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 June 30, 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.
245,528,567 shares Common Stock, $.01 par value were
outstanding on August 14, 1995.
XCL LTD. AND SUBSIDIARIES
TABLE OF CONTENTS
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)
June 30 December 31
Assets 1995 1994
------ ------- -----------
(Unaudited)
Current assets:
Cash and cash equivalents $ 2,502 $ 6,751
Accounts receivable, net 575 1,720
Amounts due from joint venture partner 3,000 --
Prepaid expenses 330 153
------- -------
Total current assets 6,407 8,624
------- -------
Property and equipment:
Oil and gas (full cost method):
Proved and evaluated properties 159,677 158,634
Unproved and unevaluated properties:
Domestic 38,661 37,856
Foreign 23,464 17,696
------- -------
62,125 55,552
Land, at cost 135 135
Other 3,022 3,018
------- -------
224,959 217,339
Accumulated depreciation, depletion
and amortization (112,074) (100,079)
------- -------
112,885 117,260
------- -------
Investments and assets held for sale 19,437 20,948
Deferred charges and other assets 2,652 2,971
------- -------
Total assets $ 141,381 $ 149,803
======= =======
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 3,918 $ 3,640
Accounts payable and accrued expenses
payable by joint venture partner 3,000 --
Royalty and production taxes payable 244 286
Dividends payable 679 965
Current maturities of limited-recourse debt 5,366 5,267
Other current maturities 5,031 29
------- -------
Total current liabilities 18,238 10,187
------- -------
Long-term debt, net of current maturities 35,775 41,607
Other non-current liabilities 2,869 2,809
Dividends payable in common stock 2,579 --
Commitments and contingencies (Note 7)
Shareholders' equity (Note 6):
Preferred stock-$1.00 par value; authorized
1,200,000 shares; issued shares of 649,244
at June 30, 1995 and December 31, 1994-
liquidation preference of $52.6 million
at June 30, 1995 649 649
Common stock-$.01 par value; authorized
350 million shares; issued shares of
239,459,293 at June 30, 1995 and
237,184,410 at December 31, 1994 2,395 2,372
Common stock held in treasury -
$.01 par value; 3,500,000 shares at
December 31, 1994 -- (35)
Additional paid-in capital 210,242 206,241
Accumulated deficit (131,366) (114,027)
------- -------
Total shareholders' equity 81,920 95,200
------- -------
Total liabilities and
shareholders'equity $ 141,381 $ 149,803
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
(Thousands of Dollars, Except Per Share Amounts)
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
1995 1994 1995 1994
---- ---- ---- ----
(Unaudited)
Oil and gas revenues $ 724 $ 1,209 $ 1,402 $ 2,547
------- ------- ------ ------
Oil and gas operating expenses:
Operating (including marketing) 283 358 564 644
Depreciation, depletion and amortization 638 861 1,296 1,761
Provision for impairment of oil and gas
properties 10,700 9,500 10,700 9,500
General and administrative 1,228 1,206 2,110 2,223
Taxes, other than income 224 293 350 590
------- ------- ------- -------
13,073 12,218 15,020 14,718
------- ------- ------- -------
Operating loss (12,349) (11,009) (13,618) (12,171)
------- ------- ------- -------
Other income (expenses):
Interest expense, net of amounts
capitalized (1,033) (424) (1,389) (879)
Other, net 119 18 132 43
------- ------ ------- -------
(914) (406) (1,257) (836)
------- ------ ------- -------
Loss before extraordinary item (13,263) (11,415) (14,875) (13,007)
Extraordinary charge for early
extinguishment of debt -- -- -- (1,742)
------- ------- ------- -------
Net loss (13,263) (11,415) (14,875) (14,749)
Preferred stock dividends (2,464) (2,554) (2,464) (2,554)
------- ------- ------- -------
Net loss attributable to common stock $ (15,727) $ (13,969) $ (17,339) $ (17,303)
======= ======= ======= =======
Loss per common and common equivalent share:
Net loss before extraordinary item $ (.07) $ (.07) $ (.07) $ (.09)
Extraordinary item -- -- -- (.01)
------ ------- ------- -------
Net loss per common and common
equivalent share $ (.07) $ (.07) $ (.07) $ (.10)
====== ======= ======= =======
Average number of common and common
equivalent shares outstanding 236,966 189,629 235,739 175,616
======= ======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of Dollars)
Six Months Ended June 30
------------------------
1995 1994
---- ----
(Unaudited)
Cash flows from operating activities:
Net loss $ (14,875) $ (14,749)
------- -------
Adjustments to reconcile net loss to net
cash provided by (used in)
operating activities:
Depreciation, depletion and amortization 1,296 1,761
Provision for impairment of oil and
gas properties 10,700 9,500
Extraordinary charge for extinguishment of debt -- 1,742
Change in assets and liabilities:
Accounts receivable 1,146 639
Receivable from joint venture partner (3,000) --
Prepaid expenses (177) (183)
Accounts payable and accrued expenses 336 (1,309)
