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ABN96009217154
Level1,31CliffStreet,FremantleWA6160|Tel+61894353200|Fax+61864447408|www.xstate.com.au
07May2018ASXLimited Electroniclodgement
SaleofDempseyProjectWorkingInterests
Summary• XstatehasagreedtodivestitsDempseyprojectworkinginterestsforpartcashandsharesto
RavenEnergyLimited.
• The divesture includes the recently drilled Dempsey 1-15 which is the subject of ongoingassessment,surroundingleasesandassociatedproductionandinfrastructure.
• Proceeds fromthe salewillbeutilized to fundXstate’sparticipation in theAlvaresappraisalwell,inwhichXstateholdsa21%workinginterest.
• ThesaleoftheDempseyprojectareaispartoftheCompany’sstrategytoderiskfromhighriskexplorationtoappraisal,developmentandproductionorientatedopportunities.
Comments
XstateResourcesLimited(ASX:XST)(“Xstate”or“theCompany”)ispleasedtoprovidethefollowingupdateinrelationtoitsworkinginterestintheDempseyProjectArea(“DempseyProject”).
Xstate has entered into a Binding Letter of Intent (“LOI”) with Raven Energy Limited (“Raven”;ASX:REL) an ASX listed company. Raven has agreed to acquire Xstate’s wholly owned subsidiaryXGas LLC (“XGas”), that holds interests in leases, land, mineral ownership, wells and relatedproductionandinfrastructureintheDempseyProjectintheSacramentoBasin,California.
Under the terms of the LOI Xstate has agreed to divest its interests in the Dempsey project forupfrontcashconsiderationofUS$500,000plusadeferredpaymentofA$500,000 incashorRavenshareswithin90daysofclosing.ThedeferredpaymentmethodisatthesolodiscretionofRaven.
Aspartofthedivestureandpostcompletion,XstateandRavenhaveagreedtojointlypursueoilandgasopportunitiesonshoreCalifornia.Thepartieshaveagreedtoenterintoaformalcooperationandservices agreement post completion of the Dempsey sale, whereby Xstate will assist Raven withbusiness development opportunities and technical expertise. As part of the two companies jointcollaborationMr.CosimoDamianowillappointedtotheboardofRaven’sUSAsubsidiary,.
ThesaleofDempseywillallowXstatetofocusitseffortsandcapitalontheAlvaresprojectwherethecompany holds a higher working interest of 21% in the Alvares appraisal well and 30% in thesurroundingleasearea.
In addition to the Sacramento Basin activities the Company continues to pursue new productionopportunitiesonshoreCaliforniathathavethepotentialtoaddsignificantvaluetotheCompany.
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07May2018 SaleofDempseyProjectWorkingInterests
Level1,31CliffStreet,FremantleWA6160|Tel+61894353200|Fax+61864447408|www.xstate.com.au
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Transactiondealterms
Under the LOI, Raven has agreed to purchase all of the issued capital in XGas and its workinginterestsintheDempseyProjectfromXstate,onthefollowingtermsandconditions:
(a) RavenwillpayXstateacashpaymentofUS$500,000payableasfollows:
(i) a non-refundable deposit of US$35,000, payable within five business days ofexecutionoftheLOI;and
(ii) thebalanceofUS$465,000ispayableoncompletionoftheAcquisition,expectedtooccuronJuly15,2018,
(b) RavenhasalsoagreedtopayXstateanadditionalpaymentofA$500,000within90daysofclosingeitherincashorRavenfullypaidordinarysharesatA$0.0018pershareandsubjecttoa12monthvoluntaryescrowperiod.
TheAcquisitionissubjecttoduediligenceandcertainconditionsprecedentwhichmustbesatisfiedpriortocompletion.
Completion of the Acquisition must occur on or by July 15, 2018 unless extended by writtenagreementbetweentheparties. However, intheeventthattheAcquisitiondoesnotcompletebyJuly 15, 2018, Raven has the option to extend completion by 45 days to August 31, 2018 for anadditionalnon-refundabledepositofUS$35,000whichisdeductiblefromthefinalcashpayment.
In 2017 theDempseyproject area contributed29,906mcf (819mcf /day) of production to XstatewhichwasequivalenttoA$89,770ofgassalesrevenue.
Additionally,uponCompletionoftheAcquisitionandintheeventthatXstatedecidestodivestallorpartof its24%working interest intheAlvaresappraisalproject,XstatewillprovidetoRavenatnoadditionalcostthefirstrightofrefusalofitsinterestintheAlvaresappraisalwellandprojectarea.
