XSTATE RESOURCES LIMITED — Interim / Quarterly Report 2012

Oct 30, 2012

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ABN 96 009 217 154
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31[st] October 2012

ASX Limited

Electronic lodgement

September 2012

Quarterly Activity Report

KEY ACTIVITY

• Xstate to realise up to US$1.375 million from Tunisian Assets Sale

• Search for new projects continues

Xstate has reached preliminary agreement to sell its 10% participating interests in the Chorbane permit, and its 10% participating interest in the Kerkouane and Pantelleria permits in Tunisia and Italy to the Gulfsands Petroleum Group.

The completion of this transaction is subject to a number of conditions, including finalisation of a formal Disposal Agreement and various regulatory approvals, including Xstate shareholder approval, and joint venture approvals. Accordingly, the timing and certainty of completion of these transactions is at present difficult to predict and appropriate announcements as to the progress of each transaction will be made in due course.

An extraordinary general meeting of Xstate shareholders has been called for 27 November 2012 to seek approval for the transaction.

The transaction will result in the receipt of US$875,000 cash on closing representing sale consideration of US$675,000 and reimbursement of joint venture expenditures of US$200,000, and potentially a further payment of a US$500,000 cash bonus upon first production resulting from the drilling of the next exploration well on the Kerkouane Permit. The next exploration well is expected to be selected from a number of advanced exploration prospects that have been developed on 3D seismic data in the Dougga Gas and Condensate discovery area of the Kerkouane Permit.

This sale is consistent with the change in strategy contained in the company presentation of September 4, 2012 in which Xstate advised it had reduced administrative costs and was seeking to realise value from its Tunisian assets as a part of changing its focus to other oil and gas opportunities.

Xstate has been and continues to actively seek new assets to revitalise the company and is pursuing mergers, assets acquisition and acreage applications over areas where Xstate management and advisors have extensive oil and gas exploration and development experience.

208 Bagot Road, Subiaco WA 6008 Tel + 61 8 9381 4215 Fax +61 8 9381 9386 www.xstate.com.au

ABN 96 009 217 154

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CORPORATE

In recognition of the current financial position of the Company, the Board has instituted changes that will see corporate and administration payments reduced by approximately 40% until such time as the Company is successfully recapitalised.

There has been no change in the capital structure of the company during the quarter.

For and on behalf of the Board of Xstate Resources Limited

Gary Jeffery

Managing Director Competent Person

The technical information provided has been compiled by Mr Gary Jeffery, Managing Director of XState Resources Limited. He is a qualified geophysicist with over 39 years technical, commercial and management experience in exploration for, appraisal and development, and transportation of oil and gas and mineral and energy resources. Mr Jeffery has reviewed the results, procedures and data contained in this release . Mr Jeffery consents to the inclusion of the above information in the form and context in which it appears.

208 Bagot Road, Subiaco WA 6008 Tel + 61 8 9381 4215 Fax +61 8 9381 9386 www.xstate.com.au

Appendix 5B Mining exploration entity quarterly report

Rule 5.3

Appendix 5B

Mining exploration entity quarterly report

Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/01, 01/06/10, 17/12/10

Name of entity

XSTATE RESOURCES LIMITED

	ABN 96 009 217 154 Consolidated statement of cash flows	ABN 96 009 217 154 Consolidated statement of cash flows	Quarter ended (“current quarter”) 30 September 2012	Quarter ended (“current quarter”) 30 September 2012
			30 September 2012
Cash flows related to operating activities 1.1 Receipts from product sales and related debtors 1.2 Payments for (a) exploration and evaluation (b) development (c) production (d) administration 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes received 1.7 Other (provide details if material) Net Operating Cash Flows		Current quarter $A’000		Year to date (9 months) $A’000
		13 (266) - - (129) - 2 - - -		28 (607) - - (679) - 23 - 8 -
		(380)		(1,227)
Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (b) equity investments (c) other fixed assets 1.9 Proceeds from sale of: (a) prospects (b) equity investments (c) other fixed assets 1.10 Loans to other entities 1.11 Loans repaid by other entities 1.12 Other – acquisition of subsidiary Net investing cash flows 1.13 Total operating and investing cash flows (carried forward)		- - - - - - - - -		- - (5) - - - - - -
		-		(5)
		(380)		(1,232)

• See chapter 19 for defined terms.