Accounts payable and accrued expenses
payable by joint venture partner 3,000 --
Royalty and production taxes payable (42) (242)
Other, net 254 276
------- -------
Total adjustments 13,513 12,184
------- -------
Net cash used in operating activities (1,362) (2,565)
------- -------
Cash flows from investing activities:
Capital expenditures (6,318) (10,022)
Investments (890) (1,350)
Proceeds from sale of assets 1,709 --
Other 351 447
------- -------
Net cash used in investing activities (5,148) (10,925)
------- -------
Cash flows from financing activities:
Proceeds from sales of common stock 48 30,131
Proceeds from sales of treasury stock 2,364 --
Proceeds from issuance of preferred stock -- 1,600
Loan proceeds -- 29,200
Proceeds from exercise of warrants and options 410 3,195
Payment of long-term debt (248) (33,381)
Payment of preferred stock dividends (250) --
Stock issuance costs and other (63) (3,021)
------- -------
Net cash provided by financing activities 2,261 27,724
------- -------
Net increase (decrease) in cash and cash equivalents (4,249) 14,234
Cash and cash equivalents at beginning of period 6,751 1,646
------- -------
Cash and cash equivalents at end of period $ 2,502 $ 15,880
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
XCL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
(1) General
The consolidated financial statements at June 30,
1995, and for the three months and six 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. (formerly The
Exploration Company of Louisiana, Inc.) and subsidiaries as
of June 30, 1995, and December 31, 1994, and the results of
their operations for the three months and six months ended
June 30, 1995 and 1994, and their cash flows for the six
months ended June 30, 1995 and 1994, have been included.
Certain reclassifications, including reclassifying accrued
interest on the subordinated debt to be paid in Common Stock
and the reserve for franchise tax to long-term liabilities,
have been made to prior period financial statements to
conform to current period presentation. 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 June 30, 1995, the Company had an operating
cash balance of $2.5 million and a working capital deficit
of $11.8 million, which includes $5.4 million in limited
recourse debt associated with the Lutcher Moore Tract and
$5.0 million in bank debt. To provide for additional near
term liquidity, the Company has negotiated the terms of a
proposed sale of the Lutcher Moore Tract, which upon closing
would result in approximately $14.8 million net of selling
expenses. This amount would eliminate the working capital
deficit, with $5.4 million to be applied to retire the
Lutcher Moore limited recourse debt, $5.0 million to be
applied to prepay principal on the Company's bank debt, and
the remainder to be applied to other working capital
requirements. The sale is subject to the execution of
definitive agreements, the purchaser securing financing and
other customary conditions to closing. If this transaction
does not close timely, the Company would have to pursue the
sale of the Lutcher Moore Tract to other interested parties
or the sale of other assets or the issuance of additional
equity securities to fund required debt payments and other
near-term capital requirements.
In addition, during the third quarter of 1995, the
Company exercised its warrants to purchase 700,000 shares of
Terrenex common stock and recognized $580,000 in net
proceeds from the sale of the Terrenex stock. As there was
no remaining basis attributed to these warrants the Company
will recognize a gain in the third quarter. The Company also
received approximately $613,000 in proceeds from the
exercise of Common Stock warrants and the sale of minor
assets.
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 a $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 reserves. During the second quarter two
unsuccessful recompletions in the Cox Field caused a
downward revision in reserve quantities which may negatively
impact the next borrowing base determination scheduled for
September 30, 1995. Therefore, the Company plans to prepay
$5 million in scheduled payments, which is $1.4 million in
excess of payments required by the credit agreement.
Subsequent to year-end 1994 the Company's bank
agreement was amended to modify certain covenant
requirements through September 29, 1995. The Company
expects to request an amendment of these covenants to ensure
compliance through December 31, 1995. While management
expects the bank to grant the amendment, should this not
occur, the Company would be in violation of its credit
agreement on September 30, 1995, giving the bank the right
to accelerate payment of the debt after applicable grace
periods. The Company would have to pursue the sale of other
assets or the issuance of additional equity securities to
fund any such accelerated payments.
