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Warren Resources Announces First Quarter 2006 Results; Earnings Per Share $0.01 versus ($0.10) in Q1 2005; Production Increases 105%; Oil and Gas Revenue Increases 213%

NEW YORK--(BUSINESS WIRE)--May 4, 2006--Warren Resources, Inc. (Nasdaq:WRES) today announced 2006 first quarter financial and operating results. The Company reported net income applicable to common stockholders of $0.7 million for the first quarter of 2006, as compared to a net loss applicable to common stockholders of $3.4 million for first quarter of 2005. Basic and diluted earnings were $0.01 per share for the first quarter 2006 as compared to a loss of $0.10 per share for first quarter of 2005.

Total revenues increased 21% to $9.8 million for first quarter 2006 as compared to revenues of $8.1 million for first quarter 2005. This increase resulted from a 213% increase in oil and gas revenue, primarily from the Wilmington Townlot Unit ("WTU") and North Wilmington Unit ("NWU") in the Wilmington oil field in California as well as an increase in realized oil and natural gas sales prices. Revenue from oil and gas sales increased $4.6 million to $6.8 million compared to the first quarter of 2005.

Production and exploration expense increased to $3.0 million for the first quarter of 2006 compared to $0.7 million in the comparable period of 2005. This increase was primarily attributable to increased production as well as increased start-up and maintenance costs associated with the WTU central facility. Total capital expenditures for wells drilled in the first quarter of 2006 were $18.5 million.

The Company reported a record increase in oil and gas production of 105% to 865.7 MMcfe for the quarter ended March 31, 2006 compared to 422.0 MMcfe for the same period in 2005. Average natural gas equivalent realized sales prices were $7.87 per Mcfe for the quarter ended March 31, 2006 as compared to $5.16 per Mcfe for the same period in 2005.

"The foundation that we laid in 2005 both operationally, including acquisitions, and financially have enabled us to deliver record production as well as improved profitability during the first quarter of 2006," commented Norman Swanton, CEO. Added, Mr. Swanton, "We are extremely pleased to report that we were able to return the company to profitability. As we move through 2006, we are well positioned to benefit from increased demand as well as attractive commodity pricing."


Wilmington Townlot Unit

Since taking over operations of the WTU in March 2005, the Company has been engaged in refurbishing the central production facility, evaluating the four primary producing zones and laying out a long-term drilling program to implement a "seven-spot" water flood pattern in the WTU. Since drilling commenced (the Company had one rig in June 2005 and added a second rig in December 2005), a total of 33 wells have been directionally drilled from the central facility. Warren completed 19 gross producing wells and 6 water injection wells. The 8 remaining wells drilled are awaiting completion. Due to the high density of the surface locations within the central facility, up to 6 drilled wells are temporarily covered over by the large "footprint" of the two drilling rigs. The Company anticipates that this condition will continue until it receives permits and constructs drilling cellars, which will allow for more rapid movements of the skid-mounted drilling rigs to accelerate drilling and completion activities. Additionally, the availability of completion rigs, supplies and replacement equipment is tighter than anticipated because of the significant increase in drilling activity in this region. As a result of these factors, the Company is reducing the budgeted wells to be drilled in 2006 by 20% from 72 wells to 58 wells. Additionally, six of the wells previously budgeted to be completed in 2006 will be delayed until the first quarter of 2007.

Based on current well tests, the first 19 wells completed are averaging approximately 30 barrels of oil per day per well with an average water oil ratio below 15 to 1. These parameters are generally within the Company's expectations, especially since water injection facilities were not upgraded until recently, which will now allow the Company to commence a water injection program. The Company anticipates that these wells will eventually produce in an average range of 50 to 70 barrels of oil per day ("BOPD") after water injection is fully activated to restore reservoir pressures. Subsequently, these wells should experience a shallow decline curve for the remaining estimated 20 year life of the wells.

