The revenue increase was due to increases in production volumes, primarily due to development activity, and increased oil and gas prices. For the three months ended March 31, 2006, oil sales volume increased to 167,167 barrels, compared to 77,260 barrels for the same period in 2005, a 116% increase and gas sales volume increased to 142,036 MCF (thousand cubic feet), compared to 83,315 MCF for the same period in 2005, a 70% increase. The average commodity prices received by Arena were $55.85 per barrel of oil and $7.35 per MCF of natural gas for the quarter ended March 31, 2006, compared to $45.70 per barrel of oil and $4.61 per MCF of natural gas for the quarter ended March 31, 2005.

Lease operating expenses for the three months ended March 31, 2006 were $10.88 per barrel of oil equivalent (“BOE”), a 10% decrease from the prior year. Depreciation, depletion and amortization costs increased 19% to $5.51 per BOE. General and administrative costs, which included a $179,767 charge for stock based compensation, were $3.69 per BOE, a 25% increase.

Net cash flow from operations for the three months ended March 31, 2006 was $7,733,918 or $0.55 per diluted share, compared to net cash flow of $2,452,877 or $0.22 per diluted share for the same period in 2005 (1).

Arena's Chief Executive Officer, Mr. Tim Rochford, stated, "We continue to ramp up our 2006 development program. Our first quarter resulted in 16 development wells drilled and 13 re-fracs on existing wells on our Fuhrman-Mascho property, where we continue to have a 100% success rate on newly drilled development wells. We have taken delivery of our own drilling rig and now have two rigs drilling full time on the Fuhrman-Mascho. We currently have a third rig drilling on our Seven Rivers Queen property in New Mexico and a fourth rig will soon be operating on our Auntie Em property in Kansas. In June, an additional drilling rig will move onto our Rocky Prospect, also in Kansas. In total, we hope to drill as many as 37 new wells in the second quarter, 31 in the Permian Basin and six in Kansas, while continuing the re-stimulation of selected existing wells. With the increase in our credit facility, we are in a position to maintain an aggressive development program, while continuing to seek additional acquisitions."

Non-GAAP Financial Measures:

Earnings for the first quarter 2006 include a non-cash charge for stock based compensation of $179,767 and a nonrecurring non-cash charge of $785,598 for warrants issued as part of a financing in July, 2005. Excluding such items, income before income taxes would have been $6,652,152 million. Adjusting for the after-tax effect of these items the Company’s earnings would have been $4,190,856 million or $0.30 per diluted share. 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.

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08.07.06
Arena Resources Announces
Record Second Quarter and
Six Month 2006 Financial
and Operating Results

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03.17.06
Arena Resources Announces
Record Financial and Operational Results for Fourth Quarter and
Year End 2005