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ABN 96 009 217 154

19 December 2013

ASX Limited

Electronic lodgement ASX Code: XST

DISPATCH OF NOTICE OF GENERAL MEETING

Attached is copy of a Notice of General Meeting, Explanatory Statement and Proxy Form for a General Meeting of shareholders to be held on Friday, 31 January 2014. This information has been dispatched to shareholders today.

A copy of the Notice of General Meeting will also be available on our website www.xstate.com.au

For and on behalf of the Board

Xstate Resources Limited ABN 96 009 217 154

Level 2, 55 Carrington Street, Nedlands, WA 6009 PO Box 985, Nedlands, WA 6909 Tel + 61 8 9423 3200 Fax +61 8 9389 8327 www.xstate.com.au

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XSTATE RESOURCES LIMITED ABN 96 009 217 154

NOTICE OF GENERAL MEETING

PROXY FORM

AND

EXPLANATORY MEMORANDUM

Date of Meeting Friday 31 January 2014

Time of Meeting 10.00 am (WST)

Place of Meeting Level 2, 55 Carrington Street Nedlands, Western Australia

XSTATE RESOURCES LIMITED

ABN 96 009 217 154

NOTICE OF GENERAL MEETING

Notice is hereby given that a General Meeting of shareholders of Xstate Resources Limited (" Company ") will be held at 10.00m (WST) on Friday 31 January 2014, at Level 2, 55 Carrington Street, Nedlands, Western Australia.

In order to determine voting entitlements, the register of Shareholders will be closed at 5.00pm (Sydney time) on 29 January 2014.

An Explanatory Memorandum containing information in relation to each of the Resolutions to be put to the meeting accompanies this Notice.

AGENDA

To consider and, if thought fit, to pass the following Resolutions.

ORDINARY BUSINESS

Ordinary Resolution 1: Ratification of Issue of Shares – Placement

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

“That, for the purposes of ASX Listing Rule 7.4 and for all other purposes, the Company ratifies the allotment and issue of 6,250,000 fully paid ordinary shares on the terms set out in the Explanatory Statement accompanying this Notice of Meeting.”

Voting Exclusion Statement: The Company will disregard any votes cast on Resolution 1 by any persons who participated in the issue and any associates of those persons. However, the Company need not disregard a vote if cast by a person as proxy for a person who is entitled to vote, in accordance with the directions of the proxy form or 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.

Ordinary Resolution 2: Ratification of Issue of Shares – Placement

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

“That, for the purposes of ASX Listing Rule 7.4 and for all other purposes, the Company ratifies the allotment and issue of 11,000,000 fully paid ordinary shares on the terms set out in the Explanatory Statement accompanying this Notice of Meeting.”

Voting Exclusion Statement: The Company will disregard any votes cast on Resolution 2 by any persons who participated in the issue and any associates of those persons. However, the Company need not disregard a vote if cast by a person as proxy for a person who is entitled to vote, in accordance with the directions of the proxy form or 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.

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Ordinary Resolution 3: Ratification of Issue of Shares – Consultant

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

“That, for the purposes of ASX Listing Rule 7.4 and for all other purposes, the Company ratifies the allotment and issue of 1,000,000 fully paid ordinary shares on the terms set out in the Explanatory Statement accompanying this Notice of Meeting.”

Voting Exclusion Statement: The Company will disregard any votes cast on Resolution 3 by any persons who participated in the issue and any associates of those persons. However, the Company need not disregard a vote if cast by a person as proxy for a person who is entitled to vote, in accordance with the directions of the proxy form or 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.

Ordinary Resolution 4: Issue of Options to Related Party – Paul Cartwright

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

“That, for the purpose of ASX Listing Rule 10.11, sections 195(4) and 208 of the Corporations Act and for all other purposes, approval is given for the Directors to allot and issue 10,500,000 Director Options to Mr Paul Cartwright (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion Statement : The Company will disregard any votes cast on this Resolution by Mr Cartwright , his nominee and any of their associates. 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.

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(a) the proxy is either:
(i) a member of the Key Management Personnel; or
(ii) a Closely Related Party of such a member; and
(b) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

(c) the proxy is the Chair of the Meeting; and
(d) the appointment expressly authorises the Chair to exercise the proxy even if the Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

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Ordinary Resolution 5: Issue of Options to Related Party – Chris Hodge

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

“That, for the purpose of ASX Listing Rule 10.11, sections 195(4) and 208 of the Corporations Act and for all other purposes, approval is given for the Directors to allot and issue 3,000,000 Director Options to Mr Chris Hodge (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion Statement : The Company will disregard any votes cast on this Resolution by Mr Hodge , his nominee and any of their associates. 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.

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(a) the proxy is either:
(i) a member of the Key Management Personnel; or
(ii) a Closely Related Party of such a member; and
(b) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

(c) the proxy is the Chair of the Meeting; and
(d) the appointment expressly authorises the Chair to exercise the proxy even if the Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

Ordinary Resolution 6: Issue of Options to Related Party – David McArthur

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

“That, for the purpose of ASX Listing Rule 10.11, sections 195(4) and 208 of the Corporations Act and for all other purposes, approval is given for the Directors to allot and issue 3,000,000 Director Options to Mr David McArthur (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion Statement : The Company will disregard any votes cast on this Resolution by Mr McArthur , his nominee and any of their associates. 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.

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Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(a) the proxy is either:
(i) a member of the Key Management Personnel; or
(ii) a Closely Related Party of such a member; and
(b) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

(c) the proxy is the Chair of the Meeting; and
(d) the appointment expressly authorises the Chair to exercise the proxy even if the Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

Ordinary Resolution 7: Approval of Issue of Shares to Director under Incentive Share Plan – Mr Paul Cartwright

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

“That, for the purposes of ASX Listing Rule 10.14 and for all other purposes, approval is given for the Directors to issue Plan Shares to Mr Paul Cartwright or his nominee pursuant to the Company’s Incentive Share Plan on terms set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by a director of the Company (except one who is ineligible to participate in any incentive scheme of the Company) and any associate of that person. However, the Company need not disregard a vote if it is cast by a person as 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.

