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) September 24, 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. On September 24, 1998, the Company issued a press release announcing that the Production Sharing Contract announced on August 20, 1998, by and between its wholly owned subsidiary, XCLCathay Ltd., and 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, People's Republic of China, was approved by The Ministry of Foreign Trade and Economic Cooperation of the People's Republic of China, on September 15, 1998, and will be effective October 1, 1998. XCL commenced work on the block on September 15, 1998, including review and reinterpretation of the extensive available seismic data, review and evaluation of nine existing wells and production and drilling facilities, and initial preparation for drilling operations. The Zhang Dong Block is a direct northwestern and northern extension of the Zhao Dong Block and extends from the shoreline of the Dagang Oilfield Complex to a water depth of approximately 10 feet. Dagang Oilfield (Group) Ltd. (Dagang), XCL's operating partner, 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 XCL's 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 the middle zones. Dagang has also constructed two drilling and production facilities on the block capable of supporting approximately 70 productive wells. XCL plans to drill appraisal wells to test the middle zones. Some of these wells will be designed to also test the shallower and deeper zones. Under the terms of the Zhang Dong Production Contract, XCL will be the operator and will be responsible for the cost of reprocessing and reinterpretation of existing 2D and 3D seismic data, upgrading of the existing drilling and production facilities on the block and initial appraisal drilling. Thereafter, development and production costs will be shared 49 percent by XCL and 51 percent by CNODC. Oil production will be shared 49 percent by XCL and 51 percent by CNODC. 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. September 28, 1998 /s/ Lisha C. Falk _________________________ By:_______________________________ Date Lisha C. Falk Corporate Secretary