FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


MARK ONE

_X_  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

     For the fiscal year ended December 31, 2001

___  Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

     For the transition period from N/A to N/A

                       Commission file number:  333-46164

                              Arena Resources, Inc.
                              ---------------------
             (Exact name of registrant as specified in its charter)

          Nevada                                  73-1596109
          ------                                  ----------
 (State of incorporation)            (I.R.S. Employer Identification Number)

     4920 South Lewis Street, Suite 107
     Tulsa, Oklahoma                                    74105
     ---------------                                    -----
 (Address of Principal Executive Offices)            (Zip Code)

Registrant's telephone number, including area code:  (918) 747-6060

                                       Name of each exchange on
     Title of each class                     which registered
     -------------------                     ----------------
     Common - $0.001 Par Value     None: Traded on Electronic Bulletin Board

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark whether the Registration (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  YES _X_  NO  ___

As of March 1, 2002, the aggregate market value of the common voting stock held
by non-affiliates of the Registrant, based upon a December 31, 2001 closing
stock price of $2.50/share, would be approximately $2,507,500.  The Company is
currently traded on the NASD Electronic Bulletin Board.  During the year 2001,
the stock has traded within a range from $.25 to $2.50.

As of March 1, 2002, the registrant had outstanding 3,604,500 shares of common
stock ($0.001 par value) and 917,573 shares of Class A convertible preferred
stock.

                                        1


                                TABLE OF CONTENTS

                                     PART I
                                                                         Page
                                                                         ----
ITEM 1    BUSINESS                                                        3

ITEM 2    PROPERTIES                                                      9

ITEM 3    LEGAL PROCEEDINGS                                               11

ITEM 4    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS             11

                                     PART II

ITEM 5    MARKET FOR REGISTRANT'S COMMON EQUITY                           11

ITEM 6    SELECTED FINANCIAL DATA                                         12

ITEM 7    MANAGEMENT'S DISCUSSTION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS                             12

ITEM 8    FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA                      13

ITEM 9    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCCUNTING AND FINANCIAL DISCLOSURES                            14

                                    PART III

ITEM 10   DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT                  14

ITEM 11   EXECUTIVE COMPENSATION                                          16

ITEM 12   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT                                                  16

ITEM 13   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                  17

                                     PART IV

ITEM 14   EXHIBITS, FINANCAIL STATEMENTS AND SCHEDULES AND
          REPORTS ON FORM 8-K                                             18

          SIGNATURES                                                      19


                                        2



                                     PART I

                                Item 1 - BUSINESS

      Forward-looking  statements in this Report, including without  limitation,
statements   relating   to   the   Company's  plans,   strategies,   objectives,
expectations, projections, intentions, anticipations and adequacy of  resources,
are  made  pursuant  to  the safe harbor provisions of  the  Private  Securities
Litigation  Reform  Act  of 1995.  Investors are cautioned  that  such  forward-
looking  statements  while made in good faith involve risks  and  uncertainties;
including,  without  limitation to, the following:   (i)  the  Company's  plans,
strategies, objectives, expectations and intentions are subject to change at any
time  at the discretion of the Company; (ii) the Company's plans and results  of
operations  will be affected by the Company's ability to manage its  growth  and
inventory  (iii) other risks and uncertainties which may be indicated from  time
to  time  in  the Company's filings with the Securities and Exchange Commission.
Neither  the  Securities and Exchange Commission nor any other  regulatory  body
takes any position as to the accuracy of forward looking statements.

GENERAL DESCRIPTION OF COMPANY AND BUSINESS

     Arena Resources, Inc., hereafter "Arena" or "the Company," was incorporated
in Nevada on August 31, 2000.  The Company completed and Initial Public Offering
pursuant to an SB-1 registration of its securities on February 16, 2001  raising
gross  proceeds of $200,000.  The Company is involved in oil and gas acquisition
and  development.   Its  initial operations are in the states  of  Oklahoma  and
Texas.   The  principal office of the Company is located  at  4920  South  Lewis
Street, Suite 107, Tulsa, Oklahoma.  The telephone number is (918) 747-6060.

      The  present  assets of Arena consist of the following:  (i)  94%  working
interest and 2-1/2% overriding royalty interest in the Casey lease in Muskogee
County,  Oklahoma  (ii) 100% working interest in two drill sites  on  properties
around  the Casey lease in Muskogee County, Oklahoma (iii) 100% working interest
in  the  Y-6  lease in Fisher County, Texas. These leases are more  particularly
described beginning on page 9 of this Report.

     In February 2001, Arena closed its Initial Public Offering (IPO) by selling
800,000  shares at $0.25/share to 29 California residents raising gross proceeds
of $200,000.  This IPO is more particularly described on page 8 or this Report.

      In  June  2001, Arena commenced an initial Private Placement  Offering  to
accredited  investors to attempt to raise between $525,000  and  $3,500,000  for
drilling  and completions, as well as additional acquisitions.  As  of  December
31, 2001 this offering has not closed but is anticipated to be closed during the
second quarter 2002.  Gross proceeds as of December 31, 2001 are $1,500,753. The
terms of this offering and use of proceeds are more fully described on page 9 of
this Report.

(A) REVENUES, COSTS AND TAXES

      All revenues, if any, and costs from oil and gas wells will be accrued  as
income or costs to Arena, not the shareholders.  Shareholders will not incur any
liability  or assessments as a shareholder.  In like manner, typical anticipated
tax  benefits  in  an  oil or gas program such as write-offs  for  drilling  and
completion costs and percentage or cost depletion will accrue directly to  Arena
and not to shareholders.

                                        3

(B) GATHERER AND PURCHASER

      Gas  produced from the Oklahoma lease areas is gathered in the field by  a
gathering/transport company which charges a transportation charge to deliver the
gas  to a principal pipeline purchaser.  The present gatherer is Enogex and  the
present purchaser is ONEOK Energy Marketing and Trading Company LP.  The current
net  price paid is approximately $2.10 to $2.35 per thousand cubic feet  of  gas
(MCF).   ONEOK pays Arena, less applicable taxes, and Arena distributes the  pro
rata  portion to working and royalty interest owners, retaining the  balance  as
gross revenues.

     Gas produced from the Texas lease is currently transported and purchased by
CMS  Taurus  Field  Services, L.P.  The current net price paid is  approximately
$1.65  to  $2.15  per thousand cubic feet of gas (MCF).  CMS  pays  Arena,  less
applicable taxes, and Arena distributes the pro rata portion to royalty interest
owners, retaining the balance as gross revenues.

      Through January 31, 2002, oil produced from the Texas lease was picked  up
via  truck  and  purchased by BML, Inc.  The net price  paid  was  approximately
$18.00  to  $26.10  per  barrel  (BBL).   BML  withheld  applicable  taxes   and
distributed  to  the royalty owners, then paid Arena its share of  net  revenue.
Effective  February  1, 2002, Sun Oil Co. has become the oil  purchaser  on  the
Texas  lease.   Sun withholds applicable taxes and distributes  to  the  royalty
owners, then pays Arena our share of net revenue.

(C) RESERVE ESTIMATES

     The following table summarizes the existing net oil and gas properties held
by  Arena  showing  both  estimated proven developed  and  proven  non-developed
reserves  with  estimated recoverable natural gas revenues from  those  reserves
expressed in increments of a thousand cubic feet (MCF) and estimated recoverable
oil  revenues  from  those reserves expressed in increments  of  barrels  (BBL).
Proven  developed  reserves  are proven reserves  upon  which  there  is  actual
production:
                                                              Estimated Net
                                                               Cash Flow at
                                                              Current Prices
                                                                Discounted
                                     Crude Oil    Natural Gas    at 10% t0
                                      (Barrels)      (MCF)     Present Value
                                     ---------   -----------   -------------
Oklahoma Proved Developed Reserves           -     1,005,169     1,169,815
Texas Proved Developed Reserves        142,371        33,395       841,777
Oklahoma Proved Undeveloped Reserves         -     1,855,548     1,900,718
Texas Proved Undeveloped Reserves      352,452        66,261     3,460,748
                                     ---------    ----------   -----------
Total Proved Reserves                  494,823     2,960,373     7,373,058
                                     =========    ==========   ===========

  The Company does not have any information regarding any unproven oil or gas
reserves and therefore have not disclosed any such information.

      The  independent  mineral  reports upon which the  foregoing  analysis  of
existing  interest  is derived have been attached as exhibits  to  this  report.

                                        4

Arena  does not warrant or guarantee the accuracy or completeness of the results
contained in such independent reserve reports prepared for the Company, and  any
such  mineral reports should be considered as an estimate rather than an  actual
determination of recoverable and potential reserves.

(D) COMPETITIVE FACTORS

      Current  competitive  factors in the domestic oil  and  gas  industry  are
unique.   The  actual price range of crude oil is largely established  by  major
international  producers.  Pricing for natural gas is  more  regional.   Because
domestic  demand for oil and gas exceeds supply, there is little risk  that  all
current production will not be sold at relatively fixed prices.  To this  extent
Arena  does not see itself as directly competitive with other producers, nor  is
there  any  significant risk that the company could not sell all  production  at
current   prices  with  a  reasonable  profit  margin.   The  risk  of  domestic
overproduction  at  current  prices  is not  deemed  significant.   The  primary
competitive  risks  would  come from falling international  prices  which  could
render current production uneconomical.

