XSTATE RESOURCES LIMITED — Capital/Financing Update 2017

Jul 16, 2017

ABN 96 009 217 154

Electronic lodgement

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17 July 2017

ASX Limited

Successful Placement for Sacramento Operations

• Xstate is pleased to advise it has successfully raised $470,000 (before costs).

• Proceeds will be used in part to fund leasing of additional acreage on trend with the Dempsey 1-15 well. Xstate holds working interests in these additonal prospects ranging from 24% to 30%.

• The Dempsey 1-15 well (XST 10% WI) is scheduled to spud late July 2017.

• The well is targeting cumulative unrisked recoverable Best Case Prospective Resources of 1 Tcf[1] gross (based on Operator’s estimates) mapped on 3D seismic (Xstate share 100 Bcf[1] ).

• Dempsey 1-15 is strategically located to nearby joint venture owned infrastructure which would provide the potential to deliver near term cash flow.

Xstate Resources Limited (ASX: XST) (“Xstate” or “the Company”) has successfully completed a placement to sophisticated investors raising $470,000 (before costs). Xstate will issue 94,000,000 fully paid shares at $0.005 cents per share. The placement was made pursuant to Section 708 of the Corporations Act and Rule 7.1 of the ASX Listing Rules.

The funds raised will be used in part for the Company's leasing of additional acreage on Dempsey prospect lookalikes in advance of the drilling of the Dempsey 1-15 well late this month.

The Board of Xstate is very encouraged by the strong support received in the Company’s capital raising which is an endorsement of the Company’s current portfolio and future growth plans. The funds will underpin an exciting exploration and development program with the aim to position Xstate for growth in 2017.

The imminent spud of the Dempsey 1-15 well is another step on the path to transform Xstate into a producing company. We are also encouraged by look alike prospects along the Dempsey trend currently being leased and Alavares appraisal activity anticipated in the second half of 2017. In addition to our Sacramento basin activities we continue to pursue new production opportunities onshore California that have the potential to add significant value to the company via production enhancement, cost control, and the drilling of new development and appraisal wells.

We welcome our new shareholders, and we thank our existing shareholders for their ongoing patience and support of the company.

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

5 July 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.

1 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 a 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 mmbbl: million barrels JV: joint venture

Bcf: billion cubic feet mmboe: million barrels oil equivalent WI: working interest

For and on behalf of the Board of Xstate Resources Limited

For further details please contact:

Cosimo Damiano

Managing Director Xstate Resources Limited Tel Office: +61 8 9425 3200 Email: cosimodamiano@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.

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