UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1995
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Commission File No. 1-10669
XCL Ltd.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-0305643
(State of Incorporation) (I.R.S. Employer
Identification Number)
110 Rue Jean Lafitte, Lafayette, LA 70508
(Address of principal executive offices) (Zip Code)
318-237-0325
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [ X ] NO [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
237,545,990 shares Common Stock, $.01 par value were
outstanding on May 15, 1995.
XCL LTD.
TABLE OF CONTENTS
Page
PART I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K.
XCL Ltd. and Subsidiaries
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
March 31 December 31
Assets 1995 1994
------- -------- -----------
(Unaudited)
Current assets:
Cash and cash equivalents $ 2,469 $ 6,751
Accounts receivable, net 534 1,720
Prepaid expenses 148 153
------- -------
Total current assets 3,151 8,624
------- -------
Property and equipment:
Oil and gas (full cost method):
Proved and evaluated properties 159,631 158,634
Unproved and unevaluated properties:
Domestic 38,882 37,856
Foreign 19,763 17,696
-------- -------
58,645 55,552
Land, at cost 135 135
Other 3,021 3,018
-------- -------
221,432 217,339
Accumulated depreciation, depletion and
amortization (100,736) (100,079)
-------- -------
120,696 117,260
-------- -------
Investments and assets held for sale 21,707 20,948
Deferred charges and other assets 3,672 2,971
-------- -------
Total assets $ 149,226 $ 149,803
======== =======
Liabilities and Shareholders' Equity
-------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 2,872 $ 3,640
Royalty and production taxes payable 204 286
Dividends payable 715 965
Current maturities of limited recourse debt 5,652 5,267
Other current maturities 2,030 29
-------- -------
Total current liabilities 11,473 10,187
-------- -------
Long-term debt, net of current maturities 39,153 41,607
Other non-current liabilities 3,327 2,809
Commitments and contingencies (Note 7)
Shareholders' equity:
Preferred stock-$1.00 par value; authorized
1,200,000 shares; issued shares of 649,244
at March 31, 1995 and December 31, 1994-
liquidation preference of $52.9 million
at March 31, 1995 649 649
Common stock-$.01 par value; authorized 325
million shares; issued shares of
237,350,886 at March 31, 1995 and
237,184,410 at December 31, 1994 2,374 2,372
Common stock held in treasury -
$.01 par value; 1,258,900 shares at
March 31, 1995 and 3,500,000 at
December 31, 1994 (13) (35)
Additional paid-in capital 207,902 206,241
Accumulated deficit (115,639) (114,027)
-------- -------
Total shareholders' equity 95,273 95,200
-------- -------
Total liabilities and shareholders'
equity $ 149,226 $ 149,803
======== ========
The accompanying notes are an integral part of these financial statements.
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
(Thousands of Dollars, Except Per Share Amounts)
Three Months Ended
March 31
1995 1994
----- ----
(Unaudited)
Oil and gas revenues $ 678 $ 1,338
------- -------
Oil and gas operating expenses:
Operating (including marketing) 281 286
Depreciation, depletion and amortization 658 900
General and administrative 882 1,017
Taxes, other than income 126 297
------- -------
1,947 2,500
------- -------
Operating loss (1,269) (1,162)
------- -------
Other income (expense):
Interest expense,
net of amounts capitalized (356) (455)
Other, net 13 25
------- -------
(343) (430)
------- -------
Loss before extraordinary item (1,612) (1,592)
Extraordinary charge for early
extinguishment of debt - (1,742)
------- -------
Net loss (1,612) (3,334)
Preferred stock dividends - -
------- -------
Net loss attributable to common stock $ (1,612) $ (3,334)
======= =======
Loss per common and common equivalent share:
Net loss before extraordinary item $ (.01) $ (0.01)
Extraordinary item - (0.01)
------- -------
Net loss per common and common equivalent share $ (.01) $ (0.02)
======= =======
Average number of common and common
equivalent shares outstanding 234,499 168,028
======= =======
The accompanying notes are an integral part of these financial statements.
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of Dollars)
Three Months Ended
March 31
1995 1994
---- ----
(Unaudited)
Cash flows from operating activities:
Net loss $ (1,612) $ (3,334)
------- -------
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation, depletion and amortization 658 900
Extraordinary charge for early extinguishment
of debt - 1,742
Change in assets and liabilities:
Accounts receivable 1,186 170
Prepaid expenses 5 (5)
Accounts payable and accrued expenses (768) (2,267)
Royalty and production taxes payable (82) (209)
Other, net 518 100
------- -------
Total adjustments 1,517 431
------- -------
Net cash used in operating activities (95) (2,903)
------ -------
Cash flows from investing activities:
Capital expenditures (4,095) (4,638)
Investments (759) -
Other (517) 181
------ ------
Net cash used in investing activities (5,371) (4,457)
------ ------
Cash flows from financing activities:
Proceeds from sales of common stock 48 25,000
Proceeds from sales of treasury stock 1,603 -
Proceeds from issuance of preferred stock - 1,600
Loan proceeds - 29,200
Proceeds from exercise of warrants and options 69 -
Payment of long-term debt (181) (29,398)
Payment of preferred stock dividends (250) -
Stock issuance costs and other (105) (2,068)
------- -------
Net cash provided by financing activities 1,184 24,334
------- -------
Net increase (decrease) in cash and cash equivalents (4,282) 16,974
Cash and cash equivalents at beginning of period 6,751 1,646
------- -------
Cash and cash equivalents at end of period $ 2,469 $ 18,620
======= =======
The accompanying notes are an integral part of these financial statements.
XCL Ltd. and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995
(1) General
The consolidated financial statements at March 31, 1995, and
for the three months then ended have been prepared by the
Company, without audit, pursuant to the Rules and Regulations of
the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such Rules
and Regulations. The Company believes that the disclosures are
adequate to make the information presented herein not misleading.
These consolidated financial statements should be read in
conjunction with the financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994, as amended. In the opinion of the
Company, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial position
of XCL Ltd. and subsidiaries as of March 31, 1995, and December
31, 1994, and the results of their operations for the three
months ended March 31, 1995, have been included. Certain
reclassifications have been made to prior period financial
statements to conform to current period presentation, including
reclassifying accrued interest on the subordinated debt to be
paid in Common Stock and the reserve for franchise tax to long-
term liabilities. These reclassifications had no effect on net
income or shareholders' equity. The results of the Company's
operations for such interim periods are not necessarily
indicative of the results for the full year. The year-end
balance sheet data was derived from audited financial statements,
but all disclosures required by generally accepted accounting
principles are not included herein.
