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 September 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)
Petroleum Tower, Suite 400
3639 Ambassador Caffery Parkway, Lafayette, LA 70503
(Address of principal executive offices) (Zip
Code)
318-989-0449
(Registrant's telephone number, including area code)
110 Rue Jean Lafitte, 2nd Floor, Lafayette, LA 70508
(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 November 15, 1999.
XCL LTD.
TABLE OF CONTENTS
Page
PART I
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 19
PART II
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Default Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 6. Exhibits and Reports on Form 8-K 21
XCL Ltd. and Subsidiaries
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
September 30, December 31,
A S S E T S 1999 1998
----------- ------------- ------------
Current assets:
Cash and cash equivalents $ 405 $ 83
Cash held in escrow (restricted) 192 205
Other 753 443
-------- ---------
Total current assets 1,350 731
-------- ---------
Property and equipment:
Oil and gas (full cost method):
Proved undeveloped properties,
not being amortized 31,247 28,274
Unevaluated properties 70,172 58,403
-------- --------
101,419 86,677
Other 1,338 1,344
-------- --------
102,757 88,021
Accumulated depreciation, depletion and
amortization (803) (761)
-------- --------
101,954 87,260
-------- --------
Investments 4,105 4,078
Investment in land 12,200 12,200
Oil and gas properties held for sale 5,059 5,099
Debt issue costs, less amortization 3,289 3,763
Other assets 1,608 1,542
-------- --------
Total assets $ 129,565 $ 114,673
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
---------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 3,250 $ 1,465
Accrued interest 11,071 2,049
Due to joint venture partner (Note 5) 10,926 8,168
Dividends payable 4,547 1,658
Notes payable 7,071 2,974
-------- --------
36,865 16,314
Senior secured notes reclassification 65,068 63,457
-------- --------
Total current liabilities 101,933 79,771
-------- --------
Long-term debt, net of current maturities -- --
Other liabilities 5,361 5,428
Commitments and contingencies (Note 8)
Shareholders' equity:
Preferred stock-$1.00 par value; authorized
2.4 million shares; issued shares of
1,342,109 at September 30, 1999 and
1,282,745 at December 31, 1998 -
liquidation preference of $115 million
at September 30, 1999 1,342 1,283
Preferred stock held in treasury -
$1.00 par value; 9,681 shares at
September 30, 1999 (10) --
Common stock-$.01 par value; authorized
500 million shares; issued shares of
23,377,971 at September 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 301,149 296,373
Accumulated deficit (272,172) (260,215)
Unearned compensation (8,271) (8,200)
-------- --------
Total shareholders' equity 22,271 29,474
-------- --------
Total liabilities and
shareholders' equity $ 129,565 $ 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 Nine Months Ended
September 30, September 30,
----------------- -----------------
1999 1998 1999 1998
------ ------ ------ ------
Costs and operating expenses:
General and administrative $ 1,082 $ 1,631 $ 3,257 $ 4,546
Other, net 32 46 102 118
------- ------- ------ ------
1,114 1,677 3,359 4,664
------- ------- ------ ------
Operating loss (1,114) (1,677) (3,359) (4,664)
------- ------- ------ ------
Other income (expense):
Interest income 2 146 6 864
Interest expense, net of
amounts capitalized (1,199) (99) (3,703) (1,951)
Other, net 660 744 994 745
------- ------- ------ ------
(537) 791 (2,703) (342)
------- ------- ------ ------
Net loss (1,651) (886) (6,062) (5,006)
Preferred stock dividends (3,097) (2,688) (5,895) (5,333)
------- ------- ------ ------
Net loss attributable to common stock $(4,748) $(3,574) $(11,957) $(10,339)
====== ====== ====== ======
Net loss per common share (basic) $ (0.20) $ (0.16) $ (0.51) $ (0.46)
====== ====== ======= =======
Net loss per common share (diluted) $ (0.20) $ (0.16) $ (0.51) $ (0.46)
====== ====== ======= =======
Weighted average number of common
shares outstanding:
Basic 23,373 22,922 23,373 22,723
Diluted 23,373 22,922 23,373 22,723
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 -- -- -- -- -- (6,062) -- (6,062)
Dividends -- -- -- -- 771 (5,895) -- (5,124)
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 -- -- -- -- 71 -- (71) --
Earned compensation -
stock options -- -- -- -- 591 -- -- 591
----- ---- ---- ---- -------- -------- -------- -------
Balance, September 30, 1999 $ 1,342 $ (10) $ 233 $ -- $301,149 $ (272,172) $ (8,271) $ 22,271
===== ==== ==== ==== ======= ======= ======== =======
The accompanying notes are an integral part of these financial statements.
