XSTATE RESOURCES LIMITED — Capital/Financing Update 2010

Dec 20, 2010

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AB N 96 009 217 154

21 December 2010

ASX Limited Electronic lodgement

XState to commen ce drilling 300 million barrel potential Sidi Dhahe r Prospect in late January 201 1

In resp o nse to shar e holder enq u iries, XStat e Resources Limited (AS X : XST) advis e s that it ex p ects the 300 million barrel Sidi Dhaher P r ospect expl o ration well to commen c e drilling in late Januar y 2011.

XState i s earning a 1 0% interest in the Chor b ane PSC by part fundin g the Sidi Dh a her well.

The op e rator of th e Sidi Dhahe r well has a d vised that t he choice of rigs has b e en narrowed to two and tha t the curren t ly anticipat e d spud dat e for the ex p loration w e ll is 28 January 2011, d e pending on the f i nal rig sele c tion and its a vailability.

The lar g e Sidi Dhaher prospect is located o nshore Tunisia in the 2 428 square kilometre C horbane Production Sharing C ontract (“PSC”) Area. T he propose d location is some 50 kil o metres from the oil industr y support c e ntre at Sf a x, and is w ell located relative to a major oi l export fa c ility and connecting oil pipel i nes, and also gas trans m ission pipe l ines which p rovide con n ections to E uropean gas markets.

• The key attributes of the Sidi Dhaher prosp e ct are: • Pot e ntial for o v er 300 Mill i on barrels o f recovera b le prospec t ive oil reso u rce in just the two pri m ary reservoir zones[1] .

• The well is anticipated to in t ersect 6 pr o spective reservoir zone s ; all of whic h produce oil and gas fro m fields with i n 50 kilometres of Sidi D haher.

• • The estimated c ost to drill t he well is approximate l y $6 million and the w e ll is planne d to take aro u nd 30 days t o drill.

• • Cha n ce of Geol o gic Success of approximately 30%[1] . • The prospectivity of Sidi D haher is s u pported b y the presence of coi n cident hyd r ocarbon indi c ator anom a lies, namel y : ▫ Seismic Fl a t Spots, on all 2D seis m ic lines cros s ing the prospect at the shallowest reservoir level; these are interpreted to be potential Direct Hydroc a rbon Indic a tors (“DHI”). Seismic flat spots are often t h e seismic e xpression o f the interface between hydrocar b ons and underlyin g water zones in good re s ervoir rock s ; and

• ▫ Surface P e troleum Ge o chemical “ M icroseepa g e” Anomali e s across th e prospect a r ea. Such anomalies are often p r esent abov e oil and gas accumulati o ns.

Attache d for invest o rs information is an up d ated presentation, title d “XState Re a dy to Drill” , which is focused on the Sidi D haher well .

For and on behalf of the Board

1 Isis Pe t roleum Cons ultants Repo r t

41 S tirling Hi g hway, Nedlands WA 6 009 Tel + 61 8 9423 3200 Fax + 61 8 9389 8327 ww w .xstate.com.au

XState Resources Limited

XState ready to Drill: Sidi Dhaher Prospect Summary 21 December 2010

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XState (ASX:XST): Ready to Drill

• Preparing to drill 300 million barrel potential Sidi Dhaher Prospect in onshore Chorbane Permit- 28 January 2011;

• Following up offshore Discoveries at Dougga and Lambouka later in 2011

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Tunisia to Europe gas
pipelines
Oil and gas pipelines and gas
plant and power station within
Chorbane area
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Sidi Dhaher Prospect

Key Attributes:

• Over 300 Million barrels of oil mean Recoverable Prospective Resource[1 ] potential in just the Primary Reservoir Zones

• Probability of Geologic Success[1] ~30%

Location of Flat Event -interpreted Direct Hydrocarbon Indicator (DHI)

• Drill Well for ~US$ 6 million in January and February 2011

• 6 Potential Reservoir Zones

• Coincident Hydrocarbon Anomalies:

• Seismic Flat Spot-interpreted Direct Hydrocarbon Indicator (DHI)

• Surface Petroleum Geochemical Anomalies

Schematic Cross Section

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Note 1. ISIS Petroleum Consultants Estimate

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Sidi Dhaher Prospect

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Sidi Daher
Prospect Map at
Top Metlaoui
~ 10 km
Sidi Daher
Prospect
Flat Event- possible
Interpreted
Direct Hydrocarbon
higher porosity
Indicator (DHI)
reservoir trend
(yellow)
4
Seismic Flat Spot Anomaly at Metlaoui Level
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Sidi Dhaher Prospect

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~ 10 km
Most likely closure at
HCI level
Flat spot (HCI) on
seismic
Sidi Daher Prospect
Surface Geochem
with structural closure over 70
Anomalies co-incident
km [2 ] on a regional high with
with Flat Spot and
encouraging coincident
Structural Closing
prospectivity indicators; and 6
Contours
potential stacked reservoirs
Map of Sidi Daher with “Prospectivity Indicators” 5
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XState Resource Summary

• XState Underlying Value Net mean un-risked oil and gas resources from only Dougga and Lambouka discoveries and upcoming Sidi Daher Prospect

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Dougga [1] 41 Bcf gas 100 Capital Structure:
XST Shares 67.5 Million
XST Options 48.4 Million
(Net Tested Contingent 2.8 million barrels condensate 90
Resources)
80
Lambouka 31 Bcf gas
70
(Net Untested 2.4 million barrels condensate
Contingent Resources)
60
Option
Sidi Daher 4 Bcf gas 50 Drilling
Soon
(Net Prospective 31 million barrels oil
resources) 40 Appraise
Late
Appraise
30 2011
Late
TOTAL (NET) 76 Bcf gas
2011
36 mmb oil and condensate 20
Option
Note 1. Currently 10%, but XST has an option to double equity to 20%
10
“Success in any of these projects could 0
elevate XState into ASX mid-cap oil and Lambouka Dougga Sidi Daher XST Total
(Un-risked)
Net XST (mmboe)
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“Success in any of these projects could elevate XState into ASX mid-cap oil and gas company ranks on comparative reserves and resources basis”

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