17/12/2010 - Appendix 5B

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Appendix 5B Mining exploration entity quarterly report

1.13 Total operating and investing cash flows (brought forward)	(380)	(1,232)
Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 1.15 Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 1.17 Repayment of borrowings 1.18 Dividends paid 1.19 Other – capital raising costs Net financing cash flows	- - - - - -	- - - - - -
	-	-
Net increase (decrease) in cash held 1.20 Cash at beginning of quarter/year to date 1.21 Exchange rate adjustments to item 1.20 1.22 Cash at end ofquarter	(380) 548 (5)	(1,232) 1,400 (5)
	163	163

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

1.23 1.24	Aggregate amount of payments to the parties included in item 1.2 Aggregate amount of loans to the parties included in item 1.10	Current quarter $A'000
		93
		-
1.25	Explanation necessary for an understanding of the transactions
	1.22 – On 20 September 2012, the Company announced that it had disposed of its Tunisia Assets for US$ 875,000 cash, subject to shareholder approval at a meeting to be held on 27thNovember 2012. 1.23 – Includes salaries and fees paid to directors, as well as superannuation paid on behalf of directors.

Non-cash financing and investing activities

• 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows N/A

• 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest

N/A

• See chapter 19 for defined terms.

17/12/2010 - Appendix 5B

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Appendix 5B Mining exploration entity quarterly report

Financing facilities available

Add notes as necessary for an understanding of the position.

3.1 Loan facilities 3.2 Credit standby arrangements	Amount available $A’000 - $100,000	Amount used $A’000
		-
		-

Estimated cash outflows for next quarter

4.1 Exploration and evaluation 4.2 Development 4.3 Production 4.4 Administration	$A’000
	-
	-
	-
	93
Total	93

Reconciliation of cash

Reconciliation of cash
Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.	Current quarter $A’000	Previous quarter $A’000
5.1 Cash on hand and at bank 5.2 Deposits at call 5.3 Bank overdraft 5.4 Other (provide details)	163	548
	-	-
	-	-
	-	-
Total: cash at end of quarter(item 1.22)	163	548

Changes in interests in mining tenements

ts in mining	tenements
Tenement reference	Nature of interest (note (2))	Interest at beginning of quarter	Interest at end of quarter

• See chapter 19 for defined terms.

17/12/2010 - Appendix 5B

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Appendix 5B Mining exploration entity quarterly report

Issued and quoted securities at end of current quarter

Description includes rate of interest and any redemption or conversion rights together with prices and dates.

	Total number	Number quoted	Issue price per security (see note 3) (cents)	Amount paid up per security (see note 3) (cents)
7.1 Preference +securities (description) 7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy-backs, redemptions
7.3 +Ordinary securities ** 7.4 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy-backs	100,881,350	100,881,350	N/A	N/A
7.5 +Convertible debt securities (description) 7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted
7.7 Options (description and conversion factor) 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired during quarter	48,438,061 66,667	48,438,061 -	Exercise price 24 cents 24 cents	Expiry date 30 June 2013 21 January2013
7.11 Debentures (totals only)
7.12 Unsecured notes (totals only)

• See chapter 19 for defined terms.

17/12/2010 - Appendix 5B

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Appendix 5B Mining exploration entity quarterly report

Compliance statement

• 1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 5).

• 2 This statement does give a true and fair view of the matters disclosed.

Sign here: Company Secretary

Date: 31 October 2012

Print name: David McArthur

Notes

• 1 The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

• 2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

• 3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities .

• 4 The definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report.

• 5 Accounting Standards ASX will accept, for example, the use of International Financial Reporting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

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• See chapter 19 for defined terms.

17/12/2010 - Appendix 5B

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