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, 1996
OR
[ ] Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
Commission File No. 1-10669
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XCL Ltd.
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(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
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(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. [X] YES [ ] NO
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
266,040,305 shares Common Stock, $.01 par value were
outstanding on May 15, 1996.
XCL LTD.
TABLE OF CONTENTS
Page
PART I
Item 1. Financial Statements............................ 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...16
PART II
Item 1. Legal Proceedings...............................20
Item 4. Submission of Matters to a Vote of Security
Holders.........................................21
Item 6. Exhibits and Reports on Form 8-K................22
XCL Ltd. and Subsidiaries
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
March 31 December 31
-------- -----------
Assets 1996 1995
------ ---- ----
(Unaudited)
Current assets:
Cash and cash equivalents $ 366 $ 1,610
Accounts receivable, net 364 340
Amounts receivable from sale of assets -- 4,151
Subscriptions receivable -- 483
Prepaid expenses 210 205
Assets held for sale 3,030 4,376
------- -------
Total current assets 3,970 11,165
------- -------
Property and equipment:
Oil and gas (full cost method):
Unproved and unevaluated foreign
properties 28,974 27,315
Land, at cost 135 135
Other 3,024 3,017
------- -------
32,133 30,467
Accumulated depreciation, depletion and
amortization (1,902) (1,845)
------- -------
30,231 28,622
------- -------
Investments 5,529 5,369
Assets held for sale 25,072 25,395
Deferred charges and other assets 1,688 1,785
------- -------
Total assets $ 66,490 $ 72,336
======= =======
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 3,940 $ 3,884
Royalty and production taxes payable 195 218
Dividends payable 928 928
Current maturities of limited
recourse debt 5,123 5,229
Collateralized credit facility 19,897 25,115
Other current maturities 31 30
------- -------
Total current liabilities 30,114 35,404
------- -------
Long-term debt, net of current maturities 15,634 15,644
Other non-current liabilities 3,491 4,388
Commitments and contingencies (Note 7)
Shareholders' equity:
Preferred stock-$1.00 par value;
authorized 1,200,000 shares; issued
shares of 688,634 at March 31, 1996
and 680,570 at December 31,1995-
liquidation preference of $54.7 million
at March 31, 1996 689 681
Preferred stock subscribed -- 4
Common stock-$.01 par value; authorized
350 million shares; issued shares of
260,960,910 at March 31, 1996 and
256,157,224 at December 31, 1995 2,610 2,561
Common stock held in treasury -
$.01 par value; 2,062,065 shares at
March 31, 1996 and 2,514,238 at
December 31, 1995 (21) (25)
Additional paid-in capital 222,330 220,364
Accumulated deficit (208,357) (206,685)
------- -------
Total shareholders' equity 17,251 16,900
------- -------
Total liabilities and
shareholders' equity $ 66,490 $ 72,336
======= =======
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
------------------
1996 1995
---- ----
(Unaudited)
Oil and gas revenues $ 576 $ 678
------ ------
Oil and gas operating expenses:
Operating (including marketing) 152 281
Depreciation, depletion and amortization 56 658
Depletion - oil and gas assets held for sale 276 --
General and administrative 1,075 882
Taxes, other than income 74 126
------ ------
1,633 1,947
------ ------
Operating loss (1,057) (1,269)
------ ------
Other income (expense):
Interest expense, net of amounts capitalized (636) (356)
Other, net 52 13
------ ------
(584) (343)
------ ------
Net loss (1,641) (1,612)
Preferred stock dividends (31) --
------ ------
Net loss attributable to common stock $(1,672) $(1,612)
====== ======
Net loss per common and common equivalent share $ (.01) $ (.01)
====== ======
Average number of common and common equivalent
shares outstanding 256,807 234,499
======= =======
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
------------------
1996 1995
---- ----
(Unaudited)
Cash flows from operating activities:
Net loss $ (1,641) $ (1,612)
------ -------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 332 658
Change in assets and liabilities:
Accounts receivable 453 1,186
Prepaid expenses (5) 5
Accounts payable and accrued expenses (93) (768)
Royalty and production taxes payable (23) (82)
Other, net 36 518
------ -------
Total adjustments 700 1,517
------ -------
Net cash used in operating activities (941) (95)
------ -------
Cash flows from investing activities:
Capital expenditures (1,123) (4,095)
Investments (160) (759)
Proceeds from sale of assets 5,700 --
Other 24 (517)
------ -------
Net cash provided by (used in)
investing activities 4,441 (5,371)
------ -------
Cash flows from financing activities:
Proceeds from sales of common stock 510 48
Proceeds from sales of treasury stock -- 1,603
Payment for treasury stock (141) --
Proceeds from issuance of preferred stock 282 --
Proceeds from exercise of warrants and options -- 69
Payment of long-term debt (5,352) (181)
Payment of preferred stock dividends -- (250)
Stock issuance costs and other (43) (105)
------ -------
Net cash provided by (used in)
financing activities (4,744) 1,184
------ -------
Net decrease in cash and cash equivalents (1,244) (4,282)
Cash and cash equivalents at beginning of period 1,610 6,751
------ -------
Cash and cash equivalents at end of period $ 366 $ 2,469
====== =======
The accompanying notes are an integral part of these financial statements.