Pricing for a significant portion of the Company's
domestic gas reserves is subject to a price floor
established by a long-term gas 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 and may not be achieved for the contract year
ending April 30, 1996 due to the downward revision in
reserve estimates at June 30, 1995. The Company's proved
reserve estimates indicate that with sufficient development
the minimum volumes will be achieved for the contract year
ending April 30, 1997.
In light of the Company's decision to focus its
activities in China, management is pursuing the sale of the
Cox Field for cash or its exchange 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 retire its bank debt or
to renegotiate the terms of its bank debt to reflect an
improved cash flow profile.
On August 10, 1995 Chinese authorities approved
the agreement reached on May 10, 1995, between the Company
and Apache Corporation ("Apache") pursuant to which Apache
will pay 100 percent of the costs to drill, test and
complete two wildcat wells and one appraisal well on the
Zhao Dong Block. If Apache elects to drill a third wildcat
well, it will also pay 100 percent of those costs. To
reflect the effect of the approval by the Chinese
authorities of the May 10, 1995 agreement on the June 30,
1995 financial statements, the Company recorded a receivable
and a corresponding reduction of capital expenditures of
approximately $3 million for its exploration costs payable
by Apache. The amounts advanced by Apache are recoverable
from revenues generated from Zhao Dong Block production.
Future expenditures beyond those described above will be
borne 50 percent each by the Company and Apache. The Company
estimates that Apache will pay for all but approximately $5
million to $6 million of its exploration expenditures
related to the Zhao Dong Block during the next twelve
months.
Pursuant to this agreement Apache will also
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. In consideration for the above
described payments, Apache will assume operatorship of the
Zhao Dong Block and increase its interest in the Zhao Dong
Block from 33.33 percent to 50 percent.
To fund its share of development of the "C" area
initial discovery on the Zhao Dong Block, the Company is in
discussions with INCC ("Internationale Nederlanden (U.S.)
Capital Corporation") 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.
On July 17, 1995, the Company signed a contract
with CNPC United Lube Oil Corporation to form a joint
venture company to engage in the manufacturing, distribution
and marketing of lubricating oil in China and southeast
Asian markets. The joint venture will have a 30 year life
unless extended. The registered capital of the joint venture
will be $4.9 million, with the Company to contribute $2.4
million for its 49 percent interest, of which $0.6 million
has been paid. The remaining $1.8 million is due pursuant to
a schedule, with the first payment due after a business
license is issued and the last payment due June 30, 1996.
The Chinese side will contribute an existing lubricating oil
blending plant in Langfang, China, with a value of $2.5
million as its investment for fifty-one percent of the
stock. The contract must be approved by Chinese authorities
before a business license can be issued and the joint
venture commences operations. Certain additional documents
must be submitted in connection with the application for the
business license. The Company expects the license to be
issued by September 30, 1995. In a letter of intent executed
contemporaneously with the contract, the parties have agreed
to consider the feasibility of (i) constructing a second
lubricating oil blending plant at a port facility near
Tianjin, China, (ii) contributing to the joint venture a
second existing plant in southwest China, and (iii) other
projects, including constructing oil terminals on the north
and south coasts of China, and engaging in upgrading certain
existing refineries within China. As of June 30, 1995, the
Company has invested $.9 million.
Management has historically had the ability to
negotiate required amendments to its credit agreement and to
generate funds through the sale of assets or securities.
Management 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 commencement of production in China and continued
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 its
Series A and Series B Preferred Stocks of $2.6 million and
$2.5 million for the six months ended December 31, 1994 and
June 30, 1995, respectively. Effective June 26, 1995, the
Company entered into agreements with three U.S. holders of
Series A Preferred Stock representing approximately 59
percent of the class pursuant to which they elected to
receive their dividends in Common Stock of the Company. The
Company will issue approximately 4.3 million shares during
the third quarter under these agreements. The Company has
agreed to register these shares of Common Stock. Cash
dividends remaining to be paid aggregate $1.2 million, of
which $0.5 million has been delivered to the Company's
registrar.
The Company's Series A Preferred Stock dividend
requirements are approximately 2.7 million British pounds
sterling annually. The Company's credit agreement restricts
the payment of cash dividends and currently, insufficient
liquidity exists to continue pay such amounts. Management
intends to pay future preferred stock dividends by selling
additional shares of the Company's Common Stock.
