8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (date of earliest event reported):  May 6, 2011

PAXTON ENERGY, INC.

(Exact name of registrant as specified in its charter)

Nevada	0-52590	20-1399613
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

295 Highway 50, Suite 2, Lake Village Professional Building, Stateline, NV 89449

Mailing Address:  P.O. Box 1148, Zephyr Cove, NV 89448-1148

(Address of principal executive offices)

Registrant’s telephone number, including area code: (775) 588-5390

Copy of correspondence to:

Richard A. Friedman, Esq.

James M. Turner, Esq.

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32nd Floor

New York, New York 10006

Tel:  (212) 930-9700   Fax:  (212) 930-9725

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01  Completion of Acquisition or Disposition of Assets.

On May 6, 2011 Paxton Energy, Inc. (the “Company”) completed its acquisition of certain assets from Montecito Offshore, L.L.C. (“Montecito”) pursuant to the Asset Sale Agreement, entered into on March 28, 2011 and amended on April 7, 2011 and May 2, 2011 (the “Montecito Agreement”) between the Company and Montecito.  Pursuant to the terms of the Montecito Agreement, Montecito agreed to sell us a 70% leasehold working interest, with a net revenue interest of 51.975% of certain oil and gas leases owned by Montecito, for $1,500,000, a subordinated promissory note in the amount of $500,000, and 15 million shares of our Common Stock.  The subordinated promissory note is subordinated to the secured convertible notes issued by the Company in the private placement that closed on May 5, 2011.

The oil and gas leases are located in the Vermillion 179 tract (“VM 179”), which is in the shallow waters of the Gulf of Mexico offshore from Louisiana, adjacent to Exxon's VM 164 #A9 well. The Company has obtained an independent reserve report relating to proven and probable reserves in the VM 179 area, which is approximately 547 acres in size.  No drilling or production has commenced as of yet, and the Company has the option of being the operator at VM 179 or engaging another party as operator.

A copy of the press release that discusses these matters is filed as Exhibit 99.1 to, and incorporated by reference in, this report. The information in this Current Report is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as shall be expressly set forth by specific reference in any such filing.

ITEM 9.01  Financial Statements and Exhibits.

(a)           Financial statements of businesses acquired.

To be filed by amendment not later than 71 calendar days after the date that this Form 8-K must be filed with the Securities and Exchange Commission.

(b)           Pro forma financial information.

To be filed by amendment not later than 71 calendar days after the date that this Form 8-K must be filed with the Securities and Exchange Commission.

(d)           Exhibits.

10.01 Second Addendum to Asset Sale Agreement dated May 2, 2011, between Montecito Offshore, L.L.C. and Paxton Energy, Inc.

10.02 Form of Subordinated Promissory Note.

10.03 Form of Assignment and Assumption Agreement.

99.1 Press Release, issued by the Company on May 9, 2011.

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SIGNATURE

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PAXTON ENERGY, INC.

Date:  May 12, 2011	By: /s/ CHARLES F. VOLK, JR.
	Charles F. Volk, Jr.
	Chief Executive Officer

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EX-10.01

Exhibit 10.01

SECOND ADDENDUM TO

ASSET SALE AGREEMENT

a Nevada corporation

Montecito Offshore, LLC

This Second Addendum to Asset Sale Agreement (the “Addendum”) is executed to be effective as of May 2, 2011 by and among Paxton Energy, Inc. a Nevada corporation (“Paxton”), whoseprincipal office is located at 295 Highway 50, Suite 2, Lake Village Professional Building, Stateline, NV 89449 (Mailing Address: P.O. Box 1148 Zephyr Cove, NV89448-1148), Montecito Offshore, L.L.C., a Louisiana limited liability company (“Seller”),whose mailing address is 909 Poydras Street, Ste 2200, New Orleans, LA 70112, and PaxAcq Inc., a Louisiana corporation (“PaxAcq”), a wholly-owned subsidiary of Paxton, whose address 8550 United Plaza Blvd, Bldg II Ste 305, Baton Rouge LA 70809.

Recitals

A.      On or about March 28, 2011, Paxton and Seller entered into an Asset Sale Agreement (the “Original Agreement”)

B.      On or about April 7, 2011, Paxton and Seller entered into the First Addendum to Asset Sale Agreement (the “First Addendum”).