Since taking over operations of the WTU in March 2005, Warren has increased gross oil production from 375 BOPD to over 1,000 BOPD. This increase results from successful workovers and initial production from new wells drilled in 2005 and 2006. The Company's average realized price during the first quarter of 2006 for crude oil in Wilmington was $52.47 per barrel at the wellhead in comparison to an average first quarter 2006 benchmark West Texas Intermediate crude price of $59.99 per barrel.

Atlantic Rim Coalbed Methane project in the eastern Washakie Basin in Wyoming

The Company and its joint venture partner, Anadarko Petroleum Corporation, completed drilling the twenty-four well program in the Jolly Roger Coalbed Methane ("CBM") Unit of the Atlantic Rim project in the Washakie Basin in Wyoming. Construction of the necessary infrastructure to commence producing the Jolly Roger wells was completed during the first quarter of 2006 enabling the commencement of dewatering operations. During the first quarter of 2006, the Company completed an additional eleven producing wells in the Blue Sky Unit, which decreased the well spacing from 160 acres to 80 acres per well. The Company believes that reducing the well spacing should drawdown the reservoir pressure and improve gas production from the Blue Sky project.

Gross gas production from the 24 well pilot program in the Doty Mountain CBM Unit has increased to over 1,500 Mcf per day from zero gas production in January 2005 and the wells are inclining consistently. A second gas compressor was recently installed in the 12 well Sun Dog CBM Unit to handle the increasing gas production from the Unit. Current gross gas production from the 12 well pilot in Sun Dog is 5,200 Mcf per day and the production is continuing to incline from the wells.

The pending Environmental Impact Statement ("EIS") being prepared by the U.S. Bureau of Land Management ("BLM") covering CBM development in the Atlantic Rim project is moving forward and a draft EIS was released for a 60-day public comment period on December 12, 2005. The BLM is reviewing all comments received and preparing responses. During the next several months the BLM is expected to develop a final EIS to be released for a subsequent 30-day public comment period. The Company believes that a final Record of Decision allowing for development of the Atlantic Rim CBM project will be posted during the latter part of 2006. Notwithstanding the timing of the Record of Decision, Warren Resources is planning to drill at least 42 CBM wells in Doty Mountain on fee lands in 2006.

Pacific Rim Coalbed Methane Project and Baxter Shale Potential in the Western Washakie Basin

The Company completed drilling a ten well exploratory project in the Rifes Rim Unit in the Pacific Rim project in the western Washakie Basin. Winter stipulations expired on May 1, 2006, which will allow the Company to complete its first ever CBM horizontal well in the Chicken Springs Unit. Additionally, Warren owns approximately 3,700 net acres in the Chicken Springs Unit which may be prospective for developing conventional natural gas in the Baxter Shale formation at a depth of approximately 12,000 feet with a reserve potential of 250 Bcfe.

Conference Call

The public is invited to listen to the Company's conference call set for today, May 4, 2006, at 10:00 a.m. Eastern Time. The call will be webcast at can be accessed from the company's website at: If you are unable to participate during the live broadcast, the webcast will be archived on Warren's website. A telephonic replay will also be available through May 11, 2006 by dialing toll-free (888) 286-8010 or (617) 801-6888 for international callers and entering passcode 90980469.

Financial and Statistical Data Tables

Following are financial highlights for the comparative first quarters ended March 31, 2006 and March 31, 2005.