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
NineMonths Ended
September 30,
-----------------
1999 1998
---- -----
Cash flows from operating activities:
Net loss $ (6,062) $ (5,006)
------- ------
Adjustments to reconcile net loss to net cash
provided by (used in)operating activities:
Depreciation, depletion and amortization 83 78
Amortization of discount on senior secured
notes and land notes 3,239 1,610
Stock compensation programs 591 1,098
Stock issued for outside professional services -- 223
Change in operating assets and liabilities:
Accounts receivable -- (83)
Refundable deposits -- 1,200
Accounts payable and accrued costs 1,785 (350)
Accrued interest 13 2,813
Other, net (443) (268)
------ ------
Total adjustments 5,268 6,321
------ ------
Net cash provided by (used in)
operating activities (794) 1,315
------ ------
Cash flows from investing activities:
Change in cash held in escrow (restricted) 13 5,013
Note receivable -- (362)
Capital expenditures (2,969) (23,578)
Investments (27) (607)
Proceeds from sale of assets -- 3
------ -------
Net cash used in investing activities (2,983) (19,531)
------ -------
Cash flows from financing activities:
Proceeds from issuance of debt 4,800 --
Proceeds from exercise of common stock
warrants and options -- 1,209
Payment of long-term debt (624) (450)
Stock /note issuance costs and other (77) (93)
------ -------
Net cash provided by financing
activities 4,099 666
------ -------
Net increase (decrease) in cash and cash equivalents 322 (17,550)
Cash and cash equivalents at beginning of period 83 21,952
------ -------
Cash and cash equivalents at end of period $ 405 $ 4,402
====== =======
The accompanying notes are an integral part of these financial statements.
XCL Ltd. and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
(1) Basis of Presentation
The consolidated financial statements at September 30, 1999,
and for the nine 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 September
30, 1999, and the results of its operations for the nine months
ended September 30, 1999 and 1998, have been included. The 1998
dividends on the Amended Series A Preferred Stock for the nine and
three months ended September 30, 1998 have been restated by $2.0
million and $0.2 million, respectively, 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
$0.54 per share to $0.46 per share for the nine months ended
September 30, 1998 and no effect per share for the three months
ended September 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
$405,000 as of September 30, 1999, and a working capital deficit
of $101 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 $6.0 million, including approximately $0.4 million in
default interest as of September 30, 1999). Further, the Company
failed to make the November 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 discussions with
the holders of at least 95% of the Notes and believes that an
agreement can be reached to avoid a declaration that all amounts
outstanding are due and payable. The possible results of such a
declaration include the Company's loss of the stock of XCL-China
and/or its interest in the Contract. In addition to the
negotiations with the holders of the Notes regarding this matter,
the Company is exploring other options for meeting its obligations
under the Notes. A negotiated agreement with the Note holders
could substantially dilute the interests of the Company's existing
equity holders. 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 on the Zhao Dong Block (Apache has incurred
approximately $16 million in 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 the Company
believes 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 8, 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 nine-month periods
ended September 30, 1999 and 1998.
Capitalized interest for the three- and nine-month periods
ended September 30, 1999 was approximately $3.0 million and $9.0
million respectively, as compared to approximately $3.3 million
and $8.8 million, respectively, for the same period in 1998.