C.      On April 29, 2011, Articles of Incorporation of PaxAcq were filed in the Office of the Secretary of State, State of Louisiana creating PaxAcq, which will be a wholly-owned subsidiary of Paxton.

D.      On April 29, 2011, Paxton, PaxAcq, Virgin Oil Company, Inc., a Louisiana corporation (“Virgin”), and Virgin Offshore U.S.A., Inc., a Delaware corporation (“Offshore”) entered into an Agreement of Merger.  Subject to satisfaction to a number of conditions described therein, Virgin and PaxAcq will merge in consideration, among other things, of common stock of Paxton to be issued to stockholders of Virgin, and Virgin will be the surviving entity in the statutory merger with PaxAcq.

E.      PaxAcq has not yet been qualified by the Bureau of Ocean Energy Management, U.S. Department of Interior (“BOEM”), but the transaction described in the Original Agreement, as amended, will close with Seller executing and delivering an assignment of the assets to be acquired to Paxton and PaxAcq under Louisiana law, and following qualification of PaxAcq by BOEM, Seller shall complete the formal assignment of such assets by the execution and delivery of a BOEM assignment of the lease referred to in the Original Agreement.

F.      The parties wish to amend further and modify certain terms of the Original Agreement and First Addendum.

NOW, THEREFORE, the parties agree as follows:

1.      Pending qualification of PaxAcq by BOEM, PaxAcq and Paxton shall close the transaction contemplated under the Original Agreement, the First Addendum, and this Second Addendum based on an assignment by Seller, as described above, in the form of the Assignment and Assumption Agreement attached hereto as Exhibit A.

2.      Once qualified by BOEM, promptly thereafter Seller shall execute and deliver to PaxAcq and Paxton the BOEM form of Assignment of Lease.  If the merger transaction referred in Recital D has closed, the Assignment shall be delivered to Virgin, as successor entity under the statutory merger with PaxAcq.

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3.      As part of the closing, PaxAcq and Paxton are obligated to execute a mortgage of the assets being acquired in favor of certain investors who have participated in a Convertible Secured Debenture Offering with Warrants (“Investors”).  Seller agrees to execute a short-form mortgage in favor of the Investors, which shall remain in effect until PaxAcq has been qualified by BOEM and Seller has transferred and assigned the lease under the BOEM-approved form.  Thereupon, the short-form mortgage executed by Seller shall be released.

4.      Subparagraph 2.1 of Paragraph 2, entitled PURCHASE PRICE is supplemented to provide that the form of the Subordinated Promissory Note referred to in Section 2.1.2.1.2 of the First Addendum shall be identical to the Subordinated Promissory Note attached as Exhibit B with blanks filled in appropriately.

5,      Paragraph 6.2 of the Agreement, as modified under the First Addendum, entitled Closing, is amended to provide that the date of Closing shall be May 4, 2011, subject to an extension of such date for up to four additional business days as may be necessary in order to deliver all of the documentation necessary for the Closing, including documents as counsel for the parties may reasonably request to consummate this transaction in accordance with industry practices or as required under applicable securities and other laws.  All documents shall be subject to the reasonable approval by counsel for each respective party.  The parties agree to execute or re-execute such additional documents and to furnish such additional data as may be necessary or desirable to evidence or consummate the transactions provided for herein and specifically to vest title in PaxAcq (or to better evidence such title) the Assets that are the subject of the Agreement and are to be conveyed.

6.      This Addendum may be executed in counterpart originals, each of which together shall constitute one binding agreement.  An executed signature page sent by fax or in PDF format shall be deemed executed by such party and may be relied upon by the receiving party and by third parties with the same effect as if a complete originally executed document were delivered and received.