(2) Liquidity and Capital Resources
At March 31, 1995, the Company had an operating cash balance
of $2.5 million. The working capital deficit of $8.3 million
included approximately $5.7 million of limited recourse debt
associated with the Lutcher Moore Tract and $2 million of
principal on the Company's bank debt due on January 1, 1996. To
provide for additional near term liquidity, the Company has
executed a contract to sell the Phoenix Lake Tract for
approximately $2.4 million, consisting of $1.8 million in cash and
a $.6 million reduction in obligations owed by the Company to the
purchaser. This transaction is scheduled to close before May 31, 1995.
The Company has also negotiated the terms of a proposed sale
of the Lutcher Moore Tract, which upon closing would result in
net cash proceeds of $8.6 million after retirement of the limited
recourse debt. The sale is subject to the execution of
definitive agreements, the purchaser securing financing and other
customary conditions to closing. Management is negotiating an
extension of the maturity dates of the limited recourse debt in
the event the purchaser cannot consummate the transaction.
In order to accelerate exploration and development of the
Zhao Dong Block, the Company on May 10, 1995, executed a letter
agreement with Apache Corporation ("Apache"), which, upon
approval by Chinese authorities, would result in the following:
(i) Apache will pay 100 percent of the costs to drill,
test and complete the next two wildcat wells on the
Zhao Dong Block. If Apache elects to drill a third
wildcat well it will also pay 100 percent of the costs
of that third exploration well.
(ii) Apache will pay 100 percent of the costs to drill,
test and complete the C-3 appraisal well in the "C"
Field;
(iii) Apache will purchase from the Company a 16.67
percent interest in the oil and gas reserves of the "C"
Field. Payment for this purchase will be computed and
made to the Company from time to time as the field is
being developed in order to insure that the Company
will receive the full market value of the 16.67 percent
interest; and
(iv) Apache will assume operatorship of the Zhao Dong
Block and, in consideration for the above identified
wells to be drilled at Apache's sole cost for the
Company, acquire from the Company an additional 16.67
percent interest in the remainder of the block outside
the "C" Field.
The Company farmed out a one-third interest in the Zhao Dong
Block to Apache in 1994. As a result of the May 10, 1995
agreement, the Company and Apache will each have a 50 percent
interest in the Zhao Dong Block. Future expenditures beyond
those described above will be borne 50 percent by the Company and
Apache, respectively. The Company estimates that the Apache
transaction will pay for all but approximately $5 million to $6
million of its exploration expenditures related to the Zhao Dong
Block for the next twelve months.
To fund development of the "C" area initial discovery on the
Zhao Dong Block, the Company is in discussions with a major
banking group with experience in debt financing in China, to
provide project debt financing for all development costs. The
banking group has indicated interest in providing such financing,
and the Company and the banking group are in the process of
discussing the terms of the proposed financing. Another
alternative available to the Company to obtain development funds
is to joint venture with another oil company or financial group.
As discussed in the Annual Report on Form 10-K for the year
ended December 31, 1994, the Company signed a letter of intent
with CNPC United Lube Oil Corporation subject to satisfaction of
certain conditions, to form a joint venture for the manufacture
and sale of lubricating oil in China and southeast Asian markets.
The joint venture, which is expected to have a 30 year life,
requires a total investment estimated at $12 million of which 40
percent shall be the capital of the venture, (shared 51 percent
to the China interest; 49 percent to the Company's interest) and
the remainder is expected to be project financed as venture
borrowings. The joint venture is to assume ownership of an
existing lubricating oil blending plant located in LangFang,
China and is to evaluate constructing a second plant. As of
March 31, 1995, the Company has invested $.8 million in this venture.
The Company currently has approximately $25.1 million in
bank debt collateralized by the Company's domestic oil and gas
reserves and the stock of certain subsidiaries. Based on an
agreement with its lending bank relating to the application of
principal prepayments, no further payments are required until the
$2 million payment due January 1, 1996. However, the borrowing
base under this credit agreement is determined, in part, by the
value of the Company's proved developed producing domestic oil
and gas reserves, which decline with production, but can be
increased by additional successful development drilling. If
development drilling is either materially delayed or is less
successful than expected, the lender could reduce the borrowing
base and thus require earlier principal reductions. The next
borrowing base determination is scheduled for September 30, 1995.
Domestic development drilling and general corporate expenditures
for the next year are estimated at $10 million to $13 million.
In light of the Company's decision to focus its activities in China,
management is considering the sale or exchange of the Cox Field for
proved producing reserves providing more cash flow and requiring
fewer development expenditures in the short term. In this process,
the Company would expect to renegotiate the terms of its bank debt
to reflect an improved cash flow profile.
The standardized measure of discounted net cash flows reflects a
tight gas severance tax exemption as provided for in Texas Railroad
Commission Statewide Rule 105. This exemption results in approximately
$5 million of net present worth discounted at 10 percent. The tight gas
severance tax exemption is a temporary exemption which expires on
August 31, 2001. There are no circumstances that must be met to keep the
exemption in place. Pricing for a significant portion of the Company's
gas reserves is subject to a price floor established by a long-term gas
purchase contract. The continued applicability of this price floor is
dependent upon the Company maintaining certain minimum gas production
volumes which were not achieved for the contract year ending April 30, 1995.
The Company's reserve estimates indicate that with sufficient development
the minimum volumes will be achieved for the contract year ending
April 30, 1996.
Management has historically had the ability to generate
funds through the sale of assets or securities, and is
confident that it can timely realize sufficient cash resources to
adequately meet its obligations and its ongoing requirements.
The timing of receipts from the various sources of funds is not
entirely within the Company's control. Thus, the scheduling of
planned activities will continue to be dependent on such cash
receipts.
Longer term liquidity is dependent on the Company's
continuing access to capital markets, including its ability to
issue additional debt and equity securities, which in certain
cases may require the consent of INCC and holders of the
Company's Subordinated Debt and Preferred Stock.
(3) Supplemental Cash Flow Information
There were no income taxes paid during the three month
periods ended March 31, 1995 and 1994. (See Note 7 herein).
Interest and associated capitalized costs for the three
month period ended March 31 totaled $1.0 million and $1.6
million, respectively for 1995 and 1994. Interest paid during
the three month periods ended March 31, 1995 and 1994 amounted to
$.6 and $.7 million, respectively.
During the three months ended March 31, 1995, the Company
issued 18,714 shares of Common Stock in payment of interest on
funds escrowed in advance of purchase of Series D Preferred
Stock.
