The revenue increase was due to increases in production and average realized sales prices. For the three months ended September 30, 2004, oil sales volume increased to 54,769 barrels, compared to 31,147 barrels for the same period in 2003, a 76% increase. For the nine months ended September 30, 2004, oil sales volume increased to 133,177 barrels, compared to 83,045 barrels for the same period in 2003, a 60% increase. For the three months ended September 30, 2004, gas sales volume increased to 52,698 MCF, compared to 20,188 MCF for the same period in 2003, a 161% increase. For the nine months ended September 30, 2004, gas sales volume increased to 112,724 MCF, compared to 47,660 MCF for the same period in 2003, a 136% increase. The average commodity prices received by Arena were $41.13 per barrel of oil and $5.05 per MCF (thousand cubic feet) of natural gas for the quarter ended September 30, 2004, compared to $28.47 per barrel of oil and $3.45 per MCF of natural gas for the quarter ended September 30, 2003. The average prices received for the nine months ended September 30, 2004 were $37.47 per barrel of oil and $4.62 per MCF of natural gas, compared to $29.29 per barrel of oil and $3.75 per MCF of natural gas for the nine month period ended September 30, 2003.

Net cash flow from operations for the nine months ended September 30, 2004 was $3,414,117, compared to net cash flow of $1,178,024 for the same period in 2003.

As of September 30, 2004 the Company had net working capital of $1,988,695 compared to $2,413,677 as of September 30, 2003. The decrease is primarily attributable to the acquisition cost of the East Hobbs Unit in May 2004.

Arena's Chief Executive Officer, Mr. Tim Rochford, stated, "We are extremely proud of the results for the third quarter. It is a record quarter for us in terms of revenue, net income, production and operating cash flow. For the third quarter, production increased 24% over the second quarter 2004, revenues increased 40%, net income 51% and operating cash flow 113%. We continue to pursue acquisition opportunities, with a focus on current production, but more importantly, the upside opportunity through the future development of proved undeveloped reserves."

Third Quarter Activity
From August 13 through August 18, 2004, Arena Resources, Inc. completed a public offering of its common stock and warrants as a unit at $6.10 per unit, before underwriters' discount and offering expenses. The Company issued 1,667,500 units resulting in proceeds to the Company of $8,303,951, net of offering costs. Each unit consists of one share of common stock and one warrant to acquire one share of common stock. Each warrant may be exercised at an exercise price of $7.32, and expires August 9, 2008.

Current / Planned Activity
East Hobbs Unit, Lea County, New Mexico - The Company plans to continue it's "workover" program on up to five additional wells. The Company successfully re-entered two wells in June and has added 100 BOE to the average daily production as a result. Additionally, the Company has drilled the first three wells of a planned twelve well development program on this lease. The first well has recently been placed in production. The other two are awaiting final completion in preparation for production in November. The Company is currently drilling the fourth well.

Auntie Em Unit, Haskell County, Kansas - The Company is ahead of schedule on the completion of a seven mile gas transmission line which will allow production from two existing gas wells to be connected to the pipeline. At the current pace, the Company hopes to have both wells in production by the end of November 2004. The Company plans on drilling at least one additional gas well on this lease.

Dodson Unit, Montague County, Texas - The Company plans on drilling the first well in its development program for this 570 acre lease by year end. Secondary recovery work is anticipated to begin within the first six months of 2005.

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09.30.04
Arena Resources, Inc. Provides Operations Update

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05.10.04
Arena Resources Completes New Mexico Lease Acquisition