XCL Ltd. and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(1) General
The consolidated financial statements at March 31,
1996, 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, 1995. 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, 1996, and December 31, 1995, and the results of their
operations for the three months ended March 31, 1996 and
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
The Company has incurred recurring net losses and
currently has a working capital deficit. The Company
anticipates insufficient cash flows from operations to meet
its current obligations, including expenditures required for
the development of the Company's assets. Since 1994, the
Company has been able to meet its financial obligations by
obtaining funds from sales of equity in the Company and
sales of various assets. Management believes that it will
be able to continue to meet its financial obligations and
fund the development of its investments through joint
ventures with partners, continued sales of assets and
continued sales of equity instruments. However, as of May
15, 1996, the Company did not have sufficient commitments in
place to insure that the Company's obligations for 1996
could be satisfied. Included in such obligations are trade
payables of approximately $1.2 million as of May 15, 1996,
of which 43 percent are unpaid in excess of 120 days from
the invoice date. Further, in addition to such trade
payables, as of May 15, 1996, the Company has accrued
liabilities of approximately $2.1 million in dispute with
Apache China Corporation LDC ("Apache") arising from joint
interest billings and cash calls. While the Company
believes that certain of the charges are valid, it does not
have sufficient liquidity to make payment at this time.
Until alternative sources of funds are obtained, sub-
stantial doubt exists regarding the Company's ability to
continue as a going concern. Management is presently
pursuing several financing arrangements, which if consum-
mated, may provide the necessary funds to satisfy its
working capital requirements.
At March 31, 1996, the Company had an operating cash
balance of $366,000 and a working capital deficit of $26.1
million, which includes $5.1 million in limited recourse
debt collateralized only by the Lutcher Moore Tract and
$19.9 million in bank debt, of which $2.6 million has been
repaid through May 15, 1996, from proceeds of property
sales. The bank debt is collateralized by the Company's
domestic oil and gas properties and the stock of certain
subsidiaries. During 1995, the Company's bank agreement was
amended to modify certain covenant requirements through
September 29, 1995. These covenants were subsequently
amended to modify requirements through April 1, 1996, and
again amended through September 30, 1996. Should
improvements in the Company's financial position not occur,
the Company would be in violation of its credit agreement
subsequent to October 1, 1996, giving the bank the right to
accelerate payment of the debt after applicable grace
periods. Further, the borrowing base under this credit
agreement is determined, in part, by the value of the
Company's domestic proved reserves which are applicable to
properties classified in the balance sheet as assets held
for sale. The next borrowing base determination has been
rescheduled for June 30, 1996.
The Company also has $5.1 million of Limited Recourse
debt outstanding which is collateralized by the Lutcher
Moore Tract, of which $2.6 million is due on May 16, 1996.
Payments of principal and interest on the remaining $2.5
million of the Lutcher Moore limited recourse debt are past
due. The Company is negotiating with the holders of these
obligations to defer payments until the Lutcher Moore Tract
can be sold. Should the deferral not be obtained the holders
have recourse only to the property itself, as the Company is
not liable for the debt.
The Company's Series A Preferred Stock dividend
requirements are approximately 2.7 million pounds sterling
(U.K.) annually and currently insufficient liquidity exists
to continue to pay such amounts. The Company declared the
Series A Preferred Stock dividend payable June 30, 1995.
A portion of this dividend was paid with shares of
Common Stock and approximately $900,000 remains to be paid
in cash. Should the Company be unable to pay this dividend
by June 30, 1996, the holders of Series A Preferred Stock
can require Board of Director representation. The December
31, 1995 dividend payment on the Series A Preferred Stock
has been declared payable in additional shares of Series
A Preferred Stock, however such shares cannot be issued
until the shares allocated to withholding taxes are sold
for cash and the proceeds remitted to the taxing authorities.
The Company's cash flow forecast (including scheduled
debt requirements) for 1996 projects that approximately $22
million ($7.5 million which was available or utilized as of
March 31, 1996) of additional working capital will be
required to fund operational and development activities.
Management's plans to obtain the necessary capital include:
o The sale of domestic oil and gas properties. Two
domestic oil and gas properties have been sold through March
31, 1996, providing proceeds of $5.4 million which was used
to repay accrued interest and $5.2 million of principal on
the Company's bank debt. On May 6, 1996, the Company sold a
third lease generating gross proceeds of approximately $3.0
million of which $2.8 million was used to prepay principal
and interest on the Company's bank debt. As a result of
this transaction the Company has satisfied all of its 1996
scheduled principal payments on its bank debt.
o The sale of the Lutcher Moore Tract. The Company is in
ongoing negotiations for the sale of this property. Should
a sale be completed, $5.1 million of the proceeds would be
applied to the limited recourse debt with additional
proceeds used to further prepay bank debt and satisfy
working capital requirements.
o The sale of corporate securities. On March 8, 1996, the
Company sold 34 Units in an offshore transaction with each
Unit priced at $15,000. The Company received approximately
$400,000 of net proceeds, after deduction of offering costs
and expenses. An aggregate of 2,040,000 shares of Common
Stock and Warrants to acquire an additional 2,040,000 shares
of Common Stock were issued at closing. On April 23, 1996,
the Company sold an additional 30 Units of Common Stock and
Warrants at $15,000 per Unit. The Company received
approximately $349,000 of net proceeds, after deduction of
offering costs and expenses. An aggregate of 1,800,000
shares of Common Stock and Warrants to acquire an additional
1,800,000 shares of Common stock were issued at closing.
With the sale of these Units, the Company has issued
essentially all authorized shares of Common Stock not
reserved to fulfill other obligations. Therefore, until
approval is sought and received from the shareholders to
increase the authorized shares of Common Stock, the Company
can only place approximately 5,800 additional shares of
Series E Preferred Stock.
o Negotiating joint venture agreements with potential
partners to supply the cash needed to pursue various China
projects. Discussions with several potential partners are
in progress.
o The sale or joint venture of its remaining oil and gas
properties. The Company is attempting to sell its remaining
domestic oil and gas properties. If a satisfactory sale
transaction cannot be negotiated, the Company will consider
a contribution of these properties to a joint venture for
further development in exchange for a joint venture
partner's contribution of all required monies for
development costs. The Company's share of revenues from
such a venture would be applied to reduce its bank debt.
