Filed by Automated Filing Services Inc. (604) 609-0244 - Arkanova Energy Corp. - Exhibit 10.3






Exhibit 10.3

OPTION AGREEMENT

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

Background

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

Terms

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

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

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




2

Signatures

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

Optionor:

 

___________________________________
David Griffin

 

Optionee:

ARKONOVA ENERGY, INC.

 

By:
___________________________________

Name:
________________________________

Title:
_________________________________