 2012 and 2011. The decrease was offset by the Company realizing a gain on hedges of approximately $0.07 million during the three months ended June 30, 2012, compared to a realized hedge loss of approximately $0.164 million for the three months ended June 30, 2011.

A comparison of production and average prices for the three months ended June 30, 2012 and 2011, respectively, follows:

                                       Three Months Ended
                                            June 30,
                                        2012          2011
Product:
Oil (Bbls)-volume                        18,241       22,136
Oil (Bbls)- average price            $    74.70     $  94.05

Natural Gas (Mcf)-volume                 15,699       29,681
Natural Gas (Mcf)- average price     $     6.29     $   5.95
Barrels of oil equivalent (BOE)          20,858       27,083
Average daily net production (BOE)          229          298

Oil and gas production expenses, depreciation, depletion and amortization

                                                                                    Three Months
                                                               Three Months Ended    Ended June
                                                                    June 30,            30,
                                                                      2012              2011
                                                                   (per BOE)         (per BOE)
Average price                                                  $     73.57          $      77.32

Production costs                                                     12.86                 11.90
Production taxes                                                      8.13                  8.75
Depletion and amortization                                          40.46                  39.34

Total operating costs                                                61.45                 59.99

Gross margin                                                   $     12.12          $      17.33

Gross margin percentage                                                 16 %                 22%

Commodity Price Derivative Activities
Changes in the market price of oil can significantly affect our profitability and cash flow. In the past we have entered into various commodity derivative instruments to mitigate the risk associated with downward fluctuations in oil prices. These derivative instruments consisted of swaps. The duration and size of our various derivative instruments varies, and depends on our view of market conditions, available contract prices and our operating strategy.

Commodity price derivative net realized gain was $0.07 million during the three months ended June 30, 2012, compared to a realized loss of $0.16 million for the three months ended June 30, 2011, for an increase in realized gain of $0.24 million, or 144% increase. We also recorded an unrealized gain on commodity price derivatives of $0.68 million for the three months ended June 30, 2012 compared to a gain of $0.70 million during the three months ended June 30, 2011, for a decrease 3% of $0.02 million.

Production costs
Production costs were $0.27 million for the three months ended June 30, 2012, as compared to $0.32 million during the three months ended June 30, 2011, a change of $0.05 million, or 16%. Production costs decreased due to lower work over expenses incurred during the three months ended June 30, 2012 compared to the three months ended June 30, 2011.

Production taxes
Production taxes were $0.17 million for the three months ended June 30, 2012, as compared to $0.24 million during the three months ended June 30, 2011, a change of $0.07 million, or 29%. Production taxes decreased due to a decrease in oil and gas revenues of $1.52 million.

General and administrative expenses
General and administrative expenses were $1.56 million for the three months ended June 30, 2012, as compared to $5.26 million for the three months ended June 30, 2011, a decrease of $3.70 million, or 70%. Our general and administrative expenses for the three months ended June 30, 2012 included approximately $0.35 million in non-cash compensation expense. General and administrative expenses for the three months ended June 30, 2011 included approximately $4.13 million in non-cash compensation expense. Excluding non-cash components, cash general and administrative expenses were $1.03 million for the three months ended June 30, 2012 compared to $1.13 million for the three months ended June 30, 2011. Cash general and administrative expenses during the three months ended June 30, 2012 decreased primarily as a result of a decrease in legal and accounting fees and third party fees related to transactions, but were also affected by general increases in other general and administrative expense areas.

Depreciation, depletion and amortization Depreciation, depletion and amortization was $0.84 million for the three months ended June 30, 2012, as compared to $1.07 million during the three months ended June 30, 2011, a decrease of $0.23 million, or 21%. Depreciation, depletion, and amortization decreased due lower unit volumes of oil and gas sales and a declining cost center. Expressed in dollars per BOE, depreciation, depletion, and amortization was $40.46 per BOE during the three months ended June 30, 2012, as compared to $39.34 during the three months ended June 30, 2011.

