UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the
[X] Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1999
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.
23,377,971 shares Common Stock, $.01 par value were
outstanding on August 13, 1999.
XCL LTD.
TABLE OF CONTENTS
Page
PART I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
PART II
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Default Upon Senior Securities
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 SHEETS
(In Thousands)
(Unaudited)
June 30, December 31,
A S S E T S 1999 1998
----------- ------- -----------
Current assets:
Cash and cash equivalents $ 37 $ 83
Cash held in escrow (restricted) 161 205
Other 721 443
------- -------
Total current assets 919 731
------- -------
Property and equipment:
Oil and gas (full cost method):
Proved undeveloped properties, not
being amortized 30,571 28,274
Unevaluated properties 66,141 58,403
------- -------
96,712 86,677
Other 1,346 1,344
------- -------
98,058 88,021
Accumulated depreciation, depletion
and amortization (790) (761)
------- -------
97,268 87,260
------- -------
Investments 4,096 4,078
Investment in land 12,200 12,200
Oil and gas properties held for sale 5,073 5,099
Debt issue costs, less amortization 3,455 3,763
Other assets 1,601 1,542
------- -------
Total assets $ 124,612 $ 114,673
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 2,771 $ 1,465
Accrued interest 8,014 2,049
Due to joint venture partner (Note 4) 10,341 8,168
Dividends payable 1,735 1,658
Notes payable 5,299 2,974
------- -------
28,160 16,314
Senior secured notes reclassification 64,531 63,457
------- -------
Total current liabilities 92,691 79,771
------- -------
Long-term debt, net of current maturities -- --
Other liabilities 5,384 5,428
Commitments and contingencies (Note 7)
Shareholders' equity:
Preferred stock-$1.00 par value;
authorized 2.4 million shares; issued
shares of 1,342,109 at June 30, 1999 and
1,282,745 at December 31, 1998 -
liquidation preference of $115 million
at June 30, 1999 1,342 1,283
Preferred stock held in treasury -
$1.00 par value; 9,681 shares at
June 30, 1999 (10) --
Common stock-$.01 par value; authorized
500 million shares; issued shares of
23,377,971 at June 30, 1999 and
23,447,441 at December 31, 1998 233 234
Common stock held in treasury -
$0.01 par value: 69,470 shares at
December 31, 1998 -- (1)
Additional paid-in capital 300,658 296,373
Accumulated deficit (267,424) (260,215)
Unearned compensation (8,262) (8,200)
------- -------
Total shareholders' equity 26,537 29,474
------- -------
Total liabilities and
shareholders' equity $ 124,612 $ 114,673
======= =======
The accompanying notes are an integral part of these financial statements.
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1999 1998 1999 1998
------ ------ ------ ------
Costs and operating expenses:
General and administrative $ 1,146 $ 1,305 $ 2,175 $ 2,915
Other, net 36 29 70 72
----- ----- ----- -----
1,182 1,334 2,245 2,987
----- ----- ----- -----
Operating loss (1,182) (1,334) (2,245) (2,987)
----- ----- ----- -----
Other income (expense):
Interest income 2 309 4 718
Interest expense, net of
amounts capitalized (1,234) (1,090) (2,504) (1,852)
Other, net (10) 10 334 1
----- ----- ----- -----
(1,242) (771) (2,166) (1,133)
----- ----- ----- -----
Net loss (2,424) (2,105) (4,411) (4,120)
Preferred stock dividends 5 (218) (2,798) (2,645)
----- ----- ----- -----
Net loss attributable to common stock $(2,419) $(2,323) $(7,209) $(6,765)
===== ===== ===== =====
Net loss per common share (basic) $ (0.11) $ (0.10) $ (0.31) $ (0.30)
===== ===== ===== =====
Net loss per common share (diluted) $ (0.11) $ (0.10) $ (0.31) $ (0.30)
===== ===== ===== =====
Weighted average number of common
shares outstanding:
Basic 23,373 22,922 23,373 22,622
Diluted 23,373 22,922 23,373 22,622
The accompanying notes are an integral part of these financial statements.
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In Thousands)
(Unaudited)
Preferred Common
Stock Stock Additional Total
Preferred Held In Common Held In Paid-In Accumulated Unearned Shareholders'
Stock Treasury Stock Treasury Capital Deficit Compensation Equity
--------- ---------- ------ -------- ---------- ----------- ------------ -------------
Balance, December 31, 1998 $ 1,283 $ -- $ 234 $ (1) $ 296,373 $ (260,215) $ (8,200) $ 29,474
Net loss -- -- -- -- -- (4,411) -- (4,411)
Dividends -- -- -- -- 486 (2,798) -- (2,312)
Preferred shares issued 59 -- -- -- 2,099 -- -- 2,158
Preferred shares converted
to treasury shares -- (10) -- -- 10 -- -- --
Treasury shares retired -- -- (1) 1 -- -- -- --
Issuance of stock purchase
warrants -- -- -- -- 1,234 -- -- 1,234
Accretion of unearned
compensation -- -- -- -- 62 -- (62) --
Earned compensation -
stock options -- -- -- -- 394 -- -- 394
----- --- ---- ---- ------- -------- ------- --------
Balance, June 30, 1999 $ 1,342 $ (10) $ 233 $ -- $ 300,658 $ (267,424) $ (8,262) $ 26,537
===== === ==== ==== ======= ======== ======= ========
The accompanying notes are an integral part of these financial statements.
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Six Months Ended
June 30,
---------------
1999 1998
---- ----
Cash flows from operating activities:
Net loss $ (4,411) $ (4,120)
------ ------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, depletion and amortization 57 50
Amortization of discount on senior secured
notes and land notes 2,334 1,074
Stock compensation programs 394 732
Stock issued for outside professional services -- 223
Change in operating assets and liabilities:
Accounts receivable -- (87)
Refundable deposits -- 1,200
Accounts payable and accrued expenses 1,306 15
Accrued interest (7) 129
Other, net (381) (162)
------ ------
Total adjustments 3,703 3,174
------ ------
Net cash used in operating activities (708) (946)
------ ------
Cash flows from investing activities:
Change in cash held in escrow (restricted) 44 5,024
Note receivable -- (362)
Capital expenditures (1,893) (13,424)
Investments (18) (551)
------ ------
Net cash used in investing activities (1,867) (9,313)
------ ------
Cash flows from financing activities:
Proceeds from issuance of debt 2,700 --
Proceeds from exercise of warrants and options -- 331
Payment of long-term debt (94) (450)
Other (77) (205)
------ ------
Net cash provided by (used in)
financing activities 2,529 (324)
------ ------
Net decrease in cash and cash equivalents (46) (10,583)
Cash and cash equivalents at beginning of period 83 21,952
------ ------
Cash and cash equivalents at end of period $ 37 $ 11,369
====== ======
The accompanying notes are an integral part of these financial statements.
XCL Ltd. and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(1) Basis of Presentation
The consolidated financial statements at June 30, 1999,
and for the six months then ended have been prepared by the
Company, without audit, pursuant to the Rules and
Regulations of the Securities and Exchange Commission. 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, 1998. The balance sheet at
December 31, 1998, included herein, has been derived from
the audited financial statements at that date, but does not
include all of the information and footnotes required by
generally accepted accounting principles for complete
financial statements. In the opinion of management all
adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial
position of XCL Ltd. and subsidiaries as of June 30, 1999,
and the results of its operations for the six months ended
June 30, 1999 and 1998, have been included. The 1998
dividends on the Amended Series A Preferred Stock for the
six and three months ended June 30, 1998 have been restated
by $2.2 million to reflect the fair value of the preferred
stock issued in satisfaction of such amounts and will be
accreted to the mandatory redemption date applying the
effective interest method. This adjustment had the effect
of reducing the 1998 loss per share attributable to Common
Stock from $0.40 per share to $0.30 per share for the six
months ended June 30, 1998 and from $0.20 per share to $0.10
per share for the three months ended June 30, 1998. The
results of the Company's operations for such interim periods
are not necessarily indicative of the results for the full
year.
(2) Liquidity and Capital Resources
The Company, in connection with its 1995 decision to
dispose of its domestic properties, is generating minimal
annual revenues and is devoting all of its efforts toward
the development of its China properties. The Company has
cash available of approximately $37,000 as of June 30, 1999,
and a working capital deficit of $91.8 million. The Senior
Secured Notes (the "Notes") in the amount of $65 million
(net of unamortized discount of $10 million) have been
reclassified to current liabilities because the Company did
not make the May 1999 interest payment (in the approximate
amount of $5.6 million). Absent an agreement with the Note
holders amending and/or extending the payment terms, the
holders of the Notes could declare all amounts outstanding
immediately due and payable. The possible results include
the Company's loss of the stock of XCL-China and/or its
interest in the Contract. The Company is in negotiations
with the holders of the Notes regarding this matter and is
exploring other options for meeting its obligations under
the Notes and expects to arrive at a satisfactory
resolution. There can be no assurance, however, that a
satisfactory resolution will result.
As previously reported, the Company has not paid
certain disputed cash calls made by Apache with respect to
the Zhao Dong Block. On June 25, 1999, the Company initiated
a $17 million, arbitration proceeding against Apache. The
Company initiated the arbitration proceedings because Apache
demanded that the Company pay $10 million in disputed Zhao
Dong Block project costs in addition to $7.2 million
previously paid to Apache which has also been disputed.