During the three months ended March 31, 1994, the Company
completed the following noncash transactions:
o Shareholders of 7,671 shares of Series C Preferred Stock elected
to exercise their conversion rights and accordingly 1,871,660
shares of the Common Stock of the Company were issued pursuant to
the terms of the Series C Preferred Stock. All of the Series C
Preferred Stock was subsequently converted to Common Stock.
o The Company issued approximately 4.8 million shares of Common
Stock in lieu of cash dividends on its Series A and Series B
Preferred Stock in respect of dividends due December 31, 1993 and
June 30, 1993, and 2,119 and 20 shares of Series C Preferred
Stock and Series D Preferred Stock, respectively, for in-kind
dividends due December 31, 1993.
(4) Investments and Assets Held for Sale
Lube Oil Investment
--------------------
As discussed in Note 2, the Company signed a letter of intent
with CNPC United Lube Oil Corporation subject to satisfaction of
certain conditions, to form a joint venture for the manufacture
and sale of lubricating oil in China and southeast Asian markets.
As of March 31, 1995, the Company has invested $.8 million in this venture.
Phoenix Lake Tract
-------------------
The Company owns a 77.78 percent fee interest in 11,700
acres comprising the Phoenix Lake Tract in southwestern
Louisiana. On May 10, 1995, the Company executed a contract to
sell the Phoenix Lake Tract for approximately $2.4 million,
retaining 75 percent of its mineral interest, with a closing
scheduled prior to May 31, 1995. The purchase price is to be
comprised of approximately $1.8 million in cash and a $.6 million
reduction in obligations owed by the Company to the purchaser.
No gain or loss is expected to be recognized.
(5) Debt
Long-term debt at March 31, 1995 consists of the following
(000's):
Current Long-Term
Maturities Portion Total
---------- ----------- --------
Collateralized credit facility $ 2,000 $23,115 $25,115
Subordinated debt (due April 5 ,2000) - 15,000 15,000
Building Mortgage 30 669 699
------ ------ ------
Total $ 2,030 $38,784 $40,814
====== ====== ======
Lutcher Moore Group
Limited Recourse Debt $ 5,652 $ 369 $ 6,021
====== ====== ======
Substantially all of the Company's assets collateralize
certain of these borrowings. Accounts payable and accrued
expenses include interest accrued at March 31, 1995, of
approximately $.6 million.
Lutcher Moore Group Limited Recourse Debt :
- -------------------------------------------
Mortgage and Seller Notes.
- -------------------------
At March 31, 1995, approximately $2.8 million of Mortgage Notes
(net of amounts escrowed for payment) and $3.2 million of Seller
Notes were outstanding. Mortgage Notes bear interest of 9
percent and mature in June 1995. Seller Notes bear interest of 8
percent and mature June 1996. The Company is negotiating an
extension of the maturity dates of the Mortgage and Seller Notes.
Collateralized Credit Facility
- ------------------------------
Under the INCC Agreement, the Company is required to
maintain minimum levels of tangible net worth, working capital
and fixed charge coverage, and expend a minimum amount on
domestic development drilling. Further, the INCC Agreement
contains certain restrictions pertaining to debt, mergers,
issuances of securities, investments, sales of property, cash
dividends and redemptions and payments related to subordinated
debt. During the first quarter of 1995, the INCC Agreement was
amended to modify certain covenant requirements.
(6) Preferred Stock and Common Stock
As of March 31, 1995, the Company had the following shares
of Preferred Stock outstanding:
Shares Liquidation Value
------- -----------------
Series A 599,244 $47,939,520 *
Series B 50,000 5,000,000
* 50 pounds sterling (U.K.) per share (1 U.K. pound sterling =
U.S. $1.60 at March 31, 1995).
At March 31, 1995, the Company had reserved approximately .9
million shares of Common Stock to be issued as dividends on
Preferred Stock. On November 30, 1994, the Company declared
cash dividend payments on Series A and Series B Preferred Stocks
of approximately $2.6 million for the six month period ended
December 31, 1994. The Company is required to sell shares of its
Common Stock to fund these dividends and as of March 31, 1995,
$715,000 of the dividends remained to be paid.
(7) Commitments and Contingencies and Subsequent Events
Other commitments, contingencies and subsequent events
include:
o In order to accelerate exploration and development of the Zhao
Dong Block, the Company on May 10, 1995, executed a letter
agreement with Apache Corporation ("Apache"), which, upon
approval by Chinese authorities, would result in the following:
(i) Apache will pay 100 percent of the costs to
drill, test and complete the next two wildcat wells
on the Zhao Dong Block. If Apache elects to drill
a third wildcat well it will also pay 100 percent
of the costs of that third exploration well.
(ii) Apache will pay 100 percent of the costs to
drill, test and complete the C-3 appraisal well in
the "C" Field;
(iii) Apache will purchase from the Company a 16.67
percent interest in the oil and gas reserves of the
"C" Field. Payment for this purchase will be
computed and made to the Company from time to time
as the field is being developed in order to insure
that the Company will receive the full market value
of the 16.67 percent interest; and
(iv) Apache will assume operatorship of the Zhao
Dong Block and, in consideration for the above
identified wells to be drilled at Apache's sole
cost for the Company, acquire from the Company an
additional 16.67 percent interest in the remainder
of the block outside the "C" Field.
The Company will retain a 50 percent interest in the Zhao
Dong Block. Under the Production Sharing Agreement effective May
1993, pursuant to which the Company acquired exploration,
development and production rights to the Zhao Dong Block, the
Company remains obligated to drill two additional exploratory
wells by May 1996. The cost of these two wells will be paid by
Apache, as described in (i) above.
o During 1992, the Company received notice, and amendment thereto,
of a proposed assessment for state income and franchise taxes.
During December 1993, the Company and two of its wholly-owned
subsidiaries, XCL-Texas, Inc. and XCL Acquisitions, Inc. were
sued in separate law suits entitled Ralph Slaughter, Secretary of
the Department of Revenue and Taxation, State of Louisiana vs.