      Secondarily,  Arena  is presently committed to use  the  services  of  the
existing  gatherers  in its present areas of production.   This  gives  to  such
gatherers  certain short term relative monopolistic powers to set gathering  and
transportation costs, because obtaining the services of an alternative gathering
company would require substantial additional costs since an alternative gatherer
would  be  required to lay new pipeline and/or obtain new rights of way  in  the
lease.

     It is also significant that more favorable prices can usually be negotiated
for larger quantities of oil and/or gas product, such that Arena views itself as
having  a price disadvantage to larger producers.  Large producers also  have  a
competitive advantage to the extent they can devote substantially more resources
to acquiring prime leases and resources to better find and develop prospects.

(E) NUMBER OF PERSONS EMPLOYED

     Both Mr. Lloyd T. Rochford and Mr. Stanley McCabe will actively continue in
management on a full time basis for the Company.  Mr. Rochford presently  serves
the  Company as its president and chief executive officer (CEO).  Mr. McCabe  is
secretary  and  treasurer.   Both Mr. Rochford  and  Mr.  McCabe  are  currently
involved  full-time in the Private Placement, acquisition efforts and continuing
operations for Arena.  As of September 01, 2001 both Mr. Rochford and Mr. McCabe
began  receiving salaries of $3,000/month for services provided to the  Company.
These salaries were paid from net revenues received.

      Salaries  paid were made on a prospective basis and no payments have  been
made  for  services  rendered  prior  to September  1,  2001,  however,  accrued
compensation  expenses have been applied in determining Mr. Rochford's  and  Mr.
McCabe's equity positions in the amount of $25,000.

      Arena agreed to pay general costs, such as travel and communications,  and
to repay Mr. Rochford and Mr. McCabe advanced third party costs directly related
to  the  organizational,  securities selling and  registration  efforts  by  the
Company,  such as expert fees, required to complete its Initial Public Offering,
Private  Placement  and  to  continue  operations.   These  repaid  amounts  are
estimated at $33,070.

                                        5


      Effective  September  1, 2001 Arena retained the services  of  William  R.
Broaddrick,  CPA to serve as chief accountant.  Effective February 1,  2002  Mr.
Broaddrick  assumed responsibilities as chief financial officer (CFO)  and  vice
president.   Mr.  Broaddrick is currently involved full time in  accounting  and
reporting  efforts  for  Arena.   Effective with hiring,  Mr.  Broaddrick  began
receiving a salary of $40,000/year.

      In  the  event  that  Arena is successful in its growth  efforts,  it  may
consider retaining other employees or experts on a full or part-time basis as it
deems  appropriate.   Arena would consider employing the  services  of  a  field
geologist  and  well completion supervisor in the event of sufficient  revenues.
The  geologist and well completion supervisor may be retained on either a  part-
time  salary  or an independent contract basis as Arena would subsequently  deem
most appropriate in the future. Arena will also probably consider hiring a full-
time secretary  or  office manager as the development of Arena  would  justify,
along with other as yet undetermined office workers or personnel.

(F)  ENVIRONMENTAL COMPLIANCE AND RISKS

      Oil and gas production is a highly regulated activity which is subject  to
significant  environmental and conservation regulations both on  a  federal  and
state level.  Historically, most of the environmental regulation of oil and  gas
production  has  been  left  to state regulatory boards  or  agencies  in  those
jurisdictions  where there is significant gas and oil production,  with  limited
direct  regulation  by  such  federal agencies as the  Environmental  Protection
Agency.   However, while the Company believes this generally to be the case  for
its production activities in Texas and Oklahoma, it should be noticed that there
are  various  Environmental  Protection Agency regulations  which  would  govern
significant spills, blow-outs, or uncontrolled emissions.

     In Oklahoma and Texas specific oil and gas regulations exist related to the
drilling, completion and operations of wells, as well as disposal of waste  oil.
There  are also procedures incident to the plugging and abandonment of dry holes
or  other  non-operational wells, all as governed by the  Oklahoma  Corporations
Commission, Oil and Gas Division or the Texas Railroad Commission, Oil  and  Gas
Division.

      Compliance  with these regulations may constitute a significant  cost  and
effort for Arena.  No specific accounting for environmental compliance has  been
maintained or projected by Arena to date.  Arena does not presently know of  any
environmental  demands, claims, or adverse actions, litigation or administrative
proceedings in which it or the acquired properties are involved or subject to or
arising out of its predecessor operations.

      In the event of a breach of environmental regulations, these environmental
regulatory agencies have a broad range of alternative or cumulative remedies  to
include:  ordering a clean up of any spills or waste material and restoration of
the  soil  or water to conditions existing prior to the environmental violation;
fines;  or enjoining further drilling, completion or production activities.   In
certain  egregious  situations the agencies may also  pursue  criminal  remedies
against the Company or its principals.

(G) DISTINCTIVE CHARACTERISTICS OF ISSUER'S BUSINESS AND INDUSTRY
      There  are certain special or distinctive characteristics of this issuer's
business  which should be understood.  While some of these characteristics  have
been  earlier  discussed  or  alluded to, we  are  summarizing  below  the  more
significant of these factors:

                                        6

  .    Oil  and  gas  production is a highly regulated industry.  The  Oklahoma
     Corporation Commission, Oil and Gas Division, Texas Railroad Commission,
     Oil and Gas Division, as well as similar regulatory agencies in other
     states, impose limitations on the number of wells per geographic area and
     also may regulate the amount of production from wells in a formation or
     given conservation area.

  .  Environmental issues, including disposal of drilling fluids and
     chemicals, waste oil and surface contamination are regulated by the
     Oklahoma Corporation Commission, the Texas Railroad Commission and
     similar agencies in other states; and, secondarily, by the Federal
     Environmental Protection Agency (EPA). Typically the EPA does not
     impose specific standards or regulations unless there is a significant
     environmental contamination.

  .   Any drilling and completion of a well must be considered high risk due
      to the danger a well may be drilled and completed at substantial cost
      only to be determined to be a dry hole or non-commercial well.

  .  The pricing for oil and gas has historically been extremely volatile and
     these price changes could render, in a short period, an otherwise
     commercially successful well non-commercial and require it to be shut-in.
     Additionally, there are risks to production including casing or formation
     collapses, blow-outs, flooding silting, as well as equipment failures.

  .  The exact structure of Arena's future oil and gas acquisition and
     operating activities is not and cannot be determined prior to the close
     of the ongoing Private Placement Offering and the anticipated actual
     acquisition of additional oil and gas properties.

(H) MANAGEMENT'S CURRENT PLANS

      Management plans to use the proceeds of the Private Placement  to  acquire
proven  operating  properties; acquire, drill and complete proven  non-operating
properties  or  drill and complete wells on currently owned proven non-operating
properties.   No reasonable projection of drilling and completion of  additional
wells to be completed, if at all, can be made at this time because Arena is  not
certain  of  when additional properties will be acquired or the  final  proceeds
available  for  such  efforts.   As  the  economic  factors  upon  which   these
alternative development decisions must be made changes on an almost daily  basis
for small independent oil and gas producers, such as Arena, it is impossible  to
make  economic  forecasts as to the ultimate structure of Arena's  oil  and  gas
program  or  the  exact use of proceeds within the over-all parameters  outlined
earlier.

(I) CURRENT ACTIVITIES

      As indicated previously, Arena is involved in an ongoing Private Placement
Offering  that  commenced June 30, 2001 and is anticipated to close  during  the
second  quarter of 2002.  As of December 31, 2001 the Private Placement Offering
has  generated gross proceeds of $1,500,753.  The terms of this offering and use
of proceeds are more fully described on page 9 of this Report.

(J) MAJOR CUSTOMERS

      As  indicated  previously, Arena presently sells all of its production  to
three purchasers.  The gas produced from the Oklahoma lease is being transported
by  Enogex  and  being sold to ONEOK.  There is no oil being produced  from  the

                                        7

Oklahoma  lease.   The gas produced from the Texas lease is being  gathered  and
sold  to  CMS Taurus Field Services, LP.  The oil produced from the Texas  lease
was  sold to BML, Inc throughout the year 2001.  Effective February 1, 2002, the
oil produced from the Texas lease is being sold to Sun Oil Co.

(K) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

      The  following  table  summarizes the production volume  and  net  revenue
recognized  for  the  year  ended December 31, 2001  separated  by  product  and
geographic area:

                                  OIL

                       Production volume        Net Revenue
        Texas Lease       16,211 BBLS             $288,372

                                  GAS

                       Production volume        Net Revenue
        Texas Lease        3,955 MCF               $6,431
      Oklahoma Leases      1,635 MCF               $2,133

      The  average price paid per MCF of gas on the Oklahoma leases  was  $2.09.
The  average  price  paid per MCF of gas from the Texas lease  was  $1.90.   The
average price paid per BBL of oil from the Texas lease was $20.70.

 (L) DESCRIPTION OF OPERATING LEASES

      In  addition  to  the described oil and gas properties, Arena  has  rental
office  space, equipment and facilities.  At present, it leases office space  at
4920  South  Lewis, Suite 107, Tulsa, Oklahoma.  As of December 31,  2001,  this
lease consists of approximately 671 square feet of office space and is leased by
the  Company  for  $506  per month including all standard office  equipment  and
furnishings.   All  lease  payments through  March  31,  2001  were  made  by  a
shareholder and are included in the services and the use of space contributed by
shareholders.   All  payments  made on or after April  1,  2001  were  made  and
accounted for as expenses to the Company.

