The revenue increase was due to increases in production volumes, development activity and increased oil and gas prices. For the three months ended June 30, 2006, oil sales volume increased to 207,922 barrels, compared to 92,233 barrels for the same period in 2005, a 125% increase, and gas sales volume increased to 198,828 MCF (thousand cubic feet), compared to 84,968 MCF for the same period in 2005, a 134% increase. For the six months ended June 30, 2006, oil sales volume increased to 375,089 barrels, compared to 169,494 barrels for the same period in 2005, a 121% increase, and gas sales volume increased to 340,864 MCF, compared to 168,283 MCF for the same period in 2005, a 103% increase. The average commodity prices received by Arena were $64.37 per barrel of oil and $6.57 per MCF of natural gas for the quarter ended June 30, 2006, compared to $44.97 per barrel of oil and $5.66 per MCF of natural gas for the quarter ended June 30, 2005. The average prices received for the six months ended June 30, 2006 were $60.59 per barrel of oil and $6.88 per MCF of natural gas, compared to $45.32 per barrel of oil and $5.12 per MCF of natural gas for the six month period ended June 30, 2005.

Lease operating expenses for the three months ended June 30, 2006 were $9.13 per barrel of oil equivalent ("BOE"), a 3% decrease from the prior year. Depreciation, depletion and amortization costs increased 29% to $5.85 per BOE. General and administrative costs, which included a $213,533 charge for stock based compensation, were $3.19 per BOE, a 13% increase. For the six months ended June 30, 2006, lease operating expenses were $9.90 per BOE, a 7% decrease from the prior year. Depreciation, depletion and amortization costs were $5.70 per BOE, a 24% increase, and general and administrative costs, which included a $393,300 charge for stock based compensation, were $3.41 per BOE, a 10% increase.

There was no outstanding debt on the Company's bank credit facility at June 30, 2006. Net cash flow from operations for the three and six months ended June 30, 2006 was $11,886,684, or $0.81 per fully diluted share, and $19,620,602, or $1.36 per fully diluted share, compared to net cash flow of $3,277,482, or $0.28, and $5,730,359, or $0.50 per fully diluted share for the same periods in 2005 (1).

Arena's Chief Executive Officer, Mr. Tim Rochford, stated, "We are just now starting to see the results of having two full-time rigs drilling on our Fuhrman-Mascho lease. We are currently drilling our 83rd new well on this lease and have increased our number of re-fracs from 36 to 52 for 2006. In addition, with the initial results we have seen from wells drilled in New Mexico and Kansas in the second quarter due to early rig availability, we have increased our CAPEX budget an additional $11.5 million and we will drill six more wells at our Seven Rivers Queen lease in New Mexico and approximately nine more wells in Kansas in 2006. We continue to add acreage that compliments our core properties in Texas and Kansas while also exploring acquisition opportunities."

Non-GAAP Financial Measures:
Earnings for the three months ended June 30, 2006 include a non-cash charge for stock based compensation of $213,533. Earnings for the six months ended June 30, 2006 include a non-cash charge for stock based compensation of $393,300 and a nonrecurring non-cash charge of $785,598 for warrants issued as part of a financing in July, 2005. Excluding such items, the Company’s earnings would have been $0.45 per diluted share for the three months ended June 30, 2006, and $0.75 for the six months ended June 30, 2006. 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