Voting Prohibition Statement: A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(a) the proxy is either:
(i) a member of the Key Management Personnel; or
(ii) a Closely Related Party of such a member; and
(b) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

(c) the proxy is the Chair of the Meeting; and
(d) the appointment expressly authorises the Chair to exercise the proxy even if the Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

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Ordinary Resolution 8: Approval of Issue of Shares to Director under Incentive Share Plan – Mr Chris Hodge

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

“That, for the purposes of ASX Listing Rule 10.14 and for all other purposes, approval is given for the Directors to issue Plan Shares to Mr Chris Hodge or his nominee pursuant to the Company’s Incentive Share Plan on terms as set out in the Explanatory Statement.”

Voting Prohibition Statement: A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(a) the proxy is either:
(i) a member of the Key Management Personnel; or
(ii) a Closely Related Party of such a member; and
(b) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

(c) the proxy is the Chair of the Meeting; and
(d) the appointment expressly authorises the Chair to exercise the proxy even if the Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

Ordinary Resolution 9: Approval of Issue of Shares to Director under Incentive Share Plan – Mr David McArthur

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

“That, for the purposes of ASX Listing Rule 10.14 and for all other purposes, approval is given for the Directors to issue Plan Shares to Mr David McArthur or his nominee pursuant to the Company’s Incentive Share Plan on terms set out in the Explanatory Statement.”

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Voting Prohibition Statement: A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(a) the proxy is either:
(i) a member of the Key Management Personnel; or
(ii) a Closely Related Party of such a member; and
(b) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

(c) the proxy is the Chair of the Meeting; and
(d) the appointment expressly authorises the Chair to exercise the proxy even if the Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

Ordinary Resolution 10: Approval to issue shares to acquire Bombora Energy Pty Ltd.

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

“That, for the purposes of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to issue 12,183,751 Shares to unrelated parties of Bombora in part consideration for the Acquisition.”

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, 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.

Ordinary Resolution 11: Approval to issue shares to Related Party Chris Hodge pursuant to the acquisition of Bombora Energy Pty Ltd.

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 Resolution 10, for the purposes of ASX Listing Rule 10.11, Sections 208 and 195(4) of the Corporations Act and for all other purposes, approval is given for the Directors to issue 250,000 Shares to Chris Hodge (or his nominee), a Director of the Company, such shares issued to Mr Hodge as a shareholder of Bombora Energy Pty Ltd”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by Mr Hodge (his nominee) and any of their associates. However, the Company need not disregard a vote if it is cast by a person as 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.

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Ordinary Resolution 12: Approval to issue shares to Related Party David McArthur pursuant to acquisition of Bombora Energy Pty Ltd.

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 Resolution10, for the purposes of ASX Listing Rule 10.11, Sections 208 and 195(4) of the Corporations Act and for all other purposes, approval is given for the Directors to issue 458,333 Shares to Mr David McArthur (or his nominee), a Director of the Company, such shares issued to Mr McArthur as a shareholder of Bombora Energy Pty Ltd”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by Mr McArthur (his nominee) and any of their associates. However, the Company need not disregard a vote if it is cast by a person as 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.

By Order of the Board

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D M McARTHUR Company Secretary Dated: 12 December 2013

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ENTITLEMENT TO ATTEND AND VOTE

The Company may specify a time, not more than 48 hours before the Meeting, at which a “snap-shot” of Shareholders will be taken for the purposes of determining Shareholder entitlements to vote at the General Meeting.

The Company’s Directors have determined that all Shares of the Company that are quoted on ASX at 5:00pm (Sydney Time) on 29 January 2014 shall, for the purposes of determining voting entitlements at the General Meeting, be taken to be held by the persons registered as holding the Shares at that time.

PROXIES

Please note that:

(a) a member of the Company entitled to attend and vote at the General Meeting is entitled to appoint a proxy;
(b) a proxy need not be a member of the Company; and
(c) a member of the Company entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise, but where the proportion or number is not specified, each proxy may exercise half of the votes.

The enclosed Proxy Form provides further details on appointing proxies and lodging Proxy Forms.

CORPORATE REPRESENTATIVE

A Shareholder that is a corporation may appoint an individual to act as its corporate representative to vote at the Meeting in accordance with section 250D of the Corporations Act. Any corporation wishing to appoint an individual to act as its representative at the Meeting should provide that person with a certificate or letter executed in accordance with the Corporations Act authorising him or her to act as that company’s representative. The authority may be sent to the Company and/or Share Registry in advance of the Meeting or handed in at the Meeting when registering as a corporate representative. A ‘Certificate of Appointment of Corporate Representative’ is enclosed if required.

ENQUIRIES

Shareholders are invited to contact the Company Secretary, David McArthur on +61 8 9423 3200 if they have any queries in respect of the matters set out in this document.

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XSTATE RESOURCES LIMITED

ABN 96 009 217 154

EXPLANATORY MEMORANDUM

This Explanatory Memorandum is intended to provide Shareholders with sufficient information to assess the merits of the Resolutions contained in the accompanying Notice of General Meeting (“ Notice ”) of the Company.

The Directors of the Company (“ Directors ”) recommend Shareholders read this Explanatory Memorandum in full before making any decision in relation to the Resolutions.

The following information should be noted in respect of the various matters contained in the accompanying Notice.

ORDINARY RESOLUTION 1: Ratification of Issue of Shares- Placement

As announced to ASX on 2 September 2013, the Company issued 6,250,000 Shares at $0.008 per Share to Paul Cartwright to raise $50,000 ( Placement ). At the time of the Placement, Mr Cartwright was not a Director of the Company.

ASX Listing Rule 7.1 provides that the Company must not issue or agree to issue, subject to specified exceptions, during any 12 month period any equity securities which, when aggregated with the number of other securities issued within that 12 month period exceeds 15% of the number of ordinary shares on issue at the beginning of that 12 month period, unless the issue falls within one of the nominated exceptions, or the prior approval of members of the Company at a general meeting is obtained.

Listing Rule 7.4 provides an issue made within the 15% limit will be treated as having been made with the approval of shareholders under Listing Rule 7.1 if subsequently approved by shareholders, thereby ‘refreshing’ the company’s ability to issue shares within the 15% limit, and restoring the company’s ability to make placements within that limit (if that is thought desirable) without the need for shareholder approval.

While the Shares described in this Resolution 1 have been issued within the 15% limit, the Company seeks Shareholder ratification of the issue of those Shares for the purpose of Listing Rule 7.4 so that the Company’s ability to issue securities will be refreshed and it will have the flexibility to issue further securities should the need or opportunity arise.

