Xstate Resources : Interim Financial Report to 30 June 2016

XSTATE RESOURCES LIMITED CONTENTS

Page

Corporate Directory 1

Directors' Report 2

Auditor's Independence Declaration 7

Consolidated Statement of Financial Position 8

Consolidated Statement of Profit or Loss and Other Comprehensive Income 9

Consolidated Statement of Changes in Equity 11

Consolidated Statement of Cash Flows 13

Notes to the Consolidated Financial Statements 14

Directors' Declaration 22

Independent Review Report 23

XSTATE RESOURCES LIMITED CORPORATE DIRECTORY

Directors

Mr Cosimo Damiano Mr Chris Hodge

Mr Ian Tchacos

Mr David McArthur

Secretary

Mr David McArthur

Registered and Principal Office

Level 2, 55 Carrington Street

Nedlands WA 6009

Website: www.xstate.com.au Telephone: +61 8 9423 3200

Facsimile: +61 8 9389 8327

Postal Address

PO Box 985

Nedlands WA 6909

Auditors

KPMG

Level 8, 235 St George's Terrace

Perth WA 6000

Bankers

ANZ Banking Group Limited Level 6, 77 St Georges Terrace

Perth WA 6000

Share Registry

Advanced Share Registry Services 110 Stirling Highway

Nedlands WA 6009

ASX Code

Shares: XST

Country of Incorporation and Domicile

Australia

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XSTATE RESOURCES LIMITED DIRECTORS' REPORT

For the six months ended 30 June 2016

The Directors present their report together with the financial statements of Xstate Resources Limited ("the Company") and of the Group, being the Company and its subsidiaries for the six months ended 30 June 2016 and the auditor's report thereon.

1. DIRECTORS

The Directors of the Company at any time during or since the end of the interim period are:

Name Period of directorship

Executive

Cosimo Damiano Managing Director

Appointed 27 October 2015

Non-executive

Chris Hodge

Member of the Audit & Risk Management Committee and Member of the Nominations & Remuneration Committee

Appointed 12 November 2013

David McArthur

Chair of the Audit & Risk Management Committee and Member of the Nominations & Remuneration Committee

Appointed 3 September 2013

Ian Tchacos

Chair of the Nominations & Remuneration Committee and Member of the Audit & Risk Management Committee

Appointed 12 August 2014

Board and management

Xstate announced a Board restructure to reflect an alignment with the Company's strategic positioning and proposed future activities in California. The key change was the appointment of Mr Cosimo Damiano, who joined the Board on 27 October 2015, as Managing Director on 31 May 2016. Mr Damiano has extensive commercial and finance experience and asset familiarity on the ground in the Company's core areas of interest in the USA. His appointment to the role of Managing Director will assist the Company to pursue, assess and secure funding for a strategy of adding low operating cost conventional oil and gas production as well as undeveloped reserves to the Company's portfolio.

Mr Damiano's remuneration package as Managing Director is $100,000 pa inclusive of superannuation.

Mr Chris Hodge, who was previously Managing Director, remains on the Board as a non-executive Director.

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