With respect to short term requirements to fund the
Company's ongoing general and administrative costs, the
Company believes that working capital will be made available
from certain of its major stockholders or other investors,
should the Company enter into a letter(s) of intent with
potential joint venture participants to provide funds for the
Company's further overhead expenditures and for the capital
requirements of the China projects.
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.
(3) Supplemental Cash Flow Information
There were no income taxes paid during the three month
periods ended March 31, 1996 and 1995. (See Note 7 herein).
Interest and associated capitalized costs for the three
month period ended March 31, 1996 and 1995 totaled $549,000
and $1.0 million, respectively. Interest paid during the
three month periods ended March 31, 1996 and 1995 amounted
to $870,000 and $583,000, respectively.
During the three months ended March 31, 1996, the
Company completed the following noncash transactions:
o As compensation for services performed resulting in
Apache Corp. purchasing an additional interest in the Zhao
Dong Block the Company issued 50,000 shares of Common Stock
to EnCap Investments, L.C. ("EnCap") and EnCap's existing
warrant to acquire 500,000 shares of Common Stock was
amended as to exercise price, expiration date and forced
conversion feature to conform the terms of this warrant to
the terms of warrants granted to the Placement Agent in the
Regulation S Unit Offering.
o As compensation for identifying Rauscher Pierce & Clark
as the Placement Agent for the Regulation S Unit Offering,
EnCap earned a four percent stock fee of the gross proceeds
of the Regulation S Unit Offering. In payment of this fee
the Company, during the first quarter, issued 267,264 shares
of Common Stock in connection with the initial closing and
during the second quarter will issue an aggregate 122,880
shares of Common Stock as compensation for the subsequent
closings.
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.
(4) Assets Held for Sale and Investments
Assets Held for Sale
--------------------
Domestic Oil and Gas Properties
- -------------------------------
During the fourth quarter of 1995, in connection with
management's decision to concentrate the Company's resources
on the development of its China investments, a decision was
made to dispose of all of the Company's domestic properties.
Accordingly, the recorded value of the Company's domestic
properties was reduced to their estimated fair market value
and the resulting balances were transferred to assets held
for sale.
During the first quarter of 1996, the Company sold two
domestic gas fields producing net proceeds of $5.4 million
which was primarily used to pay interest and prepay
principal due on the Company's bank loan. The Company sold a
third property in a sale completed during the second quarter
of 1996 generating gross proceeds of approximately $3.0
million, of which $2.8 million was applied to payment of
interest and prepayment of principal on the bank loan. The
fair market value of these three properties has been reflec-
ted as current assets in the Company's December 31, 1995
consolidated balance sheet.
Lutcher Moore Tract
- -------------------
During 1993, the Company completed the acquisition of a
group of corporations which together owned 100 percent of a
62,500-acre tract in southeastern Louisiana (the "Lutcher
Moore Tract"). Total consideration of $15.4 million
included the assumption of $9.9 million of limited recourse
debt (see Note 6 to the Consolidated Financial Statements),
$2.7 million in cash, the issuance of 3,616,667 shares of
Common Stock and warrants to purchase an additional
4,166,667 shares of Common Stock at $1.00 per share. In
connection with the purchase, the Company capitalized
acquisition related costs of $900,000. This property is
being held for sale.
Investments
-----------
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. As of March 31, 1996, the Company has invested
approximately $1.5 million in the project. Additional
payments totaling $1.8 million are to be made, the first of
which, in the amount of $550,000, is past due.
Coalbed Methane Project
- -----------------------
During 1995, the Company signed an agreement with the
China National Administration of Coal Geology, pursuant to
which the parties have commenced cooperation for the
exploration and development of coalbed methane in two areas
in China. As of March 31, 1996, the Company has invested
approximately $391,000 in the project.
(5) Debt
Long-term debt at March 31, 1996 consists of the following
(000's):
Current Long-Term
Maturities Portion Total
---------- ---------- -----
Collateralized credit facility $ 19,897 $ -- $19,897
Subordinated debt (due April 5, 2000) -- 15,000 15,000
Building Mortgage 31 634 665
------- ------- ------
Total $ 19,928 $ 15,634 $35,562
======= ======= ======
Lutcher Moore Group
Limited Recourse Debt $ 5,123 $ -- $ 5,123
======= ======= ======
Substantially all of the Company's assets collateralize
certain of these borrowings. Accounts payable and accrued
expenses include interest accrued at March 31, 1996, of
approximately $234,000.
Lutcher Moore Group Limited Recourse Debt :
- ------------------------------------------
Mortgage and Seller Notes.
- --------------------------
At March 31, 1996, approximately $2.6 million of
Mortgage Notes (net of amounts escrowed for payment) and
$2.5 million of Seller Notes were outstanding. In January
1996, the terms of the Mortgage Notes were modified
providing that the remaining principal (which bears interest
at 9.25 percent per annum) is payable on demand, and if no
demand is made, in three monthly installments of $52,300
each, commencing February 15, 1996, plus a final payment of
all outstanding principal and interest due on May 16, 1996.
The Seller Notes bear interest at 8 percent and have a final
maturity of June 1996. Payments of principal and interest on
the Seller Notes are past due. The Company is negotiating
an extension of the maturity dates of the Mortgage and
Seller Notes however, should the Company be unsuccessful in
negotiating further extension, the holders have recourse
only to the property itself, as the Company is not liable
for the debt.