Exploration Company of Louisiana, Inc. (15th Judicial District,
Parish of Lafayette, Louisiana, Docket No. 93-5449); Ralph
Slaughter, Secretary of the Department of Revenue and Taxation,
State of Louisiana vs. XCL-Texas, Incorporated (15th Judicial
District, Parish of Lafayette, Louisiana, Docket No. 93-5450);
and Ralph Slaughter, Secretary of the Department of Revenue and
Taxation, State of Louisiana vs. XCL Acquisitions, Inc. (15th
Judicial District, Parish of Lafayette, Louisiana, Docket No. 93-
5337) by the Louisiana Department of Revenue for Louisiana State
corporate franchise and income taxes. The claims relate to
assessments for the 1987 through 1991 fiscal years. The aggregate
amount of the assessments, including penalties and interest, is
approximately $2.25 million as of the original due date excluding
extensions for filing of the respective returns. The Company
believes that this contingency has been adequately provided for
in the consolidated financial statements. The law suits are all
in their initial stages. The Company has filed answers to each
of these suits and intends to defend them vigorously. The
Company believes that it has meritorious defenses and it has
instructed its counsel to contest these claims.
o In connection with a lawsuit entitled The Elia G. Gonzalez
Mineral Trust, et al vs. Edwin L. Cox, et al which was settled
and dismissed on December 31, 1993, two groups of non-
participating royalty owners filed interventions. The court
ordered the interventions stricken. During 1994, the first group
appealed and the second group filed a new lawsuit. The Company
settled the new lawsuit filed by the second group with its share
of the settlement being $20,000. During December 1994, the
appellate court affirmed the trial court's decision to deny the
intervention to the first group. The Company, in March 1995, was
named as a third party defendant by the original lessor who had
been previously sued by the nonparticipating royalty owners
comprising the first group. Management believes that the outcome
of the remaining intervention will not have a material adverse
effect on the Company's financial position or results of
operations. The Company intends to defend vigorously all claims
asserted by the first group in its lawsuit.
o During April 1994, the Company was sued in an action entitled
Kathy M. McIlhenny vs. The Exploration Company of Louisiana, Inc.
(15th Judicial District Court, Parish of Lafayette, Louisiana,
Docket No. 941845). Kathy McIlhenny, wife of an officer and
director of the Company, has asserted a claim in the aggregate
amount of approximately $.5 million in respect of compensation
for certain services alleged to have been performed on behalf of
the Company and under an alleged verbal employment agreement and,
by amendment, asserted a claim for payments arising from
purported rights to mineral interests. The Company believes that
such claim is without merit and rejects the existence of any such
alleged agreement.
o The Company is subject to other legal proceedings which arise in
the ordinary course of its business. In the opinion of
management, the amount of ultimate liability with respect to
these actions will not materially affect the financial position
or results of operations of the Company.
XCL LTD. AND SUBSIDIARIES
March 31, 1995
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
- -------------------------------
During the first quarter of 1995, the Company's operating
activities used $.1 million in cash, due to the decline in
revenues at the Cox Field caused by the lack of development
activities. This sum, plus investing activities totaling
approximately $5.4 million, primarily attributable to
expenditures on the Company's investments in China, were funded
by $4.3 million in operating cash and $1.6 million in proceeds
from the sale of treasury stock.
At March 31, 1995, the Company had an operating cash balance
of $2.5 million. The working capital deficit of $8.3 million
included approximately $5.7 million of limited recourse debt
associated with the Lutcher Moore Tract and $2 million of
principal on the Company's bank debt due on January 1, 1996. To
provide for additional near term liquidity, the Company has
executed a contract to sell the Phoenix Lake Tract for approximately
$2.4 million, consisting of $1.8 million in cash and a $.6
million reduction in obligations owed by the Company to the purchaser.
This transaction is scheduled to close before May 31, 1995.
The Company has also negotiated the terms of a proposed sale
of the Lutcher Moore Tract, which upon closing would result in
net cash proceeds of $8.6 million after retirement of the limited
recourse debt. The sale is subject to the execution of
definitive agreements, the purchaser securing financing and other
customary conditions to closing. Management is negotiating an
extension of the maturity dates of the limited recourse debt in
the event the purchaser cannot consummate the transaction.
In order to accelerate exploration and development of the
Zhao Dong Block, the Company on May 10, 1995, executed a letter
agreement with Apache Corporation ("Apache"), which, upon
approval by Chinese authorities, would result in the following:
(i) Apache will pay 100 percent of the costs to drill,
test and complete the next two wildcat wells on the
Zhao Dong Block. If Apache elects to drill a third
wildcat well it will also pay 100 percent of the costs
of that third exploration well.
(ii) Apache will pay 100 percent of the costs to drill,
test and complete the C-3 appraisal well in the "C"
Field;
(iii) Apache will purchase from the Company a 16.67
percent interest in the oil and gas reserves of the "C"
Field. Payment for this purchase will be computed and
made to the Company from time to time as the field is
being developed in order to insure that the Company
will receive the full market value of the 16.67 percent
interest; and
(iv) Apache will assume operatorship of the Zhao Dong
Block and, in consideration for the above identified
wells to be drilled at Apache's sole cost for the
Company, acquire from the Company an additional 16.67
percent interest in the remainder of the block outside
the "C" Field.
The Company farmed out a one-third interest in the Zhao Dong
Block to Apache in 1994. As a result of the May 10, 1995
agreement, the Company and Apache will each have a 50 percent
interest in the Zhao Dong Block. Future expenditures beyond
those described above will be borne 50 percent by the Company and
Apache, respectively. The Company estimates that the Apache
transaction will pay for all but approximately $5 million to $6
million of its exploration expenditures related to the Zhao Dong
Block for the next twelve months.
To fund development of the "C" area initial discovery on the
Zhao Dong Block, the Company is in discussions with a major
banking group with experience in debt financing in China, to
provide project debt financing for all development costs. The
banking group has indicated interest in providing such financing,
and the Company and the banking group are in the process of
discussing the terms of the proposed financing. Another
alternative available to the Company to obtain development funds
is to joint venture with another oil company or financial group.
As discussed in Note 2, the Company signed a letter of intent
with CNPC United Lube Oil Corporation subject to satisfaction of
certain conditions, to form a joint venture for the manufacture
and sale of lubricating oil in China and southeast Asian markets.
The joint venture requires a total investment estimated at
$12 million of which 40 percent shall be the capital of the venture,
(shared 51 percent to the China interest; 49 percent to the Company's
interest) and the remainder is expected to be project financed as venture
borrowings. As of March 31, 1995, The Company has invested $.8 million
in this venture.
The Company currently has approximately $25.1 million in
bank debt collateralized by the Company's domestic oil and gas
reserves and the stock of certain subsidiaries. Based on an
agreement with its lending bank relating to the application of
principal prepayments, no further payments are required until the
$2 million payment due January 1, 1996. However, the borrowing
base under this credit agreement is determined, in part, by the
value of the Company's proved developed producing domestic oil
and gas reserves, which decline with production, but can be
increased by additional successful development drilling. If
development drilling is either materially delayed or is less
successful than expected, the lender could reduce the borrowing
base and thus require earlier principal reductions. The next
borrowing base determination is scheduled for September 30, 1995.