Such disputed costs consist of (i) approximately $8 million
that Apache has demanded the Company pay for engineering and
design on the Zhao Dong Block (Apache has incurred
approximately $16 million in improper and excessive
engineering and design expenditures although Apache received
written authority to spend at most $2.5 million), (ii) $5.3
million consisting primarily of project costs challenged by
the Company in joint account audits for the years 1995, 1996
and 1997, as well as certain similar issues in 1998 and 1999
and (iii) $3.9 million in exploration costs that were
Apache's responsibility under its May 10, 1995 agreement
with the Company. The Company has demanded a refund of $7.2
million previously paid to Apache and has notified Apache
that it may seek their removal as operator of the Zhao Dong
Block. On that same date, but after Apache's receipt of the
formal arbitration notices, Apache filed a petition in U.S.
Bankruptcy Court to place the Company's subsidiary, XCL-
China, Ltd., into involuntary bankruptcy for failure to pay
the $10 million in disputed project costs. See Part II -
"Item 1. Legal Proceedings."
As more fully disclosed in Note 7, the Company is
obligated to meet certain minimum contractual requirements
covering the Zhao Dong and Zhang Dong Blocks in China.
Failure by the Company to meet such obligations, or secure
an extension of time in order to complete such contractual
requirements, may result in the sale or surrender of all or
part of its interest in those properties, and/or its other
interests in China. If such properties are sold or
surrendered, there can be no assurance that the Company
would recover its carrying value.
Management plans to generate the additional cash needed
through the sale or financing of its domestic assets held
for sale and the completion of additional equity, debt or
joint venture transactions. There is no assurance, however,
that the Company will be able to sell or finance its assets
held for sale or to complete other transactions in the
future at commercially reasonable terms, if at all, or that
it will be able to meet its future contractual obligations.
If production from the China properties commences in 2000,
as anticipated, the Company's proportionate share of the
related cash flow will be available to help satisfy a
portion of its cash requirements. However, there is
likewise no assurance that such development will be
successful and production will commence, and that such cash
flow will be available.
(3) Supplemental Cash Flow Information
There were no income taxes paid during the six-month
periods ended June 30, 1999 and 1998.
Capitalized interest for the three- and six-month
periods ended June 30, 1999 was $3.0 million and $6.0
million respectively, as compared to $2.8 million and $5.5
million, respectively, for the same period in 1998.
Interest paid during the three- and six-month periods ended
June 30, 1999 amounted to approximately $20,000 and $41,000,
respectively, as compared to $5.7 million and $5.8 million,
respectively, for the same periods in 1998.
(4) Disputed Amounts
As disclosed in Note 2, arbitration proceedings have
been commenced contesting this amount. See Part II - "Item
1. Legal Proceedings."
(5) Debt
Debt consists of the following (000's):
June 30, December 31,
1999 1998
-------- -----------
Senior secured notes, net of
unamortized discount of $10,469 and
$11,543, respectively $ 64,531 $ 63,457
====== ======
Notes payable:
Lutcher Moore Group Limited
Recourse Debt 1,380 1,474
XCL Land, Ltd. secured notes, net
of unamortized discount
of $281 and $0, respectively 3,919 1,500
------ ------
$ 5,299 $ 2,974
====== ======
Substantially all of the Company's assets collateralize
these borrowings.
Senior Secured Notes
- --------------------
The long-term portion of the Senior Secured Notes has
been reclassified to a current liability because the Company
did not make the May 1999 interest payment (in the
approximate amount of $5.6 million). Absent an agreement
with the Note holders amending and/or extending the payment
terms, the holders of the Notes could declare all amounts
outstanding immediately due and payable. The Company is in
negotiations with the holders of the Notes regarding this
matter.
XCL Land, Ltd. Secured Notes
- ----------------------------
In November 1998, January 1999, March 1999, April 1999
and May 1999, the Company, through its wholly owned
subsidiary, XCL Land, Ltd., issued an aggregate of 41 units,
each unit comprised of a secured note in the principal
amount of $100,000 each (the "XCL Land Secured Notes") and
five-year warrants to purchase 21,705 shares of Common Stock
of the Company in a short-term financing. Pursuant to the
terms of the subscription agreements, the exercise price of
the warrants is reduced, if the exercise price of those
warrants issued in subsequent subscriptions are more
favorable. In connection with the additional subscriptions
in May 1999, and pursuant to the terms of the subscription
agreements, the exercise prices of the warrants issued in
the November 1998 ($3.75 per share), January 1999 ($2.00 per
share), March 1999 ($1.50 per share) and April 1999 ($1.3125
per share) offerings, were all reduced to $1.25 per share.
The lenders were granted a security interest in a portion of
the partnership interests of XCL Land, Ltd. and The
Exploration Company of Louisiana, Inc., in L.M. Holding
Associates, L.P., the owner of the Lutcher Moore Tract. The
XCL Land Secured Notes bear interest at 15% per annum and
are payable 90 days from issuance, with the option for two
90-day extensions, the second of which must be approved by
the respective lender. XCL Land, Ltd. received $4.1 million
in proceeds, of which $1.2 million was allocated to the
warrants and is being amortized to interest expense over the
term of the notes. At June 30, 1999, the unamortized
discount is approximately $281,000. Approximately $0.7
million in proceeds were used to pay outstanding
indebtedness associated with the Lutcher Moore Tract and the
remaining $3.4 million was used to reduce intercompany debt.
Also during March 1999, the Company, through XCL Land,
Ltd., issued a secured note in the principal amount of
$100,000 and five-year warrants, exercisable at $1.25 per
share, to purchase 10,000 shares of Common Stock of the
Company in a short term financing with one lender. The
lender was granted a security interest in a portion of the
partnership interests of XCL Land, Ltd. and The Exploration
Company of Louisiana, Inc., in L.M. Holding Associates,
L.P., the owner of the Lutcher Moore Tract. The note bears
interest at 15% per annum and is payable 45 days after
issuance. The holder of the note has agreed to extend the
due date of the note and terms of the extension are being
negotiated. XCL Land, Ltd. received $100,000 in proceeds,
of which approximately $24,000 was allocated to the
warrants. The value allocated to the warrants was amortized
to interest expense over the term of the note. All of the
proceeds were used by the Company to reduce intercompany
debt.
Lutcher Moore Seller's Notes
- ----------------------------
During July 1999, the Company through its wholly owned
subsidiaries XCL-Acquisitions, Inc. and XCL Land Ltd.,
reached agreement with two lenders, whereby the lenders will
purchase an aggregate of $2.247 million in principal of
seller's notes ("Seller's Notes") secured by the Lutcher
Moore Tract for a purchase price of $2.1 million. The
purchase of the Seller's Notes will be funded in three
payments of $0.7 million each, the first on or before July
20, 1999, the second on or before August 12, 1999, and the
third on or before September 1, 1999. The interest rate on
the Seller's Notes is 8%, and the Seller's Notes are payable
on demand at any time after November 30, 1999. The
proceeds, as received, are being used to reduce intercompany
debt.
The Company further agreed that the purchasers of the
Seller's Notes, and under certain circumstances the holders
of the XCL Land Secured Notes, will collectively on a pro
rata basis receive 12.5% of the net proceeds received from
the sale of the Lutcher Moore Tract. Until the Lutcher
Moore Tract is sold, those same entities are entitled to
receive 12.5% of any net proceeds received by the Company
from any activity on or from the land, except for payments
for rights-of-way. Further, the Company has agreed to grant
an aggregate of 455,805 warrants, exercisable for five-years
at $0.10 per share. The holders of the warrants will have
the right after two-years, but only for a period of six
months, to exchange the warrants for fully paid shares of
Common Stock of the Company having a market value of
$800,000 at the time of exchange or, cash at the Company's
option.
The Company and those purchasers of the Seller's Notes,
and their affiliates, who also hold an aggregate of $2.0
million in XCL Land Secured Notes have agreed to extend the
term of the XCL Land Secured Notes to November 30, 1999.
The exercise price of all of the outstanding warrants issued
in connection with the XCL Land Secured Notes will be
reduced to $0.10 per share. The Company has also agreed to
amend the terms of certain existing warrants to purchase an
aggregate of 217,052 shares of Common Stock held by the
purchasers and their affiliates. The warrants will have a
new five-year term expiring July 16, 2004, the exercise
price will be reduced from $0.15 per share to $0.01 per
share, and the holders of the warrants will have the right
after two-years, but only for a period of six months, to
exchange the warrants for fully paid shares of Common Stock
of the Company having a market value at the time of exchange
of $400,000, or cash, at the Company's option.
(6) Preferred Stock and Common Stock
As of June 30, 1999, the Company had the following
shares of Preferred Stock issued and outstanding:
Liquidation
Shares Value
------ -----------
Amended Series A 1,288,847 $109,551,995
Amended Series B 53,262 5,326,200
--------- -----------
1,342,109 $114,878,195
========= ===========
Amended Series A Preferred Stock
- --------------------------------
On May 3, 1999, the Company paid approximately $4.9
million in dividends on the Amended Series A Preferred
Stock, payable in kind through the issuance of 56,950
shares.