In accordance with the requirements of Listing Rule 7.5, the following information is provided to Shareholders to allow them to assess the ratification of the issue of the Shares the subject of this Resolution 1:

(a) the total number of Shares issued by the Company was 6,250,000;
(b) the Shares were issued for $0.008 per Share;
(c) the Shares issued rank pari passu with the Company’s existing Shares;
(d) the Shares were issued to Paul Cartwright who was not a related party of the Company at the time of the issue; and
(e) the funds raised under the Placement were used for working capital.

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ORDINARY RESOLUTION 2: Ratification of Issue of Shares- Placement

As announced to ASX on 12 December 2013, the Company issued 11,000,000 Shares at $0.03 per Share to raise $330,000 ( Placement ). The shares were placed to sophisticated investors pursuant to Section 708 of the Corporations Act.

While the Shares described in this Resolution 2 have been issued within the 15% limit, the Company seeks Shareholder ratification of the issue of those Shares for the purpose of Listing Rule 7.4 so that the Company’s ability to issue securities will be refreshed and it will have the flexibility to issue further securities should the need or opportunity arise.

(a) the total number of Shares issued by the Company was 11,000,000;
(b) the Shares were issued for $0.03 per Share;
(c) the Shares issued rank pari passu with the Company’s existing Shares;
(d) the Shares were issued to sophisticated investors pursuant to Section 708 of the Corporations Act, none of whom were related parties of the Company; and
(e) the funds raised under the Placement ($330,000) will be used for working capital purposes.

ORDINARY RESOLUTION 3: Ratification of Issue of Shares to Consultant

As announced to ASX on 28 October 2013, the Company issued 1,000,000 Shares to Martens Petroleum Consulting Pty Ltd, a consultant to the Company, in satisfaction of fees owing totalling $22,000.

A summary of ASX Listing Rules 7.1 and 7.4 is set out in the explanatory memorandum for Resolution 1 above.

By ratifying this issue, the Company will retain the flexibility to issue equity securities in the future up to the 15% annual placement capacity set out in ASX Listing Rule 7.1 without the requirement to obtain prior Shareholder approval.

(a) the number of Shares issued and allotted by the Company was 1,000,000;
(b) the Shares were issued at 2.2 cents each in satisfaction of fees owing totalling $22,000;

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(c) the Shares issued rank pari passu with the Company’s existing Shares;
(d) the Shares were issued to Martens Petroleum Consulting Pty Ltd, who is not a related party of the Company; and
(e) no funds were raised through the issue of Shares as they were issued in consideration of fees owing to Martens Petroleum Consulting Pty Ltd for services to the Company.

ORDINARY RESOLUTIONS 4, 5 and 6: Grant of Options to Directors

On 4 April 2013 the Board of the Company resolved, subject to obtaining shareholder approval, to issue and allot a total 16,500,000 Options ( Director Options ) to its Directors as set out below:

(a) Paul Cartwright – 10,500,000 Options;
(b) Chris Hodge – 3,000,000 Options; and
(c) David McArthur – 3,000,000 Options,

(together, the Related Parties ) on the terms and conditions set out in Appendix 1.

For a public company 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 Section 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.

In addition, Listing Rule 10.11 also requires shareholder approval to be obtained where an entity issues, or agrees to issue, securities to a related party, or a person whose relationship with the entity or a related party is, in ASX’s opinion, such that approval should be obtained unless an exception in Listing Rule 10.12 applies.

The grant of the Director Options to the Related Parties requires the Company to obtain Shareholder approval because the grant of Director Options constitutes giving a financial benefit, and as such Messrs Cartwright, Hodge and McArthur are Related Parties of the Company by virtue of being Directors.

It is the view of the Directors that the exceptions set out in Sections 210 to 216 of the Corporations Act and Listing Rule 10.12 do not apply in the current circumstances. Accordingly, Shareholder approval is sought for the grant of Director Options to the Related Parties.

Section 195 of the Corporations Act

Section 195(1) of the Corporations Act provides that a director of a public company may not vote or be present during meetings of directors when matters in which that director holds a “material personal interest” are being considered.

If there is not a quorum of directors who are eligible to vote on a matter because of the operation of Section 195(1) of the Corporations Act, one or more directors may call a general meeting and the general meeting may deal with the matter.

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The voting prohibition in section 195(1) of the Corporations Act does not apply to a proposal to call a general meeting to consider a matter in which one or more directors have a material personal interest—that is, a director with a material personal interest may consider and vote on such a proposal.

Each of the Directors, being Paul Cartwright, Chris Hodge and David McArthur have a material personal interest in the outcome of Resolutions 4 to 6 because they will be receiving Director Options.

The Directors have exercised their right under section 195(4) of the Corporations Act to call the Meeting and put the matters the subject of Resolutions 4 to 6 to Shareholders.

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 Listing Rule 10.13, the following information is provided in relation to the proposed grant of Director Options:

(a) the Related Parties are Paul Cartwright, Chris Hodge and David McArthur by virtue of being a Directors.
(b) the maximum number of Director Options (being the nature of the financial benefit being provided) to be granted to the Related Parties in the aggregate is 16,500,000 Director Options;
(c) the Related Parties will be issued with the following Director Options:

Paul Cartwright Chris Hodge David McArthur Exercisable at 6 cents on or before 31/12/2015 3,500,000 1,000,000 1,000,000 Exercisable at 8 cents on or before 31/12/2015 3,500,000 1,000,000 1,000,000 Exercisable at 10 cents on or before 31/12/2015 3,500,000 1,000,000 1,000,000

(d) the Director Options will otherwise be issued on the terms and conditions outlined in Appendix 1;
(e) the Director Options will be granted 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 Director Options will be issued on one date;
(f) the Director Options will be granted for nil cash consideration, accordingly no funds will be raised;
(g) the value of the Director Options is $98,450 and the pricing methodology is set out in Appendix 2;
(h) the relevant interest of the Related Parties in securities of the Company is set out below:
(i) Paul Cartwright– 7,455,000 shares
(ii) Chris Hodge –500,000 shares
(iii) David McArthur – 6,127,272 shares
- 2,250,000 May 31, 2016 options
(i) the Related Parties receive remuneration for the current financial year as follows:
(i) Paul Cartwright $200,000 per annum
(ii) Chris Hodge $32,500 per annum
(iii) David McArthur $32,500 per annum- Director
- $50,000 per annum Company Secretary/Corporate

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In the previous financial year, the Related Parties received the following from the Company (paid and payable):

(i) Paul Cartwright -$Nil
(ii) Chris Hodge - $Nil
(iii) David McArthur- $54,500

Other than as set out in this Explanatory Statement, the Related Parties have not received any other emoluments from the Company;

(j) if the Director Options granted to the Related Parties are exercised, a total of 16,500,000 Shares would be allotted and issued. This will increase the number of Shares on issue from 139,052,919 to 155,552,919 (assuming that no other Options are exercised and no other Shares issued) with the effect that the share holding of existing shareholders would be diluted by 10.6% (Cartwright 6.8%, Hodge 1.9% and McArthur 1.9%).

