STOCK OPTION AND SUBSCRIPTION AGREEMENT

NONE OF THE SECURITIES TO WHICH THIS SUBSCRIPTION AGREEMENT (THE "AGREEMENT") RELATES HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

STOCK OPTION AND SUBSCRIPTION AGREEMENT

For U.S. Persons

This AGREEMENT is entered into as of the 19th day of November, 2008.

BETWEEN:

ARKANOVA ENERGY CORPORATION. , with an office at 21 Waterway Avenue, Suite 300, The Woodlands, Texas 77380 (the "Company")

AND:

REGINALD DENNY , a person with a business address at 257 Willow Ridge Road, Fort Worth, Texas 76103 (the "Optionee")

WHEREAS:

A.                          The Company's board of directors (the "Board") has approved an Amended Stock Option Plan (the "Plan"), whereby the Board is authorized to grant stock options to purchase common shares of the Company pursuant to the Plan to the directors, officers, employees, management company employees and consultants of the Company;

B.                          The Optionee entered into an Executive Employment Agreement dated October 18, 2007 with the Company, pursuant to which the Optionee provides the services as the Chief Financial Officer (the "Services"); and

C.                          The Company seeks to grant stock options to purchase a total of ONE HUNDRED THOUSAND (100,000) shares of Common Stock to the Optionee as an incentive for the continued provision of the Services;

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency whereof is hereby acknowledged, the parties hereto agree as follows:

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1.2                         The Company hereby grants to the Optionee, on the terms and conditions set out in this Agreement and in the Plan, Options to purchase a total of ONE HUNDRED THOUSAND (100,000) Optioned Shares at the Exercise Price.

1.3                         The ONE HUNDRED THOUSAND (100,000) Options shall vest immediately upon entry into this Agreement.

1.4                         The Options shall, at 5:00 p.m. (Houston time) on the Expiry Date, expire and be of no further force or effect whatsoever.

1.5                         Vested Options shall terminate, to the extent not previously exercised, in accordance with Section 5(g) of the Plan. Each unvested Option granted pursuant hereto shall terminate immediately upon termination of or resignation from the Optionee's employment or contractual relationship with the Company for any reason whatsoever.

1.6                         Subject to the provisions of this Agreement and the Plan and subject to compliance with any applicable securities laws, the Options shall be exercisable, in full or in part, at any time after vesting, until termination; provided, however, that if the Optionee is subject to the reporting and liability provisions of Section 16 of the Securities Exchange Act of 1934 with respect to the Common Stock, the Optionee shall be precluded from selling, transferring or otherwise disposing of any Common Stock underlying any Options during the six (6) months immediately following the grant of that Option. If less than all of the shares included in the vested portion of any Options are purchased, the remainder may be purchased at any subsequent time prior to the Expiry Date. Only whole shares may be issued pursuant to the exercise of any Options, and to the extent that any Options covers less than one (1) share, it is unexercisable.

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Each exercise of the Options shall be by means of delivery of a Notice of Exercise (which may be in the form attached hereto as Appendix A) to the President of the Company at its principal executive office, specifying the number of shares of Common Stock to be purchased and accompanied by payment in cash by certified check or cashier's check in the amount of the full exercise price for the Common Stock to be purchased. In addition to payment in cash by certified check or cashier's check, an Optionee or transferee of the Options may pay for all or any portion of the aggregate exercise price by complying with one or more of the following alternatives:

It is a condition precedent to the issuance of the Optioned Shares that the Optionee execute and/or deliver to the Company all documents and withholding taxes required in accordance with applicable laws.

1.7                         Nothing in this Agreement shall obligate the Optionee to purchase any Optioned Shares except those Optioned Shares in respect of which the Optionee shall have exercised the Options in the manner provided in this Agreement.

1.8                         Reference is made to the Plan for particulars of the rights and obligations of the Optionee and the Company in respect of:

all to the same effect as if the provisions of the Plan were set out in this Agreement and to all of which the Optionee assents.

1.9                         The terms of the Options are subject to the provisions of the Plan, as the same may from time to time be amended, and any inconsistencies among this Agreement and the Plan, as the same may be from time to time amended, shall be governed by the provisions of the Plan.

2.1                         The Optionee must complete, sign and return an executed copy of this Agreement to the Company.

2.2                         The Optionee shall complete, sign and return to the Company as soon as possible, on request by the Company, any documents, questionnaires, notices and undertakings as may be required by regulatory authorities, and applicable law.

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