Interest Expense
Interest expense was $2.04 million during the three months ended June 30, 2012, compared to $2.29 million during the three months ended June 30, 2011, a decrease of $0.26 million, or 11%. During the three months ended June 30, 2012, interest included non-cash charges of $1.30 million, compared to $1.37 million in the comparable period of 2011. Cash interest accruing on debt in 2012 decreased primarily as a result of lower average debt balances on term notes.

Six Months Ended June 30, 2012 compared to the Six Months Ended June 30, 2011

The Company reported a net loss for the six months ended June 30, 2012 of approximately $9,941,000 compared to a net loss of approximately $8,506,000 for the six months ended June 30, 2011.

                                                       Six months ended June 30,
                                                         2012              2011
Revenues and other income:
Oil sales                                            $   2,910,329     $  3,883,623
Gas sales                                                  228,401          285,357
Realized (losses) on commodity hedges                       12,389         (331,574
Unrealized (losses) on commodity price derivatives         575,609          222,788
Other                                                       89,509           24,910
Total revenues and other income                          3,816,237        4,085,104
Expenses:
Production costs                                           635,842          769,293
Production taxes                                           362,497          439,354
General and administrative                               3,584,064        6,856,776
Depreciation, depletion and amortization                 1,828,087        2,141,355
Impairment of evaluated properties                       3,274,718                -
Total expenses                                           9,685,208       10,206,778

Loss from continuing operations                         (5,868,971 )     (6,121,674 )
Interest expense                                        (4,170,988 )     (3,986,546 )
Other                                                         (705 )          1,115
    Conversion note derivative gain                       (100,000 )      1,601,037
Net loss                                             $  (9,940,664 )   $ (8,506,068 )

Oil and Gas Revenues and Production
Oil and gas revenues were $3.14 million for the six months ended June 30, 2012, as compared to $4.17 million for the six months ended June 30, 2011, a decrease of $1.03 million, or 25%. Our production volume on a BOE basis was 40,149 for the six months ended June 30, 2012, as compared to 52,410 for the six months ended June 30, 2011 a decrease of 12,261 BOE, or 23%. This decrease is primarily attributable to decline curves related to our Palm and State Line field wells, but partially offset by production attributable to wells drilled during the six months ended June 30, 2012.

Production and average prices for the six months ended June 30, 2012 are presented in the following table:

                                      Six Months Ended
                                          June 30,
                                      2012         2011
Product:
Oil (Bbls)-volume                      34,368       42,969
Oil (Bbls)-average price             $  84.60     $  90.38

Natural gas (Mcf)-volume               34,685       56,650
Natural gas (Mcf)-average price      $   6.58     $   5.04
Barrels of oil equivalent (BOE)        40,149       52,410
Average daily net production (BOE)        221          290

Oil and gas production expenses, depreciation, depletion and amortization

                                                               Six Months
                            Six Months Ended June 30,        Ended June 30,
                                       2012                       2011
                                    (per BOE)                  (per BOE)
Average price                   $                 78.49     $          73.22

Production costs                                  15.84                14.68
Production taxes                                   9.03                 8.38
Depletion and amortization                        45.53                40.86

Total operating costs                             70.40                63.92

Gross margin                    $                  8.09     $           9.30

Gross margin percentage                              10 %                 13 %

Commodity Price Derivative Activities
Changes in the market price of oil can significantly affect our profitability and cash flow. In the past we have entered into various commodity derivative instruments to mitigate the risk associated with downward fluctuations in oil prices. These derivative instruments consisted of swaps. The duration and size of our various derivative instruments varies, and depends on our view of market conditions, available contract prices and our operating strategy.

Commodity price derivative net realized gain was $0.01 million during the six months ended June 30, 2012, as compared to a realized loss of $0.33 million for the six months ended June 30, 2011, for an increase in realized gain of $0.34 million, or 104%. We also recorded an unrealized gain on commodity price derivatives of $0.58 million for the six months ended June 30, 2012 compared to a gain of $0.22 million during the six months ended June 30, 2011.

