Queensland, Australia - Diona Project

The Diona Project comprises 23 graticular blocks covering an area of 369 square kilometers within ATP 2077 and is located approximately 15km east of the Silver Springs gas processing plant. Within the Project, the Diona Prospect is located immediately beneath the Waggamba gas export pipeline, approximately 12km west of Waggamba Gas Field and 11km east of the Taylor Gas and Oil Field.

Under the terms of the Farm-in Agreement, XST is assigned a 51% WI in the Diona sub-block of ATP 2077 and becomes Operator in return for fully funding an exploration well in the block. Elixir will retain a 100% interest in ATP 2077 Sub-blocks A & B. Xstate has already commenced planning for the well, estimated to be drilled early in the second half of 2025, subject to ASX Re-compliance and final governmental permitting.

The proposed well will target 3 stacked reservoir objectives at:

• Showgrounds Sandstone;

• Upper Tinowon Formation; and

• Wallabella Sandstone,

all of which can be tested via a single vertical exploration well.

Diona Prospect is a four-way dip closed anticline at all three reservoir objectives, with upside stratigraphic trapping potential at Upper TInowon and Wallabella Sandstone levels.

The Diona Project is located on the south-western flank of the Taroom Trough in the Surat Bowen Basin, a long-established hydrocarbon province in eastern Australia. The first major discovery in the basin was made in 1961 on the eastern side of the basin at Moonie, which hosted most of the oil reserves in the basin, and which ultimately produced 24MMstb of oil. Exploration on the western side of the basin subsequently yielded numerous conventional gas discoveries with an average size of around 5Bcf, along with many small oil discoveries.

Despite the recent focus in the basin on unconventional exploration plays, significant potential remains for further conventional oil or gas discoveries. While likely to be of modest size, any such discoveries are well placed for commercialisation due to the significant production infrastructure that exists across the basin and the high prevailing gas prices in the region.

The Bowen-Surat Basin comprises two superimposed basins: the Permo-Triassic Bowen Basin, and the Jurassic to Cretaceous Surat Basin, each of which contain around 50% of the conventional petroleum reserves in the area. The Bowen Basin is a north-south trending back arc to foreland basin that was terminated by a major period of compression, uplift and erosion at the end of the Triassic.  It is unconformably overlain by the more regionally extensive and less deformed Surat Basin succession.

Basin fill is overwhelmingly clastic and includes fluvial deposits, coal measures, marine shales, and frequent tuffs reflecting contemporaneous volcanism. All the conventional oil and gas fields in the basin are interpreted to be sources from thick Permian aged coals of the Bowen Basin succession.

The remaining exploration prospectivity in the vicinity of the Diona Project is interpreted to be restricted to plays within the Surat Bowen Basin stratigraphic succession. The Bowen Basin comprises several discrete depocentres, the most significant of which is the Taroom Trough, which hosts most of the basin’s hydrocarbon resources. Diona is located on the south-western flank of the Taroom Trough, immediately to the east of the Wunger Ridge, which hosts a major historic gas production hub centred on the circa 100Bcf Silver Springs field.

Two highly prospective exploration plays have been identified in the Diona Project:

Showgrounds Sandstone

The Triassic aged Showgrounds Sandstone hosts most of the reserves on the Wunger Ridge to the west. The play is characterised by high quality fluvio-deltaic reservoirs trapped within structural closures that are sealed by the Snake Creek mudstone, with hydrocarbons sourced form Permian aged coals of the underlying Kianga Formation and Back Creek Group.

Historic exploration demonstrates the reservoir quality in the Showgrounds Sandstone play degrades to the ease of Diona. However, significant remaining exploration potential is recognised in an under-explored fairway that runs along the eastern flank of the Wunger Ridge, through the centre of the Diona Project. The key risks for the Showgrounds Sandstone play are the eastward degradation of reservoir quality, access to hydrocarbon charge from the deeper Permian source rocks and the reliability of mapping of structural closures on available 2D seismic data.

Permian Tinowon and Wallabella Sandstones

Up until the mid-1990s, exploration in the Taroom Trough was focused on Triassic and Jurassic objectives. None-the-less, during this period, numerous wells were either drilled targeting specific Permian objectives or deepened in pursuit of secondary targets or stratigraphic information. Several of these wells yielded serendipitous hydrocarbon discoveries in fluviodeltaic reservoirs, including the Waggamba Field, which is located immediately to the east of Diona.

Like many of the other Premian discoveries of the Taroom Trough, the seal mechanism at Waggamba is poorly understood, but it almost certainly involves and element of stratigraphic or diagenetic trapping. The Tinowon Sandstone at Waggamba was brought onstream in 1982and production has continued until the present day. Follow-up drilling to the north and south of Waggamba yielded disappointing results, with poor quality Tinowon Sandstone reservoirs encountered. However, the potential westward extension of the Waggamba Tinowon Sandstone play in the northern part of the Diona Project has not been adequately tested and is considered to have significant exploration potential. The deeper Wallabella Sandstone, which flowed gas on test in the 1981 Waggamba-1 discovery well, provides additional exploration potential at Diona. The key risks for the Tinowon and Wallabella sandstone plays are reservoir quality and the definition and sealing integrity of stratigraphic or diagenetic traps.

Operator, Elixir Energy, has undertaken a comprehensive review of the potential of the Diona Project and has high-graded the Diona Prospect for future drilling. The evaluation of the Diona Prospect, including the assessment of its Prospective Resources, is detailed below.

As well as the Diona Prospect, Elixir Energy has identified structures in the southern half of the permit that have potential at both the Showgrounds Sandstone and Permian play levels (see image across - ATP 2077(C) Top Permian (Top Bandana Formation) depth below ground level, also showing historic wells and 2D seismic data). Evaluation of these leads is impeded by an inconsistent database of multiple vintages of 2D seismic with significant miss-tie issues. Elixir has commissioned a seismic balance and depth conversion project to resolve these issues, and once complete, it is anticipated that this work will result in the identification of additional prospects within the permit.

Diona Prospect Evaluation and Prospective Resources

The Diona Prospect is located immediately beneath the Waggamba gas export pipeline, approximately 12km west of Waggamba and 11 kilometres east of the Taylor gas and oil field. The prospect targets 3 stacked reservoir objectives at Showgrounds, Upper Tinowon and Wallabella Sandstone levels, all of which can be tested via a single vertical exploration well.

Diona is a four-way dip closed anticline which is interpreted to be present at all three reservoir objectives. At the primary Top Bandana mapping horizon, the structure has an area of 1.0km2 and a vertical relief of 18m. The Tinowon and Wallabella Sandstone targets have additional stratigraphically trapped upside associated with the inferred pinch-out of these two reservoirs against the eastern flank of the Wunger Ridge.

Diona is well located for hydrocarbon charge due to its position on a prominent east-southeast nose that plunges down into the prognosed Permian source kitchen. This structural nose likely acts as a focus for migration from a ~40 square kilometre hydrocarbon fetch area that is likely to vary in maturity from the oil window to the gas-condensate window. Gas is considered the most likely hydrocarbon phase, but oil is a possibility, mainly in the Showgrounds sandstone, which is the shallowest of the three targets.

The Prospective Resources for the Diona Prospect have been evaluated by probabilistically combining the resource estimates for the three reservoir targets using a Monte Carlo simulation methodology that incorporates full risking dependencies. The resulting estimate of Prospective Resources is summarised as follows:

Refer to page 11 of Xstate Resources' ASX announcement on the 7th April 2025 (Acquisition of 51% of Diona Gas Project, Queensland) for explanatory notes to these prospective resource estimates