SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) August 6, 1998
__________________________________________
XCL LTD.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or other Jurisdiction of Incorporation)
1-10669 51-0305643
(Commission File Number) (I.R.S. Employer
Identification Number)
110 Rue Jean Lafitte, 2nd Floor
Lafayette, Louisiana 70508
(Address of Principal Executive Offices)
318-237-0325
(Registrant's Telephone Number, Including Area Code)
Item 5. Other Events.
The Company announced on August 6, 1998, that it and its
partners, China National Oil and Gas Exploration and Development
Corporation (CNODC) and Apache Corporation, began drilling the C-
5 exploration well located on the Zhao Dong Block, Bohai Bay, in
the People's Republic of China. The C-5 is located approximately
3 kilometers southwest of the successful D-2 well that tested
11,571 barrels of oil per day in January 1997. The Company does
not expect to make additional announcements with respect to the C-
5 until results have been determined.
Depending on rig availability, the Company expects that at
least two additional wells will be drilled on the Zhao Dong Block
in 1998. One of these wells would be a wildcat. The other well
would be to appraise the C-4 discovery, which was drilled in
October 1997, and tested 15,359 barrels of oil plus 6,107 MCF of
associated gas from eight zones.
XCL Ltd. and Apache Corporation each own a 50 percent
interest in the Foreign Contractor's share of the Zhao Dong
Block.
On August 20, 1998, the Company announced that, through its
wholly owned subsidiary, XCL-Cathay Ltd., it has signed a
Production Sharing Contract with China National Oil and Gas
Exploration and Development Corporation (CNODC) for the appraisal
and development of the Zhang Dong Block in the shallow-water sea
area of the Bohai Bay, The People's Republic of China. Dagang
Oilfield (Group) Ltd. (Dagang), a subsidiary of China National
Petroleum Corporation, and XCL's operating partner, has conducted
extensive 2D and 3D seismic and drilling operations on the block.
A causeway and artificial island have also been installed to
conduct drilling and production operations. Dagang and XCL will
now jointly complete appraisal and development of the block.
The Zhang Dong Block is a direct northwestern and northern
extension of the Zhao Dong Block, in which Dagang (51 percent)
and XCL (24.5 percent) are participants in the development of a
segment on which seven successful exploration and appraisal wells
have been drilled. The Zhang Dong Block extends from the
shoreline of the Dagang Oilfield Complex to a water depth of
approximately 10 feet.
Dagang has conducted approximately 300 kilometers of 2D and
70 square kilometers of 3D seismic on the block. This seismic
reflects the existence of a large geological structure extending
in depth from the shallowest through the deepest reservoirs found
productive on the adjacent Zhao Dong Block. Dagang has drilled
nine exploration and appraisal wells on the Zhang Dong Block
designed to test the middle zones found productive on the
adjacent Zhao Dong Block. Eight of these wells found
hydrocarbons in those middle zones. XCL will drill appraisal
wells to test the middle zones. Some of these wells will be
designed to also test the shallower and deeper zones. XCL and
Dagang believe that improvements in drilling and completion
technology should greatly improve production rates and
recoverable hydrocarbon reserves on the Zhang Dong Block.
Under the terms of the Zhang Dong Production Sharing
Contract, XCL will be the operator and will be responsible for
the cost of reprocesing and reinterpretation of existing 2D and
3D seismic data, upgrading of the existing drilling and
production facilities on the block and initial appraisal
drilling. The minimum drilling commitment is for one well to be
drilled during the first year of the contract. If XCL elects to
extend the appraisal phase of the contract beyond the first year,
it may do so by committing to an additional two wells during each
of the next two two-year periods, for a total commitment of five
wells over a five-year period. Development costs and production
will be shared 49 percent by XCL and 51 percent by CNODC. The
production period for each oil field on the Zhang Dong Block is
20 years from the date of commencement of commercial production.
Marsden W. Miller, Jr., Chairman and Chief Executive
Officer, said, "The signing of the Zhang Dong Production Sharing
Contract reflects the friendship, trust and spirit of cooperation
which has developed between XCL, CNODC and Dagang. The existing
seismic, wells and drilling and production facilities will allow
quick and inexpensive completion of evaluation of the block and,
after successful evaluation, early and low-cost production.
Dagang has found significant accumulations of oil in the middle
zones. We believe that the use of new drilling technology,
including that used successfully on the offsetting Zhao Dong
Block, creates the potential for substantial production from the
middle zones on the Zhang Dong Block. Additionally, the
geological data available on the Zhang Dong Block indicates that
the block is highly prospective for additional reserves in the
shallower and deeper formations which are productive on the
offsetting Zhao Dong Block."
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
XCL LTD.
August 21, 1998 /s/ Lisha C. Falk
_________________________ By:_______________________________
Date Lisha C. Falk
Secretary