XSTATE RESOURCES LIMITED

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ABN 96 009 217 154

Registered office Postal address Level 2 PO Box 985 45 Stirling Highway Nedlands WA 6909 Nedlands WA 6009 Tel: +61 8 9423 3200 Website Fax: +61 8 9389 8327 www.xstate.com.au

11 May 2010

ASX LIMITED

Dear Sir / Madam

Re: NOTICE OF MEETING

XState Resources Limited advises that a Notice of Meeting and Proxy Form for a meeting of shareholders to be held on 10 June 2010 were dispatched to shareholders today.

Yours faithfully XSTATE RESOURCES LIMITED

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DAVID McARTHUR Director

XSTATE RESOURCES LIMITED

ACN 009 217 154

NOTICE OF GENERAL MEETING

TIME : 10.00 am (WST)

DATE : 10 June 2010 PLACE : Seminar Room 2, University Club, Hackett Drive, Crawley, Western Australia

This Notice of Meeting should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their professional advisers prior to voting.

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on (+61 8) 9423 3200.

CONTENTS PAGE

Key Dates	3
Notice of General Meeting (setting out the proposed resolutions)	4
Explanatory Statement (explaining the proposed resolutions)	9
Glossary	35
Schedule 1 – Bombora Shareholders	37
Schedule 2 – Terms and conditions of Options	38
Schedule 3 – Valuation of Options	39
Annexure A – Pro-Forma Balance Sheet - XState	40
Proxy Form	41
TIME AND PLACE OF MEETING AND HOW TO VOTE

VENUE

The General Meeting of the Shareholders to which this Notice of Meeting relates will be held at 10.00 am (WST) on 10 June 2010 at:

Seminar Room 2, University Club, Hackett Drive, Crawley, Western Australia.

YOUR VOTE IS IMPORTANT

The business of the General Meeting affects your shareholding and your vote is important.

VOTING IN PERSON

To vote in person, attend the General Meeting on the date and at the place set out above.

VOTING BY PROXY

To vote by proxy, please complete and sign the enclosed Proxy Form and return by:

(a) post to XState Resources Limited, PO Box 985, Nedlands, Perth, Western Australia 6909; or
(b) facsimile to the Company on facsimile number (+61 8) 9389 8327.

so that it is received not later than 10.00 am (WST) on 8 June 2010.

Proxy Forms received later than this time will be invalid.

IMPORTANT NOTICES

Key Dates*

Event	Date
Execution of Agreement and Announcement of Acquisition	4 May
Dispatch Notice of Meeting seeking approval for Acquisition	11 May
Lodgement of Prospectus with the ASIC	19 May
Company sends notice to shareholders of Entitlement Issue	20 May
Ex date for Entitlement Issue	21 May
Record Date for eligible shareholders under Entitlement Issue	27 May
Despatch Date - despatch Prospectus for Entitlement Issue to	2 June
eligible shareholders. Announce Prospectus has been
despatched
Opening of Offer for Capital Raising under the Prospectus	2 June
Opening Date for the Offer under the Entitlement Issue	2 June
Suspension of XState’s securities from trading on ASX at the	10 June
opening of trading
General Meeting to approve Acquisition and Change in Nature	10 June
and Scale of Activities
Closing Date for the Offer under the Entitlement Issue	17 June
Closing Date of Offer for Capital Raising under the Prospectus	17 June
Despatch date for holding statements – Entitlement Issue	18 June
Ex Date – Reconstruction	23 June
Record Date for Reconstruction	29 June
Despatch Date – Reconstruction	30 June
Settlement of Acquisition and issue of Shares under Capital	1 July
Raising and Entitlement Issue and other Option placements
Anticipated date the suspension of trading is lifted and XState’s	3 July
securities commence trading again on ASX

*This timetable is indicative only and is subject to change. The directors of XState reserve the right to amend the timetable.

NOTICE OF GENERAL MEETING

Notice is given that the General Meeting of Shareholders will be held at 10.00 am (WST) on 10 June 2010 at Seminar Room 2, University Club, Hackett Drive, Crawley, Western Australia.

The Explanatory Statement to this Notice of Meeting provides additional information on matters to be considered at the General Meeting. The Explanatory Statement and the Proxy Form are part of this Notice of Meeting.

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the General Meeting are those who are registered Shareholders of the Company at 10.00 am (WST) on 10 June 2010.

Terms and abbreviations used in this Notice of Meeting and Explanatory Statement are defined in the Glossary.

AGENDA

1. RESOLUTION 1 – CONSOLIDATION OF CAPITAL

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, subject to the passing of Resolutions 2 to 12 (inclusive), for the purposes of Section 254H of the Corporations Act and for all other purposes, approval is given for the issued capital of the Company to be consolidated on the basis that:

(a) every 3 Shares be consolidated into 1 Share; and
(b) every 3 Options be consolidated into 1 Option with the exercise price amended in inverse proportion to that ratio,

and where this consolidation results in a fraction of a Share or Option being held by a Shareholder or Optionholder (as the case may be), the Directors be authorised to round that fraction up to the nearest whole Share or Option, with the consolidation taking effect as described in the Explanatory Statement.”

Short Explanation: The Company must consolidate its capital in order to satisfy Chapters 1 and 2 of the ASX Listing Rules and as a condition of the Company’s securities recommencing trading on the ASX following the Acquisition.

2. RESOLUTION 2 – CHANGE IN NATURE AND SCALE OF ACTIVITIES

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

“That, subject to the passing of Resolutions 1 and 3 to 12 (inclusive), for the purposes of ASX Listing Rule 11.1.2 and for all other purposes, the Company be authorised to make a significant change in the nature and scale of its activities to include oil and gas exploration and production.”

Short Explanation: The proposed acquisition of Bombora, if successful, will result in the Company changing its business focus to include oil & gas exploration and production. ASX Listing Rule 11.1.2 requires the Company to seek Shareholder approval where it proposes to make a significant change to the nature or scale of its activities. ASX has also advised the Company that it will be required to re-comply with the requirements of Chapters 1 and 2 of the ASX Listing Rules in accordance with ASX Listing Rule 11.1.3. Please refer to the Explanatory Statement for details.

Voting Exclusion: The Company will disregard any votes cast on this Resolution by any person who may obtain a benefit, except a benefit solely in the capacity of a security holder, if the resolution is passed and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

3. RESOLUTION 3 – ISSUE OF SHARES TO BOMBORA SHAREHOLDERS

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, subject to the passing of Resolutions 1, 2 and 4 to 12 (inclusive), for the purposes of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to allot and issue 11,660,000 Shares (on a post-Consolidation basis) to the Bombora Shareholders on the terms set out in the Explanatory Statement.”

Short Explanation : The Company has entered into the Agreement with Bombora and its Shareholders under which the Company has agreed to make an offer for the Shares to the Bombora Shareholders in order to acquire all of the issued share capital in Bombora. The Company seeks Shareholder approval for the issue of the Shares in accordance with ASX Listing Rule 7.1.

Voting Exclusion: The Company will disregard any votes cast on this Resolution by any person who may participate in the proposed issue and a person who may obtain a benefit, except a benefit solely in the capacity of a security holder, if the resolution is passed and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

4. RESOLUTION 4 – ISSUE FOR PROSPECTUS CAPITAL RAISING

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, subject to the passing of Resolutions 1 to 3 and 5 to 12 (inclusive), for the purposes of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to allot and issue up to:

(a) 7,500,000 Shares (on a post-Consolidation basis) at an issue price of $0.20 raising up to a total of $1,500,000; and
(b) 3,750,000 free attaching Options (on the basis of one (1) free attaching Option for every two (2) Shares subscribed for), on the terms and conditions set out in the Explanatory Statement.”

Short Explanation : The Company must issue a Prospectus in order to satisfy the requirements of Chapters 1 and 2 of the ASX Listing Rules and as a condition of the Company’s securities recommencing trading on the ASX following the Acquisition. Please refer to the Explanatory Statement for details.

5. RESOLUTION 5 – ISSUE OF OPTIONS TO ARGONAUT LIMITED

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, subject to the passing of Resolutions 1 to 4 and 6 to 12 (inclusive), for the purposes of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to allot and issue up to 2,500,000 Options (on a postConsolidation basis) to Argonaut Limited on the terms set out in the Explanatory Statement.”

Short Explanation : The Company has agreed to issue Argonaut the Options as part consideration for the corporate advisory fee in connection with the Capital Raising referred to in Resolution 4. The Company seeks Shareholder approval for the issue of the Options in accordance with ASX Listing Rule 7.1.

6. RESOLUTION 6 – PLACEMENT – OPTIONS

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, subject to the passing of Resolutions 1 to 5 and 7 to 12 (inclusive), for the purpose of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to allot and issue up to 5,000,000 Options (on a postConsolidation basis) to clients of Argonaut Limited in order to raise $50,000 on the terms and conditions set out in the Explanatory Statement.”

Short Explanation : The Company has agreed to issue the Options in order to raise $50,000. The Company seeks Shareholder approval for the issue of the Options in accordance with ASX Listing Rule 7.1.

Voting Exclusion : The Company will disregard any votes cast on this Resolution by any person who may participate in the proposed issue and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

7. RESOLUTION 7 - ISSUE OF OPTIONS AS CONSIDERATION FOR THE CONVERTIBLE NOTE

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, subject to the passing of Resolutions 1 to 6 and 8 to 12 (inclusive), for the purposes of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to allot and issue up to 2,500,000 Options (on a postConsolidation basis) to the Noteholders on the terms set out in the Explanatory Statement.”

Short Explanation : The Company has agreed to issue the Options to nominated third parties of Argonaut in connection with the Convertible Note. Details of these parties are set out at Section 8

of the Explanatory Statement. The Company seeks Shareholder approval for the issue of the Options in accordance with ASX Listing Rule 7.1.

8. RESOLUTION 8 – ISSUE OF OPTIONS TO GARY JEFFERY

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, subject to the passing of Resolutions 1 to 7 and 9 to 12 (inclusive), for the purposes of ASX Listing Rule 10.11 and for all other purposes, approval is given for the Directors to issue 2,500,000 Options (on a post-Consolidation basis) to Mr Gary Jeffery (or his nominee) on the terms and conditions in the Explanatory Statement.”

Short Explanation: The ASX Listing Rules require the Company to seek Shareholder approval prior to the issue of securities to a related party. Mr Gary Jeffery is a related party of the Company by virtue of the fact that he, subject to completion of the Acquisition of Bombora, will become a director of the Company.

Voting Exclusion: The Company will disregard any votes cast on this Resolution by Mr Gary Jeffery and any associate of Mr Gary Jeffery.