The market price for Shares during the term of the Director Options would normally determine whether or not the Director Options are exercised. If, at any time, any of the Director Options are exercised and the Shares are trading on ASX at a price that is higher than the exercise price of the Director 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 LOWEST LATEST	$0.049 $0.006 $0.03	15 FEBRUARY 2013 20 JUNE 2013 6 DECEMBER 2013

(l) the primary purpose of the issue of the Director Options is to provide a market linked incentive to the Related Parties to motivate and reward their performance in their respective roles as Directors;
(m) the Board acknowledges the grant of Related Party Options to Messrs Hodge and McArthur is contrary to Recommendation 8.3 of The Corporate Governance Principles and Recommendations with 2010 Amendments (2nd Edition) as published by The ASX Corporate Governance Council. However, the Board considers the grant of Related Party Options to Messrs Hodge and McArthur reasonable in the circumstances for the reason set out in paragraph (n);
(n) Mr Cartwright declines to make a recommendation to Shareholders in relation to Resolution 4 due to Mr Cartwright’s material personal interest in the outcome of the Resolution on the basis that Mr Cartwright is to be granted Director Options in the Company should Resolution 4 be passed. However, in respect of Resolutions 5 and 6, Mr Cartwright recommends that Shareholders vote in favour of those Resolutions for the following reasons:
(i) the grant of Director Options to the Related Parties will align the interests of the Related Parties with those of Shareholders;
(ii) the grant of the Director Options is a reasonable and appropriate method to provide cost effective remuneration as the non-cash form of this benefit will allow the Company to spend a greater proportion of its cash reserves on its operations than it would if alternative cash forms of remuneration were given to the Related Parties; and
(iii) it is not considered that there are any significant opportunity costs to the Company or opportunities foregone by the Company in granting the Director Options upon the terms proposed;

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(o) Mr Hodge declines to make a recommendation to Shareholders in relation to Resolution 5 due to Mr Hodges’ material personal interest in the outcome of the Resolution on the basis that Mr Hodge is to be granted Director Options in the Company should Resolution 5 be passed. However, in respect of Resolutions 4 and 6, Mr Hodge recommends that Shareholders vote in favour of those Resolutions for the reasons set out in paragraph (n);
(p) Mr McArthur declines to make a recommendation to Shareholders in relation to Resolution 6 due to Mr McArthur’s material personal interest in the outcome of the Resolution on the basis that Mr McArthur is to be granted Director Options in the Company should Resolution 6 be passed. However, in respect of Resolutions 4 and 5, Mr McArthur recommends that Shareholders vote in favour of those Resolutions for the reasons set out in paragraph (n);
(q) in forming their recommendations, each Director considered the experience of each other Related Party, the current market price of Shares, the current market practices when determining the number of Director Options to be granted as well as the exercise prices and expiry dates of those Director Options; and
(r) the Board 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 Resolutions.

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

ORDINARY RESOLUTIONS 7, 8 and 9- Approval to Issue Shares pursuant to Share Plan

ASX Listing Rule 10.11 requires Shareholder approval to be obtained where an entity issues, or agrees to issue, securities to a related party, or person whose relationship with the entity or a related party is, in ASX’s opinion, such that approval should be obtained unless an exception in ASX Listing Rule 10.12 applies.

An exception to ASX Rule 10.11 is set out in ASX Listing Rule 10.12 (exception 4) which provides that ASX Listing Rule 10.11 does not apply to issue made with the approval of Shareholders under ASX Listing Rule 10.14.

ASX Listing Rule 10.14 provides that an entity must only allow a Director or their associates to acquire securities with approval of Shareholders and provided the Notice of Meeting complies with ASX Listing Rules 10.15 or 10.15A.

On 31 May 2013 shareholders approved the adoption of an Incentive Share Plan. The Company is able to issue Shares under the Share Plan ( Plan Shares ) to eligible participants over a period of 3 years without impacting on the Company’s ability to issue up to 15% of its total ordinary securities without Shareholder approval in any 12 month period. The Listing Rules require, however, that specific approval be obtained for the issue of shares to directors.

Mr Cartwright became Managing Director of the Company on 6 November 2013, and has agreed, subject to shareholder approval, to receive shares for $100,000 of his $200,000 total remuneration (being 50% of his remuneration).

Mr Hodge joined the Board as a non-executive director on 12 November 2013, and has agreed, subject to shareholder approval, to receive shares for $16,250 of his $32,500 director’s fee (being 50% of his fees).

Mr McArthur was appointed a non-executive Director on 4 September 2013 and has agreed, subject to shareholder approval, to receive shares for $16,250 of his $32,500 director’s fee (being 50% of his fees).

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Mr McArthur also receives $50,000 per annum for Company Secretarial and Corporate services, and has agreed, subject to shareholder approval, to receive $20,000 of this remuneration by way of shares from 1 July 2013.

The shares are to be issued to the above related parties on a quarterly basis, with the issue price to be determined as a simple mathematical average calculated based on the 5 day VWAP taken at the start of the respective quarter and the 5 day VWAP taken at the end of the respective quarter. The Company has however set a maximum cap on the deemed issue price, being not less than $0.02. Therefore, the maximum number of Plan Shares the related parties could receive in aggregate would be no more than 7,625,000 Plan Shares (that is the equivalent of $152,500 at $0.02 each).

The approval to issue shares to the related parties will be for a period of 12 months from the date of approval.

