Arena Completes Texas Property Acquisition

Arena Resources has closed its previously announced acquisition of a 100% working interest, 75% net revenue interest in the Fuhrman-Mascho Field located in Andrews County, Texas, for a purchase price of $10.55 million, comprised of $9.5 million cash and 150,000 restricted shares of the company's common stock, valued at $7.00 per share. The company financed $9.0 million of the purchase price through borrowings under its bank credit facility. The effective date of the acquisition is Dec. 1, 2004, and is the fifth acquisition by the company of a Permian Basin property located in this geographic area in the past 18 months.

Property Information

The property is located in Andrews County in the Permian Basin of West Texas and consists of 11,300 acres and 136 producing wells. Arena will be the operator and have a 100% working interest and 75% net revenue interest. In addition to the 136 existing producing wells, Arena's engineering team has identified an additional 130 locations for potential future drilling and development. The company currently plans on commencing additional development of this acreage in early 2005. Current production is from the San Andres formation at a depth of approximately 4,700 feet. Additionally, Arena has acquired the rights to the Yates gas formation (3,200 feet) covering more than 9,000 acres, and is currently preparing a detailed evaluation for future exploration and development.

Production and Reserves

The current net production to the company, from this acquisition, is approximately 240 BOE per day, which increases Arena's current total net daily production from all of its properties by 28% to approximately 1,100 BOE. The company's initial reserve estimates, as reviewed by Lee Keeling & Associates Inc., an independent reservoir engineering firm, indicate the lease has approximately 6.5 million BOE of proved reserves net to Arena. This represents an estimated cost of $1.62 per BOE and increases the company's combined proved reserves to approximately 18.3 million BOE. Based on a $35.00 BOE commodity price, Arena's estimated present value of reserves, discounted at 10% (PV-10), is expected to increase approximately $90 million to a combined PV-10 value of approximately $220 million.
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