On May 16, 1995, the Company received notice from
the Series B Preferred holder exercising its redemption
rights. The Company has elected to redeem in shares of
Common Stock and the holder has exercised its option to have
the Company sell its shares of Common Stock. The aggregate
redemption price is $5 million, plus accrued dividends from
January 1, 1995 to the date of redemption. The Company has
registered 5.3 million shares for sale and has reserved
additional shares should the sale of the registered shares
not be sufficient to fulfill the redemption obligation.
(3) Supplemental Cash Flow Information
There were no income taxes paid during the six
month periods ended June 30, 1995 and 1994. (See Note 7).
Interest and associated capitalized costs for the
three and six month periods ended June 30 totaled $.7
million and $1.7 million, respectively for 1995 and $1.5
million and $3.1 million, respectively for the corresponding
periods in 1994. Interest paid during the three and six
month periods ended June 30, 1995 and 1994 amounted to $.7
million and $1.3 million, and $.6 million and $1.4 million,
respectively.
During the six months ended June 30, 1995 and
1994, the Company completed the following noncash
transactions not reported elsewhere herein:
1994:
Effective June 30, 1994, the Company conveyed
certain land holdings (fair market value of $320,000) in
payment of a two-year consulting agreement which expired on
that date.
(4) Investments and Assets Held for Sale
Lube Oil Investment
-------------------
On July 17, 1995, the Company signed a contract
with CNPC United Lube Oil Corporation to form a joint
venture company to engage in the manufacturing, distribution
and marketing of lubricating oil in China and southeast
Asian markets. (See Note 2.)
Phoenix Lake Tract
------------------
On May 18, 1995, the Company sold its 77.78
percent fee interest in 11,600 gross acres comprising the
Phoenix Lake Tract retaining 75 percent of its mineral
interest underlying those lands, less and except two tracts
covering approximately 77 net acres in which XCL retained no
mineral interest. The purchase price was comprised of
approximately $1.7 million in cash and a $.5 million
reduction in obligations owed by the Company to the
purchaser. No gain or loss was recognized on the sale.
(5) Debt
Long-term debt at June 30, 1995 consists of the following
(000's):
Current Long-Term
Maturities Portion Total
---------- --------- -----
Collateralized credit facility $ 5,000 $20,115 $25,115
Subordinated debt (due April 5 ,2000) -- 15,000 15,000
Building Mortgage 31 660 691
------- ------ ------
Total $ 5,031 $35,775 $40,806
======= ====== ======
Lutcher Moore Group
Limited Recourse Debt $ 5,366 $ -- $ 5,366
======= ====== ======
Substantially all of the Company's assets
collateralize certain of these borrowings. Accounts payable
and accrued expenses include interest accrued at June 30,
1995, of approximately $.6 million.
Lutcher Moore Group Limited Recourse Debt :
------------------------------------------
Mortgage and Seller Notes.
-------------------------
At June 30, 1995, approximately $2.7 million of Mortgage
Notes (net of amounts escrowed for payment) and $2.7 million
of Seller Notes were outstanding. In June 1995, the terms
of the Mortgage Notes were modified providing that the
remaining principal (which bears interest at 10% per annum)
is payable on demand, and if no demand is made in six
monthly installments of $52,300 each, commencing July 15,
1995, plus a final payment of all outstanding principal and
interest due on January 15, 1996. Seller Notes bear interest
of 8 percent and have a final maturity in June 1996.
Collateralized Credit Facility
------------------------------
Subsequent to year end 1994, the INCC agreement
was amended to modify certain covenant requirements through
September 29, 1995. The Company expects to request a
further amendment to ensure compliance through December 31,
1995, and to prepay $5 million of this debt during 1995.
(See Note 2.)
Secured Subordinated Debt
-------------------------
Approximately 1.6 million shares of Common Stock
were issued in payment of $1.3 million of interest due on
the Subordinated debt for the six month period ended April
1, 1995.
8% Subordinated Convertible Notes
---------------------------------
Effective May 31, 1994, holders of the 8%
Subordinated Convertible Notes exercised their conversion
rights and converted the remaining $2.25 million in
principal amount into an aggregate 2.5 million shares of
Common Stock.
(6) Preferred Stock and Common Stock
As of June 30, 1995, the Company had the following
shares of Preferred Stock outstanding:
Shares Liquidation Value
Series A 599,244 $47,639,898 *
Series B 50,000 5,000,000
*50 British pounds sterling per share (1 U.K. pound sterling =
U.S. $1.59 at June 30, 1995).