Unclaimed shares of Amended Series A Preferred Stock
resulting from the amendment, recapitalization and
conversion of the Series A, Cumulative Convertible Preferred
Stock and Series E, Cumulative Convertible Preferred Stock,
including dividends accrued thereon through November 10,
1998, are classified as treasury stock. Pursuant to the
terms of the amendment, recapitalization and conversion,
dividends have ceased to accrue on the unclaimed shares.
Amended Series B Preferred Stock
- --------------------------------
On June 30, 1999, the Company paid approximately $0.2
million in dividends on the Amended Series B Preferred
Stock, payable in kind through the issuance of 2,414 shares.
Loss Per Share
- --------------
The following table sets forth the computation of basic
and diluted loss per share (in 000's, except for per share
amounts):
Three Months Ended Six Months Ended
June 30, June 30,
__________________ _________________
1999 1998 1999 1998
Number of shares on which
basic loss per share is
calculated: 23,373 22,922 23,373 22,622
Number of shares on which
diluted loss per share is
calculated: 23,373 22,922 23,373 22,622
Net loss attributable to
common shareholders $(2,419) $(2,323) $(7,209) $(6,765)
Basic loss per share $ (0.11) $ (0.10) $ (0.31) $ (0.30)
Diluted loss per share $ (0.11) $ (0.10) $ (0.31) $ (0.30)
The effect of 37,757,548 and 34,627,207 shares of
potential common stock were anti-dilutive in the six months
ended June 30, 1999 and 1998, respectively, due to the
losses in both periods.
(7) Commitments and Contingencies
Other commitments and contingencies 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 its partner are responsible for
all exploration costs. If a commercial discovery is made,
and if CNODC exercises its option to participate in the
development 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
its partner.
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 Production period.
Work to be performed and expenditures 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 its partner 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
processing and expend a minimum of $6
million. These obligations have been met.
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. These obligations have been met.
3. During the last two years, the Contractor
is required to drill two wildcat wells and
expend a minimum of $4 million. The
Contractor has elected to proceed with the
third phase of the Exploration Period.
4. The Production Period for any oil and/or
gas field covered by the Contract (the
"Contract Area") will be 15 consecutive years
(each of 12 months), commencing for each such
field on the date of commencement of
commercial production (as determined under
the terms of the Production Sharing
Agreement). However, prior to the Production
Period, and during the Development Period,
oil and/or gas may be produced and sold
during a long-term testing period.
The Contractor may terminate the Production
Sharing Agreement at the end of each phase of the
Exploration period, without further obligation.
The Company currently estimates that its share of
the development costs on proved reserves
associated with the Zhao Dong Block to be
approximately $35.5 million.
o The Company, through its wholly owned subsidiary XCL-
Cathay Ltd., acquired the rights to appraisal, development
and production of the Zhang Dong Block, in the Bohai Bay
shallow water sea area, by executing a Petroleum Contract
(the "Contract") with China National Petroleum Corporation
("CNPC") in August 1998. The Company is the Contractor.
The Contractor shall pay all appraisal costs. If CNPC
exercises its option to participate in the development of
the field, all development and operating costs and related
oil and gas production will be shared up to 51 percent by
CNPC and the remainder by the Company.
The Contract is basically divided into three
periods: the Appraisal period, the Development
period and the Production period. Work to be
performed and expenditures to be incurred during the
Appraisal period, which consists of three phases
totaling five years from October 1, 1998, are the
exclusive responsibility of the Company. The
Contractor's obligations in the three appraisal
phases are as follows:
1. During the first year, the Contractor is
required to drill one appraisal well, perform
seismic data processing, upgrade the
artificial island and causeway, and expend a
minimum of $4 million. The parties have
agreed to delay drilling of the first
appraisal well until March 2000.
2. During the next two years, the Contractor
is required to drill two appraisal wells,
make additional improvements to the
artificial island if Contractor elects to
drill from such facility, re-evaluate a
minimum of three existing wellbores,
formulate a development program for any field
determined to be commercial, and expend a
minimum of $6 million.
3. During the last two years, the Contractor
is required to drill two appraisal wells and
expend a minimum of $6 million.
4. The Production Period for any oil and/or
gas field covered by the Agreement will be 20
consecutive years (each of 12 months),
commencing for each such field on the date of
commencement of commercial production (as
determined under the terms of the Contract).
However, prior to the Production Period, and
during the Development Period, oil and/or gas
may be produced and sold during a long-term
testing period.
The Contractor may terminate the Contract at the
end of either the first or second phase of the
Appraisal period, without further obligation.
o As previously reported, the Company has not paid
certain cash calls to Apache totaling approximately $7.7
million through August 1999 (approximately $7.5 million at
June 30, 1999), including amounts in dispute. On December
1, 1995, XCL-China submitted to arbitration certain
accounting disputes arising from operations in the Bohai Bay
Shallow Water Sea Area, People's Republic of China and
governed by a Zhao Dong Block Operating Agreement. By the
initial submission, XCL-China disputed certain amounts
charged to it by Apache in the August, September and October
1995 joint interest billings and the November and December
1995 cash calls which could develop into an event that would
trigger Apache's option to purchase the Company's interest
in the Production Sharing Agreement. Thereafter, disputes
involving joint interest billings through December 1998 were
added to the submission. In 1997, XCL-China made some
payments with respect to the disputed amounts although the
arbitration proceeding remained unresolved and inactive
inasmuch as a third arbitrator had not been selected.
On June 25, 1999, the Company initiated a $17
million, arbitration proceeding against Apache.
The Company initiated the arbitration proceedings
when Apache demanded that the Company pay $10
million in cash calls and billings that the
Company disputes in addition to $7.2 million
previously paid to Apache which has also been
disputed. Such disputed costs consist of (i)
approximately $8 million that Apache has demanded
the Company pay for engineering and design
expenditures on the Zhao Dong Block Apache has
incurred approximately $16 million in improper and
excessive engineering and design expenditures
although Apache received written authority to
spend at most $2.5 million), (ii) $5.3 million
consisting primarily of project costs challenged
by the Company in joint account audits for the
years 1995, 1996 and 1997, as well as certain
similar issues in 1998 and 1999, and (iii) $3.9
million in exploration costs that were Apache's
responsibility under its May 10, 1995 agreement
with the Company. The Company has demanded a
refund of $7.2 million previously paid to Apache
and has notified Apache that it may seek their
removal as operator of the Zhao Dong Block. See
Part II - "Item 1. Legal Proceedings."
o On June 25, 1999, after receipt of formal arbitration
notices from the Company and its subsidiary, XCL-China,
Ltd., contesting such costs, Apache filed a petition in U.S.
Bankruptcy Court to involuntarily place the Company's
subsidiary, XCL-China, Ltd. into Chapter 7 bankruptcy for
failure to pay the $10 million in disputed project costs.
o The Company is in dispute over a 1992 tax assessment
(including penalties and interest through June 30, 1999) by
the Louisiana Department of Revenue and Taxation for the
years 1987 through 1991 in the approximate amount of $3.2
million. The Company is in dispute over a 1997 assessment
(including penalties and interest through June 30, 1999)
from the Louisiana Department of Revenue and Taxation for
income tax years 1991 and 1992, and franchise tax years 1992
through 1996 in the approximate amount of $3.4 million. The
Company has filed written protests as to these assessments,
and will vigorously contest the asserted deficiencies
through the administrative appeals process and, if
necessary, litigation. The Company believes that adequate
provision has been made in the financial statements for any
liability.
o On July 26, 1996, an individual filed three lawsuits
against a wholly owned subsidiary with respect to oil and
gas properties held for sale. One suit alleges actual
damage of $580,000 plus additional amounts that could result
from an accounting of a pooled interest. Another seeks
legal and related expenses of $56,473 from an allegation the
plaintiff was not adequately represented before the Texas
Railroad Commission. The third suit seeks a declaratory
judgement that a pooling of a 1938 lease and another in 1985
should be declared terminated and further plaintiffs seek
damages in excess of $1 million to effect environmental
restoration. The Company believes these claims are without
merit and intends to vigorously defend itself.
o The Company is subject to other legal proceedings that
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.
(8) XCL-China Ltd.
The following summary financial information of XCL-
China Ltd., a wholly owned subsidiary, reflects its
financial position and its results of operations for the
periods presented (in thousands of dollars):
June 30, December 31,
1999 1998
ASSETS -------- ------------
------
Current assets $ 452 $ 174
Oil and gas properties (full cost method):
Proved undeveloped properties, not
being amortized 30,570 28,274
Unevaluated properties 63,479 56,708
------ ------
94,049 84,982
Other 418 416
------ ------
94,467 85,398
Accumulated depreciation (11) (5)
------ ------
94,456 85,393
Other assets 396 359
------ ------
$ 95,304 $ 85,926
====== ======
LIABILITIES AND SHAREHOLDER'S DEFICIT
----------------------------------------
Total current liabilities $ 10,987 $ 8,397
Due to parent 87,307 80,425
Accumulated deficit (2,990) (2,896)
------ ------
$ 95,304 $ 85,926
====== ======
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1999 1998 1999 1998
---- ----- ---- ----
Costs and expenses $ 53 $ 356 $ 94 $ 618
---- ---- --- ----
Net loss $ (53) $ (356) $ (94) $ (618)
==== ==== === ====
XCL LTD. AND SUBSIDIARIES
June 30, 1999
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Outlook
- -------
Cautionary Statement Pursuant to Safe Harbor Provisions
of the Private Securities Litigation Reform Act of 1995.
