Lexaria has a commitment to investors to find economically viable projects strategically located in proven oil and natural gas producing areas of North America.

The locations benefit from an extensive pipeline network, top-class infrastructure and a large pool of industry proven resources. The prospects are particularly attractive. These highly competitive areas offer multi-zone potential for both exploration and development opportunities.

We have entered into a strategic relationship with privately held Griffin & Griffin Exploration, L.L.C. (“Griffin”), of Jackson, Mississippi wherein they are our operator and provide extensive experience and knowledge. Our first agreement was for a 10-hole drilling program whereby we acquired a 20% gross interest in any oil & gas produced at Palmetto Point in southwest Mississippi. (This was subsequently expanded to a 32% interest and 12 wells) We also entered a second agreement for up to a 50-well drilling program whereby we originally acquired a 40% gross interest in any oil & gas produced at various project locations in southwest Mississippi. We increased our gross interest in the remaining 38 wells to be drilled in this program to 60%.

We selected Griffin as our strategic partner based on their over-40 years of experience in this area, and their knowledge gathered through their drilling, owning or operating over 100 wells in the area over the last 15 years. The Griffin family has lived in the Jackson, MS area for many years and has built solid personal and business relationships during that time. Griffin holds lands or options on lands of substantially more than 200,000 gross acres in the region, making it one of the largest independent producer/explorers in Mississippi. There are currently over 100 identified drill locations and more than 220 square miles of 3-D seismic has been attained.

Why Mississippi?

We have made this region a key focus of our company for several reasons.

First, superior economics drive our exploration and development plans. Drilling costs for shallow holes are inexpensive and completion times are quick. Reliable and extensive infrastructure exists, including pipeline gathering systems. Success rates, particularly of the Frio wells, are high. And this location, close to Henry Hub in Louisiana, ensures maximum natural gas revenue rates. Our operations are far enough removed from the coast of the Gulf of Mexico to prevent most potential hurricane-induced disruptions.

Main targets

We are targeting three main geological zones in southwest Mississippi and in Louisiana:

Frio   Characterized by shallow depths of up to about 4,000 feet; these are relatively inexpensive wells (less than $400,000 each) that are generally quick to drill and complete. The use of "Bright Spot" technology has yielded a geologic success rate of about 80% for Frio natural gas exploration. Economic success will necessarily be lower, depending on many variables.

The term "Bright Spot" is used to describe a geophysical amplitude anomaly which is simply a velocity change from high to low. Sands that contain gas are predicted by this method because the gas provides a slower velocity response giving an abnormally intense trough-peak reflection, therefore termed a "Bright Spot."

We assume a 5-year well life on economically successful Frio gas wells. We also have encountered Frio oil deposits which can offer considerably stronger economics, and are currently evaluating our strongest candidates for additional Frio oil exploration.

Frio Oil Wells are our most important current targets and focus. We own a 32% in the Belmont Lake oil discovery, which was identified using the above-noted Bright Spot technology. As of early 2009, we have two proven producing oil wells in this field and we hope to eventually have as many as ten or more wells in this field when it is fully developed. This is our lowest-risk development opportunity.

An important goal for our Company is to unlock the secret of being able to identify, in advance, between Frio Oil targets and Frio Gas targets. If we can do so, we believe we can build significant shareholder value through our 60% gross interest in exploration lands surrounding the Belmont Lake discovery.

Wilcox   Normally found at up to about 9,000 feet, but still enjoying relatively fast and easy drilling, these wells generally cost less than $1 million to drill and complete. Normal Wilcox criteria include the presence of a regional structural nosing overlain by a bar sand which terminates to the north either by shaling-out or loss of porosity and permeability, thereby providing the trapping mechanism for hydrocarbon accumulation. We assume a 10-year well life for successful Wilcox wells and are not planning to drill any Wilcox targets in the immediate future, although both the Frio and Wilcox zones are subject to our existing 50-well AMI.

Tuscaloosa   Although we are not drilling any Tuscaloosa wells with our current operator, we are interested in the geological zone and could pursue this type of target with others either in Mississippi or in Louisiana. These are deeper wells, generally between 12,000 and 14,000 feet that are nevertheless rarely overpressurized and thus not often technically challenging to complete. The objective Lower Tuscaloosa "A" Sand was deposited on a broad carbonate platform (Lower Cetaceous Shelf). This Sand is generally deposited in a fluvial-deltaic depositional environment with numerous reservoir studies conclusively identifying the sand systems as predominately point-bar sands positioned on regional monoclinal dip. Since these point-bar sands are "enclosed" sand bodies encased in shale, the necessary parameters for a stratigraphic trapping style are available.

All known productive Lower Tuscaloosa reservoirs in southwest Mississippi and north central Louisiana have displayed these types of trapping characteristics. High-resolution stratigraphic seismic data can enable geological success rates of up to about 65%. Drilling and completion costs are typically over $3 million for each Tuscaloosa well, with up to a 20-year well life possible. We do not expect to drill any Tuscaloosa wells in 2007.

Select a project from the list at left for details.