On May 16, 1995, the Company received notice from
its Series B Preferred holder exercising their option to
have their shares of preferred stock redeemed. (See Note 2.)
Series C Preferred Stock
------------------------
In June, 1994, the Company issued a redemption
notice to the holders of the Series C Preferred Stock
pursuant to which the Company would redeem their shares for
$110 per share plus accrued dividends, in cash and all such
holders elected to convert their shares of Series C
preferred Stock into Common Stock at a conversion price of
$.463 per share. The Company issued 1,871,660 shares of
Common stock in respect of such conversion during the second
quarter of 1994.
Dividends
---------
The Company declared cash dividend payments on its
Series A and Series B Preferred Stocks of $2.6 million and
$2.5 million for the six months ended December 31, 1994 and
June 30, 1995, respectively. Effective June 26, 1995, the
Company entered into agreements with three U.S. holders of
Series A Preferred Stock representing approximately 59
percent of the class pursuant to which they elected to
receive their dividends in Common Stock of the Company. The
Company will issue approximately 4.3 million shares during
the third quarter under these agreements. The Company has
agreed to register these shares of Common Stock. Cash
dividends remaining to be paid aggregate $1.2 million, of
which $0.5 million has been delivered to the Company's
registrar.
During the six months ended June 30, 1994, 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 June 30, 1993
and December 31, 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. On June 30,
1994, the Company declared dividends payable in Common stock
on its Series A and Series B Preferred Stock totaling
1,566,957 shares of Common Stock. Additionally, the Company
declared Series D Preferred Stock dividends payable in-kind
in shares of Series D Preferred Stock totaling 1,751 shares.
The Company issued such shares in the third quarter of 1994.
(7) Commitments and Contingencies and Subsequent Events
Other commitments, contingencies and subsequent
events include:
o The Company has future commitments of $1.8 million
associated with its joint venture contract to enter the
lubricating oil business in China (see Note 2).
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
June 30, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
-------------------------------
At June 30, 1995, the Company had an operating
cash balance of $2.5 million and a working capital deficit
of $11.8 million, which includes $5.4 million in limited
recourse debt associated with the Lutcher Moore Tract and
$5.0 million in bank debt. To provide for additional near
term liquidity, the Company has negotiated the terms of a
proposed sale of the Lutcher Moore Tract, which upon closing
would result in approximately $14.8 million net of selling
expenses. This amount would eliminate the working capital
deficit, with $5.4 million to be applied to retire the
Lutcher Moore limited recourse debt, $5.0 million to be
applied to prepay principal on the Company's bank debt, and
the remainder to be applied to other working capital
requirements. The sale is subject to the execution of
definitive agreements, the purchaser securing financing and
other customary conditions to closing. If this transaction
does not close timely, the Company would have to pursue the
sale of the Lutcher Moore Tract to other interested parties
or the sale of other assets or the issuance of additional
equity securities to fund required debt payments and other
near-term capital requirements.
In addition, during the third quarter of 1995, the
Company exercised its warrants to purchase 700,000 shares of
Terrenex common stock and recognized $580,000 in net
proceeds from the sale of the Terrenex stock. As there was
no remaining basis attributed to these warrants the Company
will recognize a gain in the third quarter. The Company also
received approximately $613,000 in proceeds from the
exercise of Common Stock warrants and the sale of minor
assets.
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 a $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 reserves. During the second quarter two
unsuccessful recompletions in the Cox Field caused a
downward revision in reserve quantities which may negatively
impact the next borrowing base determination scheduled for
September 30, 1995. Therefore, the Company plans to prepay
$5 million in scheduled payments, which is $1.4 million in
excess of payments required by the credit agreement.
Subsequent to year-end 1994 the Company's bank
agreement was amended to modify certain covenant
requirements through September 29, 1995. The Company
expects to request an amendment of these covenants to ensure
compliance through December 31, 1995. While management
expects the bank to grant the amendment, should this not
occur, the Company would be in violation of its credit
agreement on September 30, 1995, giving the bank the right
to accelerate payment of the debt after applicable grace
periods. The Company would have to pursue the sale of other
assets or the issuance of additional equity securities to
fund any such accelerated payments.
Pricing for a significant portion of the Company's
domestic gas reserves is subject to a price floor
established by a long-term gas 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 and may not be achieved for the contract year
ending April 30, 1996 due to the downward revision in
reserve estimates at June 30, 1995. The Company's proved
reserve estimates indicate that with sufficient development
the minimum volumes will be achieved for the contract year
ending April 30, 1997.
