Location: Wilkinson County, bordering Louisiana to the south and the Mississippi River to the west.

Lexaria has participatedin the drilling of two Frio wells in the Red Bug area. Subsequently Lexaria announced that it has acquired additional interest in any subsequent wells to be drilled in this area under the AMI, to hold a 60% gross working interest from that point forward, in all production zones to the base of the Frio formation and 40% of all production to the base of the Wilcox formation. Lexaria does not have any interest in possible Tuscaloosa targets in this area. Red Bug primarily contains larger Frio sands targets similar in some ways to the Palmetto Point prospect.

The Red Bug project to date, is of a total of 18.5 square miles (approximately 11,840 acres) which has been entirely shot with 3-D seismic. The project may be expanded in the future through additional 3-D seismic shots.

The first targeted well (Red Bug #F-3) in which Lexaria has a gross 45% interest was drilled in the Red Bug prospect in September, 2006. It successfully encountered approximately 14 feet of net natural gas pay zones. Our second well in this area (Red Bug #F-1) was completed on May 13, 2007 and encountered approximately 10 feet of net natural gas pay zones. Additional target drilling is possible but not yet scheduled.