Bayshore Exploration L.L.C. Letter To Paxton Energy, Inc., Dated July 21, 2008, Re: Election To Part

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 B ...