9. RESOLUTION 9 – ISSUE OF OPTIONS TO JOHN BEGG

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, subject to the passing of Resolutions 1 to 8 and 10 to 12 (inclusive), for the purposes of ASX Listing Rule 10.11 and for all other purposes, approval is given for the Directors to issue 2,500,000 Options (on a post-Consolidation basis) to Mr John Begg (or his nominee) on the terms and conditions in the Explanatory Statement.”

Short Explanation: The ASX Listing Rules require the Company to seek Shareholder approval prior to the issue of securities to a related party. Mr John Begg is a related party of the Company by virtue of the fact that he, subject to completion of the Acquisition of Bombora, will become a director of the Company.

Voting Exclusion: The Company will disregard any votes cast on this Resolution by Mr John Begg and any associate of Mr John Begg.

10. RESOLUTION 10 – ISSUE OF SHARES AND OPTIONS TO DAVID MCARTHUR

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, subject to the passing of Resolutions 1 to 9, 11 and 12 (inclusive), for the purposes of ASX Listing Rule 10.11 and for all other purposes, approval is given for the Directors to issue up to:

(a) 350,000 Shares (on a post-Consolidation basis); and
(b) 175,000 free attaching Options (on the basis of one (1) free attaching Option for every two (2) Shares subscribed for),

to Mr David McArthur (or his nominee) on the terms and conditions in the Explanatory Statement.”

Short Explanation: The Shares and Options will be issued pursuant to the terms of the Capital Raising for which Shareholder approval is sought under Resolution 4 . The ASX Listing Rules require the Company to seek Shareholder approval prior to the issue of securities to a related party. Mr David McArthur is a related party of the Company by virtue of the fact that he is a director of the Company.

Voting Exclusion: The Company will disregard any votes cast on this Resolution by Mr David McArthur and any associate of Mr David McArthur.

11. RESOLUTION 11 – ELECTION OF A DIRECTOR – GARY JEFFERY

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, subject to the passing of Resolutions 1 to 10 and 12 inclusive, for the purpose of clause 12.4 of the Constitution and for all other purposes, Mr Gary Jeffery, being eligible to act as a Director, be elected as a Director on and from the Settlement Date.”

Short Explanation : To the Agreement, the Company has agreed to effect the appointment of two (2) Bombora nominee directors to the Board of the Company subject to completion of the Acquisition, and receipt of Shareholder approval sought pursuant to this Resolution. Please refer to the Explanatory Statement for details.

12. RESOLUTION 12 – ELECTION OF A DIRECTOR – JOHN BEGG

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, subject to the passing of Resolutions 1 to 11 inclusive, for the purpose of clause 12.4 of the Constitution and for all other purposes, Mr John Begg, being eligible to act as a Director, be elected as a Director on and from the Settlement Date.”

DATED: 7 MAY 2010

BY ORDER OF THE BOARD

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DAVID MCARTHUR DIRECTOR

EXPLANATORY STATEMENT

This Explanatory Statement has been prepared for the information of the Shareholders in connection with the business to be conducted at the General Meeting to be held at 10.00 am (WST) on 10 June 2010 at Seminar Room 2, University Club, Hackett Drive, Crawley, Western Australia.

This purpose of this Explanatory Statement is to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions in the Notice of Meeting.

1. OVERVIEW OF CHANGE OF ACTIVITIES

1.1 Background

XState Resources Limited ( XState or the Company ) is an Australian public company listed on the official list of ASX (ASX code: XST).

The Company and its subsidiary, XState Resources (Arizona) Inc, have predominantly operated in the uranium exploration industry in the United States of America. The Company currently has a 50% participating interest in the exploration of uranium in 3 mining leases in Arizona with its joint venture partner, Liberty Star Uranium and Metals Corp.

On 21 January 2010, the Company announced the acquisition of a substantial surface geochemical database covering the main mineral provinces of Nevada in the USA. Nevada has some of the best know gold deposits in the world. Upon completion of the proposed acquisition of Bombora, the Company does not intend to actively pursue an active exploration program on this gold database and will attempt to dispose of its rights to this data base.

1.2 Background to Change of Activities – Acquisition of Bombora

On 4 May 2010, the Company announced to ASX that it had entered into a conditional agreement ( Agreement ) with an unlisted Australian public company, Bombora Energy Limited ( Bombora ) and certain major Shareholders ( Major Shareholders ), under which the Company agreed to make offers to all of the Bombora Shareholders to acquire 100% of the issued shares in Bombora ( Acquisition ). Please refer to Section 1.5 for further details regarding the terms of the Agreement proposed Acquisition.

Bombora is in the process of earning a 10% interest in potential onshore and offshore hydrocarbon permits in Tunisia and Italy, located adjacent to hydrocarbon producing fields. Please refer to Section for further details about Bombora.

As announced to ASX on 4 May 2010, the Company now intends to change the focus of its activities to include oil & gas exploration and production. This change of focus is as a consequence of a review of the Company’s mineral exploration business, which resulted in the Board forming the view that it was necessary to expand its focus into the oil & gas sector.

Pursuant to the Agreement, the Company will seek to acquire Bombora through the offer of 11,660,000 Shares to the Bombora Shareholders. Completion of the Acquisition is subject to all of the Bombora Shareholders accepting the offer by the Company for 100% of their Bombora Shares. The Acquisition of Bombora is subject to Shareholder approval and will require the Company to undertake a recompliance listing with ASX. In conjunction with the Acquisition, the Company plans to raise $1.76 million in working capital through the issue of new Shares and Options.

This working capital, in addition to the Company’s existing cash balance of approximately $2.9 million will be used to fund Bombora’s share of the offshore 3D seismic program and the offshore Lambouka and onshore exploration wells scheduled to be completed in 2010.

1.3 Background on Bombora and its assets

Bombora currently holds the right to earn interests in the permits, detailed as follows:

Permits	Interest
Tunisia (onshore) - Chorbane permit	10%
Tunisia (offshore) - Kerkouane permit	10% (option to increase to 20%, Lambouka remains at 10)
Sicily (offshore) - Pantelleria permit	10% (option to increase to 20%, Lambouka remains at 10)

1.3.1 Offshore Permits: Kerkouane (Tunisia) and Pantelleria (Italy)

These permits cover an area of over 4,500 Km[2] in water depths from around 20m to over 1000m.

Bombora is earning a 10% interest by part funding a 640 km[2] 3D seismic survey that has just been acquired for a cost to Bombora of approximately US$700,000. After this Bombora will contribute to future programs in proportion to its 10% interest in the permits, which includes the Lambouka-1 exploration well and any future appraisal of the Dougga discovery.

Dougga Discovery

Dougga was discovered in 1982 in 330m of water and has estimated Contingent (recoverable) Resources of 420 Bcf gas and 29 mmbbls of condensate or light oil. This discovery will be covered by the 3D seismic program and is expected to be the focus of future appraisal and development activity. The main reservoir is the carbonate Abiod Formation, a prolific producer elsewhere onshore and offshore Tunisia. Non hydrocarbon gas content including indicative CO2 content of approximately 30% in the gas impacts on the development cost and historically suppressed the commercial potential. Technology advances since the discovery was made 28 years ago and rising oil prices that have been evident over the past 12 months make Dougga an increasingly attractive asset.

1.3.2 Lambouka Prospect and Additional Offshore Prospects

In the offshore permits more than 16 leads and prospects are mapped, including the very large Lambouka Prospect, which will be drilled in June – July 2010 using Atwood Drilling’s Southern Cross semi-submersible drilling rig. Bombora’s expenditure commitments on the 3D seismic and Lambouka-1 drilling program (on a dry hole cost estimate basis) are approximately $3.0 million.

Lambouka has a Prospective (recoverable) Resource potential of 270 mmboe in three target horizons, all of which are present along geological trend and are productive elsewhere offshore Tunisia. The Lambouka-1 will be drilled in around 625 m of water to a total depth of approximately 3,000 m at a location in Tunisian

waters. The Lambouka Prospect extends into the adjacent Pantelleria tenement area in which Bombora is also earning a 10% interest.

Bombora considers the primary objective in Lambouka-1 to be the lower of three target horizons, the Abiod Formation which is also the hydrocarbon filled reservoir in the Dougga discovery.

There are a variety of follow up prospects in the two offshore licence areas that are prospective for both oil and gas. Of the four structures previously drilled in and around the main prospective fairway, one is a commercial oil field, two are as yet undeveloped gas and oil fields (including Dougga) and one structure had strong gas shows.

Table of Offshore Prospect and Lead Potential

Prospect or Lead	Mean Contingent Resources (recoverable mmboe)	Mean Prospective Resources (recoverable mmboe)
Dougga Discovery	991
Lambouka		270
North Dougga		70
North Tazerka		24
North Zibbibo		20
Galliano		122
East Galliano		146
Subtotals	991	652
Total Mean Contingent and Prospective Recoverable Resources in Listed Prospects and Leads	751 mmboe

Note:[1] 99 mmboe is equivalent to 420 Bcf gas plus 29 mmbbl Light Oil / Condensate

Dougga is surrounded by satellite closures that could add significantly to the total resource and hydrocarbons liquids content upon any successful future appraisal drilling.

Option to increase interest in Offshore Permit to 20%

Bombora holds an option to increase its equity in the projects contained within the Offshore Permit (including the Dougga discovery, but excluding the Lambouka Prospect) from 10% to 20% after receiving the results of both the 3D seismic and Lambouka-1. This contractual arrangement provides considerable commercial

leverage to Bombora in the event of success at Lambouka or an advance in the development of Dougga.

1.3.3 Onshore Chorbane (Tunisia)

The Chorbane licence covers 2,428 km[2] adjacent to several onshore producing oil and gas fields. There is good operational access, and proximal access to oil and gas pipeline infrastructure and support services in the coastal city of Sfax.

Bombora is earning 10% in the area by part funding on a promoted basis the drilling of the Sidi Daher Prospect which is expected to begin drilling by November 2010.

Sidi Daher has estimated Prospective (recoverable) Resource potential of 120 mmbbls hosted in three target reservoirs that are productive along geological trend. The prospect is characterised at the shallowest target level by a Flat Spot anomaly on various vintages of the crossing 2D seismic grid. This anomaly may be a direct indicator of hydrocarbons or DHI. Such anomalies when proven by drilling usually represent the base of a gas accumulation. Interestingly, a survey has revealed surface geochemical anomalies (hydrocarbons) that are reasonably consistent with the extent of the Flat Spot anomaly.

2D Seismic dip lines showing the “flat spots” across Sidi Daher Prospect

The estimated Prospective (recoverable) Resource potential mapped for the Flat Spot reservoir only is 176 Bcf of gas. Bombora has informed the Company that Bombora believes there would be a ready market in Tunisia for an onshore gas accumulation of this size. Tunisia is also directly linked to European gas markets by pipelines.