In light of the Company's decision to focus its
activities in China, management is pursuing the sale of the
Cox Field for cash or its exchange 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 retire its bank debt or
to renegotiate the terms of its bank debt to reflect an
improved cash flow profile.
On August 10, 1995 Chinese authorities approved
the agreement reached on May 10, 1995, between the Company
and Apache Corporation ("Apache") pursuant to which Apache
will pay 100 percent of the costs to drill, test and
complete two wildcat wells and one appraisal well on the
Zhao Dong Block. If Apache elects to drill a third wildcat
well, it will also pay 100 percent of those costs. To
reflect the effect of the approval by the Chinese
authorities of the May 10, 1995 agreement on the June 30,
1995 financial statements, the Company recorded a receivable
and a corresponding reduction of capital expenditures of
approximately $3 million for its exploration costs payable
by Apache. The amounts advanced by Apache are recoverable
from revenues generated from Zhao Dong Block production.
Future expenditures beyond those described above will be
borne 50 percent each by the Company and Apache. The Company
estimates that Apache will pay for all but approximately $5
million to $6 million of its exploration expenditures
related to the Zhao Dong Block during the next twelve
months.
Pursuant to this agreement Apache will also
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. In consideration for the above
described payments, Apache will assume operatorship of the
Zhao Dong Block and increase its interest in the Zhao Dong
Block from 33.33 percent to 50 percent.
To fund its share of development of the "C" area
initial discovery on the Zhao Dong Block, the Company is in
discussions with INCC ("Internationale Nederlanden (U.S.)
Capital Corporation") 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.
On July 17, 1995, the Company signed a contract
with CNPC United Lube Oil Corporation to form a joint
venture company to engage in the manufacturing, distribution
and marketing of lubricating oil in China and southeast
Asian markets. The joint venture will have a 30 year life
unless extended. The registered capital of the joint venture
will be $4.9 million, with the Company to contribute $2.4
million for its 49 percent interest, of which $0.6 million
has been paid. The remaining $1.8 million is due pursuant to
a schedule, with the first payment due after a business
license is issued and the last payment due June 30, 1996.
The Chinese side will contribute an existing lubricating oil
blending plant in Langfang, China, with a value of $2.5
million as its investment for fifty-one percent of the
stock. The contract must be approved by Chinese authorities
before a business license can be issued and the joint
venture commences operations. Certain additional documents
must be submitted in connection with the application for the
business license. The Company expects the license to be
issued by September 30, 1995. In a letter of intent executed
contemporaneously with the contract, the parties have agreed
to consider the feasibility of (i) constructing a second
lubricating oil blending plant at a port facility near
Tianjin, China, (ii) contributing to the joint venture a
second existing plant in southwest China, and (iii) other
projects, including constructing oil terminals on the north
and south coasts of China, and engaging in upgrading certain
existing refineries within China. As of June 30, 1995, the
Company has invested $.9 million.
Management has historically had the ability to
negotiate required amendments to its credit agreement and to
generate funds through the sale of assets or securities.
Management 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 commencement of production in China and continued
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 its
Series A and Series B Preferred Stocks of $2.6 million and
$2.5 million for the six months ended December 31, 1994 and
June 30, 1995, respectively. Effective June 26, 1995, the
Company entered into agreements with three U.S. holders of
Series A Preferred Stock representing approximately 59
percent of the class pursuant to which they elected to
receive their dividends in Common Stock of the Company. The
Company will issue approximately 4.3 million shares during
the third quarter under these agreements. The Company has
agreed to register these shares of Common Stock. Cash
dividends remaining to be paid aggregate $1.2 million, of
which $0.5 million has been delivered to the Company's
registrar.
The Company's Series A Preferred Stock dividend
requirements are approximately 2.7 million British pounds
sterling annually. The Company's credit agreement restricts
the payment of cash dividends and currently, insufficient
liquidity exists to continue pay such amounts. Management
intends to pay future preferred stock dividends by selling
additional shares of the Company's Common Stock.
On May 16, 1995, the Company received notice from
the Series B Preferred holder exercising its redemption
rights. The Company has elected to redeem in shares of
Common Stock and the holder has exercised its option to have
the Company sell its shares of Common Stock. The aggregate
redemption price is $5 million, plus accrued dividends from
January 1, 1995 to the date of redemption. The Company has
registered 5.3 million shares for sale and has reserved
additional shares should the sale of the registered shares
not be sufficient to fulfill the redemption obligation.
