Xstate Faces Capital Raising Challenge to Regain ASX Quotation

Context of Suspension and Re-Listing Efforts

Xstate Resources Limited (ASX: XST) remains under suspension from the ASX since August 26, 2024, following the exchange's determination that the company’s level of operations did not justify continued quotation. The Board has since focused on identifying a new project that will satisfy the ASX’s Listing Rules 1 and 2, which include meeting the assets test and shareholder spread requirements. This re-compliance process will necessitate a capital raising involving at least 300 new or existing shareholders, accompanied by the issuance of a Disclosure Document.

Operational Status and Asset Portfolio

Despite the suspension, Xstate continues to hold interests in several oil and gas assets. These include a 25% working interest in the Crest Jinn wells in Canada, a 20% stake in the Anshof project in Austria, and various interests in California, USA, including the Borba natural gas discovery and multiple leases in the Sacramento Basin. Production figures for the December 2024 quarter show modest output, with 1,709 barrels net to Xstate from Anshof and 472 barrels net from Crest Jinn. Gas production in California remains steady, though the Borba gas discovery is under review for alternative uses.

Financial Position and Capital Strategy

At the end of the quarter, Xstate reported a cash balance of A$3.55 million, with no exploration expenditure incurred during the period. Operating cash flow was negative, reflecting ongoing administrative and corporate costs. The company has not engaged in any farm-in or farm-out agreements this quarter, signaling a cautious approach to portfolio management. Importantly, the Board is preparing for a capital raising initiative tied to the new project announcement, which will be critical to meeting ASX re-listing conditions and funding future operations.

Outlook and Strategic Considerations

While the timeline for finalizing the new project remains fluid, the Board’s active engagement with the ASX and ongoing portfolio reviews suggest a strategic pivot aimed at revitalizing the company’s operational profile. The requirement to raise capital from a broad shareholder base introduces both an opportunity and a challenge, as market conditions and investor appetite will influence the success of the entitlement issue. Meanwhile, maintaining production from existing assets provides a steady, if limited, revenue stream as the company transitions.

Governance and Compliance

The quarterly report includes disclosures on payments to related parties totaling A$83,000, covering director salaries, office lease rent, and consulting services. The company’s Competent Person, Mr. Greg Channon, a seasoned geoscientist and non-executive director, has reviewed and approved the technical information, ensuring compliance with ASX Listing Rule 5.41. This governance oversight is crucial as Xstate navigates its re-compliance and operational restructuring.