Arsenal Energy Inc announces that drlling operations on the 5.625 million acre Nuqra concession in Egypt are underway. The first well, the SET-1, has now spud and has a target depth of approximately 3,800 feet. The well will test a stratagrphic trap in the Jurrasic zone identified through extensive seismic evaluation.

Arsenal anticipates drilling a minimum of two test wells in the Nuqra Basin. The second well, NARMER-1, which has a target depth of 7800 feet, is located approximately 17 miles from the SET-1 and will test a separate structure with Berriasian and Kimmeridgian sands.

The operator estimates that the two initial target structures could contain up to 40 million barrels of oil equivalent in recoverable reserves. Both well sites have road access and are located on flat dry land.

Drilling of the two wells is expected to take approximately 90 days. Arsenal and its’ partners have a third contingent location which is in the process of being approved by the Egyptian government. The well, scheduled for the third quarter of 2007, would test another independent structure approximately 4 miles from the NARMER-1 location.

Nuqra is a land-based concession located in the Upper Nile region in Egypt with rift basins that are analogous to highly prolific structures located to the East in Yemen, to the South in Sudan and to the North West in Libya which have yielded significant reserve and production volumes.