The Directors consider that Shareholder approval pursuant to Chapter 2E of the Corporations Act is not required as the issue of Plan Shares forms part of the reasonable remuneration of the related parties pursuant to section 211 of the Corporations Act.

For the purposes of ASX Listing Rule 10.15, the following information is provided to Shareholders:

(a) The Shares will be granted to Messrs Cartwright, Hodge and McArthur (Directors of the Company), or their nominees;
(b) The Shares will be issued to the above parties (or their nominees) on a quarterly basis no later than 12 months after the date of the General Meeting;
(c) The Shares will be issued in lieu of cash remuneration that the related parties are entitled to be paid and, accordingly, no funds will be raised;
(d) The Shares will be issued per the above pricing formula (being that number in total equivalent to $152,500). Based on the cap on the deemed issue price of the Plan Shares of not less than $0.02 each, the maximum number of Plan Shares the related parties could receive in aggregate would be no more than 7,625,000 Plan Shares (Cartwright – 5,000,000 Plan Shares, Hodge – 812,500 Plan Shares and McArthur – 1,812,500 Plan Shares;
(e) a total of 8,921,569 shares have been issued under the plan to date all of which were issued to Mr Gary Jeffery (former Managing Director of the Company);
(f) The persons covered under Listing Rule 10.14 entitled to participate in the Plan are Messrs Cartwright, Hodge and McArthur;
(g) There are no loans provided to related parties in relation to the acquisition of Shares under the Share Plan; and
(h) The Shares will be issued on the same terms as the fully paid ordinary shares of the Company and will rank equally with all of the Company’s existing shares. The Company will apply for quotation on ASX for any Shares issued under the Share Plan.

Ordinary Resolution 10: Approval to issue shares to acquire Bombora Energy Pty Ltd

As announced on 12 December 2013, the Company has reached agreement to acquire 75.90% of the issued share capital of Bombora Energy Pty Ltd ( Bombora ) from certain shareholders of Bombora ( Bombora Shareholders ) ( Acquisition ). The consideration for the Acquisition will be the issue of 12,892,084 Shares to Bombora Shareholders to be issued pro-rata in proportion to their existing holdings in Bombora. This Resolution 10 seeks Shareholder approval to issue 12,183,751 Shares to Bombora Shareholders unrelated to the Company. Resolutions 11 and 12 seek further approvals to issue 708,333 Shares to Bombora Shareholders that are related to the Company.

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Bombora is the legal and beneficial holder of working interests in oil and gas leases located in California, United States of America as summarized in the following table (note, all working interests are held by Bombora’s 100% owned subsidiary CALOG LLC):

Prospect Name	County	Working Interest	Prospective For:
Porter Ranch	San Luis Obispo	22.5% after first exploration well is permitted; there is an additional carried working interest encumbrance of 1.25% untila well is permitted ontheseleases	Oil
West Brentwood AMI	Contra Costa	Option to participate at 6.667% working interest after satisfaction of 10% working interest in remainder of initial Drilling Obligation substantially satisfied by drilling the Shea Dividend #1-8 well.	Oil and Gas
SCU 1-24 Produced Water Disposal Project	Fresno	10.94%	Commercial Water Disposal

Through the Acquisition, the Company will effectively be acquiring a 75.90% interest in Bombora’s projects, which will complement the Company’s existing projects.

The proposed issue of 12,892,084 Shares in consideration for the Acquisition will increase the Company’s issued Share capital from 139,052,919 Shares to 151,945,003 Shares. The Company currently has 19,500,000 unlisted options on issue exercisable at 4-8 cents on or before 31 May 2016 and 2,500,000 unlisted options on issue exercisable at 5 cents on or before 31 December 2016. On the basis that no further Shares are issued or options exercised, this will have the potential to dilute shareholdings by 7.9%.

Approval for the issue of the shares is being sought so that the Company retains its 15% placement capacity.

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

(a) the maximum number of Shares to be issued pursuant to Resolution 10 is 12,183,751;
(b) the Shares will be issued no later than 3 months after the date of the 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 issue of the Shares will occur on the same day;
(c) the Shares will be issued for nil cash consideration (for the Acquisition of Bombora) and accordingly no funds will be raised;
(d) the Shares will be issued to shareholders of Bombora unrelated to the Company pro-rata to their holdings in Bombora. Other than current Directors Chris Hodge and David McArthur all receiving consideration shares subject to shareholder approval pursuant to Resolutions 11 and 12, no other Bombora shareholders receiving Shares are related parties of the Company; and
(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.

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Ordinary Resolution’s 11 and 12: Approval to issue shares to Related Party Directors pursuant to the Bombora Energy Pty Ltd Acquisition

As set out in Resolution 10 above, the Company has reached agreement to acquire 75.90% of the issued share capital of Bombora from Bombora Shareholders.

Current Directors Chris Hodge and David McArthur are also shareholders of Bombora and as such will be receiving Shares in the Company as consideration for the Acquisition. Resolution’s 11 and 12 seek Shareholder approval to issue Shares to the related parties (or their nominees) in consideration for the Acquisition in the following portions:

(a) Hodge: 250,000 Shares;
(b) McArthur: 458,333 Shares;

For a public company 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 Section 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.

The issue of the Shares to the Related Parties requires the Company to obtain Shareholder approval because the issue of Shares constitutes giving a financial benefit, and as such Messrs Hodge and McArthur are related parties of the Company by virtue of being Directors..

Section 195 of the Corporations Act

Messrs Chris Hodge and David McArthur have a material personal interest in the outcome of Resolutions 11 and 12 because they will be receiving Shares as part of the Acquisition.

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The Directors have exercised their right under section 195(4) of the Corporations Act to call the Meeting and put the matters the subject of Resolutions 11 and 12 to Shareholders.