Paxton:	Seller:
PAXTON ENERGY, INC.	MONTECITO OFFSHORE, LLC
a Nevada corporation	a Louisiana limited liability company
By: /s/ STEPHEN SPALDING	By: /s/ ROBERT FREIHEIT
Its: Chief Financial Officer	Its: Managing Member
PaxAcq:
PAXACQ INC.
a Louisiana corporation
By: /s/ STEPHEN SPALDING
Its: Chief Financial Officer

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EX-10.02

Exhibit 10.02

SUBORDINATED PROMISSORY NOTE

$500,000.00                    May __, 2011

FOR VALUE RECEIVED, Paxton Energy, Inc., a Nevada corporation, whoseprincipal office is located at 295 Highway 50, Suite 2, Lake Village Professional Building, Stateline, NV 89449 (Mailing Address: P.O. Box 1148 Zephyr Cove, NV89448-1148), and PaxAcq Inc., a Louisiana corporation, whose address is 8550 United Plaza Blvd. Bldg. II Ste 305, Baton Rouge LA 70809 (collectively, the “Makers”), jointly and severally, promise to pay to the order of Montecito Offshore, L.L.C., a Louisiana limited liability company (“Payee”),whose mailing address is 909 Poydras Street, Ste 2200, New Orleans, LA 70112 (“Payee”), at the foregoing address or at such other address as the holder hereof may from time to time specify in writing, in lawful money of the United States of America, the principal amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00), together with interest from the date of execution and delivery hereof on the unpaid principal balance of such principal at a rate equal to nine percent (9.00%) per annum.

Maturity Date.  All unpaid principal, together with unpaid and accrued interest, shall be due and payable ninety (90) days from the date of execution and delivery of this Note.

Payment.  This Note may be prepaid at any time without penalty.  Makers will make all cash payments due under the Notes in immediately available funds on the date such payment is due in the manner and at the address set forth above.

Security.  This Indebtedness will be secured by a second lien mortgage on interest in Vermillion Block 179 in the Gulf, more particularly described in the first lien Mortgage thereon securing the Company’s Senior Indebtedness.  The term “Senior Indebtedness” shall mean principal and interest on indebtedness of Makers under Two Million Five Hundred Thousand Dollars ($2,500,000) of senior debt in favor of a group of investors in a Convertible Secured Debenture Offering that will be secured by assets being acquired under an Asset Sale Agreement with Payee.

By acceptance of this Note, Payee agrees to the terms and provisions of this Note and agrees to execute and deliver such documents as may be reasonably requested from time to time by Makers or any holder of Senior Indebtedness to evidence, better evidence, or implement its provisions.

       Events of Default and Remedies.  At the option of the holder of this Note, the entire unpaid principal balance of, and all accrued interest on, this Note shall immediately become due and payable upon the occurrence at any time of any one or more of the following (herein referred to as an "Event of Default"):

a) The Makers  shall fail to pay the principal of or interest on this Note as and when the same becomes due and payable in accordance with the terms hereof;

b) The Makers  shall fail to perform any other covenant, condition, obligation or agreement set forth in this Note or, the Mortgage securing this obligation;

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c) The Default of any provision or term of the Senior Indebtedness or the first lien mortgage securing the same.

 If an Event of Default shall occur, Payee may (a) declare the entire balance of this Note, principal and interest,  immediately due and payable; (b) exercise any rights under the Note or the Mortgage securing the  Note; and (c) exercise any other remedy provided by law or equity.  No remedy referred to herein is intended to be exclusive, but each shall be cumulative, and the exercise or beginning of exercise by Payee under of any one or more of such remedies should not preclude the simultaneous or later exercise of any or all of such remedies.  Any failure of the Payee to exercise any rights or remedies available to Payee  if an Event of Default should occur shall not constitute a waiver of Payee’s  right to exercise such rights or remedies in the event of any subsequent Event of Default.

In the event of default, interest at the highest rate allowed by law will accrue on the then unpaid balance of the Note. In no event however shall the amount of interest due hereunder exceed the maximum rate of interest allowed by applicable law.

Binding.  The rights and obligations of Makers and Payee shall be binding upon and benefit the successors, assigns, and transferees of the parties. Any provision of this Note may be amended, waived, or modified upon the written consent of the Makers and Payee.

Notices.  All notices, requests, demands, consents, instructions, or other communications required or permitted hereunder shall in writing and mailed, or delivered to each party at the respective addresses of the parties as set forth herein, or at such other address as Makers or Payee shall have furnished to the other party in writing.  All such notices and communications will be deemed effectively given the earlier of: (i) when received; (ii) when delivered personally; (iii) one (1) business day after being delivered by facsimile (with receipt of appropriate confirmation); (iv) one (1) business day after being deposited with an overnight courier service of recognized standing; or, (v) four (4) days after being deposited in the U.S. mail, first class with postage prepaid.