The Sidi Daher-1 well will be drilled to approximately 2,500 m and Bombora’s share of costs (on a dry hole basis) is estimated to be $1.1 million, of which $550,000 has already been paid by Bombora.

There are a range of additional leads and prospects in the licence area including the possible extension of a large gas discovery (approximately 900 Bcf gas in place reported in the adjacent licence) in the southwest part of the Chorbane licence.

1.4 Cash Position Post Raisings and Expected Bombora Exploration Expenditure in 2010

XState current cash balance	$2.9m
Cash raised from planned placements	$1.7m
3D Seismic	($0.7m)
Lambouka well (dry hole) and 3D seismic	($2.3m)
Chorbane onshore well (dry hole)	($0.6m)
Available working capital	$1.0m

1.5 Bombora Acquisition Terms

The Company, Bombora and the Major Shareholders have entered into an agreement under which the Company has agreed to make a conditional offer

( Offers ) to all Bombora Shareholders to acquire all of the issued share capital of Bombora ( Agreement ).

The consideration for the Acquisition of the Bombora Shares will be the issue of 11,660,000 Shares (on a post-Consolidation basis), to be issued to the Bombora Shareholders in proportion to their holdings in the Bombora Shares as set out in Schedule 1.

The Offer is conditional on a number of conditions precedent. The outstanding conditions as at the date of this Notice of Meeting are as follows:

(a) XState obtaining all necessary regulatory and Shareholder approvals required to complete the Acquisition including, without limitation, Shareholder approval to:
(i) change the nature and/or scale of XState’s activities in accordance with ASX Listing Rule 11.1.2, if required by ASX (refer to Resolution 2);
(ii) proceed with the Consolidation (refer to Resolution 1;
(iii) proceed with the Capital Raising (refer to Resolution 4);
(iv) allot and issue 15,000,000 Options at an issue price of $0.01 each, (in accordance with the ASX Listing Rules and/or Corporations Act) (refer to Resolutions 5, 6, 7, 8 and 9);
(v) allot and issue the Consideration Shares at Settlement to the Bombora Shareholders (in accordance with the ASX Listing Rules and/or Corporations Act) (Resolution 3);
(b) XState complying with any requirements of ASX including, if necessary, the requirements of Chapters 1 and 2 of the ASX Listing Rules, including issuing the prospectus ( Prospectus ), as if XState were applying for admission to the official list of ASX (as required by ASX Listing Rule 11.1.3);
(c) XState preparing the Prospectus, lodging the Prospectus with the ASIC and receiving sufficient applications to meet the minimum subscription under the Prospectus in relation to the Capital Raising;
(d) XState completing a pro-rata entitlement issue of Options (on a postConsolidation basis) on the ratio of one (1) Option for every two (2) Shares held on the relevant record date at an issue price of $0.01 each ( Entitlement Issue );
(e) XState becoming entitled to acquire 100% of the Bombora Shares as a result of each Bombora Shareholder accepting the Offer;
(f) XState arranging a loan in the amount of $1,500,000 (including the Convertible Note) to be provided to Bombora; and
(g) as at the Settlement Date, no Material Adverse Change occurs and no Material Adverse Matter becomes known to either XState or Bombora (as applicable).

1.6 Loan details

The Agreement also sets out the terms of $1,500,000 working capital loan facilities to be provided to Bombora as follows ( Loan ):

(a) $1,000,000 will be provided in accordance with the terms of a loan agreement with the Company; and
(b) $500,000 will be provided by the Noteholders in consideration for the Convertible Note.

The Company has agreed to pay a fee of 2,500,000 Options to the Noteholders and consideration for providing the advance to Bombora for the Convertible Note. Shareholder approval is sought for the issue of those Options under Resolution 7.

The Loan shall be used by Bombora for working capital expenditure, in accordance with budgeted expenditure that must be approved by the Company and the Noteholders prior to the execution of the loan agreement and the Convertible Note deed respectively. The lenders shall have the right for the Loan be secured.

Under the terms of the loan agreements, it is contemplated that if the Acquisition is not completed due to negligence, breach or default of the Company, the Loans (including the Convertible Note) will automatically convert to ordinary shares in Bombora. If the Acquisition is not completed due to negligence, breach or default of Bombora, the Loans will be repaid by Bombora and will accrue interest at 10% per annum, or be convertible into Bombora shares at the election of the lenders.

1.7 Pro-forma balance sheet

An unaudited pro-forma balance sheet of the Company following completion of the change of activities, Capital Raising and other matters is set out at Annexure A to this Notice of Meeting.

1.8 Pro-forma capital structure

The capital structure of the Company following the change to activities, Capital Raising, Consolidation and other matters is set out below:

SHARES (post-Consolidation)
Shares currently on issue	18,359,864
Placement Shares (Resolution 4)	7,500,0001
Consideration Shares to Bombora Shareholders (Resolution 3)	11,660,000
TOTAL SHARES	37,519,864

Notes:

Of these Shares, it is expected that 2,500,000 Shares will be issued the Noteholders on conversion of the Convertible Note. Refer to Section 5.2 for further details.

OPTIONS (post-Consolidation)
Options exercisable at $0.24 on or before 21 January 2013	66,667
Options exercisable at $1.50 on or before 30 April 2012	100,000
Options exercisable at $1.95 on or before 30 April	116,667

2012
Options exercisable at $2.25 on or before 30 April 2012	116,667
Options – Entitlement Issue1	9,179,932
Options – Free Attaching (Resolution 4)2	3,750,0003
Options – Placement (Resolutions 6, 8 and 9)1	10,000,000
Options – Consideration for Convertible Note (Resolution 7)1	2,500,000
Options – Corporate Advisory fee to Argonaut (Resolution 5)1	2,500,000
TOTAL OPTIONS	28,329,933

Notes:

1 These Options will be issued for $0.01 each and otherwise on the terms set out in Schedule 2.
2 Free attaching Options (on the basis of one (1) free attaching Option for every two (2) Shares issued) issued on the terms set out in Schedule 2.
3 Of these free attaching Options it is expected that 1,250,000 Options will be issued to the Noteholders on conversion of the Convertible Note. Refer to Section 5.2 for further details.

1.9 Advantages of the transaction

The Directors are of the view that the following non-exhaustive list of advantages may be relevant to a Shareholder’s decision on how to vote on the proposed Resolutions:

(a) the oil & gas exploration activities represent a significant opportunity for the Company;
(b) through the acquisition of Bombora, a larger market capitalisation and enhanced Shareholder base should provide a more liquid stock than any of either the Company or Bombora on a standalone basis;
(c) the Board of directors will provide an experienced set of skills to guide the growth of the Company; and
(d) the Consolidation will provide a more simplified structure.

1.10 Disadvantages of the transaction

The Directors are of the view that the following non-exhaustive list of disadvantages may be relevant to a Shareholder’s decision on how to vote on the proposed Resolutions:

(a) the Company will be changing the nature of its activities to become a company which will, in addition to its current business, focus on oil & gas exploration and production activities, which may not be consistent with the objectives of Shareholders;

(b) the Acquisition will result in the issue of XState Shares to the Bombora Shareholders which will have a dilutionary effect on the current holdings of Shareholders; and
(c) there are many risk factors associated with the change in nature of the Company’s activities, or rather associated with Bombora’s business and operations. Some of these risks are set out in Section 1.11 below.

1.11 Risk Factors

Shareholders should be aware that if the Resolutions are approved, the Company will be changing the nature of its activities to include oil & gas exploration and production activities which are subject to various risk factors. Based on the information available, a non-exhaustive list of risk factors are as follows:

Risks relating to the Change in Nature and Scale of Activities

Re-Quotation of Shares on ASX

As the Company has no prior involvement in the oil and gas industry, the acquisition of Bombora constitutes a significant change in the nature and scale of the Company’s activities and the Company needs to comply with Chapters 1 and 2 of the ASX Listing Rules as if it were seeking admission to the official list of ASX. There is a risk that the Company may not be able to meet the requirements of the ASX for re-quotation of its Shares on the ASX. Should this occur, the Shares will not be able to be traded on the ASX until such time as those requirements can be met, if at all.

Risks relating to the Kerkouane, Chorbane and Pantelleria Projects

The Kerkouane (offshore) and Chorbane (onshore) Projects are located in Tunisia and the Pantelleria Project (offshore) is located in Italy. The Company will be subject to the risks associated with operating in both Tunisia and Italy. Such risks can include economic, social or political instability or change, hyperinflation, currency non-convertibility or instability and changes of law affecting foreign ownership, government participation, taxation, working conditions, rates of exchange, exchange control, exploration licensing, export duties, repatriation of income or return of capital, environmental protection, mine safety, labour relations as well as government control over mineral properties or government regulations.

Changes to Tunisia’s and Italy’s mining or investment policies and legislation or a shift in political attitude may adversely affect the Company’s operations and profitability.

Exploration and Development Risks

The business of oil and gas exploration, project development and production, by its nature, contains elements of significant risk with no guarantee of success. Ultimate and continuous success of these activities is dependent on many factors such as:

(a) the discovery and/or acquisition of economically recoverable reserves ;
(b) access to adequate capital for project development ;
(c) design and construction of efficient development and production infrastructure within capital expenditure budgets ;
(d) securing and maintaining title to interests ;

(e) obtaining consents and approvals necessary for the conduct of oil and gas exploration, development and production ; and
(f) access to competent operational management and prudent financial administration, including the availability and reliability of appropriately skilled and experienced employees, contractors and consultants.

Whether or not income will result from projects undergoing exploration and development programs depends on successful exploration and establishment of production facilities. Factors including costs, actual hydrocarbons and formations, flow consistency and reliability and commodity prices affect successful project development and operations.

Drilling activities carry risk and as such, activities may be curtailed, delayed or cancelled as a result of weather conditions, mechanical difficulties, shortages or delays in the delivery of drill rigs or other equipment. In addition, drilling and operations include reservoir risk such as the presence of shale laminations in the otherwise homogeneous sandstone porosity.

Industry operating risks include fire, explosions, unanticipated reservoir problems which may affect field production performance, industrial disputes, unexpected shortages or increases in the costs of consumables, spare parts, plant and equipment, mechanical failure or breakdown, blow outs, pipe failures and environmental hazards such as accidental spills or leakage of liquids, gas leaks, ruptures, discharges of toxic gases or geological uncertainty (such as lack of sufficient sub-surface data from correlative well logs and/or formation core analyses). The occurrence of any of these risks could result in legal proceedings against the Company and substantial losses to the Company due to injury or loss of life, damage to or destruction of property, natural resources or equipment, pollution or other environmental damage, cleanup responsibilities, regulatory investigation, and penalties or suspension of operations. Damage occurring to third parties as a result of such risks may give rise to claims against the Company.

