XSTATE RESOURCES LIMITED — Capital/Financing Update 2011

Feb 24, 2011

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XState Resources Limited

ABN 96 009 217 154

Registered office Postal address 41 Stirling Highway PO Box 985 Nedlands WA 6009 Nedlands WA 6909 Tel: +61 8 9423 3200 Website Fax: +61 8 9389 8327 www.xstate.com.au

25 FEBRUARY 2011

ASX Limited

Electronic lodgement

XSTATE COMPLETES $1.25 MILLION SHARE PLACEMENT

The Board of XState Resources Limited is pleased to advise that it has successfully completed a share placement to raise $1,250,000 in new working capital through the issue of 10,000,000 ordinary shares at an issue price 12.5 cents each.

This placement has been made to sophisticated and professional investors and is conditional on the lodgement of a cleansing prospectus with ASIC, which is currently being completed. This cleansing prospectus is required to remove the secondary trading restrictions on the placement shares as the company was suspended from trading to complete its recapitalisation and reconstruction during June and July 2010. The new 10,000,000 placement shares will rank equally with XState’s existing ordinary shares and the placement is made pursuant to the company’s 15% capacity under the ASX listing rules. No shares were issued to directors or their associates.

Argonaut Securities Pty Ltd acted as Lead Manager for the Placement.

Gary Jeffery, Managing Director of XState Resources, stated:

“Preparations are nearly complete for the commencement of drilling of the Sidi Dhaher 1 well, which is now expected in early March 2011. This well will test a large prospect with up to 6 prospective reservoir zones which are interpreted to have the potential for over 300 million barrels of oil.

The funds raised by this placement will increase the Company’s working capital and may be used for testing of zones of interest in the Sidi Dhaher well, progressing XState’s oil and gas exploration and appraisal plans, as well as providing management with greater flexibility in pursuing the Company’s overall growth plans.”

An update on operations is attached to this announcement.

For and on behalf of the Board.

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XState Resources Limited

OPERATIONS UPDATE

Onshore Drilling:

The operator of the Sidi Dhaher well planned to be drilled imminently in the Chorbane acreage has advised that preparations for the commencement of drilling operations on the well are nearly completed. The operator is moving ahead cautiously towards drilling the well in early March. Site preparations have been completed and surface casing has been set. All statutory approvals for access and drilling have been obtained.

The well will test up to 6 prospective zones in a large structural closure with the potential for over 300 million barrels of recoverable oil and associated gas in the two primary target reservoirs.

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Figure 1: Challenger #37 Rig planned for Sidi Dhaher

Offshore Exploration Update:

Renewal of the Kerkouane exploration licence has been approved and three more years have been granted for exploration and appraisal activities until 22 February 2014. The exploration licence can then be renewed for another three years.

The current licence area contains a number of large appraisal and exploration targets such as:

• Dougga gas condensate field (covered by 3D seismic );

• Lambouka discovery (covered by 3D seismic);

• Dougga‐NW (“Son of Dougga”) prospect (covered by 3D seismic);

• Kerkouane gas discovery (covered by 2D seismic); and

• Newly identified structural – stratigraphic prospects in the Pliocene section (partly covered by 3D, analogy to the very large offshore Sicily discoveries recently made by ENI and Edison); and

• Several very large structural prospects typical for the over thrust area in the northern part of the licence (covered by 2D seismic).

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XState Resources Limited

Dougga Development Review

A detailed review and resource assessment study was initiated by the joint venture and is continuing. The objective of the studies is to establish the technical and commercial feasibility of the Dougga discovery made in 1981. The Dougga 1 well tested gas and condensate from an Abiod Limestone reservoir which is the producing reservoir in many fields in Tunisia. The discovery was not evaluated further at the time due to low gas prices and lack of pipeline connections to gas markets.

Since then gas and condensate prices are significantly higher, and there are now gas pipelines capable of delivering gas from Tunisia to Europe.

These studies are being based on the revised interpretation of the Dougga discovery using the results of the dual sensor 3D seismic acquired over Dougga in 2010. A further well is anticipated to be necessary to enable the joint venture to book reserves at Dougga. This well is being planned for drilling in late 2011.

XState has an option to increase its equity to 20% in the Dougga discovery and all areas of the Kerkouane PSC and Pantelleria Permit outside the Lambouka discovery structure.

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