Ann: June 2018 Quarterly Activities and Cash Flow Report, page-16

volumes have recommenced, whether it will sustain is yet to be seen... but looking ahead xst has repeated its last quarterly proclamation to bring on board further assets, something we all have been waiting for.. so fingers crossed the progression may commence..

In addition to the Sacramento Basin activities the Company continues to pursue new production opportunities onshore California that have the potential to add significant value to the Company via production enhancement, cost control, and the drilling of new development and appraisal wells.

The focus for the Company in the next quarter is to successfully conclude its new business priorities, continue to grow gas production in the Sacramento Basin and to participate in a successful production test of the Dempsey discovery well.

New Ventures

The Board and Management has continued to actively seek to identify and evaluate further asset opportunities that meet Xstate’s investment criteria and are capable of being delivered in a timely manner.

The Board have reviewed many opportunities which have varied in size and location that fit the Company’s criteria; namely existing oil production operations and material proven reserves with associated proven undeveloped development drilling locations. Very few have met the Company’s rigorous technical and commercial requirements.

The identified projects under review are typically production opportunities onshore California that have the potential to add significant value to the company via production and reserves enhancement, cost control, and the drilling of new development and appraisal wells.

Despite not concluding a new business opportunity to date, the background work carried out and ongoing engagement with potential sellers of assets places the Company in a good position to access suitable new opportunities in the near future.