Location: About 80 miles northwest of Calgary, Alberta, Canada.

We have acquired an interest in a property located northwest of Calgary, Alberta, Canada.  On September 23, 2005, the Company signed an agreement to participate in a deep well drill program. 

As of May 31, 2006, the Company has paid $348,000 for up to a 4% gross interest to participate in any oil and gas produced (before recovery of the costs of the drill program), reducing to a 2% interest after recovery of the drilling costs. Lexaria expects to pay further costs equal to it’s 4% interest in completing and equipping an earning well to a pipeline tie-in if warranted. Our net interests after overriding royalty payments will be slightly less.

Drilling of this well has been completed to a total depth of 13,650 feet and total cost of over $10 million. Testing is underway.  The operator encountered extremely high gas pressures of up to 10,000 pounds per square inch in several zones. The size of the potential gas pool is undetermined and will remain so until testing is completed, which is expected late in 2006.

Odin Capital Inc. of Calgary, Alberta, with whom the Company entered into this agreement, is a Canadian explorating finance company that arranges all aspects of identifying, financing, exploring and drilling properties. The operator of the earning well is Rosetta Exploration Inc. of Calgary, Alberta.

According to Rosetta, the Swan Hills, Leduc and Thrusted Mississippian were identified as targets that still had the potential for large pools of 100+ BCF to be discovered. Typically these plays are located in the deeper section of the basin, were there are numerous townships (36 square miles each) that have never had a deep well drilled within them. These wells are more than 3,600 meters (12,000 feet) deep, are technically challenging, tend to be sour, and involve drilling costs ranging from $6 million to $12 million. While they are also characterized by low success rates, they offer huge potential. For example, Shell’s Tay River discovery in 2004 was a noteworthy success, at 800 BCF. Thus, a primary target discovery has the potential to be a company making event. We estimate the unrisked resource potential of the Deep and Steep Unit to be 440 BCFE.

This property, located about 100 miles north of Calgary, has the potential for a significant find through a deep drilling prorgam.