Collateralized Credit Facility
- ------------------------------
The INCC Agreement provides for scheduled semiannual
borrowing base determinations by INCC based on a review of
reserve estimates and other factors, with the initial
borrowing base set at $29.2 million. Effective October 31,
1994, the borrowing base was set at $25.2 million. The net
proceeds of $4.1 million from the divestiture of the Mestena
Grande Field in January 1996, were applied to a $2 million
principal payment due January 2, 1996, a principal payment
of $1.63 million due April 1, 1996, with the remainder
applied to the balance of the outstanding indebtedness. The
net proceeds of $1.325 million from the sale of the Gonzales
Gas Unit sold in March 1996, were applied to accrued
interest through the date of closing and $1.1 million of
principal. The net proceeds of $2.79 million from the sale
of the Lopez Gas Units sold in April 1996, were applied to
accrued interest through the date of closing then to
principal of $535,556 due on July 1, 1996, principal of
$1.625 million due October 1, 1996 and the remainder against
principal due January 2, 1997. The next scheduled principal
payment is due January 2, 1997, in the amount of
approximately $1.2 million with quarterly payments of $1.63
million thereafter.
During 1995, the INCC Agreement was amended to modify
certain covenants and was further amended to modify
requirements through April 1, 1996. The credit agreement was
further amended in April 1996 to modify requirements through
September 30, 1996, and accordingly the full amount of such
debt has been reflected as a current liability. Absent these
modifications, the Company would have been in violation of
several covenants and should improvements in the Company's
financial position not occur, the Company would be in
violation of its credit agreement subsequent to October 1,
1996, giving the bank the right to accelerate payment of the
debt after applicable grace periods. The Company would need
to pursue the sale of other assets, a joint-venture or the
issuance of additional equity securities to fund any such
accelerated payments. Further, the borrowing base under
this credit agreement is determined, in part, by the value
of the Company's domestic proved reserves. The next borrow-
ing base determination, which will be based on reserves
related to oil and gas properties reflected as assets held
for sale, has been rescheduled for June 30, 1996.
(6) Preferred Stock and Common Stock
As of March 31, 1996, the Company had the following
shares of Preferred Stock issued and outstanding:
Liquidation
Shares Value
------- -----------
Series A 599,244 $ 45,743,291 (1)
Series B 44,954 4,495,400
Series E 44,436 4,443,600
- -----------
(1) 50 pounds sterling (U.K.) per share (U.K. 1 pound sterling
= U.S. $1.5267 at March 31, 1996).
Series A Preferred Stock
------------------------
The Company's Series A Preferred Stock dividend
requirements are approximately 2.7 million pounds sterling
(U.K.) annually and currently insufficient liquidity exists
to continue to pay such amounts. Further, the Company's
credit agreement restricts payment of cash dividends. With
the approval of its lender, the Company declared the June
30, 1995 dividend payable in cash, with such cash to be
obtained from the sale of Common Stock. In order to reduce
the cash requirement, 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. Cash dividends
remaining to be paid with respect to the June 30, 1995
dividend declaration, aggregate approximately $900,000.
Should the Company be unable to pay this dividend by June
30, 1996, the holders of Series A Preferred Stock can require
Board of Director representation.
The December 31, 1995 dividend payment on the Series A
Preferred Stock has been declared payable in additional
shares of Series A Preferred Stock. During 1996, the terms
of the Series A Preferred Stock were amended to allow for
payment of the December 31, 1995 and subsequent dividend
payments to be made in additional shares of Series A
Preferred Stock. The Board of Directors correspondingly
approved a 250,000 share increase in the number of shares of
Series A Preferred Stock authorized. An aggregate of 53,932
shares of Series A Preferred Stock are to be issued for
payment of the December 31, 1995 dividend and U.S. and U.K.
withholding taxes, however such shares cannot be issued
until the shares allocated to withholding taxes are sold for
cash and the proceeds remitted to the taxing authorities.
Series B Preferred 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.
Approximately 4,321 shares had been redeemed at December 31,
1995, from the sale of 919,900 shares of Common Stock. An
additional 725 shares have been redeemed during the first
quarter of 1996 from the sale of 700,000 shares of Common
Stock. Proceeds are first allocated to accrued dividends,
with the remainder applied toward redemption of shares of
the Series B Preferred Stock. During the second quarter an
additional 100,000 shares were sold and applied against
accrued dividends. By letter dated April 5, 1996, the holder
has advised the Company that it is not satisfied with the
rate at which the Series B shares are being redeemed and
that unless the rate of redemption is accelerated, the
holder may no longer extend the time in which the redemption
is to be completed.
(7) Commitments and Contingencies and Subsequent Events
Other commitments, contingencies and subsequent events
include:
o The Company acquired the rights to the exploration,
development and production of the Zhao Dong Block
by executing a Production Sharing Agreement with
CNODC in February 1993. Under the terms of the
Production Sharing Agreement, the Company and
Apache are responsible for all exploration costs.
If a commercial discovery is made, and if CNODC
exercises its option to particpate in the develop-
ment of the field, all development and operating
costs and related oil and gas production will be
shared up to 51 percent by CNODC and the remainder
by the Company and Apache.