      The current facilities are believed adequate for the initial operation  of
Arena.

      The Company also has a lease agreement for gas compressor equipment.   The
lease  became  effective in December 2001 and has a minimum term  of  6  months.
Following  the  six month minimum term, the lease will continue on  a  month  to
month  basis  until  either party provides a thirty (30) day written  notice  of
termination.  The lease payments are $1,900 a month.


                                        8

(M) REPORT ON INITIAL PUBLIC FINANCING

      The  Company completed its initial public financing by employing  an  SB-1
Registration which became effective January 12, 2001 and which was closed  as  a
minimum  offering  on  February 16, 2001.  The Company sold  800,000  shares  at
$.25/share  to  twenty-nine  California  residents  raising  $200,000  in  gross
proceeds.   The offering was also qualified as a public offering in  California,
though California will not yet allow secondary trading of the securities sold in
that jurisdiction because of the start-up nature of Arena and due to its limited
capitalization.  California also required certain net worth requirements of  the
public investors to insure their sophistication and ability to bear the risks of
investment.

      Pursuant to the provision of SEC 463 and Item 701 of Regulation  S-K,  the
Company  reports that the net proceeds of the offering have been fully expended.
The  Company  paid offering related costs including printing, accounting,  legal
and  related  filing  fee of $27,201.  The Company also expended  an  additional
$24,296  for  offering related costs from the proceeds of a  $25,000  loan  from
affiliates.   Payments  made  after  paying  offering  costs  consisted  of  the
following: $25,000 to pay off affiliated party loans, $22,337 for operating  and
related costs and $125,462 for oil and gas acquisition or development.

(N) REPORT ON PRIVATE PLACEMENT OFFERING

      In  June  2001, Arena commenced an initial Private Placement  Offering  to
accredited  investors to attempt to raise between $525,000  and  $3,500,000  for
drilling  and completions, as well as additional acquisitions.  As  of  December
31,  2001  this offering had not closed but was anticipated to be closed  during
the second quarter 2002.  Gross proceeds as of December 31, 2001 were $1,500,753
with offering costs totaling $123,132 for net proceeds of $1,377,621.

      The  Private  Placement  is a sale of the Company's  preferred  class  "A"
shares,  convertible to common on a one-to-one ratio.  The Private Placement  is
not  yet  closed  so the total amount to be raised or the employments  of  those
proceeds  are not yet subject to reporting.  However, the Private Placement  has
exceeded  the  minimum offering requirement of $525,000.  The  preferred  shares
have  been  sold  at $1.75 per share with a minimum offering of  300,000  shares
($525,000) and a maximum of 2,000,000 shares ($3,500,000).  The preferred shares
will  automatically convert to common shares if the price of the  common  shares
equals  or  exceeds  $4.00  per share for 20 consecutive  days.   Otherwise  the
conversion right is at the election of the holder.  After one year the preferred
shares  may be redeemed at 105% of their issue price plus payment of any accrued
interest,  subject  to  a  30 day notice provision.  The  preferred  shares  pay
dividends at a rate of $0.175 per share annually, paid quarterly.

                               Item 2.  PROPERTIES

(A) DRILLING ACTIVITIES

      During the year ended 2001, Arena Resources completed the drilling of  two
wells in Muskogee County, Oklahoma.  The Wallace well was drilled on the NE 1/4
of Section 33.  After drilling the Wallace was determined to be a dry hole and
has since  been plugged and abandoned.  The Casey well was drilled on the  SW
1/4  of Section  33.  The Casey was completed and placed into production during
December 2001.  Detailed information regarding this well is below.

                                        9

(B) LEASE INFORMATION

      Arena  Resources currently owns an interest in the Casey lease in Muskogee
County,  Oklahoma.  The Company began with a 40% working interest in this lease
which  was  contributed by the two principal shareholders Mr. Rochford  and Mr.
McCabe.   The  Company  has  subsequently acquired and  additional  54%  working
interest and a 2-1/2% overriding royalty interest in the lease.  Total interest
in the well consists of a 94% working interest and a 2-1/2% overriding  royalty
interest,  which  equates to approximately a 74.48% net revenue interest.  The
Casey  lease  has been completed and had first production during late December
2001.

      Arena Resources owns a 100% working interest, 80% net revenue interest, in
the  Y6  lease  in Fisher County, Texas.  Arena purchased the Y6 lease  with  an
effective  date of June 1, 2001 and has had production on this lease  from  that
date.

      The essential terms, together with acquisition basis, for these two leases
is summarized below:

Casey Lease -

     (a)  The initial 40% working interest in the Casey lease was initially
          acquired by the principal shareholders and was contributed to Arena
          as part of the initial capital contributions, accounting for
          approximately $67,500 of those contributions.

     (b)  In May 2001, the Company acquired an additional 30% working interest
          in the Casey lease from a third party. The additional working interest
          was value at $300,000 and was acquired by the issuance of 80,000
          shares of common stock valued at $1.75 per share totaling $140,000,
          the assumption of a $50,000 obligation of the seller and the issuance
          of a notes payable for $110,000, which has been settled through cash
          payments of $45,000 and the issuance of an additional 37,143 shares
          of common stock valued at $1.75 per share totaling $65,000. There was
          no beneficial conversion feature associated with the conversion of
          debt into common stock incurred prior to acquisition.  The $50,000
          liability assumed from the seller related to the seller's previous
          obligation to the operator of the properties and has been paid.

     (c)  In October 2001, the Company acquired an additional 24% working
          interest and a 2-1/2% overriding royalty interest in the Casey lease
          from a third party. The acquired interests were valued at $266,250 and
          were acquired by the issuance of 81,857 shares of common stock valued
          at $1.75 per share totaling $143,250, a cash payment of $90,000 and
          the issuance of a notes payable for $33,000. Through December 31, 2001
          the Company paid $15,000 of principal on the note.

     (d)  The Casey lease began first production in late December 2001.

     (e)  This lease will be held by production.

Y6 Lease -

     (a)  The 100% working interest in the Y6 lease was acquired effective
          June 01, 2001 from a third party for a cash payment of $750,000.

                                        10

     (b)  The Y6 lease has had production from the date of acquisition.

     (c)  The Y6 lease is being held by production.

     (d)  In connection with this acquisition, Arena issued 2,500 shares.

     In the Casey lease, Arena has a ninety four percent working interest.  This
means that Arena has a ninety four percent interest in total production after it
pays  its  pro rata share, ninety four percent, of operating costs,  but  before
royalty  payments to the mineral interest owner.  In the Y6 lease, Arena  has  a
one  hundred percent working interest.  This means that Arena has a one  hundred
percent  interest  in total production before royalty payments  to  the  mineral
interest  owner.   As  used  in  this  Report  total  production  is  the  total
recoverable  amount  of  product produced from  an  oil  or  gas  well,  usually
expressed  in quantity (barrels for oil; thousand cubic feet "MCF" for  gas)  or
dollar  amount  of  production.  Royalty payments are a  portion  of  the  total
production (usually 5-25%) paid directly to the landowner, and sometimes others,
from  the  net  cash proceeds of production after extraction taxes,  but  before
charging  any  costs.   The mineral interest owner is  usually  the  person  who
ultimately  owns the oil and gas and is usually the "lessor" or person  creating
the lease.  The mineral interest owner usually retains a royalty interest.

      In  the  Casey lease, Arena estimates its net revenue interest,  which  it
retains  after  the payment of royalty interest, would be approximately  74.48%.
This  is  derived by taking the total production, 100%, subtracting the royalty,
20.76%,  then multiplying the remaining net revenue interest, 79.24%, by Arena's
working interest share, 94%, thus yielding a 74.48% net mineral revenue  or  net
revenue interest.  In the Y6 lease, Arena has an 80% net revenue interest.  This
is  derived  by taking the total production, 100%, and subtracting  the  royalty
20%.  A net revenue interest is a term which defines the actual revenues which a
working interest holder will obtain from a given lease after payment of its  pro
rata share of production costs and after royalty payments.

                           Item 3.  LEGAL PROCEEDINGS

     There are no legal actions or claims in which the Company is engaged.

          Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      The Company did not hold a shareholders meeting in 2001, thus there was no
vote of securities holders in 2001.  The Company anticipates holding its initial
annual shareholder meeting in the late summer or early fall, 2002.

                                     Part II

     Item 5.  MARKET FOR REGISTRANT'S COMMON AND RELATED STOCKHOLDER MATTERS

      Arena began trading on the NASD Electronic Bulletin Board March 29,  2001.
Arena  is  also  listed in Standard and Poors industrial listing  and  claims  a
secondary  trading exemption based on such listing.  During the year  2001,  the
stock  has  traded within a range of from $.25 to $2.50. Following  is  a  table
showing the high and low bid per quarter since active trading commenced:


                                        11

                    Period           High Bid     Low Bid

               1st quarter - 2001       1.230       0.250
               2nd quarter - 2001       2.000       1.125
               3rd quarter - 2001       2.250       1.875
               4th quarter - 2001       2.500       2.250
               1st quarter - 2002       2.650       2.400

       Approximately  72%,  or  2,601,000,  of  Arena's  3,604,500  issued   and
outstanding shares are held by management or affiliated parties with the balance
being publicly held.

