XSTATE RESOURCES LIMITED — Capital/Financing Update 2019

May 7, 2019

ABN 96 009 217 154

Electronic lodgement

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8 May 2019

ASX Limited

Farm In Agreement Two Well Drilling Program in East Texas

Summary

• Xstate Resources will acquire a 25% working interest by funding a 33% interest in an onshore exploration project in Texas comprising a two well drilling program in addition to follow up opportunities.

• The two high impact wells to be drilled commencing early Q3 2019 will target large 3D defined structures with multiple reservoir objectives nearby existing oil fields.

• The projects to be drilled are close to strong oil markets and existing infrastructure with the potential for rapid development and early production.

• The Farmin provides firm, near term activity and rapid cash flow potential which diversifies and complements Xstate’s high risk / reward Californian gas exploration projects.

• The planned two well drilling progam will cost the Company approximately US$400,000 and will be funded from existing cash reserves.

• Further asset expansion opportunities in the USA and Canada are currently being assessed.

Comments

Xstate Resources Limited (ASX: XST) (“Xstate” or “the Company”) is pleased to announce that it has entered into a Binding Farm In Agreement (“ Agreement ”) to acquire a working interest in the Champion Project Area (“ Champion Project ”) onshore Newton County, Texas.

The Transaction provides diversification to Xstate’s exploration portfolio by adding “ready made” projects with imminent drilling and the potential for near-term oil production in the USA, until further advancements can be made on the Company’s’ high risk / reward potential Californian gas exploration projects.

Under a farmin agreement with Mosman Oil & Gas Ltd ( AIM:MSMN ) Xstate may earn a 25% interest by funding 33.33% of a planned two well program, up to an agreed cost “cap”. The estimated cost to Xstate is approximately US$0.4 million. The initial well is expected to commence drilling early 3Q 2019 and is targeting 1.9 BCF of gross mean resource potential and the second well is planned for late 2019 and is targeting 357 MBO of gross mean resource potential.

Xstate’s commitment to drill two wells in the Champion Project represents a prudent and appropriately-sized acquisition for the Company at this juncture. Whilst Texas signifies a strategic geographic shift for the Company, the operating team is well known to Xstate’s management, there is near term drilling activity and there are numerous follow up additional opportunities, in both exploration and production in the area of operations.

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

8 May 2019

Mosman Farm In, Texas

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The associated drilling investment options provide an excellent platform for growth,. The potential cash flow from drilling success will be used for further development and appraisal activities and the potential development of additional projects currently under review. The location of the assets adjacent to other oil discoveries also provides opportunities for growth and aggregation.

As a result of this transaction Xstate will develop on the ground operational capability and gain access to commercially aligned operational relationships in Texas, which will enable the identification, evaluation and potential purchase/farm in of additional production opportunities in line with the Company’s investment strategy.

The Company continues to actively seek to identify and evaluate further asset opportunities that meet Xstate’s investment criteria and are capable of being delivered in a timely and cost effective manner.

Champion Project, Newton County Texas – Xstate 25% WI[1]

The Champion Project is located in Newton County, East Texas and has several drilling locations identified using the same 3D seismic. The Champion Project was identified and sourced by Baja Oil & Gas LLC (“Baja”), a private company located Houston, Texas. Baja holds a 40% interest and will be the Operator. Key highlights:

• 240 gross acre; comprises Initial and Subsequent wells (Galaxie and Falcon wells);

• Multiple potential reservoirs (Frio sand, Hackberry member and others), most objectives at shallow depths <8,000’; low cost drilling;

• Excellent reservoir properties, high recovery factors

• Additional acreage available along trend; and

• A further four (4) prospects and leads defined by modern 3D seismic.

Figure 1: Location Map

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Champion Project Interests	Working Interests	Funding Interests2
Xstate Resources Limited (ASX: XST)	25.00%	33.33%3
Baja Oil & Gas LLC (Operator)	40.00%	20.00%
Mosman Oil & Gas Pty Ltd (LON:MSNM)	35.00%	46.67%

Champion Project – Gross Recoverable estimates4	Champion Project – Gross Recoverable estimates4
Initial Two Wells	P905	P505	P105	Mean6
Galaxie Prospect - mbo	127	290	660	357
Falcon Prospect – bcf	0.45	1.34	3.90	1.88

Source: Baja Oil & Gas LLC

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

8 May 2019

Mosman Farm In, Texas

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Notes

1 Subject to Xstate satisfying its farm in obligations

2 Funding interests for a 2 well program; therafter the partners pay there working interests

3 Xstate is funding 41.66% of the initial well with a total well cost capped at US$600,000 and includes Xstate’s contribution of US$50,000 for back costs to Mosman Oil & Gas Ltd

4 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 moveable hydrocarbons

5 Probalistic method

6 Deterministic method

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 of Terms

Tcf: trillion cubic feet Bcf: billion cubic feet mmbbl: million barrels mmboe: million barrels oil equivalent mbo: thousand barrels of oil STOOIP: stock tank original oil-in-place JV: joint venture WI: working interest AMI: area of mutual interest mcf: thousand cubic feet gas

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 9435 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. 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