In March 1994, the Company farmed out a one-third
interest in its contract rights for the Zhao Dong
Block to Apache. To further reduce the Company's
exploration capital requirements and accelerate
the development of the Zhao Dong Block, the Com-
pany signed an agreement on May 10, 1995, with
Apache (approved by Chinese authorities on August
10, 1995) pursuant to which Apache became obliga-
ted to pay 100 percent of the costs to drill and
test two wildcat wells and one appraisal well on
the Zhao Dong Block, with a requirement to pay
for a third wildcat well, if Apache elected to
participate in the second phase of the Production
Sharing Agreement. In January 1996, Apache so
elected and therefore will pay the dilling and
testing costs of a third wildcat well. The
amounts advanced by Apache are recoverable from
revenues generated from Zhao Dong Block produc-
tion. Future expenditures beyond those described
above will be borne 50 percent each by the Com-
pany and Apache. Pursuant to this agreement
Apache also purchased an additional 16.67 percent
interest in the foreign contractor's share of 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 each segment of
the field is placed on production in order to
insure that the Company will receive the full
market value of the 16.67 percent interest. In
consideration of the above described payments,
Apache assumed operatorship of the Zhao Dong Block
and increased its interest in the Zhao Dong Block
from 33.33 percent to 50 percent of the foreign
contractor's share of the Zhao Dong Block.
The Production Sharing Agreement includes the
following additional principal terms:
The Production Sharing Agreement is basically
divided into three periods: the Exploration
Period, the Development Period and the Produc-
tion period. Work to be performed and expend-
itures to be incurred during the Exploration
period, which consists of three phases totaling
seven years from May 1, 1993, are the exclusive
responsibility of the Contractor (the Company
and Apache as a group). The Contractor's
obligations in the three exploration phases are
as follows:
1. During the first three years, the Contractor
is required to drill three wildcat wells,
perform seismic data acquisition and process-
ing and expend a minimum of $6 million (The
Contractor has drilled two wildcat wells,
satisfied the seismic acquisition and minimum
expenditure requirements and has received an
extension allowing the drilling of the third
wildcat well during the first year of the
second exploration phase.);
2. During the next two years, the Contractor is
required to drill two wildcat wells, perform
seismic data acquisition and processing and
expend a minimum of $4 million (The Contrac-
tor has elected to proceed with the second
phase of the Contract. The seismic data
acquisition requirement for the second phase
has been satisfied.);
3. During the last two years, the Contractor
is required to drill two wildcat wells and
expend a minimum of $4 million.
The Production Sharing Agreement may be terminated
by the Contractor at the end of each phase of the
Exploration period, without further obligation.
o On December 1, 1995, the Company submitted certain
accounting disputes to arbitration arising from
Apache's operations at the Zhao Dong Block. In the
initial submission, the Company disputed certain
amounts charged to the Company by Apache in the
August, September and October 1995 joint interest
billings and the November and December 1995 cash
calls. Amounts involved in later months joint
interest billings and cash calls were subsequently
added to the submission. As of May 15, 1996, the
total amount in dispute and claimed by Apache to be
owed by the Company was $2.1 million. While the
Company believes that certain charges are valid,
and has fully provided for them in the consolidated
financial statements, it does not have sufficient
liquidity to make payment at this time.
o The Company has future commitments of $1.8 million
associated with its joint venture contract to enter
the lubricating oil business in China. Additional
payments totaling $1.8 million are to be made, the
first of which, in the amount of $550,000, is past
due.
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 subsi-
diaries, 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 assess-
ments, including penalties and interest, is approx-
imately $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 consoli-
dated 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 it has
meritorious defenses and 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 settle-
ment 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 pre-
viously 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 liquidity
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, former wife of a director
of the Company, has asserted a claim in the aggre-
gate amount of approximately $500,000 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 amend-
ment, 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 may be subject to other legal proceed-
ings 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 of
the Company or results of operations of the Company.
o 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 compli-
ance 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.
XCL LTD. AND SUBSIDIARIES
March 31, 1996
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
- -------------------------------
The Company has incurred recurring net losses and
currently has a working capital deficit. The Company
anticipates insufficient cash flows from operations to meet
its current obligations, including expenditures required for
the development of the Company's assets. Since 1994, the
Company has been able to meet its financial obligations by
obtaining funds from sales of equity in the Company and
sales of various assets. Management believes that it will
be able to continue to meet its financial obligations and
fund the development of its investments through joint
ventures with partners, continued sales of assets and
continued sales of equity instruments. However, as of May
15, 1996, the Company did not have sufficient commitments in
place to insure that the Company's obligations for 1996
could be satisfied. Included in such obligations are trade
payables of approximately $1.2 million as of May 15, 1996,
of which 43 percent are unpaid in excess of 120 days from
the invoice date. Further, in addition to such trade
payables, as of May 15, 1996, the Company has accrued
liabilities of approximately $2.1 million in dispute with
Apache China Corporation LDC ("Apache") arising from joint
interest billings and cash calls. While the Company
believes that certain of the charges are valid, it does not
have sufficient liquidity to make payment at this time.
Until alternative sources of funds are obtained, sub-
stantial doubt exists regarding the Company's ability to
continue as a going concern. Management is presently
pursuing several financing arrangements, which if consum-
mated, may provide the necessary funds to satisfy its
working capital requirements.