                        Item 6.  SELECTED FINANCIAL DATA

     The following constitutes only a selected summary of significant accounting
information  and  is  qualified in its entirety by  reference  to  the  complete
audited  Financial  Statements attached hereto and incorporated,  including  the
notes thereto.
                                                             From
                                                    March 3, 2000
                                           For the    (Inception)
                                        Year Ended        Through
                                      December 31,    December 31,
                                              2001           2000
Operations                              ----------     ----------
     Oil and Gas                        $  296,936     $    2,424
     Other revenues                              -              -
Expenses                                  (278,771)      (112,847)
     Net Income (Loss)                      18,165       (110,423)
     Preferred dividends                    63,092              -
     Income (Loss) applicable to
       common shares                       (44,927)      (110,423)
     Income (Loss) per common share          (0.01)         (0.04)
Working Capital                            379,468        (29,070)
Liabilities                                 99,735         47,399
Total Assets                             2,137,689        104,365
Stockholder's Equity                     2,037,954         56,966



                      Item 7.  MANAGEMENT'S DISCUSSION AND
                         ANALYSIS OF FINANCIAL CONDITION

     This Form 10-K includes "forward-looking" statements about future financial
results,  future business changes and other events that have not  yet  occurred.
For  example,  statements like we "expect," we "anticipate" or we "believe"  are
forward-looking statements.  Investors should be aware that actual  results  may
differ  materially  from  our  expressed  expectations  because  of  risks   and
uncertainties about the future.  We will not necessarily update the  information
in  this  Form10-K  if  any forward-looking statement  later  turns  out  to  be
inaccurate.   Details about risks affecting various aspects of our business  are
discussed  throughout this Form 10-K.  Investors should read all of these  risks
carefully.

                                        12

RESULTS OF OPERATIONS

     The accompanying financial statements have been prepared on a going concern
basis,  which  contemplates the realization of assets and  the  satisfaction  of
liabilities  in  the  normal  course of business.  As  shown  in  the  financial
statements for the year ended December 31, 2001, the Company earned $296,936  in
revenue and has net income of $18,165, before Class A preferred stock dividends.
The  Company  also  has  positive net cash flows  from  operations  of  $84,023.
However,  after  including the Class A preferred stock  dividends,  the  Company
incurred  a  loss of $44,927 and has a cumulative retained earnings  deficit  of
$155,350.

      The  valuation of the oil and gas reserves placed into Arena by management
for shares were based upon a discounted current estimated market value through a
reserve  report, even though such properties are valued for accounting  purposes
on  a  predecessor  cost basis.  It is difficult to actually value  the  present
assets  placed  into  Arena,  notwithstanding the existence  of  an  independent
petroleum  reserve report.  The reserve report should be considered only  as  an
estimate of potential value of recoverable reserves and not as an assurance  and
warranty  that  the Company will realize either cash flow or  gains  from  those
resources, even assuming maximum sustained production.

      The  initial capital assets contributed to Arena were supplied by its  two
principal  shareholders. In contributing these assets there was  no  independent
board of directors or shareholders to determine the reasonable valuation of  the
cash,  oil and gas properties and related interest contributed for the sharehold
interest  obtained by the founders and initial shareholders.   For  the  initial
1,300,000  shares acquired by both Mr. McCabe and Mr. Rochford, each contributed
$33,695  in  cash and a carried working interest obligation worth  approximately
$134,000.   Actual  costs for the working interest obligation totaled  $121,274.
The  remaining $12,726 was offset against additional paid in capital.  From  the
cash contribution, the Company acquired the three lease properties at a basis of
approximately $61,174.  The contributed cash increased both shareholders' equity
in  Arena.  The prior uncompensated services for the year ended 2001 of  Messrs.
McCabe  and  Rochford  have been valued at $25,000 for accounting  purposes  and
carried as additional paid in capital.

CAPITAL RESOURCES AND LIQUIDITY

     At present the Company has three sources of potential working capital.  The
first  is  the  revenue from production sales on the Y6 lease in Fisher  County,
Texas.   The  second capitol resource is revenue from production  sales  on  the
Casey  lease in Muskogee County, Texas.  The third capital resource of Arena  is
the  on-going  Private  Placement of Arena Class A preferred  stock,  which  has
yielded $1,377,621 in net proceeds.

     Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      Information  required  by  this item appears in the  Consolidated  Audited
Financial Statements and Auditors Report for Arena for the year ending  December
31, 2001 as listed under Item 14.

    Item 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                              FINANCIAL DISCLOSURE

     None.

                                        13


                                    PART III

                   Item 10.  DIRECTORS, EXECUTIVE OFFICERS AND
                              SIGNIFICANT EMPLOYEES

      Following this table is a brief biographical description for each  of  the
management principals with a brief description of their business experience  and
present  relationship to Arena, together with all required relevant  disclosures
for  the  past  five  years.   Following the biographical  information  for  the
directors and officers is a remuneration table showing current compensation  and
following this table is a security ownership table showing security ownership of
the principal officers and directors, as well as those holding 5% or more of the
issued and outstanding stock.

       NAME               POSITION            CURRENT TERM OF OFFICE

Mr. Lloyd "Tim"         Director/CEO/     Appointed in Organizational
Rochford                  President       Minutes - September, 2000.
                                          Will serve as director until
                                          first annual meeting, not yet
                                          set.  Will serve as an
                                          officer without term/contract
                                          pursuant to leave of the
                                          Board of Directors.
Mr. Stanley McCabe  Director/Treasurer/   Appointed in Organizational
                         Secretary        Minutes - September, 2000.
                     /Accounting Officer  Will serve as director until
                                          first annual meeting, not yet
                                          set.  Will serve as an
                                          officer without term/contract
                                          pursuant to leave of the
                                          Board of Directors.
Mr. Charles Crawford     Director         Appointed in Organizational
                                          Minutes - September, 2000.
                                          Will serve as director until
                                          first annual meeting, not yet
                                          set.
Mr. William "Randy"  Vice President/CFO   Will serve as an officer
     Broaddrick                           without term/contract
                                          pursuant to leave of the
                                          Board of Directors.

BACKGROUND

MR. LLOYD "TIM" ROCHFORD - DIRECTOR , CEO/PRESIDENT
Age: 55

      Mr.  Rochford has been active as an individual consultant and entrepreneur
in the oil and gas industry since 1973.  In this capacity, he has primarily been
engaged  in  the  organization and funding of private oil and gas  drilling  and
completion  projects and ventures within the mid continent region of the  United
States.

                                        14

      In  1989 Mr. Rochford was co-founder, director and CEO of a public company
known as Magnum Petroleum, Inc. ("Magnum") which is listed on the American Stock
Exchange.  Subsequently, Magnum acquired Hunter Resources, Inc. in August, 1995.
Mr.  Rochford  served  as Chairman of the Board of the combined  companies  from
August, 1995 - June, 1997.  Since July, 1997, Mr. Rochford has primarily devoted
his time and efforts to individual oil and gas acquisition and development prior
to  his commitment to participate in Arena Resources.  In 1982, Mr. Rochford was
co-founder  of  Dana Niguel Bank, a publicly held California bank operation  and
served  as  a director until 1994.  Mr. Rochford resigned as an officer/director
of  New Systems, Inc. a small public company, effective December 31, 2000.   Mr.
Rochford  attended various college level courses in business from  1967-1970  in
California.

MR. STANLEY McCABE - DIRECTOR/SECRETARY/TREASURER/
ACCOUNTING OFFICER
Age: 69

      From  1979  to  1995, Mr. McCabe was involved in Stanton Energy,  Inc.,  a
Tulsa,  Oklahoma natural resource company specializing in contract drilling  and
operation of oil and gas wells.  From 1990 to 1995, he was Chairman and  CEO  of
that  company.   In  1990,  Mr. McCabe also became a co-founder  and  subsequent
officer  and  director  of Magnum Petroleum, Inc., along with  Mr.  Rochford  as
previously discussed.  Subsequently, Mr. McCabe served as a director  of  Magnum
Hunter Resources, Inc., through December, 1996.  Since January, 1997, Mr. McCabe
has  been  involved as an independent investor and developer of  oil  and  other
natural resource companies.

      Mr.  McCabe  attended  college  courses at  the  University  of  Maryland,
primarily in business in 1961-1962.

MR. CHARLES CRAWFORD - DIRECTOR
Age: 49

      For  the  past  twenty-five years from 1975 to present, Mr.  Crawford  has
served  as an independent oil and gas exploration consultant to various  private
and  public oil and gas companies within the United States.  He has acted  as  a
consultant  to  such  firms  as  Texaco Corporation,  Phillips  Petroleum,  Mid-
Continent  and Energy as well as other regional and national companies primarily
acting in the mid-continent area.

      Mr.  Crawford  is  not  presently affiliated with any  private  or  public
companies other that his participation on the board of directors with Arena.

      Mr. Crawford received a Masters Degree in geology from Miami University of
Ohio, in 1976.  Mr. Crawford will serve the company on an as needed basis as  an
outside director.