This report contains "forward-looking statements"
within the meaning of the federal securities laws. These
forward-looking statements include, among others, statements
concerning the Company's outlook for 1999 and beyond, the
Company's expectations as to funding its capital
expenditures and other statements of expectations, beliefs,
future plans and strategies, anticipated events or trends,
and similar expressions concerning matters that are not
historical facts. The forward-looking statements in this
report are subject to risks and uncertainties that could
cause actual results to differ materially from those
expressed in or implied by the statements.
Liquidity and Capital Resources
- -------------------------------
The Company has generated minimal cash from operations
since the fourth quarter of 1995, when management made the
decision to focus its attention on operations in China and
to sell its other assets. This decision is supported by the
excellent well test results on the China properties.
At June 30, 1999, the Company had a net working capital
deficit of $91.8 million. The Company does not have, as of
August 14, 1999, sufficient funds to cover the Company's
working capital requirements and capital expenditure
obligations on the Zhao Dong and Zhang Dong Blocks during
1999.
In addition, the Company failed to make the interest
payment on the Senior Secured Notes (in the approximate
amount of $5.6 million) due on May 3, 1999. Absent an
agreement with the Note holders amending and/or extending
the payment terms, the holders of the Notes could declare
all principal amounts outstanding, and accrued interest,
immediately due and payable. The possible results include
the Company's loss of the stock of XCL-China and/or its
interest in the Contract. The Company is in negotiations
with the holders of the Notes regarding this matter, and is
exploring other options for meeting its obligations under
the Notes and expects to arrive at a satisfactory
resolution. However, there can be no assurance that a
satisfactory resolution will result.
As previously reported, the Company has not paid
certain disputed cash calls made by Apache with respect to
the Zhao Dong Block. On June 25, 1999, the Company
initiated a $17 million, arbitration proceeding against
Apache. The Company initiated the arbitration proceedings
because Apache demanded that the Company pay $10 million in
disputed Zhao Dong Block project costs in addition to $7.2
million previously paid to Apache which has also been
disputed. Such disputed costs consist of (i) approximately
$8 million that Apache has demanded the Company pay for
engineering and design expenditures on the Zhao Dong Block
(Apache has incurred approximately $16 million in improper
and excessive engineering and design expenditures although
Apache received written authority to spend at most $2.5
million), (ii) $5.3 million consisting primarily of project
costs challenged by the Company in joint account audits for
the years 1995, 1996 and 1997, as well as certain similar
issues in 1998 and 1999, and (iii) $3.9 million in
exploration costs that were Apache's responsibility under
its May 10, 1995 agreement. The Company has demanded a
refund of $7.2 million previously paid to Apache and has
notified Apache it may seek their removal as operator of
the Zhao Dong Block. On that same date, after receipt of
formal arbitration notices from the Company and its
subsidiary, XCL-China, Ltd., contesting such costs, Apache
filed a petition in U.S. Bankruptcy Court to place the
Company's subsidiary, XCL-China, Ltd., into involuntary
bankruptcy for failure to pay the $10 million in disputed
project costs. See Part II - "Item 1. Legal Proceedings."
The Company believes that its plans for the Zhao Dong
Block continue to be economically feasible at current oil
prices. Should such prices decline, it will reduce the
Company's projected economic return from the project and may
further impair its ability to meet the debt service
requirements.
As a result of the Company's decision to focus on China
and sell its U.S. assets, it presently has no source of
significant revenues. The Company incurred a loss for fiscal
1998 of $13.8 million (including a provision of $4.2 million
for impairment of certain oil and gas properties) and
expects to incur a loss in 1999 as well because production
and related cash flow from the Zhao Dong and Zhang Dong
Blocks are not expected until 2000, at the earliest.
With respect to the C-D Field on the Zhao Dong Block,
CNODC has given written notice that it will participate as
to its full 51% share and has urged that production begin as
soon as reasonably practicable. Except for certain
exploratory wells on which Apache has an obligation to pay
for all the costs, the Company is required to fund 50% of
all exploration expenditures and 24.5% of all development
and production expenditures.
Based on the current disputes with Apache, the Company
estimates that its share of development expenses for 1999
will be less than the approximately $13.7 million previously
estimated by the Company. The Company's share of
exploration expenses for the remaining two obligatory wells
to be drilled prior to the end of the Exploration Period
(which expires April 30, 2000) is approximately $5.0
million. The Company understands that Apache has requested
that the Exploration Period be extended by one year. The
Company presently projects and plans that these funds will
be available from the sale or refinancing of domestic oil
and gas properties held for sale and/or investment in land,
project financing, an increase in the amount of senior
secured notes, supplier financing, additional equity, joint
ventures with other oil companies, or proceeds from
production. Based on continuing discussions with major
shareholders, major bondholders, investment bankers, and
potential purchasers, the Company believes that such
required funds will be available. However, there is no
assurance that such funds will be available and, if
available, on commercially reasonable terms. Any new debt
could require approval of the holders of the Notes and there
is no assurance that such approval could be obtained.
In addition, the Company is the operator of the Zhang
Dong Block and, as such, is required to cover the costs of
initial appraisal drilling, upgrading production facilities
and additional studies of seismic data. The Contract
commits the Company to drill at least one well during the
first year. The parties have agreed to delay drilling of
this well until March 2000. Under the Contract, the Company
is entitled to 49% of the production. The Company estimates
that its minimum capital requirements over the next year to
satisfy the terms of the Zhang Dong Contract are
approximately $6.5 million. This amount is in addition to
amounts the Company expects to spend on the Zhao Dong Block
during 1999. Funds are expected to come from the previously
mentioned sources.
Longer-term liquidity is dependent upon the Company's
future performance, including commencement of production in
China, as well as continued access to capital markets. In
addition, the Company's efforts to secure additional
financing could be impaired if its Common Stock is delisted
from the AMEX.
If funds for the purposes described above and for
general and administrative expenses are not available, the
Company may be required to substantially curtail its
operations or sell or surrender all or part of its interest
in the Zhao Dong or the Zhang Dong Blocks and/or its other
interests in China in order to meet its obligations and
continue as a going concern. If those properties are sold
or surrendered under these circumstances, there can be no
assurance the carrying value will be realized.
The Company is not obligated to make any additional
capital payments to its lubricating oil and coalbed methane
projects, however, is in discussions with the Chinese
government about expansion of its lube oil venture. The
Company will require additional capital investments if these
discussions are successfully concluded; however, at this
time it is not known what the extent or timing for such
investments might be. Similarly, if the Company's coalbed
methane project becomes active and is successful, the
Company may make additional investments in that business,
however, the extent and timing of such investment if any, is
unknown at this time.
Other
- -----
The Company believes that inflation has had no material
impact on its sales, revenues or income during the reporting
periods.
The Company is subject to existing domestic and Chinese
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 Pronouncements
- -----------------------------
In June 1998, FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The
statement requires companies to report the fair market value
of derivatives on the balance sheet and record in income or
other comprehensive income, as appropriate, any changes in
the fair value of the derivative. SFAS No. 133 will become
effective with respect to the Company on January 1, 2001.
The Company is currently evaluating the impact of the
statement.
Results of Operations
- ---------------------
During the six-month periods ended June 30, 1999 and
1998, the Company incurred net losses of $7.2 million and
$6.8 million, respectively.
Revenues and operating expenses associated with oil and
gas properties held for sale are insignificant and
accordingly, are recorded in other costs and operating
expenses in the accompanying consolidated statements of
operations.
Interest expense, net of amounts capitalized, for the
three- and six-month periods ended June 30, 1999 was
approximately $1.2 million and $2.5 million compared to
approximately $1.1 million and $1.9 million for the same
periods in 1998. The increase was primarily attributable to
the discount amortization of the XCL Land, Ltd. secured
notes in the amount of approximately $0.7 million during the
six-month period ended June 30, 1999.
Preferred stock dividends were $2.8 million for the six
months ended June 30, 1999, as compared to $2.6, million for
the same period in 1998. The increase is the result of the
issuance of additional shares in payment of prior period
dividends. These dividends were paid in additional shares
of preferred stock at the option of the Company.
General and administrative expenses for the three- and
six-month periods ended June 30, 1999 were $1.1 million and
$2.2 million, respectively, as compared to $1.3 million and
$2.9 million, respectively, for the same periods in 1998.
The decrease was primarily attributable to reduction in
compensation expense of approximately $0.5 million,
reduction in public company costs of approximately $0.1
million and reduction in legal and professional fees of
approximately $0.1 million.
Year 2000 Compliance
- --------------------
The Year 2000 problem is the result of computer
programs being written using two digits (rather than four)
to define the applicable year and equipment with time-
sensitive embedded components. Any of the Company's
programs that have time-sensitive software or equipment that
has time-sensitive embedded components may recognize a date
using "00" as the year 1900 rather than the year 2000. This
could result in a major system failure or miscalculations.
Although no assurance can be given because of the potential
wide scale manifestations of this problem which may affect
the Company's business, the Company presently believes that
the Year 2000 problem will not pose significant operational
problems for its computer systems.
The goal of the Company's Year 2000 project is to
ensure that all of the critical systems and processes that
are under the Company's direct control remain functional.