Domestic development drilling and general corporate expenditures
for the next year are estimated at $10 million to $13 million.
In light of the Company's decision to focus its activities in China,
management is considering the sale or exchange of the Cox Field for
proved producing reserves providing more cash flow and requiring
fewer development expenditures in the short term. In this process,
the Company would expect to renegotiate the terms of its bank debt
to reflect an improved cash flow profile.
Management has historically had the ability to generate
funds through the sale of assets or securities, and is
confident that it can timely realize sufficient cash resources to
adequately meet its obligations and its ongoing requirements.
The timing of receipts from the various sources of funds is not
entirely within the Company's control. Thus, the scheduling of
planned activities will continue to be dependent on such cash
receipts.
Longer term liquidity is dependent on the Company's
continuing access to capital markets, including its ability to
issue additional debt and equity securities, which in certain
cases may require the consent of INCC and holders of the
Company's Subordinated Debt and Preferred Stock.
The Company declared cash dividend payments on Series A and
Series B Preferred Stocks of approximately $2.6 million for
December 31, 1994. The Company is required to sell shares of its
Common Stock to fund these dividends and as of March 31, 1995,
$715,000 of dividends remained to be paid.
The Company's cumulative preferred stock dividend
requirements amount to approximately $2.3 million semiannually.
The Company's credit agreement restricts the payment of cash
dividends and currently, insufficient liquidity exists to pay
such amounts. Management intends to pay future preferred stock
dividends by selling additional shares of the Company's Common
Stock.
Other General Considerations
- ----------------------------
The Company believes that inflation has had no material
impact on the Company's sales, revenues or income during such
periods. Drilling costs and costs of other related services
during the relevant periods have remained stable.
The Company is subject to existing federal, state and local
laws and regulations governing environmental quality and
pollution control. Although management believes that such
operations are in general compliance with applicable
environmental regulations, risks of substantial costs and
liabilities are inherent in oil and gas operations, and there can
be no assurance that significant costs and liabilities will not
be incurred.
New Accounting Pronouncement
- ----------------------------
In April 1995, the Financial Accounting Standards Board
issued Statement No. 121 "Accounting For The Impairment Of Long-
Lived Assets And For Long-Lived Assets To Be Disposed Of,"
effective for fiscal years beginning after December 15, 1995.
This standard describes circumstances which may result in assets
being impaired and provides criteria for recognition and
measurement of asset impairment. The Company has not analyzed the
impact of this statement on the financial position and results of
operations of the Company.
Results of Operations
- ---------------------
During the three month period ended March 31, 1995, the
Company incurred a net loss of $1.6 million as compared to a net
loss of $3.3 million during the corresponding period in 1994. The
three months results for 1994 additionally reflect an
extraordinary charge of $1.7 million for early extinguishment of
debt resulting from the refinancing of the Company's $29.2
million credit facility in February 1994.
Oil and gas revenues for the three month period ended March
31, 1995, were $.7 million compared to $1.3 million during the
corresponding period in 1994. Revenues continue to decline due
to reduced production volumes, decreases in gas prices and
limited drilling in the Cox Field. Operating costs as a percent
of revenues increased as a result of fixed costs remaining
constant and declining revenues. As the Company has not concluded
significant development projects on its domestic oil and gas
properties, it does not anticipate a material change in its short-
term production volumes and expects operating losses for the year.
The Company realized an average gas price of $1.23 per Mcf for the
three month period ended March 31, 1995, as compared to an average
of $1.93 per Mcf for the three month period in 1994, and $1.65 per
Mcf for the year ended December 31, 1994.
As the Company continues to focus its resources on
exploration and development of the Zhao Dong Block an other China
related projects, future oil and gas revenues will initially be
directly related to the degree of drilling success experienced in
the Zhao Dong Block.
Net capitalized costs for the Company's domestic oil and gas
properties at March 31, 1995, approximate the "ceiling-test"
limitation as prescribed by the Securities and Exchange
Commission guidelines. Remaining unproved and unevaluated
properties at March 31, 1995, include primarily the costs of
leases located adjacent to the Company's Berry R. Cox producing
properties. The Company drilled two exploration wells in 1994,
and if the Cox Field is not sold, exploration operations will
continue in 1995. As these unproved properties become evaluated,
their costs are reclassified to proved and evaluated properties,
and any associated future revenue is included in the calculation
of the present value of the Company's proved reserves.
Prospectively, any such costs in excess of the present value of
added reserves, or any material reductions in the net future
revenues from oil and gas reserves resulting from such factors as
lower prices or downward revisions in estimates of reserve
quantities, would cause a charge for a full-cost ceiling
impairment, absent offsetting improvements. Downward revisions in
estimates of reserve quantities may also adversely affect the
Company's borrowing base calculation under its credit facility
with INCC, which may then requirement prepayments of principal.
The standardized measure of discounted net cash flows reflects
a tight gas severance tax exemption as provided for in Texas Railroad
Commission Statewide Rule 105. This exemption results in approximately
$5 million of net present worth discounted at 10 percent. The tight gas
severance tax exemption is a temporary exemption which expires on
August 21, 2001. There are no circumstances that must be met to keep
the exemption in place. Pricing for a significant portion of the Company's
gas reserves is subject to a price floor established by a long-term gas
purchase contract. The continued applicability of this price floor is
dependent upon the Company maintaining certain minimum gas production
volumes which were not achieved for the contract year ending April 30, 1995.
The Company's reserve estimates indicate that with sufficient development
the minimum volumes will be achieved for the current year ending
April 30, 1996.
Effects on revenues are summarized on the following table:
Three Months
Ended
March 31
------------
Oil and Gas Revenues - 1994 $ 1.3
Effect of changes in volume of
gas production and sales .2
Effect of changes in gas prices .4
----
Oil and Gas Revenues - 1995 $ .7
The depreciation, depletion and amortization rate for the
three month period in 1995 and 1994 amounted to $1.25 per Mcf.
Incremental cost savings are expected in the future because
certain production has been exempted from production taxes by
state taxing authorities as a result of a "tight sands"
classification by regulatory authorities. The tight gas severance
tax exemption is a temporary exemption which expires on
August 31, 2001. This exemption and lower production volumes
resulted in the decline in "Taxes, other than income," in the first
quarter of 1995 as compared to the same period in 1994. There are
no circumstances that must be met to keep the exemption in place.