MR. WILLIAM "RANDY" BROADDRICK - VICE PRESIDENT/CFO
Age:  24

      From  1997  to  2000,  Mr. Broaddrick was employed with  Amoco  Production
Company,  performing  lease  revenue accounting and  state  production  tax  and
regulatory  reporting  functions.  During 2000, Mr. Broaddrick  became  employed

                                        15

with  Duke  Energy Field Services    performing state production tax  functions.
During  2001,  Mr.  Broaddrick joined Arena as chief accountant  and,  effective
February  1,  2002,  has assumed responsibilities as Vice  President  and  Chief
Financial Officer.

      Mr.  Broaddrick received a Bachelor's Degree in Accounting  from  Langston
University,  through Oklahoma State University - Tulsa, in 1999.  In  May  2001,
Mr. Broaddrick successfully passed the Certified Public Accountant (CPA) exam.

                        Item 11.  EXECUTIVE COMPENSATION

      Prior to September 2001, no salaries were paid to either Mr. McCabe or Mr.
Rochford  for  their full-time service to Arena.  Effective September  2001  Mr.
McCabe  and  Mr.  Rochford began receiving a salary of  $36,000/year  each.   No
payments  have been paid or are anticipated to be paid for services  contributed
prior  to September 2001.  Also effective September 2001, Mr. Broaddrick  became
employed with Arena and began receiving a salary of $40,000/year.  Additionally,
Mr. Broaddrick received 1,500 shares as a bonus.

      Additionally, the Board of Director's has authorized management to adopt a
stock  option  plan  for  officers,  however,  there  are  no  definitive  stock
incentives or option plans in place presently.

    Item 12.  SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

SHARES OWNED BY MANAGEMENT AND CERTAIN SECURITY HOLDERS

     The following table includes all shares issued to a director, officer or 5%
or  greater shareholder.  There are no created or issued stock options or  other
stock rights in Arena at the present time:

Title or Class   Name of Owner        Amount owned     Percent of Class
--------------   -------------        ------------     ----------------
Common Stock   Lloyd T. Rochford       1,299,500              36%
Common Stock   Stanley McCabe          1,300,000 (1)          36%
Common Stock   William R. Broaddrick       1,500               0%
               All Officers/Directors  2,601,000              72%
                as a group

      (1)   Of  the 1,300,000 shares owned by Mr. Stanley McCabe, 1,150,000 are
            directly owned. The remaining 150,000 shares are indirectly owned.

      As  of  March 1, 2002, in addition to the management shares listed  above,
Arena has approximately 49 public shareholders.

      Additionally, the Board of Director's has authorized management to adopt a
stock  option  plan  for  officers,  however,  there  are  no  definitive  stock
incentives or option plans in place presently.

                                        16


            Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      There are certain transactions related to Arena which are not deemed to be
"arms-length" transactions.  That is, the parties on both sides of the  contract
or  agreement  have  substantial relationships or common  interests.   All  such
material transactions are believed to be disclosed in this section.

      1.   The initial capital assets contributed to Arena were supplied by  its
two initial shareholders.  In contributing these assets there was no independent
board of directors or shareholders to determine the reasonable valuation of  the
cash,  oil  and  gas properties and related interest for the sharehold  interest
obtained  by  the founders and initial shareholders.  For the initial  1,300,000
shares acquired by both Mr. McCabe and Mr. Rochford, each contributed $33,695 in
cash and a carried working interest obligation worth approximately $134,000.  Of
the  cash contributed, $61,174 was employed to acquire the three initial leases.
The contributed cash increased both shareholders' equity in Arena. The estimated
future  development  costs  to  Messrs. McCabe and  Rochford  of  $134,000  were
estimated  by independent engineers and have been accounted for as an  estimated
receivable  from  stockholders in the accompanying financial statements.   Total
actual costs incurred in relation to the carried working interest were $121,274.
The remaining $12,726 was closed against additional paid in capital.  Any person
purchasing  Arena  stock should consider that the two initial shareholders  will
most  likely be in a control shareholder position, even after the completion  of
the  Private  Placement, to determine their initial salaries and any  amount  of
deferred  compensation  and  these actions will not  constitute  an  independent
transaction and should be considered as a potential risk factor.

      2.    Even after the Private Placement is completed, the management group,
as  described  above,  may continue in control and would  essentially  be  in  a
position  to  dictate  salaries, distributions, and other interests  as  to  all
shareholders.   While  there  is  a general common  law  as  well  as  statutory
obligation  placed upon management of Arena to act in the best interest  of  all
shareholders,  any  person  acquiring Arena stock  should  consider  that  their
minority shareholder status imposes a certain risk of not being in a position to
influence or affect the direction of the Company.

      3.    There  exists  a potential conflict that both Mr. Rochford  and  Mr.
McCabe  will  continue to pursue individually various oil and gas interests  for
their  accounts.  As officers and directors, Mr. Rochford and Mr. McCabe have  a
fiduciary duty to make appropriate oil and gas opportunities first available  to
Arena.   As a result, a certain potential conflict exists between their  pursuit
of  individual  oil and gas interests and the duty owed to Arena.   The  Company
believes  it  has resolved this potential conflict through the understanding  by
current management to make all appropriate and feasible oil or gas opportunities
first  available  to  Arena.   However, each shareholder  should  consider  such
potential  conflict  as  a  risk factor.  There are no  written  commitments  or
undertakings  between  Arena  or Messrs. McCabe and  Rochford  on  this  matter.
While  the Company considers the undertakings as an enforceable agreement,  such
undertaking may be difficult to legally enforce.

                                          17




                                     Part IV

               Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
                            AND REPORTS ON FORM  8-K

1.        Financial  Statements:   See attached Index to  Financial  Statements,
       Financial Statement and Supplemental Information as referenced in Part
       II, Item 8.

2.       Reports on Form 8-K:

       None

3.        Exhibit Index:

        3.1  Articles of Incorporation of Registrant.  Earlier filed and
              incorporated as part of SB-1 Registration Statement.

        3.2  By-Laws of Registrant. Earlier filed and incorporated as part of
              SB-1 Registration Statement.



                                        18

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
behalf by the undersigned, thereunto duly authorized.

                                   REGISTRANT:

                                   ARENA RESOURCES, INC.


Date:     March 12, 2002           By:  /s/ Lloyd T. Rochford
                                       -----------------------------
                                   Mr. Lloyd T. Rochford, President,
                                   Chief Executive Officer

Date:     March 12, 2002           By:  /s/ Stanley McCabe
                                       -----------------------------
                                   Mr. Stanley McCabe
                                   Treasurer, Secretary

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.

Date:   March 12, 2002             By:  /s/ Lloyd T. Rochford
                                       ----------------------------
                                   Mr. Lloyd T. Rochford,
                                   President/Director

Date:   March 12, 2002             By:  /s/ Stanley McCabe
                                       ----------------------------
                                   Mr. Stanley McCabe
                                   Director

Date:   March 12, 2002             By:  /s/ Charles Crawford
                                       ----------------------------
                                   Mr. Charles Crawford
                                   Director


                                        19



                     ARENA RESOURCES, INC.

                       TABLE OF CONTENTS


                                                                 Page

Report of Independent Certified Public Accountants               F-1

Balance Sheets - December 31, 2001 and 2000                      F-2

Statements of Operations for the Year Ended December 31,
  2001 and for the Period from March 3, 2000 (Date of
  Inception) through December 31, 2000                           F-4

Statement of Stockholders' Equity for the Period from March
  3, 2000 (Date of Inception) through December 31, 2000 and
  for the Year Ended December 31, 2001                           F-5

Statement of Cash Flows for the Year Ended December 31, 2001
  and for the Period from March 3, 2000 (Date of Inception)
  through December 31, 2000                                      F-7

Notes to Financial Statements                                    F-9

Supplemental Information on Oil and Gas
 Producing Activities                                            F-15




HANSEN, BARNETT & MAXWELL                         (801) 532-2200
A Professional Corporation                      Fax (801) 532-7944
CERTIFIED PUBLIC ACCOUNTANTS                5 Triad Center, Suite 750
                                            Salt Lake City, Utah 84180
                                                 www.hbmcpas.com


       REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and the Stockholders
Arena Resources, Inc.

We have audited the balance sheets of Arena Resources, Inc. as of
December 31, 2001 and 2000, and the related statements of
operations, stockholders' equity and cash flows for the year
ended December 31, 2001 and for the period from March 3, 2000
(date of inception) through December 31, 2000. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable
basis for our opinion.

In our opinion the financial statements referred to above present
fairly, in all material respects, the financial position of Arena
Resources, Inc. as of December 31, 2001 and 2000, and the results
of its operations and its cash flows for the year ended December
31, 2001 and for period from March 3, 2000 (date of inception)
through December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.


