The Company received a private equity investment of $10 million in July. The proceeds allowed the Company to increase its capital expenditure budget for the remainder of 2005 to $18.5 million and pay off the remaining debt on its bank credit facility. The Company also received approximately $10.7 million in proceeds from the exercise of its outstanding publicly traded warrants following their call for redemption in late August, which was completed in early October, 2005.

Production for the quarter ended September 30, 2005 was approximately 141,000 BOE, as compared to production of 63,552 BOE for the same quarter in 2004, a 122% increase, and a 32% increase over the 106,394 BOE produced in the second quarter of 2005. Average daily production increased from 1,169 BOEPD in the second quarter to 1,534 BOEPD. Oil and gas revenues for the third quarter of 2005 are estimated to be $7.75 million, as compared to $2.5 million for the same period in 2004, a 210% increase, and a 68% increase over the $4.6 million generated in the second quarter of 2005.

Third Quarter Operations Update
PERMIAN BASIN:
Fuhrman - Mascho, Andrews County, Texas — The Company drilled 12 new development wells in the third quarter. Nine wells have been completed and placed in production and the remaining three are in various stages of completion. Additionally, four wells which were drilled in the second quarter were successfully completed. The Company has now drilled a total of 22 new development wells since initiating its developmental drilling program in mid-April. The 19 new wells in production are currently averaging over 50 BOEPD per well. The Company performed a re-frac on nine wells during the quarter, seven of which are currently in production. Each of these wells was producing one to two BOEPD prior to the re-stimulation. The Company has now re-fraced 14 wells on this lease, nine of which have been placed in production, with daily production averaging over 20 BOEPD per well. Three wells are awaiting completion and two others are being evaluated as possible gas wells. The Company plans to drill 11 or 12 development wells in the fourth quarter for a total of 33 to 34 wells in 2005, and re-frac six additional wells for a total of 20 re-fracs in 2005.

A study by an independent petroleum geologist was completed in the third quarter as part of the Company's 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 tested one well in the third quarter and plans on testing three or four additional wells in the fourth quarter to further evaluate development potential.

Parrish Leases, Andrews County, Texas — The Company completed the acquisition of the Parrish property in August. The property is comprised of six leases totaling 720 acres, 17 producing wells, three saltwater disposal wells and a commercial saltwater disposal system. In addition to the producing wells, the Company has identified an additional 10 drilling locations. The property is contiguous to the Company's Fuhrman-Mascho Lease. Initial reserve estimates by the Company which have been reviewed by an independent reserve engineering firm, indicate approximately 945,000 BOE of proved reserves net to the Company. The Company is currently performing basic remedial work and evaluating these leases for future development.

East Hobbs Unit, Lea County, New Mexico — The Company has commenced the initial stage of a waterflood project on this property. One additional well was converted into a water injection well in preparation for secondary recovery. One more well is scheduled to be converted into a water injection well in the fourth quarter for a total of five injection wells. The Company also plans to drill two — four development wells in the fourth quarter, and perform workovers on two existing wells to increase production by opening an upper zone.

Seven Rivers Queen, Lea County, New Mexico — Remedial work on three existing wells was completed during the third quarter. Remedial work on two additional wells will be completed in the fourth quarter. The re-stimulation of two existing wells is also scheduled for the fourth quarter.

KANSAS:
Syracuse Prospect, Hamilton County, Kansas & Rocky Prospect, Greeley County, Kansas — The Company drilled two test wells on the Syracuse Prospect and one on the Rocky Prospect in the third quarter. Two of the wells, one on each prospect, have had production casing set and are awaiting completion. The third well is currently being evaluated. The Company plans on drilling another well on the Rocky Prospect in the fourth quarter to test deeper zones. The Company has continued to increase its acreage position by leasing an additional 6,000 acres, for a total of over 21,000 acres under lease in the two prospects.

Auntie Em, Haskell County, Kansas — The Company has leased an additional 700 acres and plans to drill two development wells in the fourth quarter, adding to the three existing producing wells.

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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