There is no assurance that any exploration on current or future interests will result in the discovery of an economic deposit of oil or gas. Even if an apparently viable deposit is identified, there is no guarantee that it can be economically developed.

Oil and Gas Price Volatility

The demand for, and price of, oil and natural gas is highly dependent on a variety of factors, including international supply and demand, the level of consumer product demand, weather conditions, the price and availability of alternative fuels, actions taken by governments and international cartels, and global economic and political developments.

International oil and gas prices have fluctuated widely in recent years and may continue to fluctuate significantly in the future. Fluctuations in oil and gas prices and, in particular, a material decline in the price of oil or gas may have a material adverse effect on the Company's business, financial condition and results of operations.

Hydrocarbon Reserves and Resource Estimates

Hydrocarbon reserve and resource estimates are expressions of judgement based on knowledge, experience and industry practice. Estimates that were valid when originally calculated may alter significantly when new information or techniques become available. In addition, by their very nature, resource and reserve estimates are imprecise and depend to some extent on interpretations, which may

prove to be inaccurate. As further information becomes available through additional drilling and analysis the estimates are likely to change. This may result in alterations to development and production plans which may in turn, adversely affect the Company’s operations.

General Economic and Political Risks

Changes in the general economic and political climate in Italy, Tunisia, Australia and on a global basis that could impact on economic growth, the oil and gas prices, interest rates, the rate of inflation, taxation and tariff laws, domestic security which may affect the value and viability of any oil and gas activity that may be conducted by the Company.

Oil Reserves and Commercial Oil Flow

Oil reserves are expressions of judgement based on knowledge, experience and industry practice. Estimates which were valid when originally calculated may alter significantly when new information or techniques become available. In addition, by their very nature, oil reserves are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. As further information becomes available through additional fieldwork and analysis, the estimates are likely to change. This may result in alterations to development and commercial oil flow plans which may, in turn, adversely affect the Company’s operations.

Commodity Price Volatility and Exchange Rate Risks

If the Company achieves success leading to hydrocarbon production, the revenue it will derive through the sale of commodities exposes the potential income of the Company to commodity price and exchange rate risks. Commodity prices fluctuate and are affected by many factors beyond the control of the Company. Such factors include supply and demand fluctuations for oil and gas, technological advancements, forward selling activities and other macro-economic factors.

Furthermore, international prices of various commodities are denominated in United States dollars, whereas the income and expenditure of the Company are and will be taken into account in Australian currency, exposing the Company to the fluctuations and volatility of the rate of exchange between the United States dollar and the Australian dollar as determined in international markets.

Environmental Risks

The Company will be subject to environmental laws and regulations in connection with operations it may pursue in the oil and gas industry, which operations are currently in Italy and Tunisia. The Company intends to conduct its activities in an environmentally responsible manner and in accordance with all applicable laws. However, the Company may be the subject of accidents or unforeseen circumstances that could subject the Company to extensive liability.

Further, the Company may require approval from the relevant authorities before it can undertake activities that are likely to impact the environment. Failure to obtain such approvals will prevent the Company from undertaking its desired activities. The Company is unable to predict the effect of additional environmental laws and regulations that may be adopted in the future, including whether any such laws or regulations would materially increase the Company's cost of doing business or affect its operations in any area.

Competition

The Company will compete with other companies, including major oil and gas companies. Some of these companies have greater financial and other resources than the Company and, as a result, may be in a better position to compete for future business opportunities. Many of the Company's competitors not only explore for and produce oil and gas, but also carry out downstream operations on these and other products on a worldwide basis. There can be no assurance that the Company can compete effectively with these companies.

Regulatory

Changes in relevant taxes, legal and administration regimes, accounting practice and government policies may adversely affect the financial performance of the Company.

Insurance

Insurance against all risks associated with oil and gas production is not always available or affordable. The Company will maintain insurance where it is considered appropriate for its needs however it will not be insured against all risks either because appropriate cover is not available or because the Directors consider the required premiums to be excessive having regard to the benefits that would accrue.

Operating Risks

The operations of the Company may be affected by various factors, including failure to locate or identify oil reserves, failure to achieve predicted well production flow rates, operational and technical difficulties encountered in production, difficulties in commissioning and operating plant and equipment, mechanical failure or plant breakdown, unanticipated reservoir problems which may affect field production performance, adverse weather conditions, industrial and environmental accidents, industrial disputes and unexpected shortages or increases in the costs of consumables, spare parts, plant and equipment.

General Risks

Additional Requirements for Capital

The Company’s capital requirements depend on numerous factors. Depending on the Company’s ability to generate income from its operations, the Company may require further financing in the future. Any additional equity financing will dilute shareholdings, and debt financing, if available, may involve restrictions on financing and operating activities. If the Company is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations and scale back its exploration programmes as the case may be.

Potential Acquisitions

As part of its business strategy, the Company may make acquisitions of, or significant investments in, complementary companies or prospects although no such acquisitions or investments are currently planned. Any such transactions will be accompanied by risks commonly encountered in making such acquisitions.

Economic Risks

General economic conditions, movements in interest and inflation rates and currency exchange rates may have an adverse effect on the Company’s exploration, development and production activities, as well as on its ability to fund those activities.

Market Conditions

Share market conditions may affect the value of the Company’s quoted securities regardless of the Company’s operating performance. Share market conditions are affected by many factors such as:

(a) general economic outlook;
(b) interest rates and inflation rates;
(c) currency fluctuations;
(d) changes in investor sentiment toward particular market sectors;
(e) the demand for, and supply of, capital; and
(f) terrorism or other hostilities.

The market price of securities can fall as well as rise and may be subject to varied and unpredictable influences on the market for equities in general and resource exploration stocks in particular. Neither the Company nor the Directors warrant the future performance of the Company or any return on an investment in the Company.

Reliance on Key Management

The responsibility of overseeing the day-to-day operations and the strategic management of the Company depends substantially on its senior management and its key personnel. There can be no assurance given that there will be no detrimental impact on the Company if one or more of these employees cease their employment.

Investment Speculative

The above list of risk factors ought not to be taken as exhaustive of the risks faced by the Company or by investors in the Company. The above factors, and others not specifically referred to above may, in the future, materially affect the financial performance of the Company and the value of the Company’s securities.

1.12 Directors’ Recommendation

The directors of XState and Bombora unanimously recommend the Acquisition. It is the view of the XState and Bombora directors that the Acquisition will give the Company’s Shareholders the opportunity to participate in a potentially significant exploration, development and production programme in respect of a highly prospective oil & gas project.

1.13 Competent Person

The technical information provided in this Notice of Meeting has been compiled by Mr Gary Jeffery, the current chairman of Bombora and a qualified geophysicist with over 37 years technical, commercial and management experience in exploration

for, appraisal and development and transportation of oil and gas and minerals and energy resources. Mr Jeffery has reviewed the results, procedures and data contained in this announcement. Mr Jeffery consents to the inclusion in this Notice of Meeting of the matters based on the information in the form and context in which it appears.

2. RESOLUTION 1 – CONSOLIDATION OF CAPITAL

2.1 Background

Resolution 1 seeks Shareholder approval to consolidate the number of Shares and Options on issue on a 1 for 3 basis ( Consolidation ).

The purpose of the Consolidation is to implement a more appropriate capital structure for the Company going forward and enable the Company to satisfy Chapters 1 and 2 of the ASX Listing Rules and obtain re-quotation of the Shares on ASX should Shareholder approval be obtained pursuant to Resolution 2.

2.2 Legal requirements

Section 254H of the Corporations Act provides that a company may, by resolution passed in a general meeting, convert all or any of its shares into a larger or smaller number.

The ASX Listing Rules also require that the number of options on issue be consolidated in the same ratio as the ordinary capital and the exercise price amended in inverse proportion to that ratio.

2.3 Fractional Entitlements and Taxation

Not all Shareholders and Optionholders will hold that number of Shares and Options which can be evenly divided by 3. Where a fractional entitlement occurs, the Directors will round that fraction up to the nearest whole Share or Option.

It is not considered that any taxation implications will exist for Shareholders or Optionholders arising from the Consolidation. However, Shareholders and Optionholders are advised to seek their own tax advice on the effect of the Consolidation and neither the Company, nor the Directors (or the Company’s advisors) accept any responsibility for the individual taxation implications arising from the Consolidation.

2.4 Holding Statements and Option Certificates

From the date of the Consolidation:

(a) all holding statements for Shares will cease to have any effect, except as evidence of entitlement to a certain number of Shares on a postConsolidation basis; and
(b) all certificates for unlisted Options (if any) will cease to have any effect, except as evidence of entitlement to a certain number of Options on a post-Consolidation basis.

After the Consolidation becomes effective, the Company will arrange for new holding statements for Shares to be issued to holders of those securities and, to the extent required, new certificates for unlisted Options to be issued to Optionholders.

It is the responsibility of each Shareholder or Optionholder to check the number of Shares or Options held prior to disposal or exercise (as the case may be).

2.5 Effect on capital structure

The effect which the Consolidation will have on the capital structure of the Company is set out in the table in Section 1.7 of this Explanatory Statement.

2.6 Timetable

The indicative timetable for the Consolidation is as follows:

	Event		Date
	Suspension of trading of Company’s shares	10 June 2010
	General Meeting to approve transaction	10 June 2010
	Notification to ASX of results of General Meeting	10 June 2010
	Trading in reorganised securities on a deferred settlement basis would ordinarily occur*	21 July 2010
	Last day to register transfers on a pre-reorganisation basis	25 July 2010
	First day for Company to send notice to Shareholders of change of holdings as a result of reorganisation First day for Company to register securities on a post- reorganisation basis and for issue of holding statements	28 July 2010
	Despatch date Deferred settlement market ends Last day for securities to be entered into the holders’ security holdings and for Company to send notice to each security holder	2 July 2010

The Company’s securities will be suspended from trading on this date so deferred settlement trading will not occur.

3. RESOLUTION 2 – CHANGE IN NATURE AND SCALE OF ACTIVITIES

3.1 General

Resolution 2 seeks approval from Shareholders for a change to the nature and scale of the activities of the Company to include oil and gas exploration and production.

As outlined in Section 1.5 of this Explanatory Statement, the Company has entered into the Agreement under which the Company has agreed to make Offers to all Bombora Shareholders to acquire all of the Bombora Shares.

The Agreement is subject to the conditions precedent set out in Section 1.5 above, including the requirement to obtain Shareholder approval.