Certain systems and processes may be interrelated with or
dependent upon systems outside the Company's control, and
systems within the Company's control may have unpredicted
problems. The Company has established a project team to
coordinate the phases of Year 2000 compliance to assure that
the Company's key automated systems and related processes
will remain functional through the year 2000. Those phases
consist of (i) assessment; (ii) remediation; (iii) testing;
(iv) implementation of the necessary modifications; and (v)
contingency planning. All phases of the Company's Year
2000 plan will continue to be modified and adjusted
throughout the year, as additional information becomes
available.
The Company's assessment phase consists of conducting a
company-wide inventory of its key automated systems and
related processes, analyzing and assigning levels of
criticality to those systems and processes, identifying and
prioritizing resource requirements, developing validation
strategies and testing plans, and evaluating business
partner relationships. The portions of the assessment phase
related to internally developed computer applications,
hardware and equipment, and embedded chips are substantially
complete. The Company estimates that it has completed more
than 95 percent of the assessment to determine the nature
and impact of the Year 2000 date change for third-party-
developed software. The assessment phase of the project
also involves efforts to obtain representations and
assurances from third parties, including third party
vendors, that their hardware and equipment products,
embedded chip systems, and software products being used by
or impacting the Company are or will be modified to be Year
2000 compliant. To date, the responses from such third
parties, although generally encouraging, are inconclusive.
As a result, the Company cannot predict the potential
consequences if these or other third parties or their
products are not Year 2000 compliant. The Company is
currently evaluating the exposure associated with such
business partner relationships.
The remediation phase involves converting, modifying,
replacing or eliminating key automated systems identified in
the assessment phase. The Company estimates that it has
completed approximately 90 percent of the remediation phase.
The Company has to date spent approximately $161,000 for
upgrades and/or replacement of certain of its hardware and
software to hardware and software that purports to be Year
2000 compliant. The Company estimates that an additional
expense of $49,000 will be required to replace and/or modify
and install hardware or software identified to date as non-
Year 2000 compliant.
The testing phase involves the validation of the
identified key automated systems. The Company is utilizing
test tools and written test procedures to document and
validate, as necessary, its systems testing. The Company
estimates that approximately 85 percent of the testing phase
has been completed, and expects to be substantially
completed by the end of September 1999.
The implementation phase involves placing the converted
or replaced key automated systems into operation. In some
cases, this phase will also involve the implementation of
contingency plans needed to support business functions and
processes that may be interrupted by Year 2000 failures that
are outside of the Company's control. The Company has
completed approximately 85 percent of the implementation
phase, and expects to be substantially completed by the end
of September 1999.
The contingency planning phase consists of developing a
risk profile of the Company's critical business processes
and then providing for actions the Company will pursue to
keep such processes operational in the event of Year 2000
disruptions. The focus of such contingency planning is on
prompt response to any adverse Year 2000 events and a plan
for subsequent resumption of normal operations. The plan is
expected to assess the risk of a significant failure to
critical processes performed by the Company, and to address
the mitigation of those risks. The plan will also consider
any significant failures related to the most reasonably
likely worst case scenario, discussed below, as they may
occur. In addition the plan is expected to factor in the
severity and duration of the impact of a significant
failure. The Company has finalized its contingency plan.
The Company's present analysis of its most reasonably
likely worst case scenario for Year 2000 disruptions
includes failures in the telecommunications and electricity
industries, and its partners in its international operations
to become Year 2000 compliant.
The Company does not expect the costs of its Year 2000
project to have a material adverse effect on its financial
position, results of operations, or cash flows. Based on
information available at this time the Company cannot
conclude that disruptions caused by internal or external
Year 2000 related failures will not have such an effect.
Specific factors that might affect the success of the
Company's Year 2000 efforts and the occurrence of Year 2000
disruption or expense include the failure of the Company or
its outside consultants to properly identify deficient
systems, the failure of the selected remedial action to
adequately address the deficiencies, the failure of the
Company's outside consultants to complete the remediation in
a timely manner (due to shortages of qualified labor or
other factors), unforeseen expenses related to the
remediation of existing systems or the transition to
replacement systems, the failure of third parties to become
Year 2000 compliant or to adequately notify the Company of
potential noncompliance.
Item 3. Qualitative and Quantitative Disclosures About
Market Risk.
The Company had no interest in investments subject to
market risk during the period covered by this report.
XCL LTD. AND SUBSIDIARIES
June 30, 1999
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Other than as disclosed in the Company's Annual Report
on Form 10-K or herein, 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.
On June 25, 1999, the Company initiated a $17 million,
arbitration proceeding against Apache arising from
operations in the Bohai Bay Shallow Water Sea Area, People's
Republic of China and governed by the Zhao Dong Block Joint
Operating Agreement, Participation Agreement, and May 10,
1995 Agreement. The Company initiated the arbitration
proceedings when Apache demanded that the Company pay $10
million in disputed Zhao Dong Block project costs in
addition to $7.2 million previously paid to Apache which has
also been disputed. Such disputed costs consist of: (i)
approximately $8 million that Apache has demanded the
Company pay for engineering and design on the Zhao Dong
Block (Apache has incurred approximately $16 million in
improper and excessive engineering and design expenditures,
although Apache received written authority to spend at most
$2.5 million), (ii) $5.3 million consisting primarily of
project costs challenged by the Company in joint account
audits for the years 1995, 1996 and 1997, as well as certain
similar issues in 1998 and 1999, and (iii) $3.9 million in
exploration costs that were Apache's responsibility under
its May 10, 1995 Agreement with the Company. The Company
has demanded a refund of $7.2 million previously paid to
Apache and has notified Apache that it may seek their
removal as operator of the Zhao Dong Block. Apache has
filed an answer and counterclaim denying liability, it has
appointed its arbitrator and has asked the arbitration
tribunal to determine, among other things, that the
Company's arbitration demands be denied.
On June 25, 1999, Apache China Corporation LDC filed a
petition in U.S. Bankruptcy Court Western District of
Louisiana (Case No. 99-BK-51330) to involuntarily place the
Company's subsidiary, XCL-China, Ltd., into a Chapter 7
bankruptcy for failure to pay $10 million in disputed Zhao
Dong Block project costs. XCL-China, Ltd. has filed a
motion to dismiss the involuntary bankruptcy petition.
Apache China Corporation has filed a motion to determine
whether the arbitration is stayed. Both motions are being
contested and a hearing is currently set for August 17,
1999.
Item 2(c). Changes in Securities
The following securities were issued in private placements
with accredited investors in transactions intended to
qualify for the exemption from registration pursuant to
Section 4(2) under the Securities Act of 1933, as amended.
o During May 1999, the Company, through XCL Land, Ltd., a
wholly owned subsidiary, issued 17 additional units, on the
same terms as the units issued in November 1998, January
1999, March 1999 and April 1999, except that the exercise
price of the warrants was $1.25 per share. In connection
with the additional subscriptions in May 1999, and pursuant
to the terms of the subscription agreements, the exercise
price for the warrants issued in the November 1998, January
1999, March 1999 and April 1999, offerings was reduced to
$1.25 per share. XCL Land, Ltd. received $1.7 million in
proceeds, of which approximately $308,000 was allocated to
the warrants. The value allocated to the warrants is being
amortized to interest expense over the term of the notes.
All of the proceeds were used to reduce intercompany debt.
o During July 1999, the Company through its wholly owned
subsidiaries XCL-Acquisitions, Inc. and XCL Land Ltd.,
reached agreement with two lenders, whereby the lenders will
purchase an aggregate of $2.1 million in principal of
seller's notes secured by the Lutcher Moore Tract and will
receive notes ("Seller's Notes") representing an aggregate
of $2.247 million in principal. The purchase price of the
Seller's Notes will be funded in three payments of $0.7
million each, the first on or before July 20, 1999, the
second on or before August 12, 1999, and the third on or
before September 1, 1999. The interest rate of the Notes is
8%, and the Seller's Notes are payable on demand at any time
after November 30, 1999. The proceeds, as received, are
being used to reduce intercompany debt.
The Company further agreed that the purchasers of the
Seller's Notes, and under certain circumstances the
holders of the XCL Land Secured Notes, will collectively
on a pro rata basis receive 12.5% of the net proceeds
received from the sale of the Lutcher Moore Tract. Until
the Lutcher Moore Tract is sold, those same entities are
entitled to receive 12.5% of any net proceeds received by
the Company from any activity on or from the land, except
for payments for rights-of-way. Further, the Company has
agreed to grant an aggregate of 455,805 warrants,
exercisable for five-years at $0.10 per share. The
holders of the warrants will have the right after two-
years, but only for a period of six months, to exchange
the warrants for fully paid shares of Common Stock of the
Company having a market value at the time of exchange of
$800,000, or cash, at the Company's option.
The Company and those purchasers of the Seller's Notes,
and their affiliates, who also hold and aggregate of $2.1
million in XCL Land Secured Notes have agreed to extend
the term of the XCL Land Secured Notes to November 30,
1999.
Further the Company has agreed to amend the terms of
certain existing warrants to purchase an aggregate of
217,052 shares of Common Stock held by the purchasers and
their affiliates. The warrants will have a new five-year
term expiring July 16, 2004, the exercise price will be
reduced from $0.15 per share to $0.01 per share, and the
holders of the warrants will have the right after two-
years, but only for a period of six months, to exchange
the warrants for fully paid shares of Common Stock of the
Company having a market value at the time of exchange of
$400,000, or cash, at the Company's option.
All of the above referenced warrants are first exercisable
six months to one year after issuance.