Interest paid during the three- and nine-month periods ended
September 30, 1999 amounted to approximately $206,000 and
$247,000, respectively, as compared to $37,000 and $5.8 million,
respectively, for the same periods in 1998.
(4) Prepaid Lease
On August 19, 1999, the Company entered into a one-year lease
commencing on September 1, 1999, for its current office space in
Petroleum Tower. The Company prepaid the lease in advance for an
aggregate amount of $79,704.63, including a security deposit of
$6,131.13.
(5) Disputed Amounts
As disclosed in Note 2, arbitration proceedings have been
commenced contesting this amount. See Part II - "Item 1. Legal
Proceedings."
(6) Debt
Debt consists of the following (000's):
September 30, December 31,
1999 1998
------------ ------------
Senior secured notes, net of unamortized
discount of $9,932 and $11,543, respectively $ 65,068 $ 63,457
====== ======
Notes payable:
Lutcher Moore Group Limited Recourse Debt 2,950 1,474
XCL Land, Ltd. secured notes, net of
unamortized discount of $79 and $0,
respectively 4,121 1,500
------ -------
$ 7,071 $ 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
$6.0 million, including approximately $0.4 million in default
interest as of September 30, 1999). Further, the Company failed to
make the November 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.
The Exploration Company of Louisiana, Inc. (formerly 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 price 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 September 30, 1999, the unamortized discount is
approximately $79,000. 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.
On September 8, 1999, XCL Land Ltd. was merged into The
Exploration Company of Louisiana, Inc.
During September 1999, one Note holder elected not to extend
its XCL Land Secured Note and was repaid $100,000 in principal
plus accrued interest thereon in October 1999. During October
1999, one Note holder elected not to extend its XCL Land Secured
Note in the principal amount of $200,000.
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 purchased 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 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 were 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.
(7) Preferred Stock and Common Stock
As of September 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
- --------------------------------
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.
During September 1999, the directors declared a dividend
payable in kind on November 1, 1999, to holders of Amended Series
A Preferred Stock on October 15, 1999, at the rate of 0.0475 new
shares for each share held. This dividend payment has not yet
been distributed.
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 Nine Months Ended
September 30, September 30,
__________________ _________________
1999 1998 1999 1998
----- ----- ---- ----
Number of shares on which basic
loss per share is calculated: 23,373 22,922 23,373 22,723
Number of shares on which diluted
loss per share is calculated: 23,373 22,922 23,373 22,723
Net loss attributable to common
shareholders $(4,748) $(3,574) $(11,957) $(10,339)
Basic loss per share $ (0.20) $ (0.16) $(0.51) $ (0.46)
Diluted loss per share $ (0.20) $ (0.16) $(0.51) $ (0.46)
The effect of 38,148,107 and 35,273,606 shares of potential
common stock were anti-dilutive in the nine months ended September
30, 1999 and 1998, respectively, due to the losses in both
periods.
(8) Commitments and Contingencies
Other commitments and contingencies include:
* 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.
* 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. The parties have also agreed
that the Company may delay its election to enter the second phase
of the Zhang Dong Contract until the first appraisal well has been
drilled and evaluated. This agreement has not yet been formally
documented.
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. The Company has not yet paid certain amounts
due under the terms of the Zhang Dong Contract. Failure to make
those payments if demand is made will result in loss of the
Company's interest in the Zhang Dong Block.
* On October 1, 1999, the Company met with representatives of
the AMEX, at the request of the AMEX, to present information in
support of a continued listing. The Company's continued listing
is being reviewed because:
(a) the Company has incurred losses in each of the past five
fiscal years ending December 31, 1998 and the six months ending
June 30, 1999, and continues to have a working capital deficit;
(b) the Company received a going concern opinion from its
auditors on its audited financial statements for the year ended
December 31, 1998;
(c) the Company failed to make an interest payment on its
Senior Secured Notes in May 1999;
(d) the Company's low stock price.
The Company is waiting for a determination by the AMEX.
