XSTATE RESOURCES LIMITED — Capital/Financing Update 2017

Jul 31, 2017

ABN 96 009 217 154

==> picture [151 x 69] intentionally omitted <==

01 August 2017

ASX Limited

Electronic lodgement

Drilling to commence at Dempsey 1‐15 Well

Summary

• Dempsey 1‐15 well is planned to spud on August 1, 2017 (California time).

• Cumulative Unrisked Best Case Recoverable Prospective Resources within the prospect could exceed 1 Tcf[1] gross (net 100 Bcf to Xstate’s 10% WI)

• Drilling operations are expected to take approximately 30 to 40 days.

Comments

Xstate Resources Limited (ASX: XST) (“Xstate” or “the Company”) is pleased to announce it has been advised by the operator Sacgasco Limited (ASX:SGC) (“SGC” or “the Operator”), that the Dempsey 1‐ 15 appraisal and exploration well located onshore California in the Sacramento Basin is planned to commence drilling (spud) operations on August 1, 2017 (California time). It is anticipated that the well will take approximately 30 to 40 days to reach Economic Basement at around 3,200m (10,500ft).

Xstate holds a 10% working interest in the Dempsey 1‐15 well and is fully funded for its share of the estimated cost to drill and complete for production of US$4.4mil gross (net US$0.44mil to Xstate).

The Dempsey 1‐15 is targeting seven (7) gas reservoirs mapped with 3D seismic. According to the operator, individual unrisked Deterministic Best Case Recoverable Prospective Resources for these primary targets range from 116 ‐ 352 Bcf of gas for a 100% interest. Should all the stacked reservoirs be full of gas, the cumulative unrisked Best Case Recoverable Prospective Resources within the prospect could exceed 1 Tcf[1] gross (net 100 Bcf to Xstate’s 10% WI).

The Dempsey prospect is part of a portfolio of acreage the joint venture partners have secured in the Sacramento Basin that is targeting large gas resources. The Dempsey well represents a highly attractive opportunity with near term cash flow potential and significant reserve additions. Furthermore, any success will enhance the potential of follow up leads and prospects along the Dempsey trend in which Xstate has significantly greater working interest levels (more than 20%).

Xstate wll report any material developments during the drillng operations.

Table 1: Dempsey 1‐15 Well – Working Interests

Company Name	Working Interests	Well Cost Exposure
Xstate Resources Limited (ASX:XST)	10%	10%
Sacgasco Limited (ASX:SGC) (operator)	50%	12%
Pancontinental Oil and Gas NL (ASX: PCL)	10%	20%
Empyrean Energy PLC (LON:EME)	30%	58%

Xstate makes reference to the attached ASX update in relation to the drilling of the Dempsey 1‐15 well by the operator for additional information.

Level 1, 31 Cliff Street, Fremantle WA 6160 | Tel + 61 8 9435 3200 | Fax +61 8 6444 7408 | www.xstate.com.au

Drilling Commences at Dempsey 1‐15 Well

01 August 2017

2

Cautionary Statement

1 Further details were included in the operator’s, Sacgasco Limited (ASX:SGC) Company’s ASX release dated 4 September 2014.

Prospective resources

The estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially movable hydrocarbons.

Competent Persons Report

This presentation contains forward looking statements that are subject to risk factors associated with the oil and gas industry. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by many variables which could cause actual results or trends to differ materially. The technical information provided has been reviewed by Mr Chris Hodge, Non Executive Director of Xstate Resources Limited. He is a qualified geologist with over 30 years technical, commercial and management experience in exploration for, appraisal and development of oil and gas. Mr Hodge consents to the inclusion of the information in the form and context in which it appears.

Glossary

Tcf: trillion cubic feet Bcf: billion cubic feet mmbbl: million barrels mmboe: million barrels oil equivalent JV: joint venture WI: working interest

For and on behalf of the Board of Xstate Resources Limited

For further details please contact:

Cosimo Damiano Chris Hodge Managing Director Non Executive Director Xstate Resources Limited Xstate Resources Limited Tel Office: +61 8 9435 3200 Tel Office: +61 8 9435 3200 Email: cosimodamiano@xstate.com.au Email: chrishodge@xstate.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 associated gas production. Xstate is presently pursuing new opportunities in the oil and gas sector onshore North America.