Maximum Legal Rate.  In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

Waivers by Makers.  Makers hereby waive notice of default, presentment, or demand for payment, protest or notice of nonpayment, or dishonor and all other notices or demands relative to this instrument.

Governing Law.  This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with the laws of the State of Louisiana, without regard to the conflicts of law provisions of any other state.

Notices.  All notices, payments, and other communications required or permitted by this Agreement or by law to be served on or given to a party hereto by the other party shall be deemed given: (i) when personally delivered; or (ii) one (1) business day after timely delivery to Federal Express, United Parcel Service or other nationally recognized courier for overnight delivery, charges prepaid, in each case addressed to the addressee at the address set forth above.  Either party may change its addressee, address, fax number, or email address for notice purposes by a notice given in accordance with this Agreement.

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Severability.  If any term, provision, covenant, or condition of this Note is held to be invalid, void, or unenforceable, the remaining provisions of this Note shall continue in full force and effect and shall in no way be affected, impaired, or invalidated thereby.

Makers. The term Makers as used herein shall mean all parties so designated in this Note and the singular number includes the plural.

Attorney Fees.  Makers agree to pay all costs, expenses, and reasonable attorneys’ fees incurred by the holder collecting this Note or in pursuing or defending any right or remedy the holder has under this Note. Principal and interest shall be payable in lawful money of the United States.

Limitation of Liability.  The obligations of the parties are acknowledged to be solely entity obligations, and no officer, director, employee, agent, representative, manager, member, owner, or controlling person of any such entity shall be subject to any personal liability to any person or other party, nor will any such claim be asserted by or on behalf of any party or affiliates of such party.

IN WITNESS WHEREOF, the parties hereto have executed this Note as of the date set forth above.

Makers:
	PAXTON ENERGY, INC.	PAXACQ, INC.
	a Nevada corporation	a Louisiana corporation
	By:_________________________________	By:_________________________________
	Its:______________________________	Its:______________________________

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EX-10.03

Exhibit 10.03
 

ASSIGNMENT AND ASSUMPTION AGREEMENT

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”) is made and entered into effective as of the ___ day of ________________ 2011 (the“Effective Date”), by and between Montecito Offshore, LLC., a Louisiana limited liability company (“Montecito”), and PaxAcq, Inc., a Louisiana corporation and a wholly-owned subsidiary of Paxton Energy, Inc. (“PaxAcq”). Paxton Energy, Inc., a Nevada corporation authorized to do business in Louisiana (“Paxton”), is entering this Agreement for the purpose of confirming that PaxAcq is acting as its designee under the Asset Sale Agreement, as further described below.

W I T N E S S E T H:

WHEREAS, Montecito owns an interest in Lease OCS-G 33597, covering the NE/4NE/4, NE/4NE/4SE/4;and E/2SE/4NE/4 of  Block 179, Vermilion Area, OCS Leasing Map, Louisiana Map No.3 (the “Vermilion 179 Lease”);

WHEREAS, in accordance with that Asset Sale Agreement, dated March 28, 2011, between Montecito, as seller, and Paxton, as buyer, as later amended and extended (the “Asset Sale Agreement”), Montecito agreed to convey to Paxton or its designee a 70% of 8/8ths working interest and a 51.975% of 8/8ths net revenue interest in the Vermilion 179 Lease (the “Assigned Interest”), all in return for certain cash and other consideration and the assumption of certain obligations and liabilities related to or arising out of the Assigned Interest;

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, including, without limitation, Paxton’s and PaxAcq’s collective assumption of certain liabilities and obligations relating to the Assigned Interest, together with other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto hereby agree as follows:

1.           Assignment.  Montecito hereby conveys, sells, assigns, transfers, and delivers to PaxAcq, as the designee of Paxton, all of Montecito’s  right, title and interest in and to the Assigned Interest, and any and all rights and obligations associated therewith.