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

(a) the Related Parties are Messrs Hodge and McArthur by virtue of being a Directors.
(b) the maximum number of Shares (being the nature of the financial benefit being provided) to be issued to the Related Parties (or their nominees) in the aggregate is 708,333 Shares;
(c) the Related Parties (or their nominees) will be issued Shares in the portions set out as follows:
(i) Hodge: 250,000 Shares; and
(ii) McArthur: 458,333Shares;
(d) the Shares will all be fully paid ordinary shares issued on the same terms as the Company’s existing Shares;
(e) the Shares 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 will be issued on one date;
(f) the Shares will be issued for nil cash consideration, accordingly no funds will be raised. For the purposes of this Notice, the Shares will have a deemed issue price of $0.026 each, being the closing price of the Shares as at the date of this Notice of Meeting;
(g) the relevant interest of the Related Parties in securities of the Company is set out below:
(i) Chris Hodge –500,000 shares; and
(ii) David McArthur – 6,127,272 shares
2,250,000 May 31 2016 options;
(h) the Related Parties receive remuneration as follows:
(i) Chris Hodge $32,500 per annum; and
(ii) David McArthur $32,500 per annum- Director
- $50,000 per annum Company Secretary/Corporate

In the previous financial year, the Related Parties received the following from the Company (paid and payable):

(i) Chris Hodge - $Nil; and
(ii) David McArthur- $54,500 per annum;

Other than as set out in this Explanatory Statement, the Related Parties have not received any other emoluments from the Company;

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(i) a total of 708,333 Shares are to be issued to the Related Parties pursuant to Resolutions 11 and 12. This will increase the number of Shares on issue from 139,052,919 to 139,761,252 (assuming that no Options are exercised and no other Shares issued) with the effect that the share holding of existing shareholders would be diluted by 0.50%.

(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 LOWEST LATEST	$0.049 $0.006 $0.03	15 FEBRUARY 2013 20 JUNE 2013 6 DECEMBER 2013

(k) the primary purpose of the issue of the Shares is as consideration for the acquisition of the shares held by those Related Parties in Bombora;
(l) Mr Hodge declines to make a recommendation to Shareholders in relation to Resolution 11 due to Mr Hodge’s material personal interest in the outcome of the Resolution on the basis that Mr Hodge is to be issued Shares in the Company should Resolution 11 be passed. However, in respect of Resolution 12 , Mr Hodge recommends that Shareholders vote in favour of that Resolution as the Shares are being issued as consideration for the Acquisition on the exact same terms as those Shares issued to all other Bombora shareholders;
(m) Mr McArthur declines to make a recommendation to Shareholders in relation to Resolution 12 due to Mr McArthur’s material personal interest in the outcome of the Resolution on the basis that Mr McArthur is to be issued Shares in the Company should Resolution 12 be passed. However, in respect of Resolution 11, Mr McArthur recommends that Shareholders vote in favour of those Resolution for the reasons set out in paragraph (l);
(n) Mr Cartwright (who does not have a material personal interest in Resolutions 11 and 12) recommend that Shareholders vote in favour of Resolutions 11 and 12 for the reasons set out in (k) above; and
(o) the Board 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 Resolutions.

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

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GLOSSARY

$ means Australian dollars.

ASX means ASX Limited (ACN 008 624 691) or the Australian Securities Exchange, as the context requires.

ASX Listing Rules means the Listing Rules of ASX.

Closely Related Party of a member of the Key Management Personnel means:

(a) a spouse or child of the member;
(b) a child of the member’s spouse;
(c) a dependent of the member or the member’s spouse;
(d) anyone else who is one of the member’s family and may be expected to influence the member, or be influenced by the member, in the member’s dealing with the entity;
(e) a company the member controls; or
(f) a person prescribed by the Corporations Regulations 2001 (Cth) for the purposes of the definition of ‘closely related party’ in the Corporations Act.

Company means Xstate Resources Limited - ABN 96 009 217 154

Directors means the current directors of the Company.

Explanatory Statement means the explanatory statement accompanying the Notice.

General Meeting or Meeting means the meeting convened by this Notice.

Key Management Personnel has the same meaning as in the accounting standards issued by the Australian Accounting Standards Board and means those persons having authority and responsibility for planning, directing and controlling the activities of the Company, or if the Company is part of a consolidated entity, of the consolidated entity, directly or indirectly, including any director (whether executive or otherwise) of the Company, or if the Company is part of a consolidated entity, of an entity within the consolidated group.

Notice or Notice of Meeting or Notice of General Meeting means this notice of General Meeting including the Explanatory Statement and the Proxy Form.

Ordinary Securities has the meaning set out in the ASX Listing Rules.

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

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

Shareholder means a holder of a Share.

WST means Australian Western Standard Time (Perth, Western Australia).

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Instructions for Completing ‘Appointment of Proxy’ Form

( Changes to Proxy Voting ): Sections 250BB and 250BC of the Corporations Act came into effect on 1 August 2011 and apply to voting by proxy on or after that date. Section 250R(5) of the Corporations Act came into effect on 28 June 2012 and will affect the Chair's votes on undirected proxies. Shareholders and their proxies should be aware of these changes to the Corporations Act, as they will apply to this General Meeting. Broadly, the changes mean that:
(a) if proxy holders vote, they must cast all directed proxies as directed;
(b) any directed proxies which are not voted will automatically default to the Chair, who must vote the proxies as directed; and

Further details on these changes are set out below.

( Appointing a Proxy ): A member with two or more votes entitled to attend and vote at the 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.
( Proxy vote if appointment specifies way to vote ): Section 250BB(1) of the Corporations Act provides that an appointment of a proxy may specify the way the proxy is to vote on a particular resolution and, if it does :
(a) the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way (i.e. as directed);
(b) if the proxy has 2 or more appointments that specify different ways to vote on the resolution – the proxy must not vote on a show of hands;
(c) if the proxy is the chair of the meeting at which the resolution is voted on – the proxy must vote on a poll, and must vote that way (i.e. as directed); and
(d) if the proxy is not the chair – the proxy need not vote on the poll, but if the proxy does so, the proxy must vote that way (i.e. as directed).
( Transfer of non-chair proxy to chair in certain circumstances ): Section 250BC of the Corporations Act provides that, if:
(a) an appointment of a proxy specifies the way the proxy is to vote on a particular resolution at a meeting of the Company's members;
(b) the appointed proxy is not the chair of the meeting;
(c) at the meeting, a poll is duly demanded on the resolution; and
(d) either of the following applies:
- (i) the proxy is not recorded as attending the meeting;
- (ii) the proxy does not vote on the resolution,

the chair of the meeting is taken, before voting on the resolution closes, to have been appointed as the proxy for the purposes of voting on the resolution at the meeting.

( Signing Instructions ):

(a) ( Individual ): Where the holding is in one name, the member must sign.
(b) ( Joint Holding ): Where the holding is in more than one name, all of the members should sign.
(c) ( 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.

