Document:

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:  7-25-08paxtonexh1002072108.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:

            	
              Acquisition
      of Oil and Gas Interest within AMI

            
	 
      	
              Lon
      Cartwright – 220 acre lease

            
	 
      	
              Cooke
      Ranch Prospect

            
	 
      	
              La
      Salle County, Texas

            

    

    

    Gentlemen:

    

    Reference
is made to Article VI; Paragraph 6.1 of the Exploration Agreement dated
March 1, 2006 between Bayshore Exploration L.L.C. (“Bayshore”), as
operator, and Paxton Energy, Inc. (“Paxton”), as non-operator, pertaining
to the acquisition of oil and gas interests within the Area of Mutual Interest
(AMI) in said agreement.  Bayshore has acquired a new 220 acre, more
or less, oil and gas lease dated June 2, 2008 from Lon Cartwright, lessor,
located in the C. Sullivan Survey No. 226, Abstract No. 1076, La
Salle County, Texas (see attached memorandum).

    

    Bayshore
hereby notifies Paxton of its right to purchase its proportionate share (31.75%)
of said oil and gas lease.  If Paxton elects to participate for its
share of the newly acquired oil and gas lease, please indicate your election to
participate in the space provided below and return one fully executed copy of
this letter under the terms of the Exploration Agreement to Bayshore along with
your’ check in the amount of $17,462.50 made payable to Bayshore for your share
of the lease bonus and expenses to acquire said lease on or before
August 21, 2008.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              Page
      2

            	
              July
      22, 2008

            

    

    

    If you
elect not to participate in the acquisition of said lease, please indicate your
election in the space provided below and return one fully executed copy of this
letter to Bayshore on or before August 21, 2008.

    

    Sincerely,

    

    BAYSHORE
EXPLORATION L.L.C.

    

    

    

    Jamin
Swantner

    President

    

    Attachment

    

    

    
      	
                  
      X      

            	 	
              Elect
      to Participate in New Lease Acquisition.

            
	 
      	 	 
      
	
              _______

            	 	
              Elect
      Not to Participate in New Lease
Acquisition.

            

    

    

    Paxton
Energy, Inc.

    

    

    

    By:  /s/ Robert
Freiheit

    Robert Freiheit

    

    Title:  President and
CEO

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    MEMORANDUM OF OIL AND GAS
LEASE

    

    
      	 
      	 
      	 
      	
              81200

            
	
              STATE
      OF TEXAS

            	
              §

            	 
      	 
      
	 
      	 
      	 
      	
              KNOW
      ALL MEN BY THESE PRESENTS:

            
	
              COUNTY
      OF LASALLE

            	
              §

            	 
      	 
      

    

    

    

    

    

    BE IT
REMEMBERED that on the 2nd day of June, 2008, an Oil and Gas Lease was made and
entered into between Lon Cartwright, Lessor, whose address is Twin Oaks Ranch,
Dinero, Texas 78350 and Bay Shore Exploration, L.L.C., Lessee, (whether one or
more), whose address is P. O. Box 429, Bellville, Texas 77418, pursuant to which
Lessor has leased to Lessee for a primary term of two (2) years from the 2nd day
of June, 2008, and so long thereafter as oil or gas is produced in paying
quantities thereunder or as long as said lease is otherwise maintained in whole
or in part ‘by any other provisions of said lease, and upon the terms and
conditions stated in said oil and gas lease, and subject to ‘the royalties
reserved in said oil and gas lease, those certain lands of the Lessor situated
in LaSalle County, Texas comprising 220 acres of land, more or less, described
in Exhibit “A” attached hereto.

    

    A copy of
the executed oil and gas lease herein referred to is found at the office of
Lessee at its address as listed above, or at Lessor’s address listed
above.

    

    IN
WITNESS WHEREOF, the parties hereto have executed this instrument effective the
2nd day of June, 2008, to evidence of record in the Official Records of the
County Clerk of LaSalle County, Texas, the existence of said oil and gas lease
and for all purposes.

    

    

    
      	
              LESSOR:

            
	 
      
	
              /s/ Lon
      Cartwright

            
	
              Lon
      Cartwright

            
	 
      
	 
      
	
              LESSEE:

            
	 
      
	
              BAY
      SHORE EXPLORATION, L.L.C.

            
	 
      
	
              By:  /s/ Jamin
      Swantner

            
	
              Name:  Jamin Swantner

            
	
              Title:  President

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