At March 31, 1996, the Company had an operating cash
balance of $366,000 and a working capital deficit of $26.1
million, which includes $5.1 million in limited recourse
debt collateralized only by the Lutcher Moore Tract and
$19.9 million in bank debt, of which $2.6 million has been
repaid through May 15, 1996, from proceeds of property
sales. The bank debt is collateralized by the Company's
domestic oil and gas properties and the stock of certain
subsidiaries. During 1995, the Company's bank agreement was
amended to modify certain covenant requirements through
September 29, 1995. These covenants were subsequently
amended to modify requirements through April 1, 1996, and
again amended through September 30, 1996. Should
improvements in the Company's financial position not occur,
the Company would be in violation of its credit agreement
subsequent to October 1, 1996, giving the bank the right to
accelerate payment of the debt after applicable grace
periods. Further, the borrowing base under this credit
agreement is determined, in part, by the value of the
Company's domestic proved reserves which are applicable to
properties classified in the balance sheet as assets held
for sale. The next borrowing base determination has been
rescheduled for June 30, 1996.
The Company also has $5.1 million of Limited Recourse
debt outstanding which is collateralized by the Lutcher
Moore Tract, of which $2.6 million is due on May 16, 1996.
Payments of principal and interest on the remaining $2.5
million of the Lutcher Moore limited recourse debt are past
due. The Company is negotiating with the holders of these
obligations to defer payments until the Lutcher Moore Tract
can be sold. Should the deferral not be obtained the holders
have recourse only to the property itself, as the Company is
not liable for the debt.
The Company's Series A Preferred Stock dividend
requirements are approximately 2.7 million pounds sterling
(U.K.) annually and currently insufficient liquidity exists
to continue to pay such amounts. The Company declared the
Series A Preferred Stock dividend payable June 30, 1995.
A portion of this dividend was paid with shares of
Common Stock and approximately $900,000 remains to be paid
in cash. Should the Company be unable to pay this dividend
by June 30, 1996, the holders of Series A Preferred Stock
can require Board of Director representation. The December
31, 1995 dividend payment on the Series A Preferred Stock
has been declared payable in additional shares of Series
A Preferred Stock, however such shares cannot be issued
until the shares allocated to withholding taxes are sold
for cash and the proceeds remitted to the taxing authorities.
The Company's cash flow forecast (including scheduled
debt requirements) for 1996 projects that approximately $22
million ($7.5 million which was available or utilized as of
March 31, 1996) of additional working capital will be
required to fund operational and development activities.
Management's plans to obtain the necessary capital include:
o The sale of domestic oil and gas properties. Two
domestic oil and gas properties have been sold through March
31, 1996, providing proceeds of $5.4 million which was used
to repay accrued interest and $5.2 million of principal on
the Company's bank debt. On May 6, 1996, the Company sold a
third lease generating gross proceeds of approximately $3.0
million of which $2.8 million was used to prepay principal
and interest on the Company's bank debt. As a result of
this transaction the Company has satisfied all of its 1996
scheduled principal payments on its bank debt.
o The sale of the Lutcher Moore Tract. The Company is in
ongoing negotiations for the sale of this property. Should
a sale be completed, $5.1 million of the proceeds would be
applied to the limited recourse debt with additional
proceeds used to further prepay bank debt and satisfy
working capital requirements.
o The sale of corporate securities. On March 8, 1996, the
Company sold 34 Units in an offshore transaction with each
Unit priced at $15,000. The Company received approximately
$400,000 of net proceeds, after deduction of offering costs
and expenses. An aggregate of 2,040,000 shares of Common
Stock and Warrants to acquire an additional 2,040,000 shares
of Common Stock were issued at closing. On April 23, 1996,
the Company sold an additional 30 Units of Common Stock and
Warrants at $15,000 per Unit. The Company received
approximately $349,000 of net proceeds, after deduction of
offering costs and expenses. An aggregate of 1,800,000
shares of Common Stock and Warrants to acquire an additional
1,800,000 shares of Common stock were issued at closing.
With the sale of these Units, the Company has issued
essentially all authorized shares of Common Stock not
reserved to fulfill other obligations. Therefore, until
approval is sought and received from the shareholders to
increase the authorized shares of Common Stock, the Company
can only place approximately 5,800 additional shares of
Series E Preferred Stock.
o Negotiating joint venture agreements with potential
partners to supply the cash needed to pursue various China
projects. Discussions with several potential partners are
in progress.
o The sale or joint venture of its remaining oil and gas
properties. The Company is attempting to sell its remaining
domestic oil and gas properties. If a satisfactory sale
transaction cannot be negotiated, the Company will consider
a contribution of these properties to a joint venture for
further development in exchange for a joint venture
partner's contribution of all required monies for
development costs. The Company's share of revenues from
such a venture would be applied to reduce its bank debt.
With respect to short term requirements to fund the
Company's ongoing general and administrative costs, the
Company believes that working capital will be made available
from certain of its major stockholders or other investors,
should the Company enter into a letter(s) of intent with
potential joint venture participants to provide funds for the
Company's further overhead expenditures and for the capital
requirements of the China projects.
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.
Other General Considerations
- ----------------------------
The Company believes that inflation has had no material
impact on the Company's sales, revenues or income during the
reporting 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
("FASB") issued Statement No. 121 "Accounting For The
Impairment Of Long-Lived Assets And For Long-Lived Assets To
Be Disposed Of." This standard describes circumstances
which may result in assets being impaired and provides
criteria for recognition and measurement of asset
impairment. The Company does not believe the implementation
of this statement will have a material impact on the
financial position, results of operations or cash flows of
the Company.
In October 1995, the FASB issued Statement No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123). SFAS
123 establishes a fair value-based method of accounting for
employee stock options. This method provides for compensa-
tion cost to be charged to results of operations at the
grant date. However, the statement allows companies to
continue to follow the accounting treatment prescribed by
Accounting Principles Board Opinion No. 25. Opinion 25
generally requires compensation cost to be recognized only
for the excess of the quoted market price at the grant date
over the price that an employee must pay to acquire the
stock. Companies electing to continue with Opinion 25 must
make disclosure of net income as if SFAS 123 had been
adopted. The Company has not yet determined the method of
accounting that it will follow for stock options. However,
it does not expect that adoption of the requirements of SFAS
123 would have a material impact on the financial position,
results of operations or cash flows of the Company.
