--------------------------------------------------------------------------------

Exhibit 10.3

OPTION AGREEMENT

          THIS OPTION AGREEMENT (this “Agreement”) is made and entered into this
24th day of July, 2006 (the “Effective Date”), by and between David Griffin, an
individual who is a resident of Phillips County, Arkansas (“Optionor”) and
Arkanova Energy, Inc., a Delaware corporation (“Optionee”).

Background

          Optionor owns all of the mineral interests underlying the land in
Desha County, Arkansas, described in Annex “A” attached hereto, incorporated
herein by reference and made a part hereof for all purpose (the “Lands”), and
Optionor desires to grant an option to Optionee to acquire an oil and gas lease
on Optionor’s mineral interests underlying the Land on the terms hereinafter set
forth.

Terms

          For valuable consideration, including payment in the amount of
Twenty-five and No/100 Dollars ($25.00) per gross acres (the “Option Fee”), the
receipt and sufficiency of which Optionor acknowledges, Optionor hereby grants
to Optionee, and its successors and assigns, for a term of one (1) year from the
Effective Date (the original period and any extensions thereof as herein
permitted being hereinafter referred to as the “Option Period”), the exclusive
right and option, but not the obligation, to acquire a lease on all of the Lands
on those terms and conditions as set forth in the form oil and gas lease
attached as Annex “B” to that certain Oil and Gas Lease Acquisition and
Development Agreement in letter agreement format between Optionor and Optionee
dated July 7, 2006 (the “Lease”). Optionor agrees not to enter into any oil, gas
and mineral lease or other agreements that would prevent Optionee from
exercising this option on all or any portion of the Land during the Option
Period. Should Optionee elect to exercise its option to acquire a lease within
the Option Period, Optionee shall notify Optionor in writing of the election by
depositing the notice of election into any U.S. Post Office, addressed to
Optionor, and tender to Optionor, by wire transfer in immediately available
funds for the benefit of Optionor, an amount equal to the difference between
Three Hundred and No/Dollars ($300.00) per net mineral acre acquired by Optionee
and the Option Fee per acre (the “Option Payment”). Upon the later to occur of
the placement of the written notice in the mail to Optionor and the wiring of
the Option Payment to Optionor, Optionee is authorized to place of record, in
Desha County, Arkansas, the Lease, which has been executed by Optionor, as
Lessor. The written notice and wiring of the Option Payment must take place
within the Option Period for this Option to be deemed to have been timely
exercised.

          Within six (6) months of the Effective Date, Optionor shall furnish to
Optionee and its legal counsel evidence reasonably satisfactory to Optionee and
its legal counsel as to Optionor’s ownership of all of the minerals underlying
the Lands, and for each day beyond the end of said six (6) month period that
such evidence is not delivered as herein required, the Option Period shall be
extended by a day.

          In the event Optionee does not wire the Option Payment on or before
the expiration of the Option Period this option shall terminate and the Lease
shall be null void and of no further force and effect.

--------------------------------------------------------------------------------

2

Signatures

          This Option Agreement is executed by Optionor and Optionee as of the
date of Optionor’s signature but shall be deemed effective for all purposes as
of the Effective Date stated above.

Optionor:

 

___________________________________
David Griffin

 

Optionee:

ARKONOVA ENERGY, INC.

 

By: ___________________________________

Name: ________________________________

Title: _________________________________

--------------------------------------------------------------------------------