Arena Reports 23% Jump in Earnings for Second Quarter

Arena Resources (NYSE: ARD) announced financial results for the three months and six months ended June 30, 2007.

For the three month period ended June 30, 2007, Arena had oil and gas revenues of $21,620,299, compared to $14,690,068 for the quarter ended June 30, 2006, a 47% increase and net income of $7,899,378, or $0.49 per fully diluted share, compared to net income of $6,445,224, or $0.44 per fully diluted share, for the same period in 2006, a 23% increase.

For the six month period ended June 30, 2007, the Company reported oil and gas revenues of $38,271,600, compared to oil and gas revenues of $25,070,463 for the six month period ended June 30, 2006, a 53% increase. Net income for the six month period ended June 30, 2007 was $13,607,268, or $0.86 per fully diluted share, compared to net income of $10,027,900, or $0.70 per fully diluted share, for the same period in 2006, a 36% increase.

The revenue increase was a result of increases in production volumes due to increased development activity, offset by a decrease in the realized per barrel oil prices of 11% and 10% for the three and six month periods ended June 30, 2007, respectively. For the three months ended June 30, 2007, oil sales volume increased to 327,290 barrels, compared to 207,922 barrels for the same period in 2006, a 57% increase, and gas sales volume increased to 348,169 MCF (thousand cubic feet), compared to 198,828 MCF for the same period in 2006, a 75% increase.

For the six months ended June 30, 2007, oil sales volume increased to 609,828 barrels, compared to 375,089 barrels for the same period in 2006, a 63% increase, and gas sales volume increased to 673,104 MCF, compared to 340,864 MCF for the same period in 2006, a 97% increase. The average commodity prices received by Arena were $57.29 per barrel of oil and $ 8.24 per MCF of natural gas for the quarter ended June 30, 2007, compared to $64.37 per barrel of oil and $6.57 per MCF of natural gas for the quarter ended June 30, 2006. The average prices received for the six months ended June 30, 2007 were $54.70 per barrel of oil and $7.30 per MCF of natural gas, compared to $60.59 per barrel of oil and $6.88 per MCF of natural gas for the six month period ended June 30, 2006.

Lease operating expenses, including production taxes, for the three months ended June 30, 2007 were $9.95 per barrel of oil equivalent ("BOE"), a 9% increase from the prior year. Depreciation, depletion and amortization costs increased 18% to $6.90 per BOE. General and administrative costs, which included an $881,127 charge for stock based compensation, were $4.67 per BOE, a 46% increase. Interest expense was $727,064, or $1.89 per BOE, an 836% increase. For the six months ended June 30, 2007, lease operating expenses, including production taxes, were $9.91 per BOE, no change from the prior year. Depreciation, depletion and amortization costs were $7.36 per BOE, a 29% increase, and general and administrative costs, which included a $1,520,751 charge for stock based compensation, were $4.20 per BOE, a 23% increase. Interest expense was $1.50 per BOE, a 582% increase.

There was no outstanding debt on the Company's $150 million bank credit facility at June 30, 2007.

Net cash flow from operations for the three and six months ended June 30, 2007 was $16,146,388, or $1.00 per fully diluted share, and $28,525,618, or $1.80 per fully diluted share, compared to net cash flow of $11,886,684, or $0.81, and $19,620,602, or $1.36 per fully diluted share for the same periods in 2006 (1).

Arena's Chief Executive Officer, Mr. Tim Rochford, stated, "Despite some weather and power outage disruptions, we were able to successfully continue our overall development program in the second quarter, with particular emphasis on our Permian Basin properties, where we plan to begin testing some additional wells on 10 acre spacing. We drilled 28 new development wells and re-fraced 12 existing wells on our Fuhrman Mascho properties and continued infrastructure improvements and well conversions into water injectors on our East Hobbs and North Benson New Mexico assets. Our second quarter production of 385,000 BOEs was a 60% increase over the same period in 2006 and over a 14% increase from the first quarter. We completed a $100 million common stock offering eliminating all long term debt and providing sufficient CAPEX funding, based on our current budget, into 2008. We contracted for a second company-owned drilling rig for our Fuhrman Mascho properties. We also entered into a letter of intent with a Houston-based company to produce and sell gas from the Yates formation on our Fuhrman Mascho properties beginning in late second quarter 2008. In July, we entered into an agreement for a zero-cost collar on 1,000 barrels a day of oil production with a floor of $65.00 and a ceiling of $80.50, effective August 1, 2007 and running through December 31, 2008. We are continuing to look at acquisition opportunities, primarily concentrating on those that complement our existing properties."

Non-GAAP Financial Measures:

Earnings for the three months ended June 30, 2007 include a non-cash charge for stock based compensation of $881,127. Earnings for the six months ended June 30, 2007 include a non-cash charge for stock based compensation of $1,520,751. Excluding such items, the Company's earnings would have been $0.53 per diluted share for the three months ended June 30, 2007, and $0.92 for the six months ended June 30, 2007. 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.

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.

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