                                /S/  HANSEN, BARNETT & MAXWELL

Salt Lake City, Utah
March 4, 2002


an independent member of                 Member of AICPA Division of Firms
     BAKER TILLY                                  Member of SECPS
    INTERNATIONAL

                                F-1

                        ARENA RESOURCES, INC.
                            BALANCE SHEETS
<TABLE>
<CAPTION>

                                                    December 31,     December 31,
                                                        2001            2000
                                                      ------------    ----------
                                ASSETS
<S>                                                  <C>             <C>
Current Assets
    Cash                                              $    444,564    $   18,329
    Accounts receivable                                     33,733             -
    Prepaid expenses                                           906             -
                                                      ------------    ----------
    Total Current Assets                                   479,203        18,329
                                                      ------------    ----------
Property and Equipment, Using Full Cost Accounting
    Office equipment                                         7,078             -
    Oil and gas properties subject to amortization       1,645,819        61,174
    Less:  Accumulated depreciation and amortization       (44,411)         (263)
                                                      ------------    ----------
    Net Property and Equipment                           1,608,486        60,911
                                                      ------------    ----------
Held-to-Maturity Investment                                 50,000             -
                                                      ------------    ----------
Deferred Offering Costs                                          -        25,125
                                                      ------------    ----------
Total Assets                                          $  2,137,689    $  104,365
                                                      ============    ==========
</TABLE>

         See the accompanying notes to financial statements.

                                F-2

                       ARENA RESOURCES, INC.
                    BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>

                                                    December 31,     December 31,
                                                        2001            2000
                                                      ------------    ----------
                LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                  <C>             <C>

Current Liabilities
    Accounts payable                                  $     40,576    $    3,241
    Accrued liabilities                                      5,015             -
    Loans from stockholders                                      -        25,000
    Note payable                                            18,000             -
    Accrued preferred dividends                             36,144             -
    Accrued offering costs                                       -        19,158
                                                      ------------    ----------
    Total Current Liabilities                               99,735        47,399
                                                      ------------    ----------
Stockholders' Equity
    Preferred stock - par value $0.001 per share;
     10,000,000 shares authorized; 857,573 shares
     issues and outstanding; liquidation preference
     of $1,536,897                                       1,274,021             -
    Common stock - par value $0.001 per share;
     100,000,000 shares authorized; 3,604,500
     shares and 2,600,000 shares issued and
     outstanding, respectively                               3,605         2,600
    Additional paid-in capital                             921,411       298,789
    Estimated receivable from stockholders                       -      (134,000)
    Receivable from preferred stockholder                   (5,733)            -
    Accumulated deficit                                   (155,350)     (110,423)
                                                      ------------    ----------
    Total Stockholders' Equity                           2,037,954        56,966
                                                      ------------    ----------
Total Liabilities and Stockholders' Equity            $  2,137,689    $  104,365
                                                      ============    ==========
</TABLE>

                 See the accompanying notes to financial statements.

                                       F-3



                        ARENA RESOURCES, INC.
                      STATEMENTS OF OPERATIONS

                                                             For the Period
                                                             March 3, 2000
                                                          (Date of Inception)
                                        For the Year Ended      Through
                                           December 31,        December 31,
                                               2001                2000
                                            -----------       --------------
Oil and Gas Revenues                        $   296,936          $     2,424
                                            -----------          -----------
Costs and Operating Expenses
   Oil and gas production costs                 106,927                  263
   Depreciation and depletion expense            44,148                  263
   General & administrative expense             119,696               12,321
   Services contributed by majority
     shareholders - noncash expense               8,000              100,000
                                            -----------          -----------
Total Costs and Operating Expenses              278,771              112,847
                                            -----------          -----------
Net Income (Loss)                                18,165             (110,423)

Preferred Stock Dividends                        63,092                    -
                                            -----------          -----------
Loss Applicable to Common Shares            $   (44,927)         $  (110,423)
                                            ===========          ===========
Basic and Diluted Loss
  Per Common Share                          $     (0.01)         $     (0.04)
                                            ===========          ===========
Weighted-Average Number
  of Common Shares Used
  in Per Share Calculation                    3,367,774            2,600,000
                                            ===========           ==========

          See the accompanying notes to financial statements.

                                F-4



                                                  ARENA RESOURCES, INC.
                                          STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                             Additional                              Total
                                     Preferred Stock          Common Stock     Paid-In  Shareholder  Accumulated   Stockholders'
                                  Shares         Amount      Shares   Amount   Captial   Receivable    Deficit       Equity
                                  ------         ------      ------   ------   --------  ----------   -----------   -----------
<S>                               <C>            <C>         <C>      <C>      <C>       <C>         <C>           <C>

Balance as of
  March 3, 2000
  (Date of Inception)             $    -         $   -            -   $    -   $      -  $       -    $       -     $        -

  Fair value of services
    and office space
    contributed by officers            -              -           -        -    100,000          -            -         100,000

 Common stock issued for
   $67, 389 in cash and a
   receivable for a carried
   interest in gas properties,
   March 3, 2000 through
   August, 31, 2000
   - $0.08 per share                   -              -   2,600,000    2,600    198,789    (134,000)           -         67,389

  New loss                             -              -           -        -          -          -       (110,423)     (110,423)
                                  ------     ----------   ---------   ------   --------  ----------   -----------    ----------
 Balance December 31, 2000             -     $        -   2,600,000   $2,600   $298,789  $ (134,000)  $  (110,423)   $   56,966
                                  ======     ==========   =========   ======   ========  ==========   ===========    ==========
</TABLE>

                 See the accompanying notes to financial statements.

                                       F-5


                              ARENA RESOURCES, INC.
                  STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)

<TABLE>
<CAPTION>
                                                                             Additional                              Total
                                     Preferred Stock          Common Stock     Paid-In   Shareholder  Accumulated   Stockholders'
                                  Shares         Amount      Shares   Amount   Captial    Receivable     Deficit       Equity
                                  ------     --------    ----------   -------  --------   ----------   -----------   ----------
<S>                               <C>       <C>         <C>          <C>      <C>        <C>         <C>           <C>

  Balance as of
   December 31, 2000                   -     $        -   2,600,000   $2,600   $298,789   $(134,000)  $  (110,423)  $    56,966

  Issuance of common
    stock for cash in
    IPO, net offering
    costs of $51,497                   -              -     800,000      800    147,703           -            -        148,503

  Fair value of services
    and office space
    contributed by
    officers                           -               -          -        -     25,000            -           -         25,000

  Collection of
    shareholder
    receivable                         -               -          -         -   (12,726)      134,000          -        121,274

 Issuance of common
    stock in settlement
    of debt                            -               -     37,143        37    64,963             -          -         65,000

  Issuance of common
    stock for partial
    working interest
    in gas properties                  -                -   161,857       162    283,088            -           -       283,250

  Issuance of common
    stock for services
    relating to acquisition
    of properties                      -                -     2,500         3      4,997            -           -         5,000

  Issuance of common
    stock for services                 -                -     3,000         3      5,997            -           -         6,000

  Issuance of Series A
    preferred stock in
    private placement,
    net of cash offering
    costs of $ 123,132
    and 59,200 warrants          857,573    1,274,021           -       -   103,600      (5,733)           -     1,371,888

  Preferred stock dividends            -            -           -       -         -           -      (63,092)      (63,092)

  Net Income                           -            -           -       -         -           -       18,165        18,165
                               ---------   ----------  ----------  ------  --------  ----------  -----------   -----------

 Balance as of
  December 31, 2001              857,573   $1,274,021   3,604,500  $3,605  $921,411  $   (5,733) $  (155,350)  $ 2,037,954
                               =========   ==========  ==========  ======  ========  ==========  ===========   ===========
</TABLE>

                 See the accompanying notes to financial statements.

                                       F-6


                        ARENA RESOURCES, INC.
                      STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                 For the the Period
                                                                                    March 3, 2000
                                                                                 (Date of Inception)
                                                                For the Year Ended      Through
                                                                  December 31,        December 31,
                                                                      2001                2000
                                                                 -------------       ------------
<S>                                                             <C>                 <C>
Cash Flows From Operating Activities
   Net income (loss)                                              $      18,165       $   (110,423)
   Adjustments to reconcile net income (loss) to net cash
     provided by operating activities:
      Services and use of office space contributed by officers            8,000            100,000
      Shares issused for services                                         6,000
      Depreciation and depletion                                         44,148                263
      Changes in assets and liabilities:
      Accounts receivable                                               (33,733)               -
      Prepaid expenses                                                     (906)               -
      Accounts payable and accrued liabilties                            42,349              3,241
                                                                  -------------       ------------
   Net Cash Provided by (Used in) Operating Activities                   84,023             (6,919)
                                                                  -------------       ------------
Cash Flows from Investing Activities
   Purchase of oil and gas properties                                (1,035,620)           (61,174)
   Purches of Office equipment                                           (7,078)               -
   Proceeds from sale of equipment                                       20,500                -
   Advance to unrelated party                                           (30,000)               -
   Collection of advance to unrelated party                              30,000                -
   Purchase of held-to-maturity investment                              (50,000)               -
                                                                  -------------       ------------
   Net Cash Used in Investing Activities                             (1,072,198)           (61,174)
                                                                  -------------       ------------
Cash Flows From Financing Activities
   Proceeds from issuance of common stock, net offering costs           154,470             61,422
   Proceeds from issuance of preferred stock, net offering costs      1,371,888                -
   Proceeds from issuance of a loan payable to stockholders              20,000             25,000
   Payment of loan from stockholders                                    (45,000)               -
   Payment on note payable                                              (60,000)               -
   Payment of dividends to preferred stock shareholders                 (26,948)               -
                                                                  -------------       ------------
   Net Cash Provided by Financing Activities                          1,414,410             86,422
                                                                  -------------       ------------
Net Increase in Cash                                                    426,235             18,329
                                                                  -------------       ------------
Cash at Beginning of Period                                              18,329                -
                                                                  -------------       ------------
Cash at End of Period                                             $     444,564       $     18,329
                                                                  =============       ============
</TABLE>
                    See the accompanying notes to financial statements.

