Xstate Resources : June 2022 Quarterly Activities and Cash Flow Statement

For personal use only

29 July 2022

Announcement to ASX

Electronic lodgement

JUNE 2022 QUARTERLY ACTIVITY REPORT

HIGHLIGHTS

• Total net production from Canadian assets (before Royalty) of 50,689 barrels of oil equivalent (boe), a 15% increase from the last quarter
• Net Cashflow from Operating activities exceeds $1,000,000 for the quarter
• 59 well reactivation program to commence at Red Earth targeting an additional 150 barrels of oil equivalent per day (boepd) net to Xstate
• Anshof-3 was production tested at a maximum gross rate of 132 barrels of oil per day (bopd)
• Preparation for commercial production at Anshof-3underway
• Independent Reserve Assessment of the Eocene Oil at Anshof discovery being undertaken

Xstate Resources Limited (ASX:XST) ("Xstate", "XST" or "the Company") is pleased to provide the Quarterly Activities Report for the quarter ending 30 June 2022.

CHAIRMAN'S COMMENT

"Our daily net production in Canada of 559 boepd is delivering valuable cashflow to the company. The Anshof-3 well in Austria was production tested at improved rates, and we await the well being fast-tracked into production, adding a second production hub to our business. Our existing strong cashflow now allows Xstate to actively pursue new ventures. We currently have several high impact opportunities under review."

CANADA: RED EARTH (25% WI) AND ALBERTA PLAINS (35% WI)

This quarter saw strong production and increased revenue from our Canadian assets. Production was up 13% on the previous quarter. Xstate's June quarter share of production from the Company's Canadian assets was 50,689 boe, with net operational receipts for the quarter totaling A$1.12million. This figure is inclusive of drilling costs paid from production recognized in the quarter of C$467.9k for the Alberta Plains drilling program. Net daily production at the end of the month was 559 boepd. For the first time, Xstate became a Canadian Income Taxpayer due to our ongoing operational profitability.

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The focus for Xstate's Canadian assets remains optimizing and increasing production and cashflow in this strong oil price environment. The third well of the 3 well program at Alberta Plains was drilled in the quarter on time and on budget.

XST share of Oil and Gas	June Quarter 2022	March Quarter 2022
production in Canada
Gross boe*	50,689	44,052
Net XST boe (after Royalty)	44,175	38,391

*barrels of oil equivalent (boe) - gas converted to boe using a 6:1 ratio

The Operator, Blue Sky Resources, has informed the Joint Venture that it is about to embark on a 59 well production reactivation program, which will deliver ~600 boepd gross, which is 150 boepd net to Xstate. This program will begin in the 4th quarter of 2022 and extend into 2023.

Xstate's Producing Assets in Canada

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AUSTRIA: ANSHOF-3 EXPLORATION WELL (XST:20% WI)

During the quarter, the Anshof-3 exploration well underwent production testing and flowed 132 gross bopd of 32° API oil (26 bopd net to XST). The rate was a significant improvement on the rates tested immediately after the well was drilled. Pressure data recorded during the test indicates better than expected reservoir flow performance. There were no flow barriers indicated from the test data, which is a positive indication for oil recovery from long term Anshof- 3 well production. The flow performance at Anshof-3 well also has positive implications for future Anshof wells drilled down dip from the crest of structure where the Eocene reservoirs are expected to thicken considerably. At the conclusion of testing operations, the Anshof-3 well was acidized to further enhance productivity and a production string was installed in the well as well as a down hole pump in preparation for long term production.

Anshof Prosect Map

The work to commence commercial production from Anshof-3 has commenced during the quarter. The Operator (ADX) is assessing plans to install an early production testing and processing faciilty so oil can be trucked to a nearby oil terminal for sale. Interim gross production of up to 37,000 bopd (100 bopd for a period of one year) is allowed under Austrian legislation prior to finalising a production licence for the entire discovery area.