A detailed description of the proposed Acquisition and Bombora’s assets and prospects is outlined in Section 1.3 above.

3.2 Legal requirements

ASX Listing Rule 11.1 provides that where an entity proposes to make a significant

change, either directly or indirectly, to the nature and scale of its activities, it must provide full details to ASX as soon as practicable and comply with the following:

(a) provide to ASX information regarding the change and its effect on future potential earnings, and any information that ASX asks for;
(b) if ASX requires, obtains the approval of holders of its shares and any requirements of ASX in relation to the Notice of Meeting; and
(c) if ASX requires, meet the requirements of Chapters 1 and 2 of the ASX Listing Rules as if the Company were applying for admission to the official list of ASX.

ASX has indicated to the Company that the change in the nature and scale of the Company’s activities requires the Company to (in accordance with ASX Listing Rule 11.1.3):

(a) obtain Shareholder approval; and
(b) re-comply with the admission requirements set out in Chapters 1 and 2 of the ASX Listing Rules.

4. RESOLUTION 3 – ISSUE OF SHARES TO BOMBORA SHAREHOLDERS

4.1 General

As outlined in Section 1.5 of this Explanatory Statement, the Company has agreed to make the Offers.

Under the Offers, the total consideration to be paid to the Bombora Shareholders for 100% of the Bombora Shares will be the issue of 11,660,000 Shares (in each case on a post-Consolidation basis) which will be apportioned amongst the Bombora Shareholders in the amounts set out in Schedule 1.

ASX Listing Rule 7.1 provides that a company must not, subject to specified exceptions, issue or agree to issue during any 12 month period any equity securities, or other securities with rights to conversion to equity (such as an option), if the number of those securities exceeds 15% of the number of securities in the same class on issue at the commencement of that 12 month period.

The effect of Resolution 3 will be to allow the Directors to issue the Shares during the period of 3 months after the General Meeting (or a longer period, if allowed by ASX), without using the Company’s annual 15% placement capacity.

4.2 Technical Information Required by ASX Listing Rule 7.3

The following information is provided in relation to the Shares pursuant to and in accordance with ASX Listing Rule 7.3:

(a) the maximum number of Shares to be issued is 11,660,000 Shares at a deemed issued price of $0.20 each (on a post-Consolidation basis);
(b) the Shares will be issued no later than three (3) months after the date of the General Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that allotment will occur on the same date, being the Settlement Date of the Acquisition;

(c) the Shares will be issued for nil cash consideration, but rather as consideration for the Acquisition of 100% of the Bombora Shares. Accordingly no funds will be raised from the issue of the Shares;
(d) the Shares will be issued to the Bombora Shareholders in amounts set out in Schedule 1 to this Notice of Meeting;
(e) none of the Bombora Shareholders are related parties of the Company;
(f) the Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares.

5. RESOLUTION 4 - ISSUE FOR PROSPECTUS CAPITAL RAISING

5.1 General

Resolution 4 seeks Shareholder approval for the allotment and issue of up to 7,500,000 Shares (on a post-Consolidation basis) at an issue price of $0.20 per Share to raise up to a total of $1,500,000, together with 3,750,000 free attaching Options (on the basis of one (1) free attaching Option for every two (2) Shares subscribed for).

The Company intends to conduct the Capital Raising through the issue of a Prospectus as part of its re-compliance with Chapters 1 and 2 of the ASX Listing Rules.

A summary of ASX Listing Rule 7.1 is set out Section 4.1 above.

The effect of Resolution 4 will be to allow the Directors to issue the Shares and the free attaching Options pursuant to the Capital Raising during the period of 3 months after the General Meeting (or a longer period, if allowed by ASX), without using the Company’s annual 15% placement capacity.

5.2 Technical Information Required by ASX Listing Rule 7.3

Pursuant to and in accordance with ASX Listing Rule 7.3, the following information is provided in relation to the Capital Raising:

(a) the maximum number of Shares to be issued is 7,500,000 Shares;
(b) the maximum number of free attaching Options to be issued is 3,750,000 Options;
(c) the Shares will be issued no later than 3 months after the date of the General Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that allotment will occur on the same date;
(d) the issue price of the Shares is intended to be $0.20 each (on a postConsolidation basis);
(e) the Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares;
(f) the free attaching Options will be issued on the terms set out in Schedule 2.

(g) the 7,500,000 Shares (and 3,750,000 free attaching Options) will be allocated as follows:
(i) 2,500,000 Shares shall be reserved for existing Shareholders. Priority will be given to increasing to 10,000 Shares, the holdings of Shareholders who, as a result of the Consolidation of Shares, shall hold less than a marketable parcel of Shares ($2,000 by value, being 10,000 Shares at $0.20 per Share). Allocation of the remainder of the 2,500,000 Shares shall be determined by the Board of Directors of the Company, in conjunction with Argonaut;
(ii) 2,500,000 Shares shall be issued to The Noteholders, in consideration for the conversion of the Convertible Note. Please refer to Section 8 for further details regarding the Convertible Note; and
(iii) 2,500,000 Shares shall be allocated to clients of Argonaut.
(h) the Company intends to use the amounts raised from the Capital Raising ($1,500,000) to fund Bombora’s share of the offshore 3D seismic program and the offshore Lambouka and onshore exploration wells scheduled to be completed in 2010.

Further details on the use of funds will be set out in the Prospectus that will be issued in respect of the Capital Raising.

6. RESOLUTION 5 – ISSUE OF OPTIONS TO ARGONAUT LIMITED

6.1 General

The Company has agreed to issue Argonaut up to 2,500,000 Options (on a postConsolidation basis) at an issue price of $0.01 each in order to raise $25,000 and as consideration for the payment of the corporate advisory fee in connection with the capital raising referred to in Resolution 4. The terms of issue of the Options are set out in Schedule 2 of this Notice of Meeting and will otherwise be contained in a mandate letter to be entered into between Argonaut and the Company.

Resolution 5 therefore seeks Shareholder approval for the allotment and issue of up to 2,500,000 Options to Argonaut.

A summary of ASX Listing Rule 7.1 is set out in Section 4.1 above.

The effect of Resolution 5 will be to allow the Directors to issue up to 2,500,000 Options to Argonaut within the period of 3 months after the General Meeting (or a longer period, if allowed by ASX), without using the Company’s 15% annual placement capacity.

6.2 Technical information required by ASX Listing Rule 7.1

Pursuant to and in accordance with ASX Listing Rule 7.3, the following information is provided in relation to Resolution 5:

(a) the maximum number of Options to be issued to Argonaut (or its nominee) is 2,500,000 Options;
(b) the Options will be issued no later than 3 months after the date of the General Meeting (or such later date to the extent permitted by any ASX

waiver or modification of the ASX Listing Rules) and it is intended that allotment will occur on the same date;

(c) the Options will be issued on the terms and conditions set out in Schedule 2;
(d) Argonaut is not a related party of the Company;
(e) the Options issued under Resolution 5 will be issued as consideration for the payment of the corporate advisory fee in connection with the Capital Raising referred to in Resolution 4.
(f) the funds raised from the issue of Options ($25,000) under Resolution 5 will go towards working capital expenditure.

7. RESOLUTION 6 – PLACEMENT – OPTIONS

7.1 General

Resolution 6 seeks Shareholder approval for the allotment and issue of up to 5,000,000 Options (on a post-Consolidation basis) at an issue price of $0.01 each to raise $50,000 The Options will be issued to certain Bombora Shareholders to be nominated by the directors of Bombora who have not been determined at the date of this Notice of Meeting. The terms of the issue of the Options are set out in Schedule 2 of this Notice of Meeting.

A summary of ASX Listing Rule 7.1 is set out in Section 4.1 above.

The effect of Resolution 6 will be to allow the Directors to issue up to 5,000,000 Options within the period of 3 months after the General Meeting (or a longer period, if allowed by ASX), without using the Company’s 15% annual placement capacity.

7.2 Technical information required by ASX Listing Rule 7.1

Pursuant to and in accordance with ASX Listing Rule 7.3, the following information is provided in relation to Resolution 6:

(a) the maximum number of Options to be issued to nominated investor parties is 5,000,000 Options;
(b) the Options will be issued no later than 3 months after the date of the General Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that allotment will occur on the same date;
(c) the Options will be issued on the terms and conditions set out in Schedule 2; (d) the nominated investor parties will not be related parties of the Company; and
(e) the funds raised from the issue of Options ($500,000) by the Company under Resolution 6 will go towards Bombora’s share of seismic costs, Labouka-1 well (located in offshore Tunisia) forward costs, and general working capital.

8. RESOLUTION 7 – ISSUE OF OPTIONS AS CONSIDERATION FOR THE CONVERTIBLE NOTE

8.1 General

The Company has agreed to assist with the provision of a loan facility for Bombora in the amount of $500,000 (with the assistance of Argonaut) by way of a convertible note ( Convertible Note ) between Bombora and the following parties:

(a) Argonaut Equity Partners Pty Limited;
(b) Burton Super Fund; and
(c) AFM Perseus Fund Limited,

(together the Noteholders ). The Noteholders lend a total of $500,000 to Bombora in return for the issue of the Convertible Note by Bombora. It is the intention that upon (and subject to) completion of the Acquisition, the Convertible Note will be converted into Shares and Options on the same terms as the Capital Raising, being 2,500,000 Shares in the Company together with 1,250,000 free attaching Options (on the basis of one (1) free attaching Option for every two (2) Shares held)(also in proportions to the amount loaned set out in the table below). Shareholder approval for the issue of the Shares and free attaching Options on conversion of the Convertible Note is sought under Resolution 4.

As consideration for entering into the Convertible Note, the Company has agreed to issue 2,500,000 Options (on a post-Consolidated basis) at an issue price of $0.01 per Option. Details of the amount loaned by each nominated party and the amount of Options they will each receive is set out below:

Noteholders	Amount Loaned	Options Issued as Consideration for entering; Into Convertible Note
Argonaut Equity Partners Pty Limited	$200,000	1,000,000
Burton Super Fund	$200,000	1,000,000
AFM Perseus Fund Limited	$100,000	500,000

The terms of the issue of the Options are set out Schedule 2.

A summary of ASX Listing Rule 7.1 is set out in Section 4.1 above. The effect of Resolution 7 will be to allow the Directors to issue up to 2,500,000 Options to the nominated parties within the period of 3 months after the General Meeting (or a longer period, if allowed by ASX), without using the Company’s 15% annual placement capacity.