Item 3. Defaults Upon Senior Securities
On May 3, 1999, the Company failed to make a required
interest payment (in the approximate amount of $5.6 million)
on its Senior Secured Notes, and such amount remains
outstanding to date. Failure by the Company to make such
payment could allow the holders of the Notes to declare all
principal amounts outstanding, including accrued interest,
immediately due and payable.
Item 4. Submission of Matters to a Vote of Security-
Holders
There were no matters submitted to a vote of the
security holders of the Company during the period covered by
this report.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-K.
See Index to Exhibits.
(b) Reports on Form 8-K
A current report on Form 8-K filed on June 28, 1999, to
report that the Company had notified Apache Corporation that
(i) it will seek the removal of Apache China LDC, as
operator of the companies' joint venture project in the Zhao
Dong Block, and (ii) had initiated a $17 million arbitration
proceeding against Apache.
A current report on Form 8-K was filed on July 1, 1999,
to report that the Company had received a petition filed
with the U.S. Bankruptcy Court by Apache China LDC, asking
the court to place the Company's wholly owned subsidiary,
XCL-China, Ltd., under bankruptcy protection, claiming XCL-
China had not paid a $10 million debt related to the
companies joint venture project in the Zhao Dong Block.
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/ Marsden W. Miller, Jr.
By: __________________________
Marsden W. Miller, Jr.
Chief Executive Officer
and Principal Accounting Officer
Date: August 16, 1999
INDEX TO EXHIBITS
Exhibit
2.0 Not applicable
3.1 Amended and Restated Certificate of Incorporation of
the Company. (Q)(i)
3.2 Amended and Restated By-Laws of the Company. (A)
4.1 Forms of Common Stock Certificates. (J)(i)
4.2 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. (C)(i)
4.3 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 (now known as ChaseMellon Shareholder
Services) serves as the Company's Registrar and U.S.
Transfer Agent. (D)
4.4 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. (C)(ii)
4.5 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. (C)(iii)
4.6 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. (B)(i)
4.7 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. (B)(ii)
4.8 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
April 23, 1996 30 Units (E)(i)
4.9 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
April 23, 1996 1,800,000 $.35 (E)(ii)
4.10 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
April 23, 1996 180,000 $.35 (E)(iii)
4.11 Form of a series of Stock Purchase Warrants issued
to Janz Financial Corp. Ltd. dated August 14, 1996,
entitling the holders thereof to purchase up to
3,080,000 shares of Common Stock at $0.25 per share on
or before August 13, 2001. (F)
4.12 Form of a series of Stock Purchase Warrants dated
November 26, 1996, entitling the following holders
thereto to purchase up to 2,666,666 shares of Common
Stock at $0.125 per share on or before December 31,
1999:
Warrant Holder Warrants
Opportunity Associates, L.P. 133,333
Kayne Anderson Non-Traditional
Investments, L.P. 666,666
Arbco Associates, L.P 800,000
Offense Group Associates, L.P. 333,333
Foremost Insurance Company 266,667
Nobel Insurance Company 133,333
Evanston Insurance Company 133,333
Topa Insurance Company 200,000 (G)(i)
4.13 Form of a series of Stock Purchase Warrants dated
December 31, 1996 (2,128,000 warrants) and January 8,
1997 (2,040,000 warrants) to purchase up to an
aggregate of 4,168,000 shares of Common Stock at $0.125
per share on or before August 13, 2001. (G)(ii)
4.14 Form of Stock Purchase Warrants dated February 6,
1997, entitling the following holders to purchase an
aggregate of 1,874,467 shares of Common Stock at $0.25
per share on or before December 31, 1999:
Warrant Holder Warrants
Donald A. and Joanne R. Westerberg 241,660
T. Jerald Hanchey 1,632,807 (G)(iii)
4.15 Form of a series of Stock Purchase Warrants dated
April 10, 1997, issued as a part of a unit offered with
Unsecured Notes of XCL-China Ltd., exercisable at $0.01
per share on or before April 9, 2002, entitling the
following holders to purchase up to an aggregate of
10,092,980 shares of Common Stock:
Warrant Holder Warrants
Kayne Anderson Offshore L.P. 651,160
Offense Group Associates, L.P. 1,627,900
Kayne Anderson Non-Traditional
Investments, L.P. 1,627,900
Opportunity Associates, L.P. 1,302,320
Arbco Associates, L.P. 1,627,900
J. Edgar Monroe Foundation 325,580
Estate of J. Edgar Monroe 976,740
Boland Machine & Mfg. Co., Inc. 325,580
Construction Specialists, Inc.
d/b/a Con-Spec, Inc. 1,627,900 (G)(iv)
4.16 Form of Purchase Agreement dated May 13, 1997,
between the Company and Jefferies & Company, Inc. (the
"Initial Purchaser") with respect to 75,000 Units each
consisting of $1,000 principal amount of 13.5% Senior
Secured Notes due May 1, 2004, Series A and one warrant
to purchase 1,280 shares of the Company's Common Stock
with an exercise price of $0.2063 per share ("Note
Warrants"). (H)(i)
4.17 Form of Purchase Agreement dated May 13, 1997,
between the Company and Jefferies & Company, Inc. (the
"Initial Purchaser") with respect to 294,118 Units each
consisting of one share of Amended Series A, Cumulative
Convertible Preferred Stock ("Amended Series A
Preferred Stock") and one warrant to purchase 327
shares of the Company's Common Stock with an exercise
price of $0.2063 per share ("Equity Warrants"). (H)(ii)
4.18 Form of Warrant Agreement and Warrant Certificate
dated May 20, 1997, between the Company and Jefferies &
Company, Inc., as the Initial Purchaser, with respect
to the Note Warrants. (H)(iii)
4.19 Form of Warrant Agreement and Warrant Certificate
dated May 20, 1997, between the Company and Jefferies &
Company, Inc., as the Initial Purchaser, with respect
to the Equity Warrants. (H)(iv)
4.20 Form of Designation of Amended Series A Preferred
Stock dated May 19, 1997. (H)(v)
4.21 Form of Amended Series A Preferred Stock
certificate. (H)(vi)
4.22 Form of Global Unit Certificate for 75,000 Units
consisting of 13.5% Senior Secured Notes due May 1,
2004 and Warrants to Purchase Shares of Common Stock.
(H)(vii)
4.23 Form of Global Unit Certificate for 293,765 Units
consisting of Amended Series A Preferred Stock and
Warrants to Purchase Shares of Common Stock. (H)(viii)
4.24 Form of Warrant Certificate dated May 20, 1997,
issued to Jefferies & Company, Inc., with respect to
12,755 warrants to purchase shares of Common Stock of
the Company at an exercise price of $0.2063 per share.
(H)(ix)
4.25 Form of Stock Purchase Agreement dated effective as
of October 1, 1997, between the Company and William
Wang, whereby the Company issued 800,000 shares of
Common Stock to Mr. Wang, as partial compensation
pursuant to a Consulting Agreement. (I)(i)
4.26 Form of Stock Purchase Warrants dated effective as
of February 20, 1997, issued to Mr. Patrick B. Collins
with respect to 200,000 warrants to purchase shares of
Common Stock of the Company at an exercise price of
$0.25 per share, issued as partial compensation
pursuant to a Consulting Agreement. (I)(ii)
4.27 Certificate of Amendment to the Certificate of
Designation of Series F, Cumulative Convertible
Preferred Stock dated January 6, 1998. (J)(ii)
4.28 Form of Stock Purchase Warrants dated January 16,
1998, issued to Arthur Rosenbloom (6,389), Abby Leigh
(12,600) and Mitch Leigh (134,343) to purchase shares
of Common Stock of the Company at an exercise price of
$0.15 per share, on or before December 31, 2001.
(J)(iii)
4.29 Certificate of Designation of Amended Series B,
Cumulative Convertible Preferred Stock dated March 4,
1998. (J)(iv)
4.30 Correction to Certificate of Designation of Amended
Series B, Cumulative Convertible Preferred Stock dated
March 5, 1998. (J)(v)
4.31 Second Correction to Certificate of Designation of
Amended Series B Preferred Stock dated March 19, 1998.
(J)(vi)
4.32 Form of Stock certificate representing shares of
Amended Series B Preferred Stock. (K)(ii)
4.33 Form of Agreement dated March 3, 1998 between the
Company and Arbco Associates, L.P., Kayne Anderson Non-
Traditional Investments, L.P., Offense Group
Associates, L.P. and Opportunity Associates, L.P. for
the exchange of Series B Preferred Stock and associated
warrants into Amended Series B Preferred Stock and
warrants. (K)(iii)
4.34 Form of Stock Purchase Warrants dated March 3, 1998
between the Company and the following entities:
Holder Warrants
Arbco Associates, L.P. 85,107
Kayne Anderson Non-Traditional
Investments, L.P. 79,787
Offense Group Associates, L.P. 61,170
Opportunity Associates, L.P. 23,936 (K)(iv)
4.35 Form of Stock Purchase Warrant dated effective as
of June 30, 1998, issued to Mr. Patrick B. Collins with
respect to 17,000 warrants to purchase shares of Common
Stock of the Company at an exercise price of $3.75 per
share, issued as partial compensation pursuant to a
Consulting Agreement. (L)(i)
4.36 Form of Warrant Exchange Agreement and Stock
Purchase Warrant dated September 15, 1998 to purchase
an aggregate of 351,015 shares of Common Stock at an
exercise price of $2.50 per share, subject to
adjustment, issued to Cumberland Partners in exchange
for certain warrants held by Cumberland Partners.