Warren Resources, Inc.
Consolidated Statements Of Operations (Unaudited)

                                                 Three Months Ended
                                                     March 31,
                                                  2006         2005
                                              ----------- ------------
Oil and gas sales                             $6,809,441   $2,176,587
Oil and gas sales from marketing activities    1,015,045    2,196,074
Well services                                    248,289      540,659
Turnkey Contracts with affiliated
 partnerships                                    426,597    2,279,317
Net gain (loss) on investments                   (22,924)      31,460
Interest and other income                      1,356,002      892,701
                                              ----------- ------------
                                               9,832,450    8,116,798
                                              ----------- ------------

Production & exploration                       2,979,621      673,162
Turnkey contracts                                705,716    2,021,001
Cost of marketed oil and gas purchased from
 affiliated partnerships                         992,006    2,165,092
Well services                                    295,483      194,389
Depreciation, depletion, amortization and
 impairment                                    1,473,432      761,895
General and administrative                     2,273,119    1,465,344
Interest                                         190,117    1,106,754
Retirement of debt                                     -    1,175,233
                                              ----------- ------------
                                               8,909,494    9,562,870
                                              ----------- ------------

Income (loss) before provision for income
 taxes                                           922,956   (1,446,072)

Deferred income tax expense                       67,000      114,000
                                              ----------- ------------
Income (loss) before minority interest           855,956   (1,560,072)
Minority interest                                      -     (168,034)
                                              ----------- ------------
Net Income (loss)                                855,956   (1,728,106)
                                              ----------- ------------
 Less dividends and accretion on preferred
  shares                                         170,925    1,640,432
                                              ----------- ------------
 Net Income (loss) applicable to common
  stockholders                                  $685,031  $(3,368,538)
                                              =========== ============

Earnings (loss) per common share - Basic           $0.01       $(0.10)
Earnings (loss) per share - Diluted                $0.01       $(0.10)

 Weighted average common shares
  outstanding - Basic                         52,199,474   33,358,796
 Weighted average common shares
 outstanding - Diluted                        54,314,040   33,358,796

             Gas - MMcf                            308.7        243.1
             Oil - MBbls                            92.8         29.8
             Total Equivalents (MMcfe)             865.7        422.0

 Realized Prices:
             Gas - Mcf                             $6.28        $4.65
             Oil - Bbl                             52.47        35.08
             Total Equivalents (Mcfe)               7.87         5.16

 Net cash flow provided by (used in)
  operating activities:
             Cash flow from operations        $3,682,821  $(6,733,090)
             Changes in working capital
              accounts                        (1,188,952)   6,503,667
             Cash flow from operations before
              working capital changes          2,493,869     (229,423)

Updated 2006 Guidance

Warren provides the following updated forecast for capital expenditures and production based upon the information available at the time of this release. We have revised guidance to reflect the reduced number of wells to be drilled and completed in the WTU in 2006. Please see the forward-looking statement at the end of this release for more discussion of the inherent limitations of this information.

                               Second Quarter            Year
                                   ending               ending
                                June 30, 2006      December 31, 2006
                             ------------------- ---------------------

Oil (MBbl)                         103 - 109           525 - 600
Gas (MMcf)                         291 - 300         1,150 - 1,250
Gas Equivalent (MMcfe)             909 - 954         4,300 - 4,850
Capex Budget (in thousands)         $15,300             $95,000

About Warren Resources

Warren Resources, Inc. is a growing independent energy company engaged in the exploration and development of domestic natural gas and oil reserves. Warren is primarily focused on the exploration and development of coalbed methane properties located in the Rocky Mountain region and its water flood oil recovery programs in the Wilmington Units located in the Los Angeles Basin of California. The Company is headquartered in New York, New York, and its exploration and development subsidiary, Warren E&P, Inc., has offices in Casper, Wyoming and Long Beach, California.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Statements regarding projections of revenues or income or reserves or similar items, such as statements pertaining to future revenues, future capital expenditures, future cash flows, future operations or results, and other statements that are not historical facts, are examples of forward looking statements. These forward-looking statements reflect our current views with respect to future events, based on what we believe are reasonable assumptions. No assurance can be given, however, that these events will occur. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including without limitation risks of declining oil and gas prices, competition for prospects, accuracy of reserve estimates, estimated rates of production, increases in drilling and lifting costs, increases in equipment and supply costs and other factors detailed in the Company's filings with the Securities and Exchange Commission (

For Warren Resources, Inc.
Kathleen Heaney

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