Interest expense is expected to increase in the second quarter as
the Company will not capitalize interest on the debt direcly associated
with the Cox Field because it is considering the sale or exchange of
this property.
XCL LTD. AND SUBSIDIARIES
March 31, 1995
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In October 1991, lessors under two leases dated July 20,
1982, and February 1, 1985, which were subsequently pooled to
form the R. Gonzalez No. 1 Gas Unit covering 526 acres in the
Berry R. Cox Field, filed suit against the Company and others who
hold or previously held working interests in the Gas Unit in an
action entitled The Elia G. Gonzalez Mineral Trust, et al. v.
Edwin L. Cox, et al. (341st Judicial District, Webb County,
Texas, Docket No. C-91-747-D3). The suit alleged non-performance
under certain express and implied terms of the leases, including
an allegation that defendants failed to protect the leases
against drainage from wells on adjacent tracts and failed to
properly pay royalties, and seeking an accounting of revenues and
expenses, damages and attorney's fees. The Court ordered that the
parties subject the dispute to non-binding mediation. As a
result of the mediation, the parties agreed to an amount for a
settlement payment and to the terms of a settlement agreement
dispensing with all issues and dismissing the suit. The
Company's share of the settlement payment amounted to $750,000.
The parties executed and consummated the settlement on December
31, 1993.
Two groups filed interventions in this matter on March 5,
1993, and March 15, 1993, The first group are non-participating
royalty owners claiming under the same group of leases as the
original plaintiffs. The second group sued under different
leases. The interventions were opposed by the original plaintiffs
and all defendants. After hearing arguments, the court ordered
the interventions stricken on July 14, 1993. During 1994, the
first group appealed and the second group filed a new lawsuit.
The Company settled the new lawsuit filed by the second group
with its share of the settlement being $20,000. During December
1994, the appellate court affirmed the trial court's decision to
deny the intervention to the first group. The Company in March
1995, was named as a third party defendant by the original lessor
who had been previously sued by the nonparticipating royalty
owners comprising the first group. Management believes that the
outcome of the lawsuit will not have a material adverse effect on
the Company's financial position or results of operations. The
Company intends to defend diligently all claims asserted by the
first group in its lawsuit.
During December 1993, the Company and two of its wholly-
owned subsidiaries, XCL-Texas, Inc. and XCL Acquisitions, Inc.
were sued in separate law suits entitled Ralph Slaughter,
Secretary of the Department of Revenue and Taxation, State of
Louisiana vs. Exploration Company of Louisiana, Inc. (15th
Judicial District, Parish of Lafayette, Louisiana, Docket No. 93-
5449); Ralph Slaughter, Secretary of the Department of Revenue
and Taxation, State of Louisiana vs. XCL-Texas, Incorporated
(15th Judicial District, Parish of Lafayette, Louisiana, Docket
No. 93-5450); and Ralph Slaughter, Secretary of Department of
Revenue and Taxation, State of Louisiana vs. XCL Acquisitions,
Inc. (15th Judicial District, Parish of Lafayette, Louisiana,
Docket No. 93-5337) by the Louisiana Department of Revenue for
Louisiana State corporate franchise and income taxes. The claims
relate to assessments for the 1987 through 1991 fiscal years. The
aggregate amount of the assessments, including penalties and
interest, is approximately $2.25 million. The Company believes
that these assessments have been adequately provided for in the
consolidated financial statements. The lawsuits are all in their
initial stages. The Company has filed answers to each of these
suits and intends to defend them vigorously.
During April 1994, the Company was sued in an action
entitled Kathy M. McIlhenny vs. The Exploration Company of
Louisiana, Inc. (15th Judicial District Court, Parish of
Lafayette, Louisiana, Docket No. 941845). Kathy McIlhenny, wife
of an officer and director of the Company, has asserted a claim
in the aggregate amount of approximately $.5 million in respect
of compensation for certain services alleged to have been
performed on behalf of the Company and under an alleged verbal
employment agreement and, by amendment, asserted a claim for
payments arising from purported rights to mineral interests. The
Company believes that such claim is without merit and rejects the
existence of any such alleged agreement.
Other than disclosed above, there are no material pending
legal proceedings to which the Company or any of its subsidiaries
is a party or to which any of their properties are subject.
Item 4. Submission of Matters to a Vote of Security-Holders
No matters were submitted to a vote of security holders
during the period covered by this report.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-K.
Exhibit
Number Description
2.0. Not applicable
3(i) Articles of incorporation
3.1 Certificate of Incorporation of the Company dated
December 28, 1987. (A)(i)
3.2 Certificate of Amendment to the Certificate of
Incorporation of the Company dated March 30, 1988. (A)(ii)
3.3 Certificate of Amendment to the Certificate of
Incorporation of the Company dated June 22, 1990. (B)(i)
3.4 Certificate of Amendment to the Certificate of
Incorporation of the Company dated June 12, 1993. (C)
3.5 Certificate of Amendment to the Certificate of
Incorporation of the Company dated June 8, 1992, whereby
Article Fourth was amended to increase the number of
shares of Common Stock authorized. (D)(i)
3.6 Certificate of Amendment to the Certificate of
Incorporation of the Company dated September 29, 1993,
whereby Article Fourth was amended to increase the number
of shares of Common Stock authorized. (E)(i)
3.7 Certificate of Amendment dated July 1, 1994, whereby
Article Fourth was amended to increase the number of shares
of Common Stock and the name of the Company was
changed. (F)(i)
3(ii) Amended and Restated Bylaws of the Company as currently
in effect. (A)(iii)
4.0 Instruments defining rights of security holders,
including indentures:
4.1 Form of Common Stock Certificate. (A)(iv)
4.2 Certificate of Designation of Series A, Cumulative
Convertible Preferred Stock. (G)
4.3 Form of Series A, Cumulative Convertible Preferred
Stock Certificate. (B)(ii)
4.4 Certificate of Designation of Series B, Cumulative
Preferred Stock. (H)(i)
4.5 Form of Series B, Cumulative Preferred Stock
Certificate. (H)(ii)
4.6 Form of Class B Warrants issued to China Investment
& Development Co. Ltd. to purchase 2,500,000 shares of
Common Stock at $2.00 per share payable upon redemption of
the Series B, Cumulative Preferred Stock. (H)(iii)
4.7 Form of Amendment to Certificate of Designation of
Series B Preferred Stock dated August 7, 1992. (D)(ii)
4.8 Certificate of Designation of Series C, Cumulative
Convertible Preferred Stock. (E)(ii)
4.9 Copy of Amendment to Certificate of Designation of
Series C Preferred Stock dated February 18, 1994.(I)(i)
4.10 Form of Series C, Cumulative Convertible Preferred Stock
Certificate. (I)(iii)
4.11 Certificate of Designation of Series D, Cumulative
Convertible Preferred Stock. (I)(iv)
4.12 Form of Amendment to Certificate of Designation of
Series D Preferred Stock dated January 24, 1994. (I)(ii)
4.13 Form of Series D, Cumulative Convertible Preferred Stock
Certificate. (E)(v)
4.14 Form of Warrant dated January 31, 1994 to purchase
2,500,000 shares of Common Stock at an exercise price of
$1.00 per share, subject to adjustment, issued to INCC. (I)(iii)
4.15 Form of Registrar and Stock Transfer Agency Agreement,
effective March 18, 1991, entered into between the Company
and Manufacturers Hanover Trust Company (predecessor to Chemical Bank),
whereby Chemical Bank serves as the Company's Registrar and U.S.