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 and six month period ended June
30, 1995, the Company incurred net losses of $13.3 million
and $14.9 million, respectively, as compared to net losses
of $11.4 million and $14.7 million, respectively, during the
corresponding periods in 1994. The six months results for
1995 include a $10.7 million provision for impairment of oil
and gas properties as compared to a $9.5 provision in 1994.
The carrying amounts of the Company's properties in Texas
were written down by $10.7 million in the second quarter of
1995 in order to comply with the ceiling limitation
prescribed by the Securities and Exchange Commission (the
"SEC") principally due to downward revisions in estimated
reserves. Poor results in two recent recompletions (the BMT
69 No. 1 and the Armstrong 258 No. 1) caused the deletion of
approximately 7.0 net BCF of gas in the Berry R. Cox Field.
The 1994 results 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 and six month
periods ended June 30, 1995, were $.7 million and $1.4
million compared to $1.2 million and $2.5 million during the
corresponding periods in 1994. Revenues declined due to
reduced production volumes and decreases in gas prices which
were not offset by new production resulting from additional
drilling in the Cox Field. Operating costs as a percent of
revenues increased as a result of fixed costs remaining
constant while prices declined. As the Company has not
undertaken 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
continued operating losses. The Company realized an average
gas price of $1.29 per Mcf for the six month period ended
June 30, 1995, as compared to an average of $1.85 per Mcf
for the six 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 and other
China projects, future oil and gas revenues will be directly
related to the degree of drilling success initially
experienced in the Zhao Dong Block.
Net capitalized costs for the Company's domestic
oil and gas properties at June 30, 1995, approximate the
"ceiling-test" limitation as prescribed by the "SEC"
guidelines. Remaining unproved and unevaluated properties
at June 30, 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.
Effects on revenues are summarized on the
following table:
Three Months Six Months
Ended Ended
June 30 June 30
------------ ----------
Oil and Gas Revenues - 1994 $ 1.2 $ 2.5
Effect of changes in volume of
gas production and sales (0.3) (0.5)
Effect of changes in gas prices (0.3) (0.7)
Effect of oil and liquid revenues, net 0.1 0.1
---- ----
Oil and Gas Revenues - 1995 $ 0.7 $ 1.4
The depreciation, depletion and amortization rate
for the six month period in 1995 averaged $1.26 per Mcf
compared to $1.23 per Mcf in the corresponding period of
1994. Interest expense will continue to increase throughout
the year as the Company will not capitalize interest on the
debt directly associated with the Cox Field because it is
considering the sale or exchange of this property.
XCL LTD. AND SUBSIDIARIES
June 30, 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 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 non-participating
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 it's
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
believes that its has meritorious defenses and it has
instructed its counsel to contest these claims.
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.
On June 14, 1995, the Company held an Annual
Meeting of Shareholders at the New York East Side Marriott
Hotel, 525 Lexington Avenue, New York, New York. A quorum
was present, and the matters put to a vote at the meeting
were (1) election of three Class II directors of the
Company's Board of Directors, and (2) approval of an
amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock.
The Company's Board of Directors is divided into
three Classes with each Class consisting of at least one
executive director and one non-executive director serving
three year terms. Messrs. Marsden W. Miller, Jr., Edmund
McIlhenny, Jr. and Francis J. Reinhardt, Jr. were elected as
Class II directors at this meeting. A total of not fewer
than 159,012,295 votes, constituting a plurality of all of
the votes cast at the meeting by holders of share present in
person or by proxy, were voted for each of the named persons
elected as Class II directors to the Company to serve until
the Annual Meeting of Shareholders to be held in 1998.
Class III directors are Messrs. John T. Chandler
and Fred Hofheinz, whose terms expire at the 1996 Annual
Meeting of Shareholders, and Class I directors are Messrs.
David A. Melman, Arthur W. Hummel, Jr., and Sir Michael
Palliser, whose terms expire at the 1997 Annual Meeting of
Shareholders..
