Net Calories/Exercise

OK, I've been using MFP for 1 month. I'm 5`2` 195 & my goal is 130. In 1mo I've lost 9lbs. My goal is 1200 calories daily & I've been exercising 6 out of 7 days. Thing is I'm not quite sure how net calories works. Some say you must eat back the calories you earn thru exercise & then some say its optional. I'm typically burning 650 calories thru exercise daily. I have been sticking w/just the 1200 cals not eating any back. Is this right? Any advice? Thanks.

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