Results of Operations
- ---------------------
During the three month periods ended March 31, 1996 and
March 31, 1995, the Company incurred net losses of $1.6
million.
Oil and gas revenues for the three month period ended
March 31, 1996, were $576,000 compared to $678,000 during
the corresponding period in 1995. Revenues will continue to
decline as the Company completes its announced program of
selling substantially all of its U.S. producing properties.
Interest expense increased in the first quarter of 1996 as
compared to the corresponding period in 1995, due primarily
to reduced capitalization of interest costs as the balance
of qualifying assets declined. Net interest charges are not
expected to increase significantly throughout 1996 as the
Company has made $7.8 million in principal payments on its
bank debt in the first and second quarters of 1996.
As the Company continues to focus its resources on
exploration and development of the Zhao Dong Block, future
oil and gas revenues will initially be directly related to
the degree of drilling success experienced in the Zhao Dong
Block. The Company does not anticipate significant increases
in its oil and gas production in the short-term and expects
to incur operating losses until such time as sufficient
revenues from the China projects are realized which exceed
operating costs.
XCL LTD. AND SUBSIDIARIES
March 31, 1996
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. The Company believes that it has
meritorious defenses and 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 $500,000 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.
On December 1, 1995, the Company submitted certain
accounting disputes to arbitration arising from Apache's
operations at the Zhao Dong Block. In the initial
submission, the Company disputed certain amounts charged to
the Company by Apache in the August, September and October
1995 joint interest billings and the November and December
1995 cash calls. Amounts involved in later months joint
interest billings and cash calls were subsequently added to
the submission. As of May 15, 1996, the total amount in
dispute and claimed by Apache to be owed by the Company was
$2.1 million. The Company believes that these charges have
been fully provided for in the consolidated financial
statements.
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
By a Circular dated January 31, 1996, the Company
solicited the written consent of the holders of the
Company's Series A Preferred Stock for approval to an
amendment to the terms thereof, to allow the December 31,
1995, and subsequent semi-annual dividend payments to be
made in additional shares of Series A Preferred Stock. To
provide a sufficient number of shares to make "in kind"
dividend payments, the Board of Directors authorized a
250,000 share increase in the number of shares of preferred
stock designated as Series A Preferred Stock. The consent of
two-thirds of the issued and outstanding shares of Series A
Preferred Stock held of record on December 29, 1995, was
required for approval. A total of 485,662 votes were cast
as follows with respect to the amendment:
Consenting: 485,662
Non-Consenting: --
No matters were submitted to a vote of holders of the
Common Stock during the fourth quarter of the fiscal year
covered by this report.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-K.
1.0 Not applicable
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)
3.8 Certificate of Amendment dated June 19, 1995,
whereby Article Fourth was amended to increase the
number of shares of Common Stock. (N)(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 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)(iv)
4.21 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)(v)
4.22 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)(vi)
4.23 Form of Amendment to Certificate of Designation of
Series B Preferred Stock dated June 30, 1994. (F)(vii)
4.24 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)(vii)
4.25 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)
4.26 Copy of Amendment to Certificate of Designation of
Series A Preferred Stock dated October 31, 1995. (N)(ii)
4.27 Copy of Certificate of Designation of Series E,
Cumulative Convertible Preferred Stock dated November 2,
1995. (N)(iii)
4.28 Form of Purchase Agreement between the Company and
each of the Purchasers of Units in the Regulation S Unit
Offering conducted by Rauscher Pierce & Clark with
closings as follows:
December 22, 1995 116 Units
March 8, 1996 34 Units (O)(i)
4.29 Form of Warrant Agreement between the Company and
each of the Purchasers of Units in the Regulation S Unit
Offering conducted by Rauscher Pierce & Clark, as
follows:
Closing Date Warrants Exercise Price
------------ -------- --------------
December 22, 1995 6,960,000 $.50
March 8, 1996 2,040,000 $.35 (O)(ii)
4.30 Form of Warrant Agreement between the Company and
Rauscher Pierce & Clark in consideration for acting as
placement agent in the Regulation S Units Offering, as
follows:
Closing Date Warrants Exercise Price
------------ -------- --------------
December 22, 1995 696,000 $.50
March 8, 1996 204,000 $.35 (O)(iii)
4.31 Form of Amendment of Certificate of Designation of
Series A Preferred Stock dated April 11, 1996. (O)(iv)
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 $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)(vi)
10.3 Copy of Subordination Agreement among the Company,
INCC and the holders of the Secured Notes dated.
(I)(vii)
10.4 Form of First Amendment of Secured Subordinated Note
dated January 31, 1994. (I)(viii)
10.5 Form of First Amendment of Limited Recourse Secured
Lease Note dated January 31, 1994. (I)(ix)
10.6 Stock Pledge Agreement dated January 31, 1994, among
the Company and INCC. (I)(x)
10.7 Deed of Trust, Mortgage, Assignment, Security
Agreement and Financing Statement from XCL-Texas, Inc.
to INCC dated January 31, 1994. (I)(xi)
10.8 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)(xii)
10.9 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)(xiii)
10.10 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)(vii)
10.11 Letter Agreement dated June 30, 1994 between the
Company, China Investment & Development Co. Ltd. and
China Investment and Development Corporation. (F)(ix)
10.12 Letter Agreement dated July 10, 1994 between the
Company and holders of the Lease Notes. (F)(x)
10.13 Stock Purchase Agreement between the Company and
Provincial Securities Limited dated May 17, 1994.