(L)(ii)
4.37 Form of Warrant Agreement dated October 1, 1998 to
purchase 50,000 shares of Common Stock at an exercise
price of $3.75 per share, subject to adjustment, issued
to Steven B. Toon, a former officer of the Company.
(M)(i)
4.38 Form of a series of Stock Purchase Warrants dated
November 6, 1998, issued as a part of a unit offered
with secured Notes of XCL Land Ltd., exercisable at
$3.50 per share on or before November 6, 2003,
entitling the following holders to purchase up to an
aggregate of 325,575 shares of Common Stock:
Warrant Holder Warrants
J. Edgar Monroe Foundation 21,705
Estate of J. Edgar Monroe 151,935
Construction Specialists, Inc.
d/b/a Con-Spec, Inc. 151,935 (M)(ii)
4.39 Form of a series of Stock Purchase Warrants issued
as part of a unit offered with Secured Notes of XCL
Land Ltd., entitling the following holders to purchase
shares of Common Stock:
Initial
Warrant Holder Warrants Exercise Price Date
Estate of J. Edgar Monroe 54,262 $2.00 January 15, 1999
Construction Specialists, Inc.
d/b/a Con-Spec, Inc. 54,262 $2.00 January 15, 1999
Doug Ashy 21,705 $1.50 March 22, 1999
Edgar D. Daigle 21,705 $1.50 March 25, 1999
T. Jerald Hanchey 43,410 $1.3125 April 13, 1999
Northern Securities Limited 325,575 $1.25 May 17, 1999
Mitch Leigh 43,410 $1.25 May 21, 1999 (N)(i)
4.40 Form of Warrant Amendment Agreement between the
Company, J. Edgar Monroe Foundation (1976), Estate of
J. Edgar Monroe, and Construction Specialists, Inc.
d/b/a Con-Spec, Inc. amending the warrant exercise
price of warrants dated November 6, 1998, from $3.50 to
$2.00 per share. (N)(ii)
4.41 Form of a Stock Purchase Warrant dated March 15,
1999 issued to Mr. Robert R. Durkee, Jr. as part of a
unit offering with Secured Notes of XCL Land, Ltd.,
exercisable at $1.25 per share on or before March 15,
2004. (N)(iii)
4.42 Form of a Second Warrant Amendment Agreement dated
March 19, 1999, between the Company, J. Edgar Monroe
Foundation (1976), Estate of J. Edgar Monroe, and
Construction Specialists, Inc. d/b/a Con-Spec, Inc.
amending the warrant exercise price of warrants dated
November 6, 1998, from $2.00 to $1.50 per share.
(N)(iv)
4.43 Form of a Third Warrant Amendment Agreement dated
April 13, 1999, between the Company, J. Edgar Monroe
Foundation (1976), Estate of J. Edgar Monroe, and
Construction Specialists, Inc. d/b/a Con-Spec, Inc.
amending the warrant exercise price of warrants dated
November 6, 1998 and January 15, 1999, from $1.50 per
share to $1.3125 per share. *
4.44 Form of a Warrant Amendment Agreement dated April
13, 1999, between the Company and Edgar D. Daigle,
amending the warrant exercise price of warrants dated
March 25, 1999, from $1.50 per share to $1.3125 per
share. *
4.45 Form of a Warrant Amendment Agreement dated April
13, 1999, between the Company and Doug Ashy, Sr.,
amending the warrant exercise price of warrants dated
March 22, 1999, from $1.50 per share to $1.3125 per
share. *
4.46 Form of a Fourth Warrant Amendment Agreement dated
May 21, 1999, between the Company, J. Edgar Monroe
Foundation (1976), Estate of J. Edgar Monroe, and
Construction Specialists, Inc. d/b/a Con-Spec, Inc.
amending the warrant exercise price of warrants dated
November 6, 1998 and January 15, 1999, from $1.3125 per
share to $1.25 per share. *
4.47 Form of a Second Warrant Amendment Agreement dated
May 21, 1999, between the Company and Edgar D. Daigle,
amending the warrant exercise price of warrants dated
March 25, 1999, from $1.3125 per share to $1.25 per
share. *
4.48 Form of a Second Warrant Amendment Agreement dated
May 21, 1999, between the Company and Doug Ashy, Sr.,
amending the warrant exercise price of warrants dated
March 22, 1999, from $1.3125 per share to $1.25 per
share. *
4.49 Form of a Warrant Amendment Agreement dated May 21,
1999, between the Company and T. Jerald Hanchey,
amending the warrant exercise price of warrants dated
April 13, 1999, from $1.3125 per share to $1.25 per
share. *
4.50 Form of a Warrant Amendment Agreement dated May 21,
1999, between the Company and Mitch Leigh, Abby Leigh
as Trustee Under Indenture of Mitch Leigh F/B/O Andrew
Leigh, Arthur Rosenbloom as Trustee Under Indenture of
Mitch Leigh F/B/O Rebecca Millicent Leigh and Arthur
Rosenbloom as Trustee Under Indenture of Mitch Leigh
F/B/O David George Leigh, amending the warrant exercise
price of warrants held individually and in trust for
the benefit of Andrew Leigh from $3.50 per share to
$1.25 per share, and extending the expiration of such
warrants from December 31, 2001 to December 31, 2004;
amending the exercise price of the warrants held in
trust for the benefit of Rebecca M. Leigh and David G.
Leigh from $7.50 per share to $1.25 per share and
extending the date of expiration of such warrants from
January 2, 2001 to December 31, 2004. *
9.0 Not applicable.
10.39 Form of Consulting Agreement dated June 15, 1998,
between the Company and Mr. Patrick B. Collins, whereby
Mr. Collins performs certain accounting advisory
services. (L)(iii)
10.44 Zhang Dong Petroleum Sharing Contract dated August
20, 1998. (L)(vi)
10.45 Form of a series of Secured Notes dated November
6, 1998, between the Company and the following
entities:
Note Holder Principal Amount
J. Edgar Monroe Foundation $100,000
Estate of J. Edgar Monroe $700,000
Construction Specialists, Inc.
d/b/a Con-Spec, Inc. $700,000 (M)(iii)
10.46 Form of Subscription Agreement dated November 6,
1998, by and between XCL Land, Ltd., the Company and
the subscribers of Units, each unit comprised of
$100,000 in secured Notes and 21,705 warrants. (M)(iv)
10.47 Form of Security Agreement dated November 6, 1998,
by and between XCL Land, Ltd. and holders of the
secured Notes of XCL Land, Ltd. dated November 6, 1998.
(M)(v)
10.48 Form of Security Agreement dated November 6, 1998,
by and between The Exploration Company of Louisiana,
Inc. and holders of the secured Notes of XCL Land, Ltd.
dated November 6, 1998. (M)(vi)
10.49 Form of Subscription Agreement by and between XCL
Land, Ltd., the Company and the subscribers of Units,
each unit comprised of $100,000 in Secured Notes and
21,705 warrants. (N)(v)
Subscriber Units Date
Estate of J. Edgar Monroe 2.5 January 15, 1999
Construction Specialists, Inc.
d/b/a Con-Spec, Inc. 2.5 January 15, 1999
Doug Ashy, Sr. 1.0 March 22, 1999
Edgar D. Daigle 1.0 March 25, 1999
T. Jerald Hanchey 2.0 April 13, 1999
Northern Securities Limited 15.0 May 17, 1999
Mitch Leigh 2.0 May 21, 1999 (N)(vi)
10.50 Form of a series of secured Notes between the
Company and the following entities:
Note Holder Principal Amount Issue Date
Estate of J. Edgar Monroe $250,000 January 15, 1999
Construction Specialists, Inc.
d/b/a Con-Spec, Inc. $250,000 January 15, 1999
Doug Ashy, Sr. $100,000 March 22, 1999
Edgar D. Daigle $100,000 March 25, 1999
T. Jerald Hanchey $200,000 April 13, 1999
Northern Securities Limited $1,500,000 May 17, 1999
Mitch Leigh $200,000 May 21, 1999 (N)(vii)
10.51 Form of First Amendment to Security Agreement
dated January 15, 1999, by and between XCL Land, Ltd.
and holders of the Secured Notes of XCL Land, Ltd.
dated November 6, 1999. (N)(viii)
10.52 Form of First Amendment to Security Agreement
dated January 15, 1999, by and between The Exploration
Company of Louisiana, Inc. and holders of the secured
Notes of XCL Land, Ltd. dated November 6, 1998.
(N)(ix)
10.53 Acknowledgement and Agreement Regarding Security
Interest by the J. Edgar Monroe Foundation (1976) dated
January 15, 1999. (N)(x)
10.54 Form of Security Agreement by and between XCL
Land, Ltd. and the following holders of the Secured
Notes of XCL Land, Ltd.:
Note Holder Date
Doug Ashy, Sr. March 22, 1999
Edgar D. Daigle March 25, 1999 (N)(xi)
10.55 Form of Security Agreement by and between The
Exploration Company of Louisiana, Inc. and the
following holders of the Secured Notes of XCL Land,
Ltd.