2.           Assumption, Release, and Indemnification.  PaxAcq hereby accepts Montecito’s interest in the Assigned Interest, and any and all rights and obligations associated with these assets (collectively, the “Assigned Assets”), and hereby assumes and agrees to perform, and fully discharge, the payment and performance of all liabilities and obligations relating to the Assigned Assets, arising after the Effective Date hereof. In addition, Montecito hereby releases, holds harmless, and agrees to indemnify Paxton and PaxAcq from any and all claims arising out of or relating to the Assigned Assets arising before or relating to the period before the Effective Date.

3.           AS IS-WHERE IS; PHYSICAL INSPECTION AND ENVIRONMENTAL CONDITION.  PAXTON AND PAXACQ REPRESENT THAT THEY HAVE INSPECTED THE ASSIGNED ASSETS AND ALL EQUIPMENT AND PROPERTY LOCATED THEREON AND ACCEPT THE PHYSICAL AND ENVIRONMENTAL CONDITION OF THE ASSIGNED ASSETS ON AN “AS IS-WHERE IS” BASIS, IN THEIR PRESENT CONDITION AND STATE OF REPAIR.  PAXTON AND PAXACQ RELEASE MONTECITO FROM ANY LIABILITY WITH RESPECT TO THE PHYSICAL AND ENVIRONMENTAL CONDITION OF THE ASSIGNED ASSETS AS OF THE EFFECTIVE DATE HEREOF, TO THE EXTENT NOT CAUSED BY OR ATTRIBUTABLE TO MONTECITO’S NEGLIGENCE, FAULT, OR STRICT LIABILITY.  MONTECITO FURTHER REPRESENTS THAT IT HAS NOT MADE, AND HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE CONDITION OF THE ASSIGNED ASSETS, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND FREEDOM FROM REDHIBITORY VICES OR DEFECTS.

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4.           Subrogation.  Paxton and PaxAcq shall, in assuming such obligations, be fully subrogated to each and every right of Montecito with respect thereto to the fullest extent permitted by law.

6.           Successors and Assigns.  This Agreement shall bind and inure to the benefit of Montecito and Paxton and PaxAcq and their respective successors and assigns.

7.           Headings.  The headings are inserted for convenience of reference only and shall be ignored in the construction or interpretation hereof.

8.           Governing Law.  Unless otherwise expressly indicated, this Agreement shall be governed by and construed in accordance with the laws of the State of Louisiana, excluding such laws that direct the application of the laws of any other jurisdiction.

9.           Survival and Binding Agreement.  The terms and conditions hereof shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, personal representatives, successors, and permitted assigns.

10.          Counterparts.  This Agreement may be executed in one or more counterparts, each

of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

11.          BOEMRE Form of Assignment. The Parties acknowledge that Montecito’s assignment of the Assigned Interest will also need to be completed on the appropriate BOEMRE form. However, the completion of the BOEMRE form of assignment shall in no way affect or alter the Effective Date hereof.

12.          Conflict With Asset Sale Agreement. To the extent that the terms hereof conflict with the terms of the Asset Sale Agreement, the terms of the Asset Sale Agreement shall control.

13.          Subject to Agreement of Merger. This Agreement is also subject to the terms of that Agreement of Merger, dated April 29, 2011, between and among Paxton, PaxAcq, Virgin Oil Company, Inc., a Louisiana corporation, and Virgin Offshore U.S.A., Inc., a Delaware corporation (the “Merger Agreement”). To the extent that the terms hereof conflict with the terms of the Merger Agreement, the terms of the Merger Agreement shall control.

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IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of the date first set forth above.

Montecito Offshore, LLC.

By:

Name:

Title:

PaxAcq, Inc.

By:

Name:

Title:

Paxton Energy, Inc.

By:

Name:

Title:

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ACKNOWLEDGMENTS

STATE OF LOUISIANA

PARISH OF ORLEANS

On this ___ day of May, 2011, before me appeared___________, to me personally known, who being by me duly sworn, did say that he is the ________________ of Montecito Offshore, LLC., and that the foregoing instrument was signed on behalf of, and as duly authorized by, said limited liability company, and said appearer acknowledged that he executed said instrument as the free act and deed of said limited liability company.

IN WITNESS WHEREOF, I have hereunto set my official hand and seal on the date hereinabove written.

