How to properly format an Extend HDD to put games and PKGs files?

Hi Guys,

I am not sure how to format my new Seagate (STEA1000400) 1TB. I want to put my PKGs backups and install games using it as extend storage.
My questions is: Is possible to do that?

In case yes, do I have to format using "Format as Extended Storage" option in PS4's system or format using "exFAT" in windows system?

Thanks.