* As previously reported, the Company has not paid certain
cash calls and disputed charges to Apache totaling approximately
$10.9 million through November 1999 (approximately $10.7 million
at September 30, 1999). 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."
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. . See Part II - "Item 1. Legal
Proceedings."
* The Company is in dispute over a 1992 tax assessment
(including penalties and interest through September 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 September 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 $3.5 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.
* 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.
* 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.
(9) 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):
September 30, December 31,
1999 1998
----------- -----------
ASSETS
------
Current assets $ 452 $ 174
Oil and gas properties (full cost method):
Proved undeveloped properties,
not being amortized 31,247 28,274
Unevaluated properties 66,568 56,708
------ ------
97,815 84,982
Other 356 416
------ ------
98,171 85,398
Accumulated depreciation (13) (5)
------ ------
98,158 85,393
Other assets 416 359
------ ------
$ 99,026 $ 85,926
====== ======
LIABILITIES AND SHAREHOLDER'S DEFICIT
----------------------------------------
Total current liabilities $ 11,485 $ 8,397
Due to parent 90,866 80,425
Accumulated deficit (3,325) (2,896)
------ ------
$ 99,026 $ 85,926
====== ======
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
Costs and expenses $ 335 $ 82 $ 429 $ 700
----- ---- ---- -----
Net loss $ (335) $ (82) $ (429) $ (700)
===== ==== ==== =====
XCL LTD. AND SUBSIDIARIES
September 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 September 30, 1999, the Company had a net working capital
deficit of $101 million. The Company does not have, as of November
15, 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 interest payments on
the Senior Secured Notes (in the aggregate approximate amount of
$11.6 million, including approximately $0.4 million in default
interest as of September 30, 1999) due on May 3 and November 1,
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 Company is in discussion with the
holders of at least 95% of the Notes and believes that an
agreement can be reached to avoid a declaration that all amounts
outstanding are due and payable. The possible results of such a
declaration include the Company's loss of the stock of XCL-China
and/or its interest in the Contract. In addition to the
negotiations with the holders of the Notes regarding this matter,
the Company is exploring other options for meeting its obligations
under the Notes. A negotiated agreement with the Note holders
could substantially dilute the interests of the Company's existing
equity holders. 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 that 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 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 the Company believes 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 should 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.
Results of Operations
- ---------------------
During the nine-month periods ended September 30, 1999 and
1998, the Company incurred net losses of $6.1 million and $5.0
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
nine-month periods ended September 30, 1999 was approximately $1.2
million and $3.7 million compared to approximately $0.1 million
and $2.0 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 $1.2
million during the nine-month period ended September 30, 1999.
Preferred stock dividends were $5.9 million for the nine months
ended September 30, 1999, as compared to $5.3 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 are to be paid in additional shares of preferred stock
at the option of the Company.
General and administrative expenses for the three- and nine-month
periods ended September 30, 1999 were approximately $1.1 million
and $3.3 million, respectively, as compared to approximately $1.6
million and $4.5 million, respectively, for the same periods in
1998. The decrease was primarily attributable to reduction in
compensation expense of approximately $1.1 million and a reduction
in public company costs 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 has completed 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 98 percent of the remediation phase. The Company
has to date spent approximately $165,000 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 $45,000 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 98
percent of the testing phase has been completed, and expects to be
completed by the end of 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 98
percent of the implementation phase, and expects to be completed
by the end of 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 that
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 was held during
August 1999. XCL-China, Ltd. is awaiting the court's decision.
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.
* 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 purchased an
aggregate of $2.247 million in principal of seller's notes secured
by the Lutcher Moore Tract ("Seller's Notes) for a purchase price
of $2.1 million. 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 were 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.
On November 1, 1999, the Company failed to make a required
interest payment (in the approximate amount of $5.6 million) on
its Senior Secured Notes.
The Company has not yet distributed a declared in kind
dividend payable November 1, 1999, on its Amended Series A
Preferred Stock.
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 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.