With respect to the resolution relating to the
approval and adoption of an amendment to Article FOURTH of
the Company's Certificate of Incorporation to increase the
Company's total current authorized capital stock from
356,200,000 shares to 351,200,000 shares, consisting of
350,000,000 shares of Common Stock, par value $.01 per
share, and 1,200,000 shares of
Preferred Stock, par value $1.00 per share, a total of
159,012,295 votes were cast to ratify the amendment, as
follows:
148,762,674 votes in favor
9,447,230 votes against
802,391 abstentions
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, 1944 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. (L)(i)
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
China 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. (L)(ii)
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. (L)(iii)
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. (L)(iv)
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. (L)(v)
10.29 Modification Agreement of Non-Negotiable Promissory Note
and Waiver Agreement between Lutcher & Moore Cypress Lumber
Company and L.M. Holding Associates, L.P. dated June 15,
1995. *
10.30 Third Amendment to Credit Agreement between Lutcher-Moore
Development Corp., Lutcher & Moore Cypress Lumber Company,
The First National Bank of Lake Charles, Mary Elizabeth Mecom,
The Estate of John W. Mecom, The Mary Elizabeth Mecom Irrevocable
Trust, Matilda Gray Stream, The Opal Gray Trust,
Harold H. Stream III, The Succession of Edward M. Carmouche,
Virginia Martin Carmouche and L.M. Holding Associates, L.P.
dated June 15, 1995. *
10.31 Second Amendment to Appointment of Agent for Collection and
Agreement to Application of Funds between Lutcher-Moore
Development Corp., Lutcher & Moore Cypress Lumber Company,
L.M. Holding Associates, L.P. and The First National Bank of
Lake Charles, dated June 15, 1995. *
10.32 Contract of Chinese Foreign Joint Venture dated July 17, 1995,
between United Lube Oil Corporation and XCL China Ltd. for the
manufacturing and selling of lubricating oil and related products.*
10.33 Letter of Intent dated July 17, 1995 between CNPC United Lube
Oil Corporation and XCL Ltd. for discussion of further projects. *
10.34 Form of Letter Agreement dated June 26, 1995, between the Company
and three of its U.S. holders of Series A Preferred Stock,
whereby the following such holders have agreed to accept
Common Stock in respect of dividends payable December 31, 1994
and June 30, 1995 in the amounts set forth:
12/31/94 6/30/95
Holder Dividend Dividend Shares
Kayne Anderson
Investment Management $627,788.12 $689,238.87 2,225,024
Cumberland Associates, Inc. $429,056.51 $445,838.59 1,487,294
T. Rowe Price & Associates $159,975.00 $166,232.25 554,543 *
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.
(L) Incorporated by reference to Quarterly Report on Form
10-Q for the quarter ended March 31, 1995, filed May 15,
1995, where it appears as: (i) Exhibit 4.28; and (ii)
through (v) Exhibits 10.25 through 10.28, respectively.
(b) Reports on Form 8-K
A current report on Form 8-K was filed on May 25,
1995, to report the sale of the Phoenix Lake Tract located
in southwestern Louisiana.
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: August 14, 1995
Commission File No. 1-10669
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
EXHIBITS
to
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of
XCL LTD.
The Securities Exchange Act of 1934
June 30, 1995
XCL Ltd. and Subsidiaries
Exhibit 11-Computation of Earnings Per Common and Common Equivalent Share
(Amounts in thousands except, per share amounts)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
---- ---- ---- ----
PRIMARY:
Loss before extraordinary item $(13,263) $(11,415) $(14,875) $(13,007)
Extraordinary charge for early
extinguishment of debt -- -- -- (1,742)
------ ------ ------ ------
Net loss (13,263) (11,493) (14,797) (14,749)
Dividends on preferred stock (2,464) (2,554) (2,464) (2,554)
------ ------ ------ -------
Net loss attributable to common
stock $(15,727) $(13,969) $(17,339) $(17,303)
====== ====== ====== ======
Weighted average number of shares
common stock outstanding 236,966 189,629 235,739 175,616
Common stock equivalents
(computed using treasury stock
method) -- -- -- --
------- ------- ------- -------
Average number of shares of
common stock and common stock
equivalents outstanding 236,966 189,629 235,739 175,616
======= ======= ======= =======
Net loss per common and common
equivalent share:
Net loss before
extraordinary item $ (.07) $ (.07) $ (.07) $ (.09)
Extraordinary item -- -- -- (.01)
------- ------- ------ ------
Net loss per common and common
equivalent share $ (.07) $ (.07) $ (.07) $ (.10)
======= ======= ======= ======
FULLY DILUTED:
Fully diluted net loss per common
and common equivalent share (1) (1) (1) (1)
----------
(1) All amounts are anti-dilutive or immaterial and therefore not
presented in the financial statements.