Arena Resources Posts Record Second Quarter



Arena Resources Inc. on Monday announced its financial results for the second quarter and six months ended June 30, 2006.

For the three-month period ended June 30, 2006, Arena had oil and gas revenues of $14,690,068, compared to $4,628,554 for the quarter ended June 30, 2005--a 217% increase. For the three-month period ended June 30, 2006, the company had net income of $6,445,224, or $0.44 per fully diluted share, compared to net income of $1,715,100, or $0.15 per fully diluted share, for the same period in 2005--a 276% increase.

For the six-month period ended June 30, 2006, the company reported oil and gas revenues of $25,070,463, compared to oil and gas revenues of $8,543,289 for the six-month period ended June 30, 2005--a 193% increase. Net income for the six-month period ended June 30, 2006 was $10,027,900, or $0.70 per fully diluted share, compared to net income of $3,001,800, or $0.26 per fully diluted share, for the same period in 2005--a 234% increase.

The revenue increase was due to increases in production volumes, development activity, and increased oil and gas prices. For the three months ended June 30, 2006, oil sales volume increased to 207,922 barrels, compared to 92,233 barrels for the same period in 2005--a 125% increase, and gas sales volume increased to 198,828 MCF (thousand cubic feet), compared to 84,968 MCF for the same period in 2005--a 134% increase.

For the six months ended June 30, 2006, oil sales volume increased to 375,089 barrels, compared to 169,494 barrels for the same period in 2005--a 121% increase--and gas sales volume increased to 340,864 MCF, compared to 168,283 MCF for the same period in 2005--a 103% increase. The average commodity prices received by Arena were $64.37 per barrel of oil and $6.57 per MCF of natural gas for the quarter ended June 30, 2006, compared to $44.97 per barrel of oil and $5.66 per MCF of natural gas for the quarter ended June 30, 2005. The average prices received for the six months ended June 30, 2006, were $60.59 per barrel of oil and $6.88 per MCF of natural gas, compared to $45.32 per barrel of oil and $5.12 per MCF of natural gas for the six month period ended June 30, 2005.

Lease operating expenses for the three months ended June 30, 2006, were $9.13 per barrel of oil equivalent (BOE)--a 3% decrease from the prior year. Depreciation, depletion, and amortization costs increased 29% to $5.85 per BOE. General and administrative costs, which included a $213,533 charge for stock-based compensation, were $3.19 per BOE--a 13% increase. For the six months ended June 30, 2006, lease operating expenses were $9.90 per BOE--a 7% decrease from the prior year. Depreciation, depletion, and amortization costs were $5.70 per BOE--a 24% increase--and general and administrative costs, which included a $393,300 charge for stock-based compensation, were $3.41 per BOE--a 10% increase.

There was no outstanding debt on the company's bank credit facility at June 30, 2006.

Net cash flow from operations for the three and six months ended June 30, 2006, was $11,886,684, or $0.81 per fully diluted share, and $19,620,602, or $1.36 per fully diluted share, compared to net cash flow of $3,277,482, or $0.28, and $5,730,359, or $0.50 per fully diluted share for the same periods in 2005 (1).

"We are just now starting to see the results of having two full-time rigs drilling on our Fuhrman-Mascho lease," said Tim Rochford, Arena's CEO. "We are currently drilling our 83rd new well on this lease and have increased our number of re-fracs from 36 to 52 for 2006. In addition, with the initial results we have seen from wells drilled in New Mexico and Kansas in the second quarter due to early rig availability, we have increased our CAPEX budget an additional $11.5 million. and we will drill six more wells at our Seven Rivers Queen lease in New Mexico and approximately nine more wells in Kansas in 2006. We continue to add acreage that complements our core properties in Texas and Kansas while also exploring acquisition opportunities."

Non-GAAP Financial Measures:

Earnings for the three months ended June 30, 2006 include a non-cash charge for stock based compensation of $213,533. Earnings for the six months ended June 30, 2006 include a non-cash charge for stock based compensation of $393,300 and a nonrecurring non-cash charge of $785,598 for warrants issued as part of a financing in July 2005. Excluding such items, the company's earnings would have been $0.45 per diluted share for the three months ended June 30, 2006, and $0.75 for the six months ended June 30, 2006. The company believes results excluding these items are more comparable to estimates provided by security analysts and, therefore, are useful in evaluating operational trends of the company and its performance, compared to other similarly situated oil and gas producing companies.

(1) Cash Flow from Operations is a non-GAAP financial measure that 
   represents "Net Cash Provided By Operating Activities" adjusted
   for the change in operating assets and liabilities. See below for
   a reconciliation of the related amounts.

Arena Resources Inc. is an oil and gas exploration, development and production company with current operations in Texas, Oklahoma, Kansas, and New Mexico.

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