You absolutely need to take your 1200 kcal and would be good if you took that extra what you are burning during your workouts. It depends on what are eating, some carbs and sugars can make you crazy hungry. if I avoid sweets, pies , bread and so on i am happy with 1200 kcal as you can take plenty off food in those calories.

1200 calories/day is pretty much the lowest level of calorie restriction recommended, and if you're very tall or very big, it isn't recommended at all. Do you know your Basal Metabolic Rate (BMR)? If not, calculate it here: http://www.bmi-calculator.net/bmr-calculator/

BMR is the number of calories your body will use in a coma. You aren't in a coma and need to eat above your BMR every day. Depending on activity levels, you multiple your BMR by a factor to get your Total Daily Energy Expenditure (TDEE). This is what you need to eat to maintain your current body weight. You can find the multiplying factors here: http://www.bmi-calculator.net/bmr-calculator/harris-benedict-equation/

Once you know your TDEE, you want to eat fewer calories than this in order to lose weight. It's normally recommended to eat 500 calories below your TDEE, as this should result in a pound of weight loss every week.

So I set myself two limits: One is my BMR, which I never allow myself to eat below, and the other is my TDEE - 500 calories, which I want to hit for healthy levels of weight loss. For me, BMR is 1650 and TDEE - 500 is 1800 calories, so I could never eat a 1200 calorie diet.

If you use this method, your exercise and daily activity is already accounted for, so you don't have to eat back your exercise calories, since those calculations are often inaccurate.