XSTATE RESOURCES LIMITED — Capital/Financing Update 2011

Jan 11, 2011

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ABN 96 009 217 154

12 January 2011

ASX Limited

Electronic lodgement

Update‐ Rig Contracted, XState to commence drilling 300 million barrel potential Sidi Dhaher Prospect in early February 2011

XState Resources Limited (ASX: XST) advises that it now expects the 300 million barrel Sidi Dhaher Prospect exploration well to commence drilling in early February 2011.

XState is earning a 10% interest in the Chorbane PSC by part funding the Sidi Dhaher well.

The operator of the Sidi Dhaher well has advised that a rig has been contracted and that the currently anticipated spud date for the exploration well is the first week of February 2011, depending on receipt of expected Government approvals.

The key attributes of the Sidi Dhaher prospect (illustrated below) are:

• Potential for over 300 Million barrels of recoverable prospective oil resource in just the two primary reservoir zones, with a Chance of Geologic Success of approximately 30%. These resource estimates are higher than the Operator estimates and are based on mapping by the independent expert for the XState Prospectus dated 26 May 2010.

• The well is anticipated to intersect 4 additional prospective, but secondary reservoir zones.

• All of the expected reservoir zones produce oil and gas from fields within 50 kilometres of Sidi Dhaher.

• The estimated cost to drill the well is approximately $6 million and the well is planned to take around 30 days to drill.

• The prospectivity of Sidi Dhaher is supported by the presence of coincident hydrocarbon indicator anomalies, namely:

• Seismic Flat Spots, on all 2D seismic lines crossing the prospect at the shallowest reservoir level; these are interpreted to be potential Direct Hydrocarbon Indicators (“DHI”). Seismic flat spots are often the seismic expression of the interface between hydrocarbons and underlying water zones in good reservoir rocks; and

• Surface Petroleum Geochemical “Microseepage” Anomalies across the prospect area. Such anomalies are often present above oil and gas accumulations.

Gary Jeffery, Managing Director of XState enthusiastically observed: “Sidi Dhaher is a very exciting well for XState and has the potential to be a company maker in its own right. Significantly a discovery at Sidi Dhaher could provide early production for XState; a company that has only been in the oil and gas industry for 6 months, but which has already built has a solid foundation of gas and condensate resources at its Dougga and Lambouka discoveries offshore Tunisia.”

ABN 96 009 217 154

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Sidi Dhaher Prospect Summary:

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For and on behalf of the Board