ASX ANNOUNCEMENT: 28TH SEPTEMBER 2010 Golden Eagle Gas Field Reserves Upgrade Highlights ? Independent resource report completed by RPS Energy ? Increased resources of Discovered Gas Initially In Place (GIIP) RPS Energy Independent Resource Report Golden State Resources has received the awaited independent resource report on the Golden Eagle Gas Field which was completed by RPS Energy. The result is well beyond expectations and the directors are delighted to announce the substantial increase of over 85%, in Discovered Gas Initially In Place (GIIP). The Golden Eagle Gas Field has already achieved over 40% of the indicated GIIP (90%) target of 50 Bcf which was predicted in the original 2006 prospectus. The area which provided the bulk of the RPS data collection for GIIP (90%) represents only a very small part of the field. In light of the fantastic RPS result, with the large area and lower formations still to be discovered, it is reasonable to conclude that the original indicated target will be exceeded by a substantial margin. The company remains committed to fully discover the gas and liquids contained within Golden Eagle Gas Field, including the Leadville Limestone and has immediately embarked on preparation work to lodge an application for a series of new well locations. Golden Eagle Expenditure Allocation In the coming week past activities on the Golden Eagle Gas Field will be reviewed with the focus on allocating expenditure in accordance with Acquisition, Infrastructure, Gas Discovery and Gas production efforts. Evaluation of the RPS Report and Executive Summary Mr Rick de Boer has included a brief summary evaluation of the RPS report which includes a clarification of technical terms related to various gas measures utilised by RPS in reporting the upgrade of the Golden Eagle Gas Field resource. On behalf of the directors, Richard Sciano 2 BRIEF SUMMARY ON THE RPS RESERVES UPGRADE ? R de BOER ? Independent resource report completed by RPS ? Significant Increases in Discovered Gas resources ? Substantial increases in discovered GIIP in the Ismay Fm: P90 up 85% from 9.0 Bcf to 16.7 Bcf P50 up 91% from 31.5 Bcf to 60.4 Bcf P10 up 109% from 101.0 Bcf to 212.0 Bcf ? The increase in discovered resources highlights: The success of Paradox Basin #3 in providing critical data Importance of demonstrating commercial production capability ? RPS commissioned to undertake a deliverability and development study ? Tenders to provide gas production facilities are currently being finalised SUMMARY Golden State Resources is very pleased to announce the results of the independent resource evaluation compiled by RPS Energy. Overall resources have increased and importantly there is a substantial increase in the ?Discovered? GIIP for the Pennsylvanian Ismay Formation which is due mainly to the excellent results of Paradox Basin #3. Paradox Basin #3 was drilled specifically to target the Ismay Formation and the information acquired improved overall certainty of the petrophysical evaluation with the positive results from testing have seen a big shift in the estimated resources. No further data was acquired on the deeper objectives and resource estimates for the Alkali Gulch and Leadville limestone remain unchanged. RPS was contracted by Golden State Resources Limited (?Golden State?) to provide an update of its Independent Resource Evaluation of the Golden Eagle Gas Field, conducted in November 2009. The updated evaluation includes the results of the recently drilled Paradox Basin 3 well and RPS?s independent petrophysical analysis. Golden State drilled the first well, Paradox Basin-1, in late 2006 and early 2007 and discovered gas in the Ismay and Barker Creek members within the Paradox Formation. In the first half of 2009 Golden State drilled Paradox Basin-2 down dip of the Paradox Basin- 1 well. The Paradox Basin-2 well again found gas in the Ismay. Paradox 3 was drilled as deviated well with its top hole location at Paradox Basin-1. Paradox Basin-3 also found gas in the Ismay, flowing gas to surface post a fracture stimulation treatment. Gas Initially-in-Place (?GIIP?) estimates have been prepared in accordance with SPE/WPC/AAPG/SPEE Resources Management System (PRMS, 2007). The estimates for GIIP (Bscf) for the Golden Eagle Gas Field within the Ismay and Barker Creek members are shown in Table 1. The estimates for undiscovered GIIP for the Golden Eagle Unit Area within the Alkali Gulch and Leadville Formation are shown in Table 2. All volumes were estimated probabilistically by RPS. Golden State?s working interest in the permit is 100% The estimated discovered Gas Initially In Place (GIIP) in the Ismay Formation increased at all confidence levels. The P90 increased from 9.01 Billion Cubic feet (Bcf) to 16.7 Bcf. The 1 RPS energy Oct 2009 estimate 3 P50 increased from 31.5 Bcf to 60.4 Bcf and the P10 increased from 101.0 Bcf to 212.0 Bcf. The current resources fall into the discovered contingent resource category. Contingent resources represent discovered gas for which there is no current commercial production facilities and convert directly to Proved Reserves once a development plan is approved2. Golden State Resources has commissioned a deliverability and development study and is currently receiving tenders from gas gatherers to build a pipeline and gas plant. The gas plant will process production from Paradox Basin #1 & 3 which will then be connected to the Williams distribution network via a ten kilometre gas pipeline. The directors are very pleased with the results of Paradox Basin #3 and look forward to future developments on the Golden Eagle Gas Field. 2 Both SEC and SPE guidelines set similar criteria around commerciality to include not only economics but also some evidence of a commitment to proceed with development projects within a reasonable time frame. This includes confirmation of market, production and transportation facilities, and the required lease extensions. Neither set of definitions specifies the documentation to support these claims. Neither definition requires ?absolute certainty? in terms of approvals, contracts, market, etc. spe.org/industry/reserves/docs/OGR_Mapping_Final_Report.pdf 4 Location of Golden Eagle Schematic section through Golden Eagle Gas Field Rick De Boer Executive Director
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