SacramentoBasinAppraisalandExplorationActivities–AlvaresProject
TheAlvaresjointventureisevaluatingappraisaloptionsforthe1,500mofgasshowsencounteredinthe Alvares -1 well gas discovery. The Alvares Conventional Gas Prospect is an appraisal projecttestingtheAlvares-1gasdiscoverydrilledin1982onalargestructuremappedon2Dseismic.
Xstate holds a 21% working interest in the Alvares Gas project which the operator estimates tocontain a total (100%) recoverable unrisked prospective gas resource on a best estimatedeterministicbasisofapproximately2.4Tcf(400millionbarrelsofequivalentoil“mmboe”).
TheAlvares JointVenture is currentlyevaluatinghowbest to test stronggas shows recordedovermore than1,500metresbelowa thick, sealing shale at 2,350metres. Wireline logdata from theAlvares-1wellindicatesseveralzoneswithconventionalgasreservoirpotential.
ThewellboreofAlvares1willbeassessedfor itssuitability forreentryandapossibleproductiontest asa costeffectivewayofevaluating thepotentialofextensivegas showsencountered in thediscoverywellwhiledrillingforoilin1982.Theupper500metrethickintervalofthebestgasshowswerenotpreviouslyevaluatedduetologgingdifficultiesrelatedtohigh-pressuregasinflux.
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07May2018 SaleofDempseyProjectWorkingInterests
Level1,31CliffStreet,FremantleWA6160|Tel+61894353200|Fax+61864447408|www.xstate.com.au
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XSTATERESOURCESLIMITED–SACRAMENTOBASINTENEMENTLISTNORTHERNCALIFORNIA
Projectname Category WorkingInterest(WI)AlvaresAppraisalWell Appraisal 21%AlvaresProject Exploration&Appraisal 24%Dempsey1-15Well Exploration&Appraisal 10%DempseyAMI Activeleasing3largeprospects 24%RanchoCapayField Production 10%Maltonfield Production 30%EastRiceEastCreekField Production 10%LosMedanosGasField Production 10%DutchSloughField Production 30%DenvertonField Production 30%NorthernCaliforniaAMI ActiveProspectGeneration 30%Projectsarecontinuouslyreviewedfortheirstrategicfitandareexpectedtobemodifiedovertimetoreflectindustryconditions.
Disclaimers
Exploration in the USA is conducted on leases grant by Mineral Right owners, in Xstate’s caseprimarily private individuals or groups. Leases can vary in size from very small parcels (part of anacre)tolargelandholdings(coveringafewsquaremiles).Leasesgenerallyarefor5yearsandrentalsarepaidannually.Therearenoworkcommitmentsassociatedwiththeleases.Someleasesare‘HeldByProduction’androyalties,generallylessthan20%ofrevenues,arepaidtomineralrightownersinlieuofrentals.Xstatehasnotlistedall it leasesasit is impracticalandnotmeaningfulforpotentialprojectvalueassessment inaconventionalgasplay.Adetailed listingof leasesmayalso lead toalossofcompetitiveadvantageandconsequentreducedvaluetoXstateshareholders.
CompetentPersonsReport
Thispresentationcontainsforwardlookingstatementsthataresubjecttoriskfactorsassociatedwiththe oil and gas industry. It is believed that the expectations reflected in these statements arereasonable,buttheymaybeaffectedbymanyvariableswhichcouldcauseactualresultsortrendstodiffermaterially. The technical information provided has been reviewed byMr Chris Hodge, NonExecutive Director of Xstate Resources Limited. He is a qualified geologist with over 30 yearstechnical,commercialandmanagementexperienceinexplorationfor,appraisalanddevelopmentofoilandgas.MrHodgeconsentstotheinclusionoftheinformationintheformandcontextinwhichitappears.
GlossaryofTerms
Tcf:trillioncubicfeet Bcf:billioncubicfeetmmbbl:millionbarrels mmboe:millionbarrelsoilequivalentJV:jointventure WI:workinginterestAMI:areaofmutualinterest mcf:thousandcubicfeetgas
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07May2018 SaleofDempseyProjectWorkingInterests
Level1,31CliffStreet,FremantleWA6160|Tel+61894353200|Fax+61864447408|www.xstate.com.au
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ForandonbehalfoftheBoardofXstateResourcesLimited
Forfurtherdetailspleasecontact:
CosimoDamianoManagingDirectorXstateResourcesLimitedTelOffice:+61894353200Email:cosimodamiano@xstate.com.auAboutXstateResourcesLimited
XstateResources(ASXCode:XST) isanASX listedcompanyfocusedontheoilandgassector. TheCompany has existing gas exploration assets located in the Sacramento Basin, California andassociatedgasproduction.Xstate ispresentlypursuingnewopportunities in theoilandgassectoronshoreNorthAmerica.
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