Production for the quarter ended June 30, 2005 was approximately 102,000 BOE (Barrels of Oil Equivalent), as compared to production of 46,405 BOE for the same quarter 2004, a 120% increase, and a 12% increase over the 91,000 BOE produced in the first quarter of 2005. Oil and gas revenues for the second quarter 2005 are estimated to be $4.5 million, as compared to $1.8 million for the same period in 2004, a 150% increase, and a 15% increase over the $3.9 million generated in the first quarter of 2005.

The Company has increased its capital budget for 2005 by $4 million to approximately $18.5 million. The increase is directly attributable to the level of activity on the Company's Fuhrman-Mascho lease in Andrews County, Texas. Management has increased the number of development wells to be drilled in 2005 on the Fuhrman-Mascho from 27 to 33. They have also increased the number of re-stimulations of existing wells in 2005 from 12 to 20. The Company will continue to concentrate most of its attention on its Fuhrman-Mascho and East Hobbs leases through the end of 2005. However, management intends to continue the preparation and upgrading of infrastructure on other selected properties, as well as drilling three test wells and two developmental wells in Kansas. The Company will also continue to actively pursue future acquisition opportunities.

Second Quarter Operations Update

PERMIAN BASIN:
East Hobbs Unit, Lea County, New Mexico – All of the wells in the East Hobbs Unit typically have four potential production zones with most of them producing from the lower three zones. During the second quarter, the Company opened the upper zone on two wells. The wells are currently averaging approximately 40 BOEPD (Barrels of Oil Equivalent Per Day) per well. Arena plans to drill two additional developmental wells on this property in 2005.

The Company has initiated a waterflood project on this property as well. The construction of a centralized tank battery and water plant was completed in the second quarter. Three wells were converted to water injection wells in preparation for secondary recovery. Two additional wells are to be converted to water injection wells in July. Water injection was commenced in June. Since acquiring this lease in May 2004, the Company has increased net daily production from approximately 225 BOE to over 550 BOE at a cost of approximately $3 million.

Fuhrman – Mascho, Andrews County, Texas – The Company secured a drilling rig under a long-term contract and in mid-April began drilling the first of 33 wells planned to be drilled in 2005. From mid-April through the end of the quarter, the Company drilled ten new wells. Six wells have been completed and placed in production and the remaining four are in various stages of completion. After initial production rates ranging from 40 – 100 BOEPD per well, the six wells in the aggregate are now averaging approximately 240 BOEPD. The Company also began a re-stimulation program using new fracturing technology. Work began on the first well in mid-April. From mid-April through the end of the quarter, the Company performed a re-frac on five wells, three of which are currently in production averaging approximately 30 BOEPD per well. Each of these wells was producing one to two BOEPD prior to the re-stimulation. The other two wells are in the process of recovering the load water used in the re-frac and will soon be placed in production. The Company plans on performing this re-frac technique on 20 wells in 2005.

As part of its evaluation of the development potential of the Yates gas formation which is present in approximately 9,000 acres of the Fuhrman-Mascho lease, the Company has commissioned a study by an independent petroleum geologist which should be completed in the third quarter.

Seven Rivers Queen, Lea County, New Mexico – In the second quarter, implementation of remedial work on five existing wells was initiated and expected to be completed in the third quarter. The workover of two existing wells using the new fracturing technique is scheduled to be completed in the third quarter.

KANSAS:

Auntie Em Unit, Haskell County, Kansas – The Company completed the acquisition of approximately 2,500 acres in Haskell and Gray Counties in the second quarter, thereby tripling its acreage on this prospect, where it plans to drill two development wells in 2005.

Syracuse Prospect, Hamilton County, Kansas & Rocky Prospect, Greeley County, Kansas – The Company completed the acquisition of approximately 98% of these leases totaling approximately 15,000 acres in the second quarter and plans on drilling two test wells on the Syracuse Prospect and one on the Rocky Prospect in the third quarter.

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08.25.05
Arena Resources, Inc. Announces Redemption of Public Warrants

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04.13.05
Arena Resources, Inc. Provides
First Quarter 2005
Operations Update