(F)(xi)
10.14 Consulting agreement between the Company and Sir
Michael Palliser dated April 1, 1994. (K)(i)
10.15 Consulting agreement between the Company and Mr.
Arthur W. Hummel, Jr. dated April 1, 1994. (K)(ii)
10.16 Letter Agreement between the Company and Mr. William
Wang dated June 2, 1992, executed effective February 10,
1993. (K)(iii)
10.17 First Amendment to Credit Agreement between the
Company and Internationale Nederlanden (U.S.) Capital
Corporation dated April 13, 1995. (L)(ii)
10.18 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)
10.19 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)
10.20 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)
10.21 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. (M)(i)
10.22 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. (M)(ii)
10.23 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. (M)(iii)
10.24 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. (M)(iv)
10.25 Letter of Intent dated July 17, 1995 between CNPC
United Lube Oil Corporation and XCL Ltd. for discussion
of further projects. (M)(v)
10.26 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 $429,056.51 $445,838.59 1,487,294
T. Rowe Price &
Associates, Inc. $159,975.00 $166,232.25 554,543 (M)(vi)
10.27 Copy of Letter Agreement dated March 31, 1995, between
the Company and China National Administration of Coal
Geology for the exploration and development of coal bed
methane in Liao Ling Tiefa and Shanxi Hanchang Mining
Areas. (N)(iv)
10.28 Copy of Second Amendment to Credit Agreement
between the Company and Internationale Nederlanden
(U.S.) Capital Corporation dated effective as of
September 29, 1995. (N)(v)
10.29 Copy of Fee Agreement dated October 26, 1995, between
the Company and EnCap Investments L.C. for past services
and proposed European equity offering. (N)(vi)
10.30 Copy of Engagement Letter dated November 9, 1995,
between the Company and Rauscher Pierce & Clark for a
proposed Unit offering to be conducted in Europe.
(N)(vii)
10.31 Memo of Understanding dated December 14, 1995,
between XCL Ltd. and China National Administration of
Coal Geology. (O)(v)
10.32 Copy of Purchase and Sale Agreement dated December
28, 1995, between XCL Ltd., XCL-Texas, Inc. and Cody
Energy Corporation, for the sale to Cody Energy of the
Mestena Grande Field located in Texas. (O)(vi)
10.33 Form of Fourth 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 January 16, 1996. (O)(vii)
10.34 Form of Third 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
January 16, 1996. (O)(viii)
10.35 Copy of Purchase and Sale Agreement dated March 8,
1996, between XCL-Texas, Inc. and Tesoro E&P Company,
L.P. for the sale of the Gonzales Gas Unit located in
south Texas. (O)(ix)
10.36 Copy of Limited Waiver between the Company and
Internationale Nederlanden (U.S.) Capital Corporation
dated April 3, 1996. (O)(x)
10.37 Copy of Purchase and Sale Agreement dated April
22, 1996, between XCL-Texas, Inc. and Dan A. Hughes
Company for the sale of the Lopez Gas Unites located in
south Texas. *
11. Statement re computation of per share earnings *
16. Not applicable.
17. Not applicable.
20. Not applicable.
23. Not applicable.
24. Not applicable.
27. Financial Data Schedule *
99. 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; and (vii) 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
(iii) Exhibits 4.28 through 4.30, respectively; (iv)
through (viii) Exhibits 4.34 through 4.38,
respectively; and (ix) through (xi) Exhibits 10.8
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 10Q 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 (xii) Exhibit 10.41 through
Exhibit 10.47, respectively; and (xii) Exhibit 10.49.
(J) Incorporated by reference to an Annual Report
on Form 10K 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.
(M) Incorporated by reference to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, filed
August 14, 1995, where it appears as: (i) through (vi)
Exhibits 10.29 through 10.34, respectively.
(N) Incorporated by reference to Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995,
filed November 13, 1995, where it appears as: (i)
Exhibit 3.8; (ii) and (iii) Exhibits 4.29 and 4.30,
respectively; and (iv) through (vii) Exhibits 10.35
through 10.38, respectively.
(O) Incorporated by reference to Annual Report on
Form 10-K for the year ended December 31, 1995, filed
April 15, 1996, where it appears as: (i) through (iv)
Exhibits 4.28 through 4.31, respectively; and (v)
through (x) Exhibits 10.31 through 10.36, respectively.
(b) Reports on Form 8-K
A current report on Form 8-K was filed on January 8,
1996, to report that it had completed the sale of its
interests in the Mestena Grande Field to Cody Energy, Inc.
A current report on Form 8-K was filed on January 17,
1996, to report that the Company had sold in an unregistered
offering in compliance with Regulation S of the Securities
Act of 1933, as amended, an aggregate of 116 Units, each
Unit comprised of 60,000 shares of Common Stock and a
warrant to purchase 60,000 shares of Common Stock.
A current report on Form 8-K was filed on March 18,
1996, to report that the Company had recorded a $58.8
million fourth quarter noncash write-down for impairment of
domestic oil and gas properties and that the Company had
reached agreement with Tesoro E&P Company, L.P. for the sale
of its interest in the Gonzales Gas Unit located in the Cox
Field.
A current report on Form 8-K was filed on April 1,
1996, to report that the Company had completed the sale of
the Gonzales Gas Unit to Tesoro E&P Company, L.P.
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/ David A. Melman
By: ----------------------------
David A. Melman
Executive Vice President and
General Counsel
Date: May 15, 1996