Bayshore Exploration L.L.C.                        20501 Katy Freeway, Suite 216
                                                               Katy, Texas 77450
                                                            Phone (281) 646-1919
                                                              Fax (281) 647-9448
                                                      bayshoreexpl@sbcglobal.net

December 30, 2005

Paxton Energy, Inc.
2533 North Carson Street
Suite 6232
Carson City, Nevada 89706

         RE:      Purchase Agreement -- 20% Working Interest
                  Alamo Operating Company, L.C. -- Cartwright No. 1 Well
                  Cooke Ranch Prospect -- La Salle County, Texas

Gentlemen:

This letter is written to evidence the agreement between Bayshore Exploration
L.L.C. ("Bayshore") and Paxton Energy, Inc. ("Paxton") pertaining to the Alamo
Operating Company, L.C. -- Cartwright No. 1 Well located in the C. Sullivan
Survey No. 226, A -1076, La Salle County, Texas. Bayshore is the owner and
holder of a 20% working interest, subject to a 75% net revenue interest, in the
Alamo Operating Company, L.C. -- Cartwright No. 1 Well. Paxton desires to
purchase said 20% working interest from Bayshore with the following terms and
conditions:

         1.       On or before the expiration of 120 days from the date of this
                  Letter Agreement, Paxton agrees to pay to Bayshore the sum of
                  $237,800.00 U.S. dollars which represents the total purchase
                  price for said 20% working interest.

         2.       On or before the expiration of 120 days from the date of this
                  Letter Agreement, Paxton agrees to pay to Bayshore the sum of
                  $176,800.00 U.S. dollars which represents the total purchase
                  price of 20% of the leasehold and working interest in and to
                  8,840 acres ("the subject acreage"), more or less, which is
                  illustrated in bold outline on the attached land plat as
                  Exhibit "A" hereto. The purchase of said 20% leasehold
                  interest by Paxton from Bayshore will increase Paxton's
                  leasehold interest in the subject acreage to a 31.75%
                  leasehold interest.

         3.       Upon receipt of the above mentioned sums paid to Bayshore by
                  Paxton in a timely manner as set out above, Bayshore agrees to
                  assign to Paxton a 20% working interest in the Alamo Operating
                  Company, L.C.-Cartwright No. 1 Well (75% NRI). Paxton shall
                  also have the option to participate for said 20% working
                  interest in subsequent well(s) drilled on the subject acreage
                  under the terms of a mutually acceptable Joint Operating
                  Agreement, naming Bayshore as operator.

         4.       The purchase of said 20% working interest in the Alamo
                  Operating Company, L.C.-Cartwright No. 1 Well by Paxton from
                  Bayshore will increase Paxton's working interest in the
                  subject acreage to a 31.75% working interest.

         5.       This Letter Agreement is the entire agreement between the
                  parties hereto pertaining to the purchase of a 20% working
                  interest in the Alamo Operating Company, L.C.-Cartwright No. 1

<PAGE>

                  Well and supersedes all prior oral and written agreements. Any
                  changes to this agreement must be agreed to in writing between
                  both parties.

         6.       The parties agree to execute such additional agreements and
                  documents as may be necessary to effectuate the intentions of
                  this Agreement.

         7.       This Letter Agreement, shall be construed in accordance with
                  and governed by the laws of the State of Texas, shall be
                  binding upon and shall inure to the benefit of the parties
                  hereto and shall extend to and be binding upon their
                  respective successors and assigns.

If the foregoing is your understanding of our agreement, please acknowledge your
acceptance by signing in the space provided below and returning one fully
executed copy of this Letter Agreement to Bayshore at your earliest convenience.

Sincerely,

BAYSHORE EXPLORATION L.L.C.

/s/ Jamin Swantner
Jamin Swantner
President

PAXTON ENERGY, INC.

/s/ Robert Freiheit
Robert Freiheit, CEO

Attachment: Exhibit "A" -- Land Plat