XCL LTD
10-Q, 1997-05-14
CRUDE PETROLEUM & NATURAL GAS
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<PAGE>
                                                                 
                          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 March 31, 1997

                               OR
                                
                Transition Report Pursuant to Section 13 or 15(d) of
     [  ]       the Securities Exchange Act of 1934

                   Commission File No. 1-10669
                                
                            XCL Ltd.
     (Exact name of registrant as specified in its charter)

       Delaware                                51-0305643
(State of Incorporation)                    (I.R.S. Employer
                                         Identification Number)

110 Rue Jean Lafitte, Lafayette, LA                         70508
(Address of principal executive offices)                  (Zip Code)

                          318-237-0325
      (Registrant's telephone number, including area code)

                               N/A
 (Former name, former address and former fiscal year, if changed
                       since last report)
                                
     Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.   YES [X]     NO [  ]

      Indicate  the number of shares outstanding of each  of  the
issuer's  classes  of common stock, as of the latest  practicable
date.

      297,342,240  shares  Common  Stock,  $.01  par  value  were
outstanding on May 13, 1997.
<PAGE>
                            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                        13

                             PART II

Item 1.  Legal Proceedings                                          16
Item 2.  Changes in Securities                                      16
Item 3.  Defaults Upon Senior Securities                            17
Item 4.  Submission of Matters to a Vote of Security Holders        18
Item 6.  Exhibits and Reports on Form 8-K                           18
<PAGE>
                    XCL Ltd. and Subsidiaries
                 PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements

                   CONSOLIDATED BALANCE SHEET
                     (Thousands of Dollars)
                                                       March 31    December 31
                           Assets                        1997          1996
                           ------                      --------    -----------
                                                             (Unaudited)
Current assets:
      Cash and cash equivalents                        $     278    $     113
      Accounts receivable, net                                47           23
      Prepaid expenses                                       201          212
                                                        --------     --------
                       Total current assets                  526          348
                                                        --------     --------
Property and equipment:
      Oil and gas (full cost method):
           Proved and unproved properties under 
            development not being amortized               35,742       34,305

      Land, at cost                                            -          135
      Other                                                1,306        2,492
                                                        --------      -------
                                                          37,048       36,932
      Accumulated depreciation, depletion and 
       amortization                                       (1,085)      (1,491)
                                                        --------      -------  
                                                          35,963       35,441
                                                        --------      -------
Investments                                                2,652        2,383
Assets held for sale                                      21,058       21,058
Deferred charges and other assets                          1,877        1,634
                                                        --------     --------  
                       Total assets                    $  62,076    $  60,864
                                                        ========     ======== 

            Liabilities and Shareholders' Equity
            ------------------------------------

Current liabilities:
      Accounts payable and accrued costs               $   4,753    $   3,880
      Accounts payable and accrued costs due to 
       joint venture partner                               4,709        4,202
      Royalty and production taxes payable                    14           21
      Dividends payable                                      928          928
      Current maturities of limited recourse debt          5,324        5,091
      Collateralized credit facility                      17,279       17,279
      Current maturities of secured subordinated debt     15,000       15,000
      Other current maturities                                 -          652
                                                         -------      ------- 
           Total current liabilities                      48,007       47,053
                                                         -------      -------
Long-term debt, net of current maturities
                                                               -            -
Other non-current liabilities                              2,683        2,770
Commitments and contingencies (Note 6)
Shareholders' equity:
      Preferred stock-$1.00 par value; authorized 
       2,400,000 shares; issued shares of
       756,352 at March 31, 1997 and 669,411 at 
       December 31, 1996-liquidation preference of 
       $64.2 million at March 31, 1997                       756          669
      Common stock-$.01 par value; authorized 500 
       million shares; issued shares of 292,289,945 
       at March 31, 1997 and 285,754,151 at
       December 31, 1996                                   2,923        2,858
      Common stock held in treasury - $.01 par value; 
       1,042,065 shares at March 31, 1997 and 
       December 31, 1996                                     (10)         (10)
      Additional paid-in capital                         229,673      226,956
      Accumulated deficit                               (221,956)    (219,432)
                                                        --------     --------
           Total shareholders' equity                     11,386       11,041
                                                        --------     --------
                       Total liabilities and 
                         shareholders' equity          $  62,076    $  60,864
                                                        ========     ========  

 The accompanying notes are an integral part of these financial statements.
<PAGE>
                    XCL Ltd. and Subsidiaries
                                
              CONSOLIDATED STATEMENT OF OPERATIONS
            (In Thousands, Except Per Share Amounts)

                                                           Three Months Ended
                                                                March 31
                                                           ------------------
                                                            1997        1996
                                                            ----        ----
                                                               (Unaudited)

Oil and gas revenues from properties held for sale      $     85     $    576
                                                         -------      -------
Costs and operating expenses:
      Operating (including marketing)                         67          152
      Depreciation and amortization                           18           56
      Depletion - oil and gas assets held for sale            38          276
      General and administrative                             720        1,075
      Taxes, other than income                                58           74
                                                         -------      -------
                                                             901        1,633
                                                         -------      ------- 
Operating loss                                              (816)      (1,057)
                                                         -------      -------   

Other income (expense):
      Interest expense, net of amounts capitalized          (634)        (636)
      Other, net                                             239           52
                                                         -------       ------
                                                            (395)        (584)
                                                         -------       ------ 

Net loss                                                  (1,211)      (1,641)
Preferred stock dividends                                 (1,404)      (1,191)
                                                         -------      -------
Net loss attributable to common stock                   $ (2,615)    $ (2,832)
                                                         =======      =======

Net loss per common and common equivalent share         $   (.01)    $   (.01)
                                                         =======      =======

Average number of common and common equivalent 
 shares outstanding                                      288,058      256,807
                                                         =======      =======
                                
 The accompanying notes are an integral part of these financial statements.

<PAGE>
                    XCL Ltd. and Subsidiaries
                                
              CONSOLIDATED STATEMENT OF CASH FLOWS
                     (Thousands of Dollars)
                                                           Three Months Ended
                                                                 March 31
                                                           -------------------
                                                            1997         1996
                                                            ----         ----
                                                               (Unaudited)
Cash flows from operating activities:
    Net loss                                              $  (1,211)  $  (1,641)
                                                           --------    --------
    Adjustments to reconcile net loss to net cash used 
       in operating activities:
        Depreciation, depletion and amortization                 56         332
        Change in assets and liabilities:
             Accounts receivable                                (24)        453
             Prepaid expenses                                    11          (5)
             Accounts payable and accrued costs                 593        (480)
             Accounts payable and accrued costs due to 
              joint venture partner                             507         387
             Royalty and production taxes payable                (7)        (23)
             Other, net                                          (1)         36
                                                           --------     -------
                  Total adjustments                           1,135         700
                                                           --------     -------
                  Net cash used in operating activities         (76)       (941)
                                                           --------     -------
Cash flows from investing activities:
    Capital expenditures                                       (893)     (1,123)
    Investments                                                (269)       (160)
    Proceeds from sale of assets                                759       5,700
    Other                                                         5          24
                                                