Level 1, 31 Cliff Street, Fremantle WA 6160 | Tel + 61 8 9435 3200 | Fax +61 8 6444 7408 | www.xstate.com.au

==> picture [143 x 109] intentionally omitted <==

Sacgasco Limited

ABN 83 114 061 433 Unit 14, 210 Bagot Road, Subiaco, WA, 6008. T +61 8 9388 2654 E info@sacgasco.com

Announcement to ASX 1 August 2017

Drilling to commence on 1+Tcf Dempsey 1-15 Natural Gas Well

• Sacgasco Operated Dempsey 1-15 well is planned to spud in Sacramento Basin, California on August 1, 2017 (California time)

• Drilling expected to take 30-40 days to drill to Economic Basement at around 3,200m (10,000ft)

• Dempsey Natural Gas Prospect contains over seven stacked conventional sandstone reservoir targets

• Offset wells had gas shows and production from Kione and Princeton Canyon formation above the Forbes producing field reservoirs

• Dempsey 1-15 is the first well to test the primary reservoir formations in this part of the under-explored Sacramento Basin

• The secondary reservoirs are interpreted to be gas bearing on trend with Dempsey

• While there is limited subsurface control for the under-explored parts of the basin, the petroleum play is proven with reservoirs, seals and demonstrated traps, and Gas shows and flows in similar reservoirs indicate pipeline quality Dry Gas

• Operational reports will be released weekly – with key operational events and results to be released consistent with the Company’s continuous disclosure obligations

Sacramento Basin-focused natural gas developer and producer, Sacgasco Limited (ASX:

SGC) (“Sacgasco” or “the Company”) is pleased to advise that it plans to commence drilling of the Company’s 1+ Tcf Dempsey 1-15 well in the Sacramento Basin in California on 1 August 2017 (California time).

The Dempsey natural gas well is planned to be drilled in three discrete sections to depths of approximately 600m, 2,000m and 3,200m associated with decreasing planned casing sizes. The well has been designed conservatively to provide flexibility to respond to well bore conditions and progressive results.

Sacgasco interprets seven target gas reservoir levels. Individual, unrisked Deterministic Prospective Resources for the primary targets range from 116 Bcf to 352 Bcf of recoverable gas. Should all the stacked reservoirs be full of gas, the cumulative unrisked recoverable Prospective Resources within the prospect could exceed 1 Tcf.

The primary targets are interpreted in a series of Cretaceous sandstone reservoirs that exhibit structurally consistent amplitude anomalies similar to those that are observed on seismic elsewhere in the basin where conventional sandstone reservoirs have trapped natural gas in mapped structural closures, e.g. Tulainyo / James and Alvares wells.

The Company expects to intersect gas shows in a number of zones in the well and these will be assessed based on the information available, but quantitative results will need to await conventional logging after drilling each section of the well and may need flow testing to be definitive.

==> picture [485 x 321] intentionally omitted <==

Figure 1: Multiple Reservoir Targets from as shallow as 500 metres

==> picture [480 x 271] intentionally omitted <==

Figure 2: Drilling ahead - Graham Rig #9 at Dempsey 1-15

After Farm‐in Working Interests in the Dempsey Gas Project:

Sacgasco Limited (ASX: SGC) (Operator) 50% Empyrean Energy PLC (LON: EME) 30% Pancontinental Oil and Gas NL (ASX: PCL) 10% Xstate Resources Limited (ASX: XST) 10%

PEOCO LLC (“the Operator”) is wholly-owned by Sacgasco.

Managing Director Gary Jeffery commented:

“Drilling the Dempsey well is one of the most anticipated and exciting wells I have been associated with in my 45 year career. It has the potential to change the industry’s perception of the Cretaceous and Jurassic sediments in the under-explored parts of the Sacramento Basin, and subsequently the future of the 2.5 Tcf per year Californian Natural Gas Market.

As usual the drilling of the well is the culmination of extensive planning. Shareholders are assured that the Company will be providing updates and will keep shareholders fully informed on key operational events and results.

Since the Dempsey 1-15 well will be exploring for a new gas pool, Sacgasco has, in order to protect longer term shareholder value, requested that the regulator keep the detailed well records and filings confidential for two years as allowed by Section 3234 of the Public Resources Code of California. The regulator has approved the “Confidential Status” for Dempsey 1-15.”

For and on behalf of the Board of Sacgasco Limited.

Gary Jeffery Managing Director +61 8 9388 2654

Sam Burns Six Degrees Investor Relations +61 400 164 067

About Sacgasco Limited (ASX: SGC)

Sacgasco Limited (ASX: SGC) is an Australian-based energy company focused on conventional gas exploration and production in the Sacramento Basin, onshore California. Sacgasco has an extensive portfolio of natural gas producing wells and prospects at both exploration and appraisal stages, including multi-Tcf opportunities. The Company is targeting gas supply to the local Californian gas market and burgeoning LNG market in North America. Sacgasco is of the view that the size of the prospects in California have the potential to supply both the domestic Californian gas market and export LNG markets.

www.sacgasco.com

Twitter: @SacGasC o