Xstate Resources Limited has announced a re-compliance capital raising to fund its acquisition of a 51% interest in the Diona Project in Queensland and the drilling of the Diona-1 well, aiming to resume ASX trading.
- Capital raise of $2-3 million via 100-150 million shares at $0.02 each
- Acquisition of 51% interest in Diona Project from Elixir Energy
- Drilling of Diona-1 well targeting three stacked reservoirs planned for Q3 2025
- Shares currently suspended, re-compliance with ASX Listing Rules required
- Offer includes priority allocation for existing shareholders and is conditional on approvals
Background and Offer Details
Xstate Resources Limited (ASX – XST), an oil and gas exploration company, has lodged a re-compliance prospectus to raise between $2 million and $3 million through the issue of 100 million to 150 million shares priced at $0.02 each. This capital raising is designed to support the company's strategic acquisition of a 51% working interest in the Diona Project, located within the ATP 2077 permit in Queensland's Surat-Bowen Basin, from Elixir Energy Limited.
The offer includes a priority allocation of $1 million worth of shares for eligible existing shareholders, reflecting the company's commitment to its current investor base. The offer is not underwritten and is subject to several conditions, including shareholder approval at a general meeting scheduled for 28 July 2025, ASX approval for re-compliance with Chapters 1 and 2 of the Listing Rules, and the satisfaction of acquisition conditions.
Strategic Acquisition and Project Overview
The acquisition of the Diona Project marks a significant shift in Xstate's operational focus, providing the company with a majority interest and operatorship of a promising petroleum exploration asset. The Diona Prospect targets three stacked reservoir plays within the Showgrounds, Upper Tinowon, and Wallabella Sandstones. Independent technical assessments estimate a mean prospective resource of approximately 2.6 billion standard cubic feet equivalent (Bscfe) net to Xstate, with a 55% chance of discovery and an 85% chance of development.
Drilling of the Diona-1 well is planned to commence in the third quarter of 2025, with an estimated cost of $2.65 million. The well is strategically located about 300 meters from an existing gas pipeline, which could facilitate expedited production if the exploration is successful. Following the initial drilling, further exploration and development activities are anticipated, governed by a joint operating agreement with Elixir Energy.
Financial Position and Use of Funds
As of 31 May 2025, Xstate holds cash reserves of approximately $2.74 million. The funds raised from the offer, combined with existing cash, will primarily be allocated to drilling the Diona-1 well, exploration and development activities, offer costs, and working capital to support ongoing operations. The company’s financial history shows a return to profitability in recent years, with net profits after tax of $1.43 million in 2023 and $1.21 million in 2024, following a loss in 2022.
The company’s shares have been suspended from trading on the ASX since August 2024 pending re-compliance with listing rules. Successful completion of the offer and acquisition is expected to satisfy ASX requirements for reinstatement to official quotation, subject to ASX’s absolute discretion.
Risks and Governance
Investors should be aware that the offer is highly speculative, with key risks including the uncertainty of exploration success, the ability to secure ASX re-admission, and the need for additional funding beyond this raise to develop the Diona Project fully. The company also faces operational risks typical of oil and gas exploration, including regulatory compliance, environmental considerations, and market volatility in commodity prices and foreign exchange rates.
Xstate’s board comprises experienced professionals with deep expertise in oil and gas exploration and corporate governance. The company has engaged reputable advisers, including BDO Corporate Finance for financial assurance, McCullough Robertson for legal due diligence, and independent technical specialist Calan McIntyre for resource evaluation.
Outlook
With the capital raise underway and acquisition conditions progressing, Xstate is positioning itself to re-enter the ASX market and advance its exploration ambitions in Queensland. The upcoming shareholder meeting and ASX decisions will be critical milestones. Success at the Diona-1 well could unlock significant value and mark a new chapter for the company, but investors should weigh the speculative nature of the investment carefully.
Bottom Line?
Xstate’s capital raise and acquisition set the stage for a pivotal exploration phase, but execution risks and market uncertainties remain.
Questions in the middle?
- Will Xstate secure shareholder and ASX approvals to complete the acquisition and re-compliance?
- What are the detailed plans and contingencies if the Diona-1 well does not yield commercial hydrocarbons?
- How will Xstate manage funding requirements beyond this raise to bring the Diona Project into production?