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(d) ( 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.

( Voting in person ):

(a) A Shareholder that is an individual may attend and vote in person at the Meeting. If you wish to attend the Meeting, please bring the attached proxy form to the Meeting to assist in registering your attendance and number of votes. Please arrive 15 minutes prior to the start of the Meeting to facilitate this registration process.
(b) A Shareholder that is a corporation may appoint an individual to act as its representative to vote at the Meeting in accordance with Section 250D of the Corporations Act. The appropriate “Certificate of Appointment of Corporate Representative” should be produced prior to admission. A form of the Certificate is enclosed with this Notice of Meeting
( Return of Proxy Form ): To vote by proxy, please complete and sign the enclosed Proxy Form and return the Proxy Form (and any Power of Attorney under which it is signed):
(a) In person to Level 2, 55 Carrington Street, Nedlands, Perth, WA;
(b) By mail to PO Box 985, Nedlands, WA, 6909.
(c) By Facsimile to +61 8 9389 8327;
(d) By scan and email to [email protected]

so that it is received at least 48 hours prior to commencement of the General Meeting. Proxy Forms received later than this time will be invalid.

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XSTATE RESOURCES LIMITED

ABN 96 009 217 154

APPENDIX 1

The materials terms and condition of the Options referred to in Resolutions 4, 5 and 6 are as follows:

(a) The Options will be unlisted.
(b) The Options will be issued in 3 tranches on a proportionate basis to each of the Related Parties with exercise prices as follows (“Exercise Price”):
(i) 5.5 million options 6 cents;
(ii) 5.5 million options 8 cents; and
(iii) 5.5 million options 10 cents.
(c) The Options are exercisable at any time on or before 2 years from the date of issue (“Expiry Date”).
(d) Each Option exercised will entitle the holder to one Share in the capital of the Company.
(e) The notice attached to the certificate has to be completed when exercising the Options (“Notice of Exercise”).
(f) Options may be exercised by the holder completing and forwarding to the Company a Notice of Exercise and payment of the exercise price for each Option being exercised prior to the Expiry Date.
(g) All Shares issued upon exercise of the Options will rank pari passu in all respects with the Company’s then existing Shares.
(h) Shares allotted and issued pursuant to the exercise of Options will be allotted and issued not more than 15 business days after the receipt of a properly executed Notice of Exercise and payment for the Exercise Price of each Option being exercised. The Company will apply for official quotation on ASX of Shares issued pursuant to the exercise of Options.
(i) The holder of Options cannot participate in new issues of securities to holders of Shares unless the Options have been exercised and the Shares have been allotted and registered in respect of the Options before the record date for determining entitlements to the issue. The Company must give notice to the holder of the Options of any new issue before the record date for determining entitlements to the issue in accordance with the ASX Listing Rules. Options can only be exercised in accordance with these terms and conditions.
(j) If the Company makes a pro rata bonus issue of Shares to holders of Shares (other than an issue in lieu or in satisfaction of dividends or by way of dividend reinvestment) and no Shares have been allotted and registered in respect of the exercise of Options before the record date for determining entitlements to the bonus issue, then the number of Shares or other securities for which the holder of the Options is entitled to subscribe on exercise of the Options is increased by the number of Shares or other securities that the holder of the Options would have received if the Options had been exercised before the record date for the bonus issue. No change will be made to the Exercise Price.
(k) If at any time the capital of the Company is reconstructed, all rights of an Option holder are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the reconstruction.

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XSTATE RESOURCES LIMITED ABN 96 009 217 154

APPENDIX 2 Valuation of Options to be issued to Directors

The Company has valued the Options to be issued to Directors (“Director Options”) using the Black-Scholes option model and based on the assumptions as set out in the table below, with the Director Options ascribed a value range as follows:

Assumptions:

Value date	2/12/13	2/12/13	2/12/13
Share price	$0.028	$0.028	$0.028
Exercise price	$0.06	$0.08	$0.10
Term	2 years	2 years	2 years
Volatility	75%	75%	75%
Risk free interest rate	2.93%	2.93%	2.93%
Indicative value per Option
(cents)	$0.0031	$0.0059	$0.0089

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CERTIFICATE OF APPOINTMENT OF CORPORATE REPRESENTATIVE

Shareholder Details

This is to certify that by a resolution of the directors of:

………………………………………………………………………….…….….………... ( Company ), Insert name of Shareholder Company

the Company has appointed:

……………………..……………………………………………………………………….……….…, Insert name of corporate representative

in accordance with the provisions of section 250D of the Corporations Act 2001, to act as the body corporate representative of that Company at a general meeting of the members of XState Resources Limited to be held on 31 January 2014 commencing at 10.00 am (WST) and at any adjournments of that general meeting.

DATED ……………………………………………………….

Please sign here

Executed by the Company ) in accordance with its constituent documents ) ) ............................................….………….….….. .................................................…………………….... Signed by authorised representative Signed by authorised representative ............................................................……...….. .................................................………………….…... Name of authorised representative (print) Name of authorised representative (print) .....................................................…….…..….. ............................................….………………..…….. Position of authorised representative (print) Position of authorised representative (print)

Instructions for Completion

Insert name of appointing Shareholder Company and the name or position of the appointee corporate representative (eg “John Smith” or “each director of the Company”).
Execute the Certificate following the procedure required by your Constitution or other constituent documents.
Print the name and position (eg director) of each authorised company officer who signs this Certificate on behalf of the Company.
Insert the date of execution where indicated.
Prior to the Meeting, send or deliver the Certificate to the registered office of Xstate Resources Limited at Level 2, 55 Carrington Street, Nedlands WA 6009 or fax the Certificate to the registered office at +61 8 9389 8327

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PROXY FORM

APPOINTMENT OF PROXY

XSTATE RESOURCES LIMITED

ABN 96 009 217 154

GENERAL MEETING

I/We

Address

being a Member of Xstate Resources Limited entitled to attend and vote at the General Meeting, hereby

Appoint

Name of proxy ( Please note : Leave blank if you have selected the Chair of the General Meeting as your 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 (except for Resolutions 4-12 which require the below express authorisation), at the General Meeting to be held at 10.00 am (WST) on Friday 31 January 2014 at Level 2, 55 Carrington Street, Nedlands, Western Australia, and at any adjournment of that meeting.

