paxtonexh1001072108.htm


    
      

      

    

    
      	
              Bayshore
      Exploration L.L.C.

            	
              P.
      O. Box 429

            
	
              Bellville,
      TX  77418

            
	
              Phone
      (979) 865-9924

            
	
              Fax
      (979) 865-9322

            
	
              bayshoreexpl@sbcglobal.net

            


    

    


    


    


    


    July 21,
2008

    


    


    


    Paxton
Energy, Inc.

    Attn:  Rob
Freiheit

    4120
Douglas Blvd.

    Suite
306-428

    Granite
Bay, CA  95746

    


    
       

      
        	 RE:	 Amendatory Letter
      Agreement
	 	 Exploration
      Agreement dated March 1, 2006
	 	 Cooke
      and Storey Ranch Prospects
	 	 La
      Salle County, Texas


      

       

    

    Gentlemen:

    


    Reference
is made to that certain Exploration Agreement dated March 1, 2006 by and between
Bayshore Exploration L.L.C. ("Bayshore") and Paxton Energy, Inc. ("Paxton")
pertaining to the Cooke and Storey Ranch Prospects located in La Salle County,
Texas.  This letter is written to amend and confirm said Exploration
Agreement with the following changes:

    


    
      	
               
      

            	
              1.

            	
              Bayshore
      is the operator of certain oil and gas wells and leasehold interests in
      which Paxton participates as a working interest owner.  Bayshore
      and Paxton have reviewed past due invoices on these wells to date and have
      determined that the total amount due to Bayshore by Paxton through
      March 31, 2008 is $304,900.32, $208,842.32 of the debt relates to the
      drilling and completion of the Cooke No. 6 Well for which special
      payment provisions below have been made pursuant 10 this
      agreement.

            


    

    
      
        	 	 	 
	
                 

              	
                 

              	On or
      before August 15, 2008 Paxton agrees to pay Bayshore an initial
      payment towards the past due invoices of $75,000.00
  USD.
	 	 	 


      

    

    
      	
               
      

            	
              2.

            	
              Bayshore
      agrees to assign to Paxton, within 15 days of receipt of the initial
      payment of $75,000.00, all of Paxton’s right, title and interests in and
      to the producing wells and the proration units assigned
      thereto.

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    
      	 Page 2	
              July
      23, 2008

            


    

     

    


    
      	
               
      

            	
              3.

            	
              The
      remaining balance for past due invoices owed to Bayshore by Paxton shall
      be paid to Bayshore in full on or before December 31,
      2008.

            


    

    


    
      	
               
      

            	
              4.

            	
              Bayshore
      agrees to deliver to Paxton, upon receipt of the initial payment of
      $75,000.00, 305,000 shares of restricted common stock of Paxton, suitably
      endorsed, for delivery to certain investors in
  Paxton.

            


    

    


    
      	
               
      

            	
              5.

            	
              Upon
      execution of this agreement, Bayshore and Paxton agree to put Paxton’s
      working interest in the Cooke No. 6 Well, less a retained ten percent
      (10%) working interest, up for sale to third parties.  In the
      event that a sale of Paxton’s working interest (21.75% WI) in the Cooke
      No. 6 Well occurs on or before December 31, 2008 the proceeds
      from the sale shall be delivered directly to Bayshore to offset any
      remaining balance owed by Paxton.

            


    

    


    
      	
               
      

            	
              6.

            	
              This
      Amendatory Letter Agreement shall be incorporated into and made a part of
      that certain Exploration Agreement dated March 1, 2006 between
      Bayshore and Paxton.  All other terms and conditions of said
      Exploration Agreement shall remain in
force.

            


    

    


    If the
foregoing is your understanding of our agreement, please indicate your
acceptance in the space provided below and return one fully executed copy of
this agreement to Bayshore on or before July 31, 2008.

    


    


    
      	
              Bayshore
      Exploration, L.L.C.

            	
              Paxton
      Energy, Inc.

            
	 
      	 
      
	
              /s/ Jamin Swantner

            	
              /s/ Robert Freiheit

            
	
              Jamin
      Swantner, President

            	
              Robert
      Freiheit

            
	
              Date:  7-24-08

            	
              Date:  7-25-08