A current report on Form 8-K was filed on September 7, 1999,
to report that the Company had relocated its headquarters offices.
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: November 15, 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. (O)(i)
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. (O)(ii)
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. (O)(iii)
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. (O)(iv)
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. (O)(v)
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. (O)(vi)
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. (O)(vii)
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. (O)(viii)
4.51 Form of Stock Purchase Warrants dated July 16, 1999,
issued to Construction Specialists, Inc. d/b/a Con-Spec, Inc. and
the Estate of J. Edgar Monroe, to each purchase 227,902 shares of
Common Stock of the Company, at an exercise price of $0.10 per
share on or before April 13, 2004, in connection with the purchase
of an interest in certain Sellers Notes on the Lutcher Moore
Tract. *
4.52 Form of a Fifth Warrant Amendment Agreement dated July
16, 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 $1.25
per share to $0.10 per share. *
4.53 Form of a Warrant Amendment Agreement dated July 16,
1999, between the Company and Boland Machine & Mfg. Co., Inc.,
extending the term of a warrant dated April 10, 1997, from April
9, 2002 to July 16, 2004, reducing the exercise price from $0.15
per share to $0.01 per share, and providing the holder an option
to exchange the warrants for $100,000 in Common Stock of the
Company or cash, at the Company's option, during a six month
period beginning July 17, 2001. *
4.54 Form of a Warrant Amendment Agreement dated July 16,
1999, between the Company and J. Edgar Monroe Foundation,
extending the term of a warrant dated April 10, 1997, from April
9, 2002 to July 16, 2004, reducing the exercise price from $0.15
per share to $0.01 per share, and providing the holder an option
to exchange the warrants for $32,000 in Common Stock of the
Company or cash, at the Company's option, during a six month
period beginning July 17, 2001. *
4.55 Form of a Warrant Amendment Agreement dated July 16,
1999, between the Company and the Estate of J. Edgar Monroe,
extending the term of a warrant dated April 10, 1997, from April
9, 2002 to July 16, 2004, reducing the exercise price from $0.15
per share to $0.01 per share, and providing the holder an option
to exchange the warrants for $100,000 in Common Stock of the
Company or cash, at the Company's option, during a six month
period beginning July 17, 2001. *
4.56 Form of a Warrant Amendment Agreement dated July 16,
1999, between the Company and Construction Specialists, Inc. d/b/a
Con-Spec, Inc., extending the term of a warrant dated April 10,
1997, from April 9, 2002 to July 16, 2004, reducing the exercise
price from $0.15 per share to $0.01 per share, and providing the
holder an option to exchange the warrants for $168,000 in Common
Stock of the Company or cash, at the Company's option, during a
six month period beginning July 17, 2001. *
4.57 Form of a Third Warrant Amendment Agreement dated July
16, 1999, between the Company and Doug Ashy, Sr., amending the
warrant exercise price of warrants dated March 22, 1999, from
$1.25 per share to $0.10 per share. *
4.58 Form of a Warrant Amendment Agreement dated July 16,
1999, between the Company and Northern Securities Limited,
amending the warrant exercise price of warrants dated May 17,
1999, from $1.25 per share to $0.10 per share. *
4.59 Form of a Warrant Amendment Agreement dated July 16,
1999, between the Company and Mitch Leigh, amending the warrant
exercise price of warrants dated May 21, 1999, from $1.25 per
share to $0.10 per share. *
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. (O)(ix)
10.63 Form of Security Agreement by and between The
Exploration Company of Louisiana, Inc. and
T. Jerald Hanchey dated April 13, 1999. (O)(x)
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.
