XSTATE RESOURCES LIMITED — Interim / Quarterly Report 2014

Jul 30, 2014

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ABN 96 009 217 154
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31[st] July 2014

ASX Limited

Electronic lodgement

June 2014

Quarterly Activity Report

HIGHGLIGHTS

• Leasing in California is proceeding as planned- addition landholding currently under negotiation.

• Porters Ranch anticline drilling application proceeding.

• Gas production in line with expectation.

• Completed the purchase of the remaining 24.1% of the shares in Bombora Energy Pty Ltd.

Leasing proceeding as planned (XST 10% to 30%)

Over the last quarter Xstate has increased it leasing campaign with another 10,000 gross acres being processed for leasing. The company’s initial objective is to secure the cornerstones over another four type I and type II prospects.

As of the end of June 2014 Xstate has a gross exposure to 23,000 acres covering all three reservoir/seal play types in the Sacramento Basin and the Porter Ranch anticline.

Porter Ranch anticline, Santa Maria Basin (XST 22.5%)

During June the JV operator in California confirmed the receipt of a letter from the San Luis Obispo County confirming that the drilling application had been accepted as complete for processing and will now receive its environmental determination pursuant to the Californian Environmental Quality Act.

We are now awaiting details on the timeline for such a determination to be made.

Gas production assets (XST 10%)

The seven gas wells in which XST has and interest have continued to produce small volumes of gas which have been sold into the Californian market.

Suite 1, 45 Ord Street, West Perth, WA 6005 Tel + 61 8 9226 0866

www.xstate.com.au

ABN 96 009 217 154

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– Planned activity September Quarter

Subsequent to the end of the June Quarter, the company’s leasing campaign has continued with additional leasing documentation sent to land owners.

Corporate

Acquisition of the remaining 24.1% of Bombora Energy Pty Ltd completed

XST was able to acquire the remaining 24.1% of Bombora which was completed on the 10[th] June 2014 by way of the issue of 4,092,502 shares in Company.

For and on behalf of the Board of Xstate Resources Limited

Paul Cartwright Managing Director

Competent Person

The technical information provided has been compiled by Mr Paul Cartwright, Managing Director of Xstate Resources Limited. He is a qualified petroleum geologist with over 25 years technical, commercial and management experience in exploration for, appraisal and development, and transportation of oil and gas and mineral and energy resources. Mr Cartwright has reviewed the results, procedures and data contained in this release. Mr Cartwright consents to the inclusion of the above information in the form and context in which it appears.

The estimated quantities of petroleum that may potentially be recovered by the applicaton 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 .

US exploration is conducted on leases grant by Mineral Right owners, in XST’s case primarily private individuals or groups. Leases can vary in size from very small parcels (part of an acre) to large landholdings (covering a few square miles). Leases generally are for 5 years and rentals are paid annually. There are no work commitments associated with the leases. Some leases are ‘Held By Production’ and royalties, generally less than 20% of revenues, are paid to mineral right owners in lieu of rentals. XST has not listed all it leases as it is impractical and not meaningful for potential project value assessment in a conventional gas play. A detailed listing of leases may also lead to a loss of competitive advantage and consequent reduced value to XST shareholders.

Suite 1, 45 Ord Street, West Perth, WA 6005 Tel + 61 8 9226 0866

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	Quarter ended (“current quarter”)
96 009 217 154	30 JUNE 2014

Consolidated statement of cash flows

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 / (paid) 1.7 Other – cash on acquisition of subsidiary Net Operating Cash Flows	Current quarter $A’000	Year to date (6 months) $A’000
	- (40) - - (130) - - - - -	- (63) - - (280) - 1 - - 2
	(170)	(340)
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 - sale of exploration assets Net investing cash flows 1.13 Total operating and investing cash flows (carried forward)	- - - - - - - - -	- - - - - - - - -
	-	-
	(170)	(340)

• 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)	(170)	(340)
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	- - - - - (8)	1,000 - - - - (47)
	(8)	953
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	(178) 1,014 (18)	613 258 (53)
	818	818

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
			62
			-
1.25 n-cas 2.1 2.2	Explanation necessary for an understanding of the transactions 1.23 - Includes salaries and fees paid to directors, as well as superannuation paid on behalf of directors. Also includes corporate and accounting services paid to a company associated with one of the directors. h financing and investing activities Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows	Explanation necessary for an understanding of the transactions
		1.23 - Includes salaries and fees paid to directors, as well as superannuation paid on behalf of directors. Also includes corporate and accounting services paid to a company associated with one of the directors.
	None
	Details of outlays made by other entities to establish or increase their share in projects in which the reporting entityhas an interest
	None

Non-cash financing and investing activities

• 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	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
	150
	-
	-
	90
Total	240

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)	818	1,014
	-	-
	-	-
	-	-
Total: cash at end of quarter(item 1.22)	818	1,014

Changes in interests 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	Nil	N/A	N/A	N/A
	N/A	N/A	N/A	N/A
7.3 +Ordinary securities ** 7.4 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy-backs	179,805,048	179,805,048	N/A	N/A
	921,488 4,092,502	921,488 4,092,502	4.2 cents 4.0 cents	4.2 cents 4.0 cents
7.5 +Convertible debt securities (description) 7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted	Nil	N/A	N/A	N/A
	N/A	N/A	N/A	N/A
7.7 Options (description and conversion factor) 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired during quarter	19,500,000 17,000,000 2,500,000	- -	Exercise price Various Various 5 cents	Expiry date 31 May 2016 31 December 2015 31 December 2016
	-	-	-	-
	N/A	N/A	N/A	N/A
7.11 Debentures (totals only)	Nil	N/A
7.12 Unsecured notes (totals only)	Nil	N/A

• 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:

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Date: 31 July 2014

Company Secretary

Print name: David M 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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