* Important for Resolutions 4-12

If you have not directed your proxy how to vote as your proxy in respect of Resolutions 4-12 and the Chair is, or may by default be, appointed your proxy, you must mark the box below.

I/we direct the Chair to vote in accordance with his/her voting intentions (as set out above) on Resolutions 4-12 (except where I/we have indicated a different voting intention above) and expressly authorise that the Chair may exercise my/our proxy even though Resolutions 4-12 are connected directly or indirectly with the remuneration of a member of the Key Management Personnel and acknowledge that the Chair may exercise my/our proxy even if the Chair has an interest in the outcome of Resolutions 4-12 and that votes cast by the Chair for Resolutions 4-12, other than as proxy holder, will be disregarded because of that interest.

If the Chair is, or may by default be, appointed your proxy and you do not mark this box and you have not directed the Chair how to vote, the Chair will not cast your votes on Resolutions 4-12 and your votes will not be counted in calculating the required majority if a poll is called on Resolutions 4-12.

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The Chair intends to vote undirected proxies in favour of all Resolutions in which the Chair is entitled to vote.

Voting on Business of the General Meeting

FOR AGAINST ABSTAIN Resolution 1 – Ratification of issue of shares-Placement Resolution 2 – Ratification of issue of shares-Placement Resolution 3 – Ratification of issue of shares- Consultant Resolution 4 – Issue of options to Paul Cartwright Resolution 5 – Issue of options to Chris Hodge Resolution 6 – Issue of options to David McArthur Resolution 7 – Issue of Incentive Shares- Paul Cartwright Resolution 8 – Issue of Incentive Shares Chris Hodge Resolution 9 – Issue of Incentive shares- David McArthur Resolution 10 – Approval of share issue to acquire Bombora Energy Resolution 11 – Approval to issue shares to Related Party Chris Hodge as a Bombora shareholder Resolution 12 – Approval to issue shares to Related Party David McArthur as a Bombora shareholder

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 be counted in computing the required majority on a poll.

If two proxies are being appointed, the proportion of voting rights this proxy represents is ____%.

Signature of Member(s)

_______

Date: ____

Individual or Member 1 Sole Director/Company Secretary Contact Name: ________	Member 2 Director *_ Contact Ph (daytime):* ____	Member 3

		Director/Company Secretary _ Date: __

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AI assistant

XSTATE RESOURCES LIMITED — Proxy Solicitation & Information Statement 2013

66107_rns_2013-12-18_11b94fd8-ebab-4df1-89c8-de8361674ece.pdf

DISPATCH OF NOTICE OF GENERAL MEETING

XSTATE RESOURCES LIMITED ABN 96 009 217 154

NOTICE OF GENERAL MEETING

PROXY FORM

AND

EXPLANATORY MEMORANDUM

XSTATE RESOURCES LIMITED

ABN 96 009 217 154

NOTICE OF GENERAL MEETING

AGENDA

ORDINARY BUSINESS

Ordinary Resolution 1: Ratification of Issue of Shares – Placement

Ordinary Resolution 2: Ratification of Issue of Shares – Placement

Ordinary Resolution 3: Ratification of Issue of Shares – Consultant

Ordinary Resolution 4: Issue of Options to Related Party – Paul Cartwright

Voting Prohibition Statement:

Ordinary Resolution 5: Issue of Options to Related Party – Chris Hodge

Voting Prohibition Statement:

Ordinary Resolution 6: Issue of Options to Related Party – David McArthur

Voting Prohibition Statement:

Ordinary Resolution 7: Approval of Issue of Shares to Director under Incentive Share Plan – Mr Paul Cartwright

Ordinary Resolution 8: Approval of Issue of Shares to Director under Incentive Share Plan – Mr Chris Hodge

Ordinary Resolution 9: Approval of Issue of Shares to Director under Incentive Share Plan – Mr David McArthur

Ordinary Resolution 10: Approval to issue shares to acquire Bombora Energy Pty Ltd.

Ordinary Resolution 11: Approval to issue shares to Related Party Chris Hodge pursuant to the acquisition of Bombora Energy Pty Ltd.

Ordinary Resolution 12: Approval to issue shares to Related Party David McArthur pursuant to acquisition of Bombora Energy Pty Ltd.

By Order of the Board

ENTITLEMENT TO ATTEND AND VOTE

PROXIES

CORPORATE REPRESENTATIVE

ENQUIRIES

XSTATE RESOURCES LIMITED

ABN 96 009 217 154

EXPLANATORY MEMORANDUM

ORDINARY RESOLUTION 1: Ratification of Issue of Shares- Placement

ORDINARY RESOLUTION 2: Ratification of Issue of Shares- Placement

ORDINARY RESOLUTION 3: Ratification of Issue of Shares to Consultant

ORDINARY RESOLUTIONS 4, 5 and 6: Grant of Options to Directors

Section 195 of the Corporations Act

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

ORDINARY RESOLUTIONS 7, 8 and 9- Approval to Issue Shares pursuant to Share Plan

Ordinary Resolution 10: Approval to issue shares to acquire Bombora Energy Pty Ltd

Ordinary Resolution’s 11 and 12: Approval to issue shares to Related Party Directors pursuant to the Bombora Energy Pty Ltd Acquisition

Section 195 of the Corporations Act

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

GLOSSARY

Instructions for Completing ‘Appointment of Proxy’ Form

( Signing Instructions ):

( Voting in person ):

XSTATE RESOURCES LIMITED

ABN 96 009 217 154

APPENDIX 1

XSTATE RESOURCES LIMITED ABN 96 009 217 154

APPENDIX 2

Valuation of Options to be issued to Directors

Assumptions:

CERTIFICATE OF APPOINTMENT OF CORPORATE REPRESENTATIVE

Shareholder Details

Please sign here

Instructions for Completion

PROXY FORM

APPOINTMENT OF PROXY

XSTATE RESOURCES LIMITED

ABN 96 009 217 154

GENERAL MEETING

*** Important for Resolutions 4-12**

The Chair intends to vote undirected proxies in favour of all Resolutions in which the Chair is entitled to vote.

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Date: ____

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XSTATE RESOURCES LIMITED Proxy Solicitation & Information Statement 2013

* Important for Resolutions 4-12