Xstate has earned a 20% working interest in the Anshof Prospect Area.

CALIFORNIA: BORBA NATURAL GAS DRILLING (XST WI 33.33%)

Evaluations to monetize the previously reported Borba gas discovery continued with review of alternative developments, these include electricity production for an onsite data centre, hydrolysis of natural gas for Hydrogen generation for the local transport market or other means of transporting the gas molecules to local markets. Permitting of onsite facilities is being initiated.

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CALIFORNIA: SACREMENTO BASIN PRODUCTION (VARIOUS WIs)

The Company continued to maintain leases in the Sacramento Basin during the quarter. Xstate has working interests (WI) of between 10% and 33% in oil and gas leases. In addition to our existing Sacramento Basin production, the Company is investigating workover and exploration opportunities to take advantage of the current high gas prices in California.

		Oil and Gas production	June Quarter 2022		March Quarter 2022
		in California (mcf*)
		Gross Gas	31,794		32,169
		Net XST (after Royalty)	3,280		3,112
		Note: mcf = Thousand Cubic feet gas
XSTATE TENEMENT LISTING - 30 June 2022
	XSTATE RESOURCES LIMITED - TENEMENT LIST
	Project name	Category	Working Interest (WI)
	Anshof 3 Farmin	Exploration	20%
	Alvares Project	Appraisal	25%
	Dempsey 1-15 Well	Exploration & Appraisal	10%
	Dempsey Trend - (Includes	Active leasing 3 large prospects	33%
	Borba)
	Rancho Capay Field	Production	10%
	Malton field	Production	30%
	East Rice East Creek Field	Production	10%
	Los Medanos Gas Field	Production	10%
	Dutch Slough Field	Production	30%
	Red Earth	Production	25%
	Alberta Plains	Production	35%

NEW VENTURES

During the quarter, Xstate initiated a global review of new venture opportunities. The Company is pursuing high impact exploration and development opportunities that can be acquired by leveraging off our strong cashflow.

CORPORATE

On the 6th of June 2022, Xstate advised that Mr David McArthur had resigned as a Director and that Mr Andrew Bald had had been appointed as a Non-Executive Director.

Mr Andrew Bald has over 35 years of experience in financial markets and since branching out on his own in 2003, has raised capital for, and listed, a number of junior oil and gas and mineral exploration companies. From 2013 through 2016 he was Managing Director of Burleson Energy, an oil and gas explorer with production in Texas, USA, and he has also been on the board and acted as company secretary to a number of other ASX listed companies.

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LISTING RULE 5 DISCLOSURES

LR 5.4.1: Exploration expenditure during the quarter totalled $31k. This is comprised entirely of ongoing exploration operations in California.

LR 5.4.3: Production expenditure payments for Canadian Oil and Gas operations during the quarter were $nil.

LR 5.4.5: Payments to related parties totalled $175k. These were in respect of Directors' salaries and superannuation payments, in addition to payments for corporate management services and consulting services to Director related entities.

This release was approved by the Board of the Company

Andrew Childs

Executive Chairman

Xstate Resources Limited

Tel Office: [phone]

About Xstate Resources Limited:

Xstate Resources (ASX:XST) is an ASX listed company focused on the oil and gas sector. The Company has existing oil and gas assets located in the California in the United States of America, Alberta in Canada and Austria. Xstate is presently pursuing new opportunities in the oil and gas sector onshore North America and around the world.

Leases:

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

Competent Person:

The technical information provided has been supervised and reviewed in detail by XST's Competent Person, Mr Greg Channon, who is also a Non-Executive Director of the company. Mr Channon is a qualified geoscientist with over 35 years of oil and gas industry experience and a member of the American Association of Petroleum Geologists and the South East Asian Exploration Society and is a graduate of the Australian Institute of Company Directors. He is qualified as a competent person in accordance with ASX listing rule 5.41. Mr Channon consents to the inclusion of the information in this report in the form and context in which it appears.

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