Transfer Agent. (J)
4.16 Copy of Warrant Agreement and Stock Purchase Warrant
dated March 1, 1994 to purchase 500,000 shares of Common
Stock at an exercise price of $1.00 per share, subject to
adjustment, issued to EnCap Investments, L.C. (I)(iv)
4.17 Copy of Warrant Agreement and form of Stock Purchase
Warrant dated March 1, 1994 to purchase an aggregate 600,000
shares of Common Stock at an exercise price of $1.00
per share, subject to adjustment, issued to principals of
San Jacinto Securities, Inc. in connection with its
financial consulting agreement with the Company. (I)(v)
4.18 Form of Warrant Agreement and Stock Purchase Warrant
dated April 1, 1994, to purchase an aggregate 6,440,000
shares of Common Stock at an exercise price of $1.25 per
share, subject to adjustment, issued to executives of the
Company surrendering all of their rights under their
employment contracts with the Company. (F)(ii)
4.19 Form of Warrant Agreement and Stock Purchase Warrant
dated April 1, 1994, to purchase an aggregate 878,900
shares of Common Stock at an exercise price of $1.25 per
share, subject to adjustment, issued to executives of the
Company in consideration for salary reductions sustained
under their employment contracts with the Company. (F)(iii)
4.20 Copy of Warrant Agreement and Stock Purchase Warrant
dated April 1, 1994, to purchase 375,000 shares of Common
Stock at an exercise price of $1.25 per share, subject to
adjustment, issued to Ivory & Sime Enterprise Capital Plc.
(F)(iv)
4.21 Copy of Warrant Agreement and Stock Purchase Warrant
dated April 1, 1994, to purchase 100,000 shares of Common
Stock at an exercise price of $1.25 per share, subject to
adjustment, issued to Henry D. Owen. (F)(v)
4.22 Copy of Warrant Agreement and Stock Purchase Warrant
dated April 1, 1994, to purchase 1,000,000 shares of Common
Stock at an exercise price of $1.25 per share, subject to
adjustment, issued to Provincial Securities Limited. (F)(vi)
4.23 Form of Warrant Agreement and Stock Purchase Warrant
dated April 1, 1994, to purchase 200,000 shares of Common
Stock at an exercise price of $1.25 per share, subject to
adjustment, issued to Thomas H. Hudson. (F)(vii)
4.24 Form of Warrant Agreement and Stock Purchase Warrant
dated May 25, 1994, to purchase an aggregate 100,000 shares
of Common Stock at an exercise price of $1.25 per share,
subject to adjustment, issued to the holders of Purchase
Notes B, in consideration of amendment to payment terms of
such Notes. (F)(viii)
4.25 Form of Warrant Agreement and Stock Purchase Warrant
dated May 25, 1994, to purchase an aggregate 100,000 shares
of Common Stock at an exercise price of $1.25 per share,
subject to adjustment, issued to the holders of Purchase
Notes B, in consideration for the granting of an option to
further extend payment terms of such Notes. (F)(ix)
4.26 Form of Amendment to Certificate of Designation of
Series B Preferred Stock dated June 30, 1994. (F)(x)
4.27 Form of Warrant Agreement and Stock Purchase Warrant
dated July 1, 1994, to purchase 100,000 shares of Common
Stock at an exercise price of $1.50 per share, subject to
adjustment, issued to Joe T. Rye. (F)(xi)
4.28 Form of Warrant Agreement and Stock Purchase Warrant
dated January 31, 1995, to purchase 100,000 shares of Common
Stock at an exercise price of $.75 per share, subject to
adjustment, issued to Energy Advisors, Inc. *
10.0 - Material Contracts
10.1 Contract for Petroleum Exploration, Development and
Production on Zhao Dong Block in Bohai Bay Shallow Water Sea
Area of The People's Republic of China between China
National Oil and Gas Exploration and Development Corporation
and XCL - China, Ltd., dated February 10, 1993. (E)(vi)
10.2 Copy of Employment Agreement dated May 1, 1993, between
a subsidiary of the Company and Roy F.C. Chase (I)(vi)
10.3 Copy of Amendment Agreement to Second Agreement to
Substitute Collateral dated December 6, 1993, between the
Company and the holders of the Company's Lease Notes. (I)(vii)
10.4 Copy of Net Revenue Interest Assignment dated December
6, 1993, between the Company and the Company's Lease Note
holders. (I)(viii)
10.5 Copy of Net Profits Royalty Conveyance dated December 6,
1993, between the Company and the Company's Lease Note
Holders. (I)(ix)
10.6 Copy of Prepayment and Termination Agreement dated
January 31, 1994, between the Company, Manufacturers Hanover
Trust Company (predecessor to Chemical Bank), as agent, and
Banque Paribas, Christiania Bank and Den norske Bank. (I)(x)
10.7 $35,000,000 Credit Agreement dated as of January 31,
1994, between the Company and Internationale Nederlanden
(U.S.) Capital Corporation ("INCC"), as Agent. (I)(xi)
10.8 Copy of Subordination Agreement among the Company, INCC
and the holders of the Secured Notes dated. (I)(xii)
10.9 Form of First Amendment of Secured Subordinated Note
dated January 31, 1994. (I)(xiii)
10.10 Form of First Amendment of Limited Recourse Secured
Lease Note dated January 31, 1994. (I)(xiv)
10.11 Stock Pledge Agreement dated January 31, 1994, among
the Company and INCC. (I)(v)
10.12 Deed of Trust, Mortgage, Assignment, Security Agreement
and Financing Statement from XCL-Texas, Inc. to INCC dated
January 31, 1994. (I)(xvi)
10.13 Form of Net Revenue Interest Assignment dated February
23, 1994, between the Company and the purchasers of the
Company's Series D, Cumulative Convertible Preferred Stock.