8.2 Technical information required by ASX Listing Rule 7.1

Pursuant to and in accordance with ASX Listing Rule 7.3, the following information is provided in relation to Resolution 7:

(a) the maximum number of Options to be issued to the Noteholders are 2,500,000 Options;

(b) the Options will be issued no later than 3 months after the date of the General Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that allotment will occur on the same date;
(c) the Options will be issued on the terms and conditions set out in Schedule 2; (d) Argonaut Equity Partners Pty Limited, Burton Super Fund and AFM Perseus Fund Limited are not related parties of the Company;
(e) as a result of the issue of Options under Resolution 7, the Options will raise $25,000. This will go towards working capital expenditure; and
(f) the Options issued under Resolution 7 will be issued to Argonaut Equity Partners Pty Limited, Burton Super Fund and AFM Perseus Fund Limited in consideration for entering into the Convertible Note with Bombora. The loan received by Bombora through the issue of the Convertible Note ($500,000) will be used to fund Bombora’s share of seismic costs, Lambouka-1 well (located in offshore Tunisia) forward costs, and general working capital.

9. RESOLUTIONS 8 AND 9– ISSUE OF OPTIONS TO GARY JEFFERY AND JOHN BEGG

9.1 General

As stated in Resolution 6 above, the Company intends to issue up to 5,000,000 Options (on a post-Consolidation basis) at an issue price of $0.01 each to raise $50,000. Messrs Gary Jeffery and John Begg ( Related Parties ), being proposed directors of the Company, will each receive 2,500,000 Options on the same terms as this issue.

9.2 ASX Listing Rule 10.11

ASX Listing Rule 10.11 requires a listed company to obtain Shareholder approval by ordinary resolution prior to the issue of securities (including an option) to a related party. Messrs Jeffery and Begg are considered to be related parties of the Company by virtue of the fact that upon completion of the Acquisition (and subject to Shareholders’ approval) they will become Directors of the Company.

However, approval pursuant to Listing Rule 7.1 is not required in order to issue the Options to Related Parties as approval is being obtained under ASX Listing Rule 10.11. The issue of the Options will not be included in the 15% calculation for the purposes of ASX Listing Rule 7.1.

9.3 Chapter 2E of the Corporations Act

For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company, the public company or entity must:

(a) obtain the approval of the public company’s members in the manner set out in Sections 217 to 227 of the Corporations Act; and
(a) give the benefit within 15 months following such approval,

unless the giving of the financial benefit falls within an exception set out in Sections 210 to 216 of the Corporations Act. . Section 210 of the Corporations Act states that Shareholder approval is not needed to give a financial benefit on terms that:

(a) would be reasonable in the circumstances if the public company or entity were dealing at arm’s length; or
(b) are less favourable to the related party than the terms referred to in paragraph (a).

It is the view of the Directors that the exception set out in Section 210 of the Corporations Act applies in the current circumstances, as the issue of the Options for which approval is being sought will be made to non-related parties on exactly the same terms. Accordingly, Shareholder approval is not sought for the issue of Options to the Related Parties under the Corporations Act.

9.4 Shareholder Approval

The following information is provided in relation to the proposed issue of Options:

(a) the related parties are Messrs Gary Jeffery and John Begg and they are related parties by virtue of being proposed Directors of the Company;
(b) the maximum number of Options (being the nature of the financial benefit being provided) to be issued to the Related Parties is:
(i) 2,500,000 Options to Mr Gary Jeffery, or his nominee; and
(ii) 2,500,000 Options to Mr John Begg, or his nominee;
(c) the Options will be issued to the Related Parties no later than 1 month after the date of the General Meeting (or such later date as permitted by any ASX waiver or modification of the ASX Listing Rules) and it is anticipated the Options will be issued on one date;
(d) the Options will be issued at $0.01 each in order to raise $50,000;
(e) the terms and conditions of the Options are set out in Schedule 2;
(f) the value of the Options and the pricing methodology is set out in Schedule 3;
(g) the relevant interests of the Related Parties in securities of the Company are set out below;

are set out below;
Related Party	Shares	Options
Mr John Begg	Nil	Nil
Mr Gary Jeffery	Nil	Nil

(h) the remuneration and emoluments from the Company to the Related Parties for both the current financial year and previous financial year are set out below:

Parties for both the current financial set out below:	year and previous	financial year are
Related Party	Current Financial Year	Previous Financial Year
Mr John Begg1	Nil	Nil
Mr Gary Jeffery1	Nil	Nil

1 At the date of this Notice of Meeting, Mr Gary Jeffery and Mr John Begg are not Directors of the Company. They are therefore not entitled to remuneration and emoluments from the Company.

(i) if the Options issued to the Related Parties are exercised, a total of 5,000,000 Shares would be allotted and issued. This will increase the number of Shares on issue from 18,359,864 to 23,359,864 (on a postConsultation basis) (assuming that no other Options are exercised and no other Shares issued) with the effect that the shareholding of existing Shareholders would be diluted by 22%.
(j) the market price for Shares during the term of the Options would normally determine whether or not the Options are exercised. If, at any time any of the Options are exercised and the Shares are trading on ASX at a price that is higher than the exercise price of the Options, there may be a perceived cost to the Company.
(k) the trading history of the Shares on ASX in the 12 months before the date of this Notice of General Meeting is set out below:

	Price	Date
Highest	0.070 cents	23 September 2009
Lowest	0.032 cents	5 August 2009
Last	0.080 cents	5 May 2010

(l) the Options are being issued in connection with and on the same terms as the placement of Options for which approval is sought under Resolution 6. Therefore, the primary purpose of the issue of the Options to the Related Parties is to provide working capital for the Company, as provided for in Section 7.2.
(m) the Directors recommend that Shareholders vote in favour of Resolutions 8 and 9. The Board are not aware of any other information that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company to pass the Resolutions.

Approval pursuant to ASX Listing Rule 7.1 is not required in order to issue the Options to the Related Parties as approval is being obtained under ASX Listing Rule 10.11. Accordingly, the issue of Options to the Related Parties will not be included in the 15% calculation of the Company’s annual placement capacity pursuant to ASX Listing Rule 7.1.

10. RESOLUTION 10 – ISSUE OF SHARES AND OPTIONS TO DAVID MCARTHUR

10.1 General

As stated in Resolution 4 above, the Company is seeking Shareholder approval to issue 7,500,000 Shares (together with 3,750,000 free attaching Options) via a Prospectus to raise $1,500,000 as part of its re-compliance with Chapters 1 and 2 of the ASX Listing Rules.

Included as part of the Capital Raising as stated in Resolution 4, the Company may issue up to 350,000 Shares (together with 175,000 free attaching Options) at $0.20 each to David McArthur, a Director of the Company.

The Options are free attaching on the basis of one (1) Option for every two (2) Shares held. Details of the Options are set out in Schedule 2.

10.2 ASX Listing Rule 10.11

Approval pursuant to Listing Rule 7.1 is not required in order to issue the Shares and Options to Mr David McArthur as approval is being obtained under ASX Listing Rule 10.11. The issue of the Shares and Options will not be included in the 15% calculation for the purposes of ASX Listing Rule 7.1.

10.3 Chapter 2E of the Corporations Act

For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company, the public company or entity must:

(a) obtain the approval of the public company’s members in the manner set out in Sections 217 to 227 of the Corporations Act; and
(b) give the benefit within 15 months following such approval,

unless the giving of the financial benefit falls within an exception set out in Sections 210 to 216 of the Corporations Act. Section 210 of the Corporations Act states that Shareholder approval is not needed to give a financial benefit on terms that:

(a) would be reasonable in the circumstances if the public company or entity were dealing at arm’s length; or
(b) are less favourable to the related party than the terms referred to in paragraph (a).

It is the view of the Directors that the exception set out in Section 210 of the Corporations Act applies in the current circumstances, as the issue of the Shares and Options for which approval is being sought will be made to non-related parties on exactly the same terms pursuant to the Prospectus and the Capital Raising. Accordingly, Shareholder approval is not being sought for the issue of Shares and Options to Mr David McArthur under the Corporations Act.

10.4 Shareholder Approval (Chapter 2E of the Corporations Act and Listing Rule 10.11)

Pursuant to and in accordance with the requirements of Sections 217 to 227 of the Corporations Act and ASX Listing Rule 10.13, the following information is provided in relation to the proposed issue of Options and Shares:

(a) the related party is Mr David McArthur, who is a related party by virtue of being a Director ( Related Parties );
(b) the maximum number of free attaching Options and Shares (being the nature of the financial benefit being provided) to be issued to the Related Party is:
(i) 350,000 Shares; and
(ii) 175,000 free attaching Options.

(c) the Shares and free attaching Options will be issued to the Related Parties no later than 1 month after the date of the General Meeting (or such later date as permitted by any ASX waiver or modification of the ASX Listing Rules) and it is anticipated the Shares and free attaching Options will be issued on one date;
(d) the Shares will be issued at $0.20 each to raise $70,000.
(e) the terms and conditions of the free attaching Options are set out in Schedule 2;
(f) the value of the free attaching Options and the pricing methodology is set out in Schedule 3;
(g) the relevant interests of the Related Party in securities of the Company are set out below;

set out below;
Related Party	Shares	Options
Mr David McArthur	2,705,523	Nil

The remuneration and emoluments from the Company to the Related Party for both the current financial year and previous financial year are set out below:

below:
Related Party	Current Financial Year	Previous Financial Year
Mr David McArthur	$87,200	$91,736

(h) if the Shares are issued and free attaching Options issued to the Related Party are exercised, a total of 525,000 Shares would be allotted and issued. This will increase the number of Shares on issue from 18,359,864 to 18,884,864 (assuming that no other Options are exercised and no other Shares issued) with the effect that the shareholding of existing Shareholder would be diluted by 2.8%;

(i) The market price for Shares during the term of the free attaching Options would normally determine whether or not the free attaching Options are exercised. If, at any time any of the free attaching Options are exercised and the Shares are trading on ASX at a price that is higher than the exercise price of the free attaching Options, there may be a perceived cost to the Company;

(j) the trading history of the Shares on ASX in the 12 months before the date of this Notice of General Meeting is set out below:

	Price	Date
Highest	0.070 cents	23 September 2009
Lowest	0.032 cents	5 August 2009
Last	0.080 cents	5 May 2010

(k) the primary purpose of the issue of the Shares and free attaching Options to the Mr David McArthur is to enable Mr McArthur to participate in the Capital Raising;
(l) the Board acknowledges the issue of the Shares and free attaching Options to Mr David McArthur is contrary to Recommendation 8.2 of the ASX Corporate Governance Principles and Recommendations. However, the Board considers the issue of the Shares and free attaching Options to Mr David McArthur reasonable in the circumstances, given the necessity to attract the highest calibre of professionals to the Company, whilst maintaining the Company’s cash reserves and given Mr McArthur currently holds approximately 5% of the issued capital of the Company; and
(m) Mr David McArthur declines to make a recommendation to Shareholders in relation to Resolution 10 due to his material personal interest in the outcome of the Resolution. The other Directors, who do not have a material interest in the outcome of Resolution 10, recommend that Shareholders vote in favour of Resolution 10. The Board (other than Mr David McArthur) is not aware of any other information that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company to pass the Resolution.