(O)(xi)
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. (O)(xii)
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. (O)(xiii)
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. (O)(xiv)
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. (O)(xv)
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. (O)(xvi)
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. (O)(xvii)
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. (O)(xviii)
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. (O)(xix)
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. (O)(xx)
10.74 Form of Security Agreement dated May 17, 1999, between
XCL Land, Ltd. and Northern Securities Limited. (O)(xxi)
10.75 Form of Security Agreement dated May 17, 1999, between
The Exploration Company of Louisiana, Inc. and Northern Securities
Limited. (O)(xxii)
10.76 Form of Security Agreement dated May 21, 1999 between
XCL Land, Ltd. and Mitch Leigh. (O)(xxiii)
10.77 Form of Security Agreement dated May 21, 1999 between
The Exploration Company of Louisiana, Inc. and Mitch Leigh.
(O)(xxiv)
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. (O)(xxv)
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. (O)(xxvi)
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.
(O)(xxvii)
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. (O)(xxviii)
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. (O)(xxix)
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. (O)(xxx)
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. (O)(xxxi)
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. (O)(xxxii)
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. (O)(xxxiii)
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. (O)(xxxiv)
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. (O)(xxxv)
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. (O)(xxxvi)
10.90 Form of Security Agreement dated July 16, 1999, between
XCL-Acquisitions, Inc., as Grantor, and Construction Specialists,
Inc. and the Estate of J. Edgar Monroe, as Lenders, securing the
amounts owed the Lenders under the Seller Notes and XCL Land
Secured Notes. *
10.91 Form of Participation Agreement dated July 16, 1999, by
and between XCL-Acquisitions, Inc., Construction Specialists, Inc.
and the Estate of J. Edgar Monroe, setting forth the terms and
conditions pursuant to which the Lenders hold their interest in
the Seller Notes. *
10.92 Form of Note Modification and Amendment Agreements dated
July 16, 1999, by and between XCL Land, Ltd. and the Estate of J.
Edgar Monroe, Construction Specialists, Inc.a nd The J. Edgar
Monroe Foundation (1976), whereby the maturity of the XCL Land
Secured Notes dated November 6, 1998 and January 15, 1999 have
been extended to November 30, 1999. *
10.93 Form of Assignment of Net Proceeds whereby Con-Spec and
Estate of J. Edgar Monroe are to receive an aggregate of 7.5% of
any net proceeds received from the sale of the Lutcher Moore
Tract, less commissions and closing expenses, and 7.5% of any net
proceeds received from any activity on the Tract, except for
rights-of-ways. *
10.94 Form of First Amendment to and Assumption of Security
Agreement dated as of September 30,1999, by and between XCL-Texas,
Inc. and Mitch Leigh, whereby XCL-Texas assumed all of XCL Land's
obligations under the Security Agreement. *
10.95 Form of First Amendment to Security Agreement dated as
of September 30, 1999, by and between The Exploration Company of
Louisiana, Inc. and Mitch Leigh. *
10.96 Form of Fourth Amendment to Security Agreement dated as
of September 30, 1999, by and between The Exploration Company of
Louisiana, Inc. and Construction Specialists, Inc. *
10.97 Form of Fourth Amendment to and Assumption of Security
Agreement dated as of September 30, 1999, by and between XCL-
Texas, Inc. and Construction Specialists, Inc., whereby XCL-Texas
assumed all of XCL Land's obligations under the Security
Agreement. *
10.98 Form of First Amendment to and Assumption of Security
Agreement dated as of September 30, 1999, by and between XCL-
Texas, Inc. and Northern Securities Limited, whereby XCL-Texas
assumed all of XCL Land's obligations under the Security
Agreement. *
10.99 Form of First Amendment to Security Agreement dated as
of September 30, 1999, by and between The Exploration Company of
Louisiana, Inc. and Northern Securities Limited *
10.100 Form of Termination of Security Agreements dated
October 1, 1999, whereby the Security Agreements dated March 22,
1999 between The Exploration Company of Louisiana, Inc. and XCL
Land Ltd., respectively, and Doug Ashy, Sr. were terminated. *
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.
(O) Incorporated by reference to Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999, filed on August 14, 1999,
where it appears as: (i) through (viii) Exhibits 4.43 through
4.50; and (vix) through (xxxvi) Exhibits 10.62 through 10.89.