                                        F-7


                        ARENA RESOURCES, INC.
                STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                 For the the Period
                                                                                    March 3, 2000
                                                                                 (Date of Inception)
                                                                For the Year Ended      Through
                                                                  December 31,        December 31,
                                                                      2001                2000
                                                                 -------------       ------------
<S>                                                             <C>                 <C>
Non Cash Investing and Financing Activities

   Services contributed by officers and capitalized
      as developmental costs                                     $      17,000       $        -

   Common stock issued for oil and gas properties                      283,250                -

   Note payable issued for oil and gas properties                      143,000                -

   Common stock issued for services related to
    property acquisition                                                 5,000                -

   Common stock issued for an estimated receivable
    from shareholders                                                        -          134,000

   Settlement of estimated receivable from stockholders
    via stockholder payments of developmental costs                    121,274                -

   Elimination of remaining estimated receivable from
    stockholder against additional paid-in capital                     (12,726)               -

   Preferred stock issued for receivable from stockholder                5,733                -

   Accrual of preferred dividends                                       36,144                -

</TABLE>
                   See the accompanying notes to financial statements.

                                        F-8


                              ARENA RESOURCES, INC.
                          NOTES TO FINANCIAL STATEMENTS


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization - Arena Resources, Inc. (the "Company") began operations as an
unincorporated joint venture on March 3, 2000.  Thereafter, the joint venture
acquired an interest in oil and gas properties in Oklahoma.  On August 31, 2000,
the joint venture was incorporated under the laws of the State of Nevada.  On
that date, the assets of the joint venture, which consisted primarily of the
property interests, net of the liabilities of the joint venture, were
transferred to the corporation in exchange for the issuance of 2,600,000 shares
of common stock.

The reorganization of the joint venture into the corporation was a transfer
between enterprises under common control and the assets and liabilities
transferred were recorded by the corporation at their historical cost to the
joint venture. The accompanying statement of operations for the period from
March 3, 2000 through December 31, 2000 has been prepared on a combined basis
and includes the operations of the joint venture through August 31, 2000 and
those of the corporation through December 31, 2000.

Nature of Operations - The Company owns interests in oil and gas properties
located in Oklahoma and Texas. The Company is engaged primarily in the
acquisition, exploration and development of oil and gas properties and the
production and sale of oil and gas.

Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Held to Maturity Investment - The Company is required to maintain a $50,000
certificate of deposit at a federally insured institution in order to do
business in the state of Texas.  The maturity date of the investment is July
2003.

Oil and Gas Properties - The Company uses the full cost method of accounting for
oil and gas properties.  Under this method, all costs associated with
acquisition, exploration, and development of oil and gas properties are
capitalized.  Costs capitalized include acquisition costs, geological and
geophysical expenditures, lease rentals on undeveloped properties and costs of
drilling and equipping productive and non-productive wells.  Drilling costs
include directly related overhead costs.  Capitalized costs are categorized
either as being subject to amortization or not subject to amortization.

All capitalized costs of oil and gas properties, including the estimated future
costs to develop proved reserves and estimated future costs of site restoration,
are amortized on the unit-of-production method using estimates of proved
reserves as determined by independent engineers.  Investments in unproved
properties and major development projects are not amortized until proved
reserves associated with the projects can be determined or until impairment
occurs.  If the results of an assessment indicate that the properties are
impaired, the amount of the impairment is added to the capitalized costs to be

                                F-9

amortized.  Depletion expense for the year ended December 31, 2001, was $43,818,
based on depletion at the rate of $2.57 per barrel of oil and for the year ended
December 31, 2000, was $263, based on depletion at the rate of $2.52 per barrel
of oil.

In addition, the capitalized costs are subject to a "ceiling test," which
basically limits such costs to the aggregate of the "estimated present value,"
discounted at a 10-percent interest rate of future net revenues from proved
reserves, based on current economic and operating conditions, plus the lower of
cost or fair market value of unproved properties.

Basic and Diluted Income (Loss) Per Share -Basic income (loss) per common share
is computed by dividing net income (loss) by the weighted-average number of
common shares outstanding during the period.  Diluted income (loss) per share is
calculated to give effect to potentially issuable common shares except during
periods when those potentially issuable common shares would increase income
or decrease loss per common share. The 857,573 shares of Class A preferred stock
were excluded from the calculation of diluted income (loss) per common share
during the year ended December 31, 2001 because they were anti-dilutive.

Concentration - During the year ended December 31, 2001 sales were to a customer
represented 97% of total sales.  At December 31, 2001, 85% of accounts
receivable are due from this customer.

NOTE 2 - ACQUISITION OF OIL AND GAS PROPERTIES

Upon incorporation, certain property interests were transferred to the Company.
These interests included a 40% working interest in certain gas properties in
Oklahoma. In May 2001, the Company acquired an additional 30% working interest
in the gas properties from a third party.  The additional working interest was
valued at $300,000 and was acquired by the issuance of 80,000 shares of common
stock valued at $1.75 per share totaling $140,000, the assumption and payment of
$50,000 in obligations of the seller and the issuance of two notes payable
totaling $110,000.  The $65,000 note was due in 90 days with the remaining
balance of $45,000 due in 120 days.  The notes bore no interest and imputed
interest on the notes was not material due to their short term. The $50,000
liability transferred from the seller related to the seller's previous
obligation with the operator of the properties and was paid in May 2001.  During
2001, the Company paid $45,000 of principal on notes and issued 37,143 shares of
common stock at $1.75 per share in settlement of the remaining $65,000 of
principal of the note.  The value of the stock was based on its market value at
the date of the settlement and resulted in no gain or loss on the settlement of
the note payable.

In October 2001, the Company acquired an additional 24% working interest and a
2.5% overriding royalty  interest in gas properties in Oklahoma.  The total
purchase price was $266,250.  The consideration provided by the Company consists
of 81,857 shares of the Company's restricted common stock valued at $143,250 or
$1.75 per share; $90,000 paid in cash; and a $33,000 note payable due on
December 31, 2001, without interest. The value of the stock was based on its
market value on the date issued. As of December 31, 2001 Arena had paid $15,000
towards the balance of the note leaving a remaining balance of $18,000 payable
at December 31, 2001.

                                F-10

During the month of July 2001, the Company completed the acquisition of a 100%
working interest (80% net revenue interest) in oil and gas properties located in
Texas.  Though the acquisition didn't close until July, the effective date of
this agreement was June 1, 2001and Arena became responsible for operating costs
for June production and was entitled to June production revenues.  The working
interest was valued at $750,000 and was purchased with a $750,000 cash payment.
The funds were derived from the private placement offering of the Company's
Class A preferred stock.

During the third quarter of 2001, the Company acquired new leasehold interests
adjacent to the property in Oklahoma, constituting 141 acres, for $6,633.

NOTE 3 - STOCKHOLDERS' EQUITY

The Company is authorized to issue 100,000,000 common shares, with a par value
of $0.001 per share, and 10,000,000 Class A preferred shares, with a par value
of $0.001 per share.

From March 3, 2000 through August 31, 2000, the owners of the Company, while it
was a joint venture, contributed $67,389 in cash to the joint venture and
contributed a working interest in gas property.  Upon its incorporation on
August 31, 2000, the Company issued 2,600,000 shares of common stock in exchange
for the capital contributions previously made to the joint venture and for the
commitment by the two stockholders to pay the Company's 40% share of the costs
to work over one well and drill and complete two wells on the Company's
property.  The estimated future development cost to the two stockholders of
$134,000 was estimated by an independent engineer and was accounted for as an
estimated receivable from the stockholders.  As of December 31, 2001, the two
stockholders had paid $121,274 related to drilling the two wells.  As a result,
$121,274 was reduced from the estimated receivable from stockholders and was
capitalized as properties subject to amortization.  Management determined that
the work over of the third well was not economical and determined not to
complete the work over.  Thus the remaining balance of the estimated receivable
of $12,726 was offset against additional paid-in capital.

The Company completed a public offering of 800,000 shares of common stock on
February 14, 2001 for $200,000 in cash, net of $51,497 of offering costs.

From July through November 2001, the Company issued 857,573 shares of 10% Class
A convertible preferred stock in a private placement offering at $1.75 per
share. The Company received $1,371,888 in proceeds, net of cash offering costs
of $123,132. The placement agents received a cash commission of 10% on shares
they placed and warrants to purchase 59,200 shares of common stock at $1.75 per
share for a period of three years. The fair value of the warrants was $103,600
and was accounted for as an additional offering cost. Through December 31, 2001,
gross proceeds received consisted of $1,495,020 in cash and $5,733 in a

                                F-11

subscription agreement receivable from a shareholder. The Class A preferred
stock is convertible into common shares from the date of issuance at a one-for-
one ratio.  The Class A preferred shares will automatically be converted into
common shares if the price of the common shares is equal to or greater than
$4.00 for 20 consecutive days.  After one year, the Class A preferred shares may
be redeemed by the Company, subject to a 30-day notice, at $1.84 per share plus
payment of any accrued dividends.  The Class A preferred shares accrue dividends
at the rate of $0.175 per share annually and are payable quarterly.  The Class A
preferred shares are non-voting and are entitled to priority over the common
shares in the payment of dividends and in liquidation.