Approval pursuant to ASX Listing Rule 7.1 is not required in order to issue the Shares and free attaching Options to Mr David McArthur as approval is being obtained under ASX Listing Rule 10.11. Accordingly, the issue of the Shares and free attaching Options to Mr David McArthur will not be included in the 15% calculation of the Company’s annual placement capacity pursuant to ASX Listing Rule 7.1.

11. RESOLUTION 11 – ELECTION OF A DIRECTOR – GARY JEFFERY

Clause of the Constitution allows the Company in a general meeting by ordinary resolution to appoint any person as a director, but only where the total number of directors does not at any time exceed the maximum number specified by the Constitution.

Pursuant to the Agreement, the Company will take all actions necessary to effect the appointment to the Board of Mr Gary Jeffery on or before Settlement Date.

Mr Jeffery has over thirty six years of experience in the oil, gas and mining and energy utilities industries working for a range of organizations in over thirty countries worldwide. He has broad project development, production operations and exploration management experience in resources and has demonstrated in his career the ability to find and commercialize oil and gas fields. Mr Jeffery has held management positions at AWE Limited, ARC Energy Limited, Tap Oil Limited, Griffin Energy, Normandy Mining, Hadson Energy (now Apache), WAPET, Oxoco International and Texaco (now Chevron).

In addition to being a Director of Bombora, Mr Jeffery is a graduate member of the Australian Institute of Company Directors, a member of the Non-Exec Advisory Board of private company Velrada, a fellow of the Australian Institute of Energy, and a member of WA Energy Research Alliance (WAERA) Industry Advisory Group, Petroleum Club WA and SEAPEX.

Resolution 11 proposes Mr Gary Jeffery as a new director of the Company in accordance with clause 12.4 of the Constitution.

12. RESOLUTION 12 – ELECTION OF A DIRECTOR – JOHN BEGG

Clause 12.4 of the Constitution allows the Company in a general meeting by ordinary resolution to appoint any person as a director, but only where the total number of directors does not at any time exceed the maximum number specified by the Constitution.

Pursuant to the Agreement, the Company will take all actions necessary to effect the appointment to the Board of Mr John Begg on or before the Settlement Date.

Mr Begg has over 30 years experience in the upstream oil and gas industry in Australia and internationally. He has a strong reputation as an oil finder and builder of assets. Most recently Mr Begg was Managing Director of Salinas Energy overseeing that company's growth within 2 years from concept to a long term oil producer with a large exploration portfolio. Prior to that Mr Begg was the founding and Managing Director of Voyager Energy Limited which was successfully merged with ARC Energy in 2005, after making 2 commercial oil discoveries with the Company's first 2 wells.

Mr Begg is a member of AAPG, and a past committee member of oil industry body APPEA and the Singapore - Australia Business Council.

Resolution 12 proposes Mr John Begg as a new director of the Company in accordance with clause 12.4 of the Constitution.

13. ENQUIRIES

Shareholders are required to contact Mr David McArthur on (+ 61 8) 9423 3200 if they have any queries in respect of the matters set out in these documents.

14. GLOSSARY

$ means Australian dollars.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited.

ASX Listing Rules means the Listing Rules of ASX.

Acquisition means the acquisition by the Company of 100% of the Bombora Shares.

Agreement means the agreement entered into between the Company, Bombora and the Bombora Shareholders dated 30 April 2010 under which the Company agreed to make an offer to all Bombora Shareholders to acquire all of the Bombora Shares.

Announcement Date means the date on which the Company and Bombora made public the Acquisition, being 4 May 2010.

Argonaut means Argonaut Limited, including any of the subsidiaries of Argonaut Limited.

Board means the current board of directors of the Company.

Bombora means Bombora Energy Limited (ACN 139 389 326).

Bombora Shares means the fully paid ordinary shares in the capital of Bombora Energy Limited.

Bombora Shareholders means the Shareholders of Bombora Energy Limited as set out in Schedule 1 of this Explanatory Statement.

Business Day means Monday to Friday inclusive, except New Year’s Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX declares is not a business day.

Capital Raising means the offer by the Company to allot and issue of up to 7,500,000 Shares (on a post-Consolidation basis) at an issue price of $0.20 per Share to raise up to a total of $1,500,000, as proposed in Resolution 4.

Company means XState Resources Limited (ACN 009 217 154).

Consolidation means the consolidation of the issued securities of the Company existing at the Announcement Date on a 1 for 3 basis (rounded up to the nearest whole number), which consolidation is proposed to become effective on the date the resolution is passed.

Constitution means the Company’s constitution.

Convertible Note means the convertible note to be entered into between Bombora and nominated parties of Argonaut to be executed within 10 Business Days of execution of the Agreement (or such later date that is agreed between the parties but not later than the date that the Formal Agreement is entered into).

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the current directors of the Company.

Entitlement Issue means the pro-rata Entitlement Issue of Options (on a post-Consolidation basis) on the ratio of one (1) Option for every two (2) Shares held on the relevant record date at an issue price of $0.01 each.

Explanatory Statement means the explanatory statement accompanying the Notice of Meeting.

General Meeting means the meeting convened by the Notice of Meeting.

Material Adverse Change means one or more occurrences or matters individually or in aggregate that are within the control of Bombora and that:

(a) have a material adverse effect on the business, properties, financial condition, results, operations or prospects of XState, Bombora or their subsidiaries, taken as a whole, and without limiting the generality of the foregoing creates or could reasonably be expected to create liabilities, or results or could reasonably be expected to result in a diminution of the value of XState or Bombora assets, which in aggregate exceed $250,000; or
(b) prevent XState or Bombora from performing its obligations under the Agreement.

Material Adverse Matter means any matter which has occurred but is not in the public domain at the date of the Agreement and has not been disclosed to XState or Bombora (by the other party) prior to the date of this Agreement and which:

(a) had it occurred after the date of the Agreement would have been a Material Adverse Change; and
(b) had it been known prior to the date of the Agreement, the other party’s Board would not have resolved to execute the Agreement (acting reasonably).

Noteholders means the parties referred to in Section 81, being the holders of the Convertible Note.

Notice of Meeting or Notice of General Meeting means this notice of general meeting including the Explanatory Statement.

Option means an option to acquire a Share with the terms and conditions set out in Schedule 2 of the Explanatory Statement.

Optionholder means a holder of an Option as the context requires.

Prospectus means the prospectus to be lodged in respect of the Capital Raising, in accordance with Resolution 4.

Resolutions means the resolutions set out in the Notice of Meeting, or any one of them, as the context requires.

Settlement Date means the settlement date under the Agreement, which is five (5) Business Days after the satisfaction or waiver of the conditions precedent contained in the Agreement (as summarised in Section 1.4 of the Explanatory Statement).

Share means a fully paid ordinary share in the capital of the Company.

Shareholder means a holder of a Share.

WST means Western Standard Time as observed in Perth, Western Australia.

SCHEDULE 1 – BOMBORA SHAREHOLDERS

Bombora Shareholders	Shares held in Bombora	Shares to be received as consideration
Rock Doc Pty Ltd Atf The Begg Family Trust	4,500,000	1,748,700
Andrew Ross Childs	2,000,000	777,200
Lake GardaPtyLtd	2,000,000	777,200

Gary John Jeffery Atf The Dungay Superannuation Fund	3,000,000	1,165,800
Andrew OakleyVenn	1,000,000	388,600
Petrogenesis Energy Investments Limited	1,600,000	621,760
Gregory John Munyard, Maria Ann Munyard, Carmen Helene Munyard Atf Riviera Superannuation Fund A/c	1,000,000	388,600
LPJ PtyLtd	700,000	272,020
Serjeant Nominees Pty Ltd the SerjeantFamilyA/c>	500,000	194,300
Michael Dennis Lee Atf The Lee Family A/c	1,000,000	388,600
Yennub Pty Ltd Atf The Lee FamilyA/c>	1,000,000	388,600
Chaleyer Holdings Pty Ltd Atf Rubben Family A/c	1,300,000	505,180
Jemaya Pty Ltd Atf The JH Featherby Super FundA/c	1,600,000	621,760
Argonaut EquityPartners PtyLtd	1,000,000	388,600
Tuffy Nominees Pty Ltd Atf The HouseFundA/c	600,000	233,160
Alexander FlemingWylie	1,500,000	582,900
Christopher Hodge	400,000	155,440
Graeme Clatworthy Atf The G ClatworthyFamilyA/c	500,000	194,300
Toltec Holdings PtyLtd	1,000,000	388,600
Berenes Nominees Pty Ltd Atf TheBerenes Super FundA/c	1,300,000	505,180
Eonia PtyLtd	500,000	194,300
Syncopated PtyLtd	1,000,000	388,600
Richard John Malcolm	1,000,000	388,600
TOTAL	30,000,000	11,658,000

SCHEDULE 2 – TERMS AND CONDITIONS OF OPTIONS

The Options entitle the holder to subscribe for Shares on the following terms and conditions:

(a) Each Option gives the Optionholder the right to subscribe for one Share. To obtain the right given by each Option, the Optionholder must exercise the Options in accordance with the terms and conditions of the Options.
(b) The Options will expire at 5:00 pm (WST) on the date which is three (3) years from the date of issue ( Expiry Date ). Any Option not exercised before the Expiry Date will automatically lapse on the Expiry Date.
(c) The amount payable upon exercise of each Option will be $0.24 ( Exercise Price ).
(d) The Options held by each Optionholder may be exercised in whole or in part, and if exercised in part, multiples of 1,000 must be exercised on each occasion.
(e) An Optionholder may exercise their Options by lodging with the Company, before the Expiry Date:
(i) a written notice of exercise of Options specifying the number of Options being exercised; and
(ii) a cheque or electronic funds transfer for the Exercise Price for the number of Options being exercised ( Exercise Notice ).
(f) An Exercise Notice is only effective when the Company has received the full amount of the Exercise Price in cleared funds.
(g) Within 10 Business Days of receipt of the Exercise Notice accompanied by the Exercise Price, the Company will allot the number of Shares required under these terms and conditions in respect of the number of Options specified in the Exercise Notice.
(h) All Shares allotted upon the exercise of Options will upon allotment rank pari passu in all respects with other Shares.
(i) The Company will apply for quotation of the Options on ASX. The Company will apply for quotation of all Shares allotted pursuant to the exercise of Options on ASX within 10 Business Days after the date of allotment of those Shares.
(j) If at any time the issued capital of the Company is reconstructed, all rights of an Optionholder are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the reconstruction.
(k) There are no participating rights or entitlements inherent in the Options and Optionholders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 6 Business Days after the issue is announced. This will give Optionholders the opportunity to exercise their Options prior to the date for determining entitlements to participate in any such issue.
(l) An Option does not confer the right to a change in exercise price or a change in the number of underlying securities over which the Option can be exercised.