Note Holder Date
Doug Ashy, Sr. March 22, 1999
Edgar D. Daigle March 25, 1999 (N)(xii)
10.56 Form of Subscription Agreement dated March 15,
1999, by and between XCL Land, Ltd. and Robert R.
Durkee, Jr. for a unit comprised of a $100,000 45-day
secured note and 10,000 warrants to purchase Common
Stock of XCL Ltd.. (N)(xiii)
10.57 Form of Promissory Note dated March 15, 1999, by
and between Robert R. Durkee, Jr. in the principal
amount of $100,000. (N)(xiv)
10.58 Form of Security Agreement by and between XCL
Land, Ltd. and Robert R. Durkee, Jr. dated March 15,
1999. (N)(xv)
10.59 Form of Security Agreement by and between The
Exploration Company of Louisiana, Inc. and Robert R.
Durkee, Jr. dated March 15, 1999. (N)(xvi)
10.60 Consulting Agreement dated January 1, 1999,
between the Company and R. Thomas Fetters, Jr., a
director of the Company, whereby Mr. Fetters performs
certain geological consulting services. (N)(xvii)
10.61 Amendment to Personal Services Agreement dated
January 15, 1999, between the Company and Benjamin B.
Blanchet, an officer and director of the Company.
(N)(xviii)
10.62 Form of Security Agreement by and between XCL
Land, Ltd. and T. Jerald Hanchey dated April 13, 1999. *
10.63 Form of Security Agreement by and between The
Exploration Company of Louisiana, Inc. and
T. Jerald Hanchey dated April 13, 1999. *
10.64 Form of Second Amendment to Security Agreement
dated April 13, 1999, between XCL Land, Ltd. and Estate
of J. Edgar Monroe, amending that Security Agreement
dated November 6, 1998. *
10.65 Form of Second Amendment to Security Agreement
dated April 13, 1999, between XCL Land, Ltd. and J.
Edgar Monroe Foundation (1976), amending that Security
Agreement dated November 6, 1998. *
10.66 Form of Second Amendment to Security Agreement
dated April 13, 1999, between XCL Land, Ltd. and
Construction Specialists, Inc. d/b/a Con-Spec, Inc.,
amending that Security Agreement dated November 6,
1998. *
10.67 Form of First Amendment to Security Agreement
dated April 13, 1999, between XCL Land, Ltd. and Edgar
D. Daigle, amending that Security Agreement dated March
25, 1999. *
10.68 Form of First Amendment to Security Agreement
dated April 13, 1999, between XCL Land, Ltd. and Doug
Ashy, Sr., amending that Security Agreement dated March
22, 1999. *
10.69 Form of Second Amendment to Security Agreement
dated April 13, 1999, between The Exploration Company
of Louisiana, Inc. and Estate of J. Edgar Monroe,
amending the Security Agreement dated November 6, 1998. *
10.70 Form of Second Amendment to Security Agreement
dated April 13, 1999, between The Exploration Company
of Louisiana, Inc. and J. Edgar Monroe Foundation
(1976), amending the Security Agreement dated November
6, 1998. *
10.71 Form of Second Amendment to Security Agreement
dated April 13, 1999, between The Exploration Company
of Louisiana, Inc. and Construction Specialists, Inc.
d/b/a Con-Spec, Inc., amending the Security Agreement
dated November 6, 1998. *
10.72 Form of First Amendment to Security Agreement
dated April 13, 1999, between The Exploration Company
of Louisiana, Inc. and Edgar D. Daigle, amending the
Security Agreement dated March 25, 1999. *
10.73 Form of First Amendment to Security Agreement
dated April 13, 1998 between The Exploration Company of
Louisiana, Inc. and Doug Ashy, Sr., amending the
Security Agreement dated March 22, 1999. *
10.74 Form of Security Agreement dated May 17, 1999,
between XCL Land, Ltd. and Northern Securities Limited. *
10.75 Form of Security Agreement dated May 17, 1999,
between The Exploration Company of Louisiana, Inc. and
Northern Securities Limited. *
10.76 Form of Security Agreement dated May 21, 1999
between XCL Land, Ltd. and Mitch Leigh. *
10.77 Form of Security Agreement dated May 21, 1999
between The Exploration Company of Louisiana, Inc. and
Mitch Leigh. *
10.78 Form of Third Amendment to Security Agreement
dated May 21, 1999, between XCL Land, Ltd. and
Construction Specialists, Inc. d/b/a Con-Spec, Inc.,
amending the Security Agreement dated November 6, 1998.
*
10.79 Form of Third Amendment to Security Agreement
dated May 21, 1999, between XCL Land, Ltd. and Estate
of J. Edgar Monroe, amending the Security Agreement
dated November 6, 1998. *
10.80 Form of Third Amendment to Security Agreement
dated May 21, 1999, between XCL Land, Ltd. and J. Edgar
Monroe Foundation (1976), amending the Security
Agreement dated November 6, 1998. *
10.81 Form of Third Amendment to Security Agreement
dated May 21, 1999, between The Exploration Company of
Louisiana, Inc. and Estate of J. Edgar Monroe, amending
the Security Agreement dated November 6, 1998. *
10.82 Form of Third Amendment to Security Agreement
dated May 21, 1999, between The Exploration Company of
Louisiana, Inc. and Construction Specialists, Inc.
d/b/a Con-Spec, Inc., amending the Security Agreement
dated November 6, 1998. *
10.83 Form of Third Amendment to Security Agreement
dated May 21, 1999, between The Exploration Company of
Louisiana, Inc. and J. Edgar Monroe Foundation (1976),
amending the Security Agreement dated November 6, 1998. *
10.84 Form of Second Amendment to Security Agreement
dated May 21, 1999, between The Exploration Company of
Louisiana, Inc. and Edgar D. Daigle, amending the
Security Agreement dated March 25, 1999. *
10.85 Form of Second Amendment to Security Agreement
dated May 21, 1999, between XCL Land, Ltd. and Edgar D.
Daigle, amending the Security Agreement dated March 25,
1999. *
10.86 Form of Second Amendment to Security Agreement
dated May 21, 1999, between The Exploration Company of
Louisiana, Inc. and Doug Ashy, Sr., amending the
Security Agreement dated March 22, 1999. *
10.87 Form of Second Amendment to Security Agreement
dated May 21, 1999, between XCL Land, Ltd. and Doug
Ashy, Sr., amending the Security Agreement dated March
22, 1999. *
10.88 Form of First Amendment to Security Agreement
dated May 21, 1999, between The Exploration Company of
Louisiana, Inc. and T. Jerald Hanchey, amending the
Security Agreement dated April 13, 1999. *
10.89 Form of First Amendment to Security Agreement
dated May 21, 1999, between XCL Land, Ltd. and T.
Jerald Hanchey, amending the Security Agreement dated
April 13, 1999. *
11.0 Not applicable.
15.0 Not applicable.
18.0 Not applicable.
19.0 Not applicable.
22.0 Not applicable.
23.0 Not applicable.
24.0 Not applicable.
27.0 Financial Data Schedule *
99.0 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 Exhibits 3(c).
(B) 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) Exhibit
4.34 and (ii) Exhibit 4.36.
(C) Incorporated by reference to Amendment No. 1 to
Annual Report on Form 10-K filed April 15, 1994, where
it appears as: (i) Exhibit 4.32; (ii) Exhibit 4.36;
and (iii) Exhibit 4.37.
(D) 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.
(E) 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 (iii)
Exhibits 4.28 through 4.30, respectively.
(F) Incorporated by reference to Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996,
filed November 14, 1996, where it appears as Exhibits
4.32.
(G) Incorporated by reference to Annual Report on Form
10-K for the year ended December 31, 1996, filed April
15, 1997, where it appears as (i) through (iii)
Exhibits 4.35 through 4.38; and (iv) Exhibit 4.40.
(H) Incorporated by reference to Current Report on Form
8-K dated May 20, 1997, filed June 3, 1997, where it
appears as (i) through (ix) Exhibits 4.1 through 4.9,
respectively.
(I) Incorporated by reference to Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997,
filed November 14, 1997, where it appears as (i)
Exhibit 4.52; and (ii) Exhibit 10.62.
(J) Incorporated by reference to Annual Report on Form
10-K for the year ended December 31, 1997, filed April
15, 1998, where it appears as (i) Exhibit 4.1; (ii)
through (vi) Exhibits 4.32 through 4.36, respectively.
(K) Incorporated by reference to Amendment No. 1 to
Annual Report on Form 10-K for the year ended December
31, 1997, filed April 22, 1998, where it appears as (i)
Exhibit 3.1; and (ii) through (iv) Exhibits 4.37
through 4.39, respectively.
(L) Incorporated by reference to Amendment No. 2 to
Registration Statement on Form S-1 filed October 23,
1998, where it appears as: (i) Exhibit 4.40; (ii)
Exhibit 4.41; (iii) Exhibit 10.49; and (vi) Exhibit
10.54.
(M) Incorporated by reference to Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998,
filed on November 16, 1998, where it appears as: (i)
and (ii) Exhibits 4.42 and 4.43, respectively; and
(iii) through (vi) Exhibits 10.55 through 10.58,
respectively.
(N) Incorporated by reference to Annual Report on Form
10-K for the year ended December 31, 1998, filed on
April 15, 1999, where it appears as: (i) through (iv)
Exhibits 4.42 to 4.45; and (v) through (xviii) Exhibits
10.49 through 10.61.