Production costs
Production costs were $0.64 million during the six months ended June 30, 2012, as compared to $0.77 million for the six months ended June 30, 2012, a decrease of $0.13 million, or 17%. Production costs decreased due to lower work over expenses during the six months ended June 30, 2012.

Production taxes
Production taxes were $0.36 million during the six months ended June 30, 2012, as compared to $0.44 million during the six months ended June 30, 2011, a decrease of $0.08 million, or 18%. Production taxes decreased due to the decrease of both revenues and BOE for the six months ended June 30, 2012.

General and administrative expenses
General and administrative expenses were $3.58 million for the six months ended June 30, 2012 compared to $6.86 million for the six months ended June 30, 2011, a decrease of $3.28 million, or 70%. Our general and administrative expenses for the six months ended June 30, 2012 included approximately $0.69 million in non-cash compensation expense and $0.505 million for non-cash payment for consulting fees. General and administrative expenses for the six months ended June 30, 2011 included approximately $4.68 million in non-cash compensation expense. Excluding non-cash components, cash general and administrative expenses were $2.39 million for the six months ended June 30, 2012 compared to $2.17 million for the six months ended June 30, 2011. Cash general and administrative expenses during the three months ended June 30, 2012 increased primarily as a result of a increases in payroll, legal and accounting fees and third party fees related to transactions, as well as general increases in other general and administrative expense areas.

Depreciation, depletion and amortization Depreciation, depletion, and amortization were $1.83 million during the six months ended June 30, 2012, as compared to $2.14 million during the six months ended June 30, 2011, a decrease of $0.31 million, or 14.5%. Depreciation, depletion, and amortization decreased due lower unit volumes of oil and gas sales and a declining cost center. Expressed in dollars per BOE, depreciation, depletion, and amortization was $45.53 per BOE during the six months ended June 30, 2012, as compared to $40.86 during the six months ended June 30, 2011.

Impairment of evaluated properties
Impairment of evaluated properties was $3.27 million during the six months ended June 30, 2012, as compared to no impairment during the six months ended June 30, 2011. Impairment of evaluated properties increased due to capitalized costs exceeding the ceiling value as of the quarter ended March 31, 2012

Interest Expense
Interest expense was $4.17 million during the six months ended June 30, 2012, compared to $3.99 million during the six months ended June 30, 2011, an increase of $0.18 million, or 5%. During the six months ended June 30, 2012, interest included non-cash charges of $2.60 million, compared to $2.20 million for the six months ended June 30, 2011. Cash interest accruing on debt in 2012 decreased primarily as a result of lower average term loan balances.

Liquidity and Capital Resources

Cash used in operating activities during the six months ending ended June 30, 2012 was $1.27 million; this use of cash, coupled with the cash used in investing activities, exceeded cash provided by financing activities by $2.24 million and resulted in a corresponding decrease in cash. This net use of cash also substantially contributed to a $3.35 million decrease in working capital as of June 30, 2012 as compared to the working capital balance as of December 31, 2011.

In the immediate term, the Company expects that additional capital will be required to fund its capital budget for 2012, partially to fund some of its ongoing overhead, and to provide additional capital to generally improve its working capital position. In March 2012, the Company secured commitments to fund up to $5 million of additional convertible debentures (see Note 7-Loan Agreements). As of June 30, 2012, $2.8 million of the amount has been funded. In August 2012, the Company restructured some of the terms of this offering, and completed the $5.0 million offering, resulting in the issuance of $2.2 million in additional convertible debentures (see Note 11- Subsequent Events.)

Pursuant to our credit agreements with Hexagon, LLC ("Hexagon"), a substantial portion of our monthly net revenues from our producing properties is required to be used for debt and interest payments. In addition, our debt instruments contain provisions that, absent consent of the lenders, may restrict our ability to raise additional capital. Also, the Hexagon debt is currently due on September 30, 2013, and will need to be extended or retired prior to that date.

. . .