(I)(xvii)
10.14 Copy of financial consulting agreement between the
Company and San Jacinto Securities, Inc. dated. (I)(xviii)
10.15 Modification Agreement for Petroleum Contract on Zhao
Dong Block in Bohai Bay Shallow Water Sea Area of The
People's Republic of China dated March 11, 1994, between the
Company, China National Oil and Gas Exploration and
Development corporation and Apache Chine Corporation LDC.
(I)(xvix)
10.16 Amendment of Loan Agreement and Promissory Notes, and
option to Purchase Shares dated December 21, 1993 between
the Company and Estate of J. Edgar Monroe, J. Edgar Monroe
Foundation and Patrick A. Tesson. (E)(vii)
10.17 Letter Agreement dated May 25, 1994 between the
Company, L.M. Holdings Associates, L.P. and vendors holding
Purchase Note B with respect to the Lutcher Moore Tract.
(E)(viii)
10.18 Pledge of Shares, Security Agreement and Financing
Statement, dated effective April 15, 1994, between the
Company and Estate of J. Edgar Monroe, J. Edgar Monroe
Foundation and Patrick A. Tesson. (F)(xii)
10.19 Letter Agreement dated June 30, 1994 between the
Company, China Investment & Development Co. Ltd. and China
Investment and Development Corporation. (F)(xiii)
10.20 Letter Agreement dated July 10, 1994 between the
Company and holders of the Lease Notes. (F)(xiv)
10.21 Stock Purchase Agreement between the Company and
Provincial Securities Limited dated May 17, 1994. (F)(xv)
10.22 Consulting agreement between the Company and Sir
Michael Palliser dated April 1, 1994. (K)(i)
10.23 Consulting agreement between the Company and Mr. Arthur
W. Hummel, Jr. dated April 1, 1994. (K)(ii)
10.24 Letter Agreement between the Company and Mr. William
Wang dated June 2, 1992, executed effective February 10,
1993. (K)(iii)
10.25 First Amendment to Credit Agreement between the Company
and Internationale Nederlanden (U.S.) Capital Corporation
dated April 13, 1995. *
10.26 Letter of Intent between the Company and CNPC United
Lube Oil Corporation for a joint venture for the manufacture
and sale of lubricating oil dated January 14, 1995. *
10.27 Purchase and Sale Agreement dated May 10, 1995, between
XCL Land, Ltd., a wholly owned subsidiary of the Company
("Seller") and The Succession of Edward M. Carmouche,
Matilda Gray Stream, Harold H. Stream, III, The Opal Gray
Trust, Matilda Geddings Gray Trust for Harold H. Stream,
III, Matilda Geddings Gray Trust for William Gray Stream,
Matilda Geddings Gray Trust for Sandra Gray Stream, M.G.
Stream Trust for Harold H. Stream, III, M.G. Stream Trust
for William Gray Stream, and M.G. Stream Trust for Sandra
Gray Stream ("Purchasers") whereby the Purchasers will
acquire Seller's fee interest in and to a parcel of
southwestern Louisiana land known as the Phoenix Lake Tract. *
10.28 Farmout Agreement dated May 10, 1995, between XCL-China
Ltd., a wholly owned subsidiary of the Company and Apache
Corporation whereby Apache will acquire an additional
interest in the Zhao Dong Block, Offshore People's Republic
of China. *
11. Statement re computation of per share earnings. *
15. Not applicable.
18. Not applicable.
19. Not applicable.
22. Not applicable.
23. Not applicable.
24. Not applicable.
27.1 Financial Data Schedule *
99.1 Glossary of Terms *
____________________________
* Filed herewith.
(A) Incorporated by reference to the Registration
Statement on Form 8-B filed on July 28, 1988, where it
appears as: (i) through (iii) as Exhibits 3(a) through 3(c),
respectively; and (iv) as Exhibit 4.1.
(B) Incorporated by reference to a Quarterly Report on
Form 10-Q filed on August 14, 1990, where it appears as:
(i) Exhibit 3 and (ii) Exhibit 4.4.
(C) Incorporated by reference to an Annual Report on
Form 10-K filed on March 30, 1992, where it appears as
Exhibit (3)(g).
(D) Incorporated by reference to a Quarterly Report on
Form 10-Q filed August 14, 1992, where it appears as: (i)
Exhibit 4.25 and (ii) Exhibit 4.28.
(E) Incorporated by reference to a Registration
Statement on Form S-3 (File No. 33-68552) where it appears
as: (i) Exhibit 4.27; (ii) Exhibit 4.14; (iii) Exhibit 4.16;
(iv) Exhibit 4.17; (v) Exhibit 4.19; (vi) Exhibit 10.1;
(vii) Exhibit 10.5; and (viii) Exhibit 10.6.
(F) Incorporated by reference to Post-Effective
Amendment No. 2 to Registration Statement on Form S-3 (File
No. 33-68552) where it appears as: (i) through (xi) Exhibits
4.28 through 4.38, respectively; and (xii) through (xv)
Exhibits 10.7 through 10.10, respectively.
(G) Incorporated by reference to a Current Report on
Form 8-K filed on August 13, 1990, where it appears as
Exhibit 4.
(H) Incorporated by reference to Quarterly Report on
Form 10-Q filed May 15, 1991, where it appears as: (i)
Exhibit 4.1; (ii) Exhibit 4.2; and (iii) Exhibit 4.5.
(I) Incorporated by reference to Amendment No. 1 to
Annual Report on Form 10-K filed April 15, 1994, where it
appears as: (i) Exhibit 4.35; (ii) Exhibit 4.31; (iii)
Exhibit 4.32; (iv) Exhibit 4.36; (v) Exhibit 4.37; (vi)
through (xvix) Exhibit 10.36 through Exhibit 10.49.
(J) Incorporated by reference to an Annual Report on
Form 10-K for the fiscal year ended December 31, 1990, filed
April 1, 1991, where it appears as Exhibit 10.27.
(K) Incorporated by reference to Amendment No. 1 to an
Annual Report on Form 10-K/A No. 1 for the fiscal year ended
December 31, 1994, filed April 17, 1995, where it appears
as: (i) through (iii) Exhibits 10.22 through 10.24,
respectively.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period covered
by this report.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
XCL Ltd.
/s/ Pamela G. Shanks
By: __________________________
Pamela G. Shanks
Vice President-Finance and
Chief Financial Officer
Date: May 15 , 1995