During the year ended December 31, 2001, the Company accrued $63,092 in Class A
preferred stock dividends.  Of this amount, $26,948 was paid during 2001 and the
remaining $36,144 has been accrued as of December 31, 2001.

The Company has committed to include the common shares underlying the warrants
issued to the placement agents in any registration statement filed with the U.S.
Securities and Exchange Commission during the three-year period from the date
the warrants were issued.

During the year ended December 31, 2001, two officers/stockholders contributed
services to the Company with an estimated value of $25,000.  Of this amount,
$8,000 represents compensation expenses and $17,000 represents direct and
incremental costs of acquiring gas properties and was capitalized as part of oil
and gas properties.

During the year ended December 31, 2001, the Company issued a total of 5,500
shares of restricted common stock, valued at $11,000 based on a stock price of
$2.00, as payment for services. The Company capitalized as part of oil and gas
properties $5,000 and the remaining $6,000 was charged to expense.

NOTE 4 - RELATED PARTY TRANSACTIONS

Two stockholders loaned the Company $25,000 in 2000.  The loan was short-term
with no due date and no interest rate.  The loan was repaid in March 2001.

A stockholder loaned the Company $20,000 in July 2001.  The loan was short-term
with no due date and no interest rate.  The loan was repaid in July 2001.

In March 2001, the Company paid $30,000 to a company that is related to the
Company through common management for the acquisition of an oil and gas lease.
Shortly after the payment had been made to the related party, the transaction
was negated and the oil and gas lease was not acquired.  The advance was repaid
to the Company in April 2001.

NOTE 5 - INCOME TAXES

The Company has paid no federal or state income taxes since its incorporation.
As of December 31, 2001, the Company had net operating loss carry forwards for

                                F-12

federal income tax reporting purposes of $108,641 which, if unused, will expire
in 2021. Principal temporary differences relate to depletion and net operating
loss carry forwards. The net deferred tax asset consists of the following at
December 31, 2001 and 2000:

                                            2001     2000
                                          --------  --------
     Deferred tax asset - operating
      loss carryforwards                  $ 41,041  $ 17,443
     Deferred tax liability - depletion    (30,374)        -
     Valuation allowance                   (10,667)  (17,143)
                                          --------  --------
     Total Deferred Income Tax Assets     $      -  $      -
                                          ========  ========

The following is a reconciliation of the income tax computed using the federal
statutory rate to the provision for income taxes:

                                             2001      2000
                                          --------  --------
     Tax at federal statutory rate (34%)  $  6,176  $(37,544)
     State benefit, net of federal tax         600    (3,644)
     Loss during joint venture phase
      allocable to partners in joint
      venture                                    -    23,745
     Change in valuation allowance          (6,776)   17,443
                                          --------  --------
       Provision for Income Taxes         $      -  $      -
                                          ========  ========
NOTE 6 - OPERATING LEASES

On October 1, 2000, the Company entered into a one-year operating lease
agreement for office space.  Under terms of the lease, the Company pays $506 per
month through October 1, 2002. All payments through February 28, 2001, were made
by a shareholder and are included in the services and the use of office space
contributed by shareholders. The Company incurred lease expense of $5,658 for
the year ended December 31, 2001. The future minimum lease payments under the
operating lease agreement as of December 31, 2001 consist of $4,140 due during
the year ending December 31, 2002.

On December 5, 2001, the Company entered into a lease agreement for gas
compressor equipment.  The rental rate on the agreement is $1,900 per month.
The agreement has a minimum term of 6 months, after which the lease will
continue on a month to month basis until canceled by either party.  Either party
may terminate the agreement upon thirty (30) days written notice.

NOTE 7 - SUBSEQUENT EVENTS

As of February 28, 2002, the Company had made payments totaling $8,000 towards
the outstanding notes payable.  The remaining balance of the note is $10,000.

                                F-13

Subsequent to December 31, 2001, the Company issued an additional 60,000 shares
of Arena Class A preferred stock.  Gross proceeds from the issuance of these
shares were $105,000.

                                F-14


                        ARENA RESOURCES, INC.
                SUPPLEMENTAL INFORMATION ON OIL AND GAS
                        PRODUCING ACTIVITIES
                             (UNAUDITED)


Capitalized Costs Relating to Oil and Gas Producing Activities

                                                December 31,
                                             -----------------------
                                                2001        2000
                                             ----------   ----------
  Proved oil and gas properties              $1,645,819   $   61,174
  Less accumulated depletion                    (44,081)        (263)
                                             ----------   ----------
     Net Capitalized Costs                   $1,601,738   $   60,911
                                             ==========   ==========

Costs Incurred in Oil and Gas Producing Activities for the Years Ended
December 31, 2001 and 2000
                                                   December 31,
                                            ------------------------
                                                2001         2000
                                            -----------   ----------
  Acquisition of proved properties          $ 1,383,908   $   61,174
  Development costs                             201,120            -
                                            -----------   ----------
     Total Costs Incurred                   $ 1,585,028   $   61,174
                                            ===========   ==========

Results of Operations for Oil and Gas Producing Activities for the Years Ended
December 31, 2001 and 2000

                                               2001          2000
                                            -----------   ----------
  Oil and Gas revenues                      $   296,936   $    2,424
  Production costs                             (106,927)        (263)
  Depletion                                     (43,818)        (263)
                                            -----------   ----------
    Results of Oil and Gas Producing
     Operations                             $   146,191   $    1,898
                                            ===========   ==========

Reserve Information - The following estimates of proved developed and proved
undeveloped reserve quantities and related standardized measure of discounted
net cash flow are estimates only, and do not purport to reflect realizable
values or fair market values of the Company's reserves.  The Company emphasizes
that reserve estimates are inherently imprecise and that estimates of new
discoveries are more imprecise than those of producing oil and gas properties.
Accordingly, these estimates are expected to change as future information
becomes available.  All of the Company's reserves are located in the United
States of America.

Proved undeveloped reserves are estimated reserves of crude oil (including
condensate and natural gas liquids) and gas that geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions.  Proved
developed reserves are those expected to be recovered through existing wells,
equipment, and operating methods.

                                F-15

The standardized measure of discounted future net cash flows is computed by
applying period-end prices of oil and gas (with consideration of price changes
only to the extent provided by contractual arrangements) to the estimated future
production of proved oil reserves, less estimated future expenditures (based on
year-end costs) to be incurred in developing and producing the proved reserves,
less estimated future income tax expenses (based on year-end statutory tax
rates, with consideration of future tax rates already legislated) to be incurred
on pretax net cash flows less tax basis of the properties and available credits,
and assuming continuation of existing economic conditions.  The estimated future
net cash flows are then discounted using a rate of 10 percent per year to
reflect the estimated timing of the future cash flows.

                                     For the Period Ended December 31,
                                           2001                2000
                                   --------------------  -------------------
                                    Oil (1)   Gas (1)    Oil (1)   Gas (1)
                                   --------  ----------  -------  ----------
Proved Developed and Undeveloped
  Reserves
  Beginning of period                     -     478,263        -           -
  Purchases of minerals in place    493,649   1,636,959        -     478,909
  Extensions and discoveries              -     843,512        -           -
  Production                        (16,211)     (5,590)       -           -
  Revisions of previous estimates    17,385       7,229        -        (646)
                                   --------  ----------  --------  ---------
  End of Year                       494,823   2,960,373         -    478,263
                                   ========  ==========  ========  =========
Proved Developed Reserves           142,371   1,038,564         -     60,034
                                   ========  ==========  ========  =========
___________________________
  (1) Oil reserves are stated in barrels; gas reserves are stated in thousand
      cubic feet.

Standardized Measure of Discounted Future Net Cash Flows
 at December 31, 2001 and 2000
                                                 2001             2000
                                             -----------      -----------
  Future cash inflows                        $16,985,483      $ 1,984,790
  Future production and development costs     (5,914,164)        (457,684)
  Future income tax expenses                  (3,257,738)        (498,506)
                                             -----------      -----------
  Future Net Cash Flows                        7,813,581        1,028,600
  10% annual discount for estimated timing
   of cash flows                              (3,012,320)        (285,148)
                                             -----------      -----------
  Standardized Measure of Discounted
   Future Net Cash Flows                     $ 4,801,261      $   743,452
                                             ===========      ===========

                                F-16

The following are the principal sources of change in the standardized measure of
discounted future net cash flows during the years ended December 31, 2001 and
2000:

                                                     2001             2000
                                                  -----------      -----------
  Purchase of minerals in place                   $ 9,656,702      $ 1,037,889
  Extensions and discoveries                          938,209                -
  Development costs expended                          201,120                -
  Sales of oil and gas produced,
   net of production costs                           (195,692)          (2,161)
  Accretion of discount                               699,440           88,113
  Net changes in prices and production costs       (5,568,751)          28,886
  Revision of estimated future development costs      (35,706)               -
  Revision of estimated recoverable reserves          171,863                -
  Change in estimated timing of cash flows                  -          (48,964)
  Net change in income taxes                       (1,809,376)        (360,311)
                                                  -----------      -----------
  Net Change During the Period                    $ 4,057,809      $   743,452
                                                  ===========      ===========


                                F-17