SCHEDULE 3 – VALUATION OF OPTIONS

The Options to be issued to the Related Parties pursuant to Resolutions 4 to 10 have been independently valued / valued by internal management.

Using the theoretical Black & Scholes option model and based on the assumptions set out below, the Options were ascribed a value range, as follows:

Assumptions:

Valuationdate	5May2010

Market price ofShares	0.24cents

Exercise price	0.24 cents

Expiry date	15 July 2013

Risk freeinterestrate	6.75%

Volatility	40%	50%	60%

Indicative value per Option	8.35 cents	9.69 cents	11cents

Note: The valuation ranges noted above are not necessarily the market prices that the Options could be traded at and they are not automatically the market prices for taxation purposes.

ANNEXURE A – PRO-FORMA BALANCE SHEET - XSTATE

Pro-forma statement of financial position as at 31 March 2010 following acquisition of Bombora and proposed XState capital raisings is set out below:

ASSETS Cash and cash receivable Trade and other receivables Total Current Assets Acquisition, Exploration and Evaluation Expenditure Total Assets Liabilities Trade and other payables Employee benefits Total Current Liabilities Total Liabilities Net Assets Equity Share Capital Reserves Retained Earnings Total Equity	AUDITED 31 DECEMBER 2009 PROPOSED TRANSACTIONS 3,021,991 1,666,650 25,147 - 3,047,138 - 2,332,000 3,047,138 77,151 - 1,288 - 78,439 78,439 2,968,699 31,884,265 3,832,000 (349,952) 241,650 (28,565,614) (75,000) 2,298,699	PRO - FORMA 4,688,641 25,147
		4,713,788
		2,332,000
		7,045,788
		77,151 1,288
		78,439
		78,439
		6,967,349
		35,716,265 (108,302) (28,640,614)
		6,967,349

PROXY FORM

APPOINTMENT OF PROXY XSTATE RESOURCES LIMITED ACN 009 217 154

GENERAL MEETING

			GENERAL MEETING
I/We
of
	being	a member of XState Resources Limited entitled to attend and vote at the General Meeting, hereby
Appoint
	Name of proxy
OR			the Chair of the General Meeting as your proxy

or failing the person so named or, if no person is named, the Chair of the General Meeting, or the Chair’s nominee, to vote in accordance with the following directions, or, if no directions have been given, as the proxy sees fit, at the General Meeting to be held at 10.00 am (WST), on 10 June 2010 at Seminar Room 2, University Club, Hackett Drive, Crawley, Western Australia, and at any adjournment thereof.

If no directions are given, the Chair will vote in favour of all the Resolutions.

If the Chair of the General Meeting is appointed as your proxy, or may be appointed by default, and you do not wish to direct your proxy how to vote as your proxy in respect of Resolutions 2 to 10 please place a mark in this box.

By marking this box, you acknowledge that the Chair of the General Meeting may exercise your proxy even if he has an interest in the outcome of Resolutions 2 to 10 and that votes cast by the Chair of the General Meeting for Resolutions 2 to 10 other than as proxy holder will be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chair will not cast your votes on Resolutions 2 to 10 and your votes will not be counted in calculating the required majority if a poll is called on Resolutions 2 to 10.

OR

Voting on Business of the General Meeting

FOR AGAINST ABSTAIN

Resolution 1 – Consolidation of Capital Resolution 2 – Change in Nature and Scale of Activities Resolution 3 – Issue of Shares to Bombora Shareholders Resolution 4 – Issue for Prospectus Capital Raising Resolution 5 – Issue of Options to Argonaut Limited Resolution 6 – Placement - Options Resolution 7 – Issue of Options in Connection with the Convertible Note Resolution 8 – Issue of Options to Gary Jeffery Resolution 9 – Issue of Options to John Begg Resolution 10 – Issue of Shares and Options to David McArthur Resolution 11 – Election of a Director – Gary Jeffery Resolution 12 – Election of a Director – John Begg

Please note : If you mark the abstain box for a particular Resolution, you are directing your proxy not to vote on that Resolution on a show of hands or on a poll and your votes will not to be counted in computing the required majority on a poll.

Signature of Member(s):

Signature of Member(s): Date: ____ Individual or Member 1 Member 2 Member 3 Sole Director/Company Secretary Director Director/Company Secretary

Contact Name: _____ Contact Ph (daytime): _________

XSTATE RESOURCES LIMITED ACN 009 217 154

Instructions for Completing ‘Appointment of Proxy’ Form

( Appointing a Proxy ): A member entitled to attend and vote at a General Meeting is entitled to appoint not more than two proxies to attend and vote on a poll on their behalf. The appointment of a second proxy must be done on a separate copy of the Proxy Form. Where more than one proxy is appointed, such proxy must be allocated a proportion of the member’s voting rights. If a member appoints two proxies and the appointment does not specify this proportion, each proxy may exercise half the votes. A duly appointed proxy need not be a member of the Company.
( Direction to Vote ): A member may direct a proxy how to vote by marking one of the boxes opposite each item of business. Where a box is not marked the proxy may vote as they choose. Where more than one box is marked on an item the vote will be invalid on that item.

3. ( Signing Instructions ):

( Individual ): Where the holding is in one name, the member must sign.
( Joint Holding ): Where the holding is in more than one name, all of the members should sign.
( Power of Attorney ): If you have not already provided the Power of Attorney with the registry, please attach a certified photocopy of the Power of Attorney to this form when you return it.
( Companies ): Where the company has a sole director who is also the sole company secretary, that person must sign. Where the company (pursuant to Section 204A of the Corporations Act) does not have a company secretary, a sole director can also sign alone. Otherwise, a director jointly with either another director or a company secretary must sign. Please sign in the appropriate place to indicate the office held.
( Attending the Meeting ): Completion of a Proxy Form will not prevent individual members from attending the General Meeting in person if they wish. Where a member completes and lodges a valid Proxy Form and attends the General Meeting in person, then the proxy’s authority to speak and vote for that member is suspended while the member is present at the General Meeting.
( Return of Proxy Form ): To vote by proxy, please complete and sign the enclosed Proxy Form and return by:
(a) post to XState Resources Limited, PO Box 985, Nedlands, Perth, Western Australia 6909; or
(b) facsimile to the Company on facsimile number (+61 8) 9389 8327.

so that it is received not later than 10.00 am (WST) on 8 June 2010.

AI assistant

XSTATE RESOURCES LIMITED — Proxy Solicitation & Information Statement 2010

66107_rns_2010-05-10_f2c4519d-c780-4e85-95b1-3ed50efaf2ab.pdf

XState Resources Limited

ASX LIMITED

Re: NOTICE OF MEETING

XSTATE RESOURCES LIMITED

ACN 009 217 154

NOTICE OF GENERAL MEETING

CONTENTS PAGE

VENUE

YOUR VOTE IS IMPORTANT

VOTING IN PERSON

VOTING BY PROXY

Proxy Forms received later than this time will be invalid.

IMPORTANT NOTICES

Key Dates*

NOTICE OF GENERAL MEETING

AGENDA

1. RESOLUTION 1 – CONSOLIDATION OF CAPITAL

2. RESOLUTION 2 – CHANGE IN NATURE AND SCALE OF ACTIVITIES

3. RESOLUTION 3 – ISSUE OF SHARES TO BOMBORA SHAREHOLDERS

4. RESOLUTION 4 – ISSUE FOR PROSPECTUS CAPITAL RAISING

5. RESOLUTION 5 – ISSUE OF OPTIONS TO ARGONAUT LIMITED

6. RESOLUTION 6 – PLACEMENT – OPTIONS

7. RESOLUTION 7 - ISSUE OF OPTIONS AS CONSIDERATION FOR THE CONVERTIBLE NOTE

8. RESOLUTION 8 – ISSUE OF OPTIONS TO GARY JEFFERY

9. RESOLUTION 9 – ISSUE OF OPTIONS TO JOHN BEGG

10. RESOLUTION 10 – ISSUE OF SHARES AND OPTIONS TO DAVID MCARTHUR

11. RESOLUTION 11 – ELECTION OF A DIRECTOR – GARY JEFFERY

12. RESOLUTION 12 – ELECTION OF A DIRECTOR – JOHN BEGG

DATED: 7 MAY 2010

BY ORDER OF THE BOARD

EXPLANATORY STATEMENT

1. OVERVIEW OF CHANGE OF ACTIVITIES

1.1 Background

1.2 Background to Change of Activities – Acquisition of Bombora

1.3

Background on Bombora and its assets

1.3.1 Offshore Permits: Kerkouane (Tunisia) and Pantelleria (Italy)

Dougga Discovery

1.3.2 Lambouka Prospect and Additional Offshore Prospects

Table of Offshore Prospect and Lead Potential

Option to increase interest in Offshore Permit to 20%

1.3.3 Onshore Chorbane (Tunisia)

2D Seismic dip lines showing the “flat spots” across Sidi Daher Prospect

1.4 Cash Position Post Raisings and Expected Bombora Exploration Expenditure in 2010

1.5 Bombora Acquisition Terms

1.6 Loan details

1.7 Pro-forma balance sheet

1.8 Pro-forma capital structure

Notes:

Notes:

1.9 Advantages of the transaction

1.10 Disadvantages of the transaction

1.11 Risk Factors

Risks relating to the Change in Nature and Scale of Activities

Re-Quotation of Shares on ASX

Risks relating to the Kerkouane, Chorbane and Pantelleria Projects

Exploration and Development Risks

Oil and Gas Price Volatility

Hydrocarbon Reserves and Resource Estimates

General Economic and Political Risks

Oil Reserves and Commercial Oil Flow

Commodity Price Volatility and Exchange Rate Risks

Environmental Risks

Competition

Regulatory

Insurance

Operating Risks

General Risks

Additional Requirements for Capital

Potential Acquisitions

Economic Risks

Market Conditions

Reliance on Key Management

Investment Speculative

1.12 Directors’ Recommendation

1.13 Competent Person

2. RESOLUTION 1 – CONSOLIDATION OF CAPITAL

XSTATE RESOURCES LIMITED Proxy Solicitation & Information Statement 2010