XSTATE RESOURCES LIMITED — Capital/Financing Update 2016

Dec 6, 2016

ABN 96 009 217 154

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7 December 2016

ASX Limited

Electronic lodgement

Los Angeles Basin Oil Field Acquisition Update

• Xstate is continuing its due diligence, which it aims to complete by close of business December 16, 2016.

• The extended due diligence period has enabled Xstate to secure all available field data and engage directly with the Sansinena field operator.

• Since assuming field operations mid‐year, the operator, Matrix Oil Corp., has undertaken extensive field work which is being assessed by the independent engineering and geotechnical consultants Netherland Sewell and Associates (“NSA”).

• Xstate has commissioned NSA to undertake further valuation work and sensitivities incorporating the most recent operational trends of the field.

• Whilst there has been a delay in our due diligence due to the assimilation of all the necessary data, Xstate continues to gain confidence in the underlying quality of the asset and remains committed to close out the acquisition by February 3, 2017.

Xstate Resources Limited (ASX:XST) (“Xstate” or “the Company”) is pleased to provide an update in regards to the Los Angeles Basin Oil Fields transaction announced on 4 November 2016.

Xstate is continuing to conduct due diligence, which is planned to complete by December 16, 2016. The due diligence process has been extended due to a delay in securing all available field data and getting direct engagement with the Sansinena field operator (Matrix Oil Corp.). This engagement has provided an intimate understanding of the current field operations as well as the planned productivity enhancement and reserves development work program.

The extensive recent work undertaken by the independent engineering and geotechnical consultant Netherland Sewell and Associates (“NSA”) on behalf of Matrix has been made available to Xstate. This work provides a third party detailed technical and commercial understanding of the field. Xstate has commissioned NSA to undertake further valuation work and sensitivities incorporating the most recent operational trends for the field and further due diligence work undertaken by Xstate’s own local consultants.

Xstate’s initial review of production operations at the Sansinena field indicates that significant productivity gains are available through: flaring of excess gas, gas plant debottlenecking and the ongoing return to production of shut in wells. These gains are expected within months of the closing date for the acquisition. Xstate anticipates more substantial production increases by mid‐2017 following the commencement of drilling of proven undeveloped reserves in close proximity to existing producing wells.

From the due diligence work to date, Xstate continues to gain confidence in the underlying quality of the asset and the capability of the operator who like Xstate is highly focused and motivated to achieve the field’s full economic potential.

Level 2, 55 Carrington Street, Nedlands WA 6009 | Tel + 61 8 9423 3200 | Fax +61 8 9389 8327 www.xstate.com.au

7 December 2016

ASX Release – LA Basin Oil Fields Acquisition

For and on behalf of the Board of Xstate Resources Limited

For further details please contact:

Cosimo Damiano Media/Broker Enquiries Managing Director Luke Forrestal/Andrew Rowell Xstate Resources Limited Cannings Purple Tel Office: +61 8 9423 3200 Mob: 0411 479 144/0400 466 226 Email: cosimodamiano@xstate.com.au Email: lforrestal@canningspurple.com.au arowell@canningspurple.com.au

About Xstate Resources Limited

Xstate Resources (ASX Code: XST) is an ASX listed company focused on the oil and gas sector. The Company has existing gas exploration assets located in the Sacramento Basin, California and minor associated gas production.

Level 2, 55 Carrington Street, Nedlands WA 6009 | Tel + 61 8 9423 3200 | Fax +61 8 9389 8327 www.xstate.com.au