__________________________________________

Notary Public in and for the State of Louisiana

My Commission is Issued For Life

STATE OF ________

COUNTY OF __________

On this __ day of May, 2011, before me appeared ______________, to me personally known, who being by me duly sworn, did say that he is the _________________ of PaxAcq, Inc., and that said instrument was signed on behalf of, and as duly authorized by, said corporation and said appearer acknowledged that he executed said instrument as the free act and deed of said limited liability company.

IN WITNESS WHEREOF, I have hereunto set my official hand and seal on the date hereinabove written.

______________________________________

Notary Public in and for the State of ________

My Commission Is Issued For _____

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STATE OF ___________

COUNTY OF ___________

On this ____ day of May, 2011, before me appeared _____________, to me personally known, who being by me duly sworn, did say that he is the ___________ of Paxton Energy, LLC, and that said instrument was signed on behalf of, and as duly authorized by, said limited liability company and said appearer acknowledged that he executed said instrument as the free act and deed of said limited liability company,

IN WITNESS WHEREOF, I have hereunto set my official hand and seal on the date hereinabove written,

______________________________________

Notary Public in and for the State of _______

My Commission Is Issued For _____

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EX-99.1

Exhibit 99.1

Paxton Energy Closes on Vermilion 179 Property

Acquisition Contains Oil and Gas Reserves Valued at Over $90 Million

SAN FRANCISCO, CA--(Marketwire - 05/10/11) - Paxton Energy, Inc. (OTC.BB:PXTE - News) (Paxton), an energy turnaround company engaged in the acquisition, exploration, development and drilling of oil and natural gas properties, is pleased to announce that on Friday, May 6, 2011, Paxton closed on the agreement with Montecito Offshore, LLC ("Montecito") of Louisiana, whereby Paxton acquired a 70% working interest in 546.875 acres in the Vermilion 179 (VM 179) track for $1,500,000 cash, a $500,000 subordinated note and the issuance of 15 million shares of Paxton common stock.

Located in the shallow waters of the Gulf of Mexico offshore from Louisiana, VM 179 is adjacent to Exxon's VM 164 #A9 well. Based on the Montecito Independent Reserve report by James E. Hubbard, dated March 29, 2010, Proven and Probable reserves have a PV-10 value of $92,000,000 at $85 per barrel oil and $4 per mcf gas.

"The Vermilion 179 acquisition follows the company's strategy of acquiring producing properties with proved and probable reserves," said Charles F. Volk, Jr., Chairman of Paxton.

About Paxton
Paxton engages in the acquisition, exploration, development and drilling of oil and natural gas properties. Paxton is an energy turnaround company whose strategy is to acquire cash flow producing properties with proved and probable reserves, develop the fields by reworking existing wells and drilling new wells. Paxton was founded in 2004 and is based in Stateline, Nevada.

Cautionary Note to U.S. Investors
Effective January 1, 2010, the United States Securities and Exchange Commission (SEC) now permits oil and gas companies, in their filings with the SEC, to disclose not only "proved" reserves (i.e., quantities of oil and gas that are estimated to be recoverable with a high degree of confidence), but also "probable" reserves (i.e., quantities of oil and gas that are as likely as not to be recovered) as well as "possible" reserves (i.e., additional quantities of oil and gas that might be recovered, but with a lower probability than probable reserves). As noted above, statements of reserves are only estimates and may not correspond to the ultimate quantities of oil and gas recovered. Any reserve estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include estimated reserves not necessarily calculated in accordance with, or contemplated by, the SEC's latest reserve reporting guidelines. Investors are urged to consider closely the disclosure in Paxton's Annual Report on Form 10-K available from Paxton at P.O. Box 1148, Zephyr Cove, NV 89448 (attn: Investor Relations). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC's website at www.sec.gov.

Safe Harbor
Statements about Paxton's future expectations and all other statements in this press release other than historical facts, are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and as that term is defined in the Private Securities Litigation Reform Act of 1995. Paxton intends that such forward-looking statements be subject to the safe harbors created thereby. The above information contains information relating to Paxton that is based on the beliefs of Paxton and/or its management as well as assumptions made by and information currently available to Paxton or its management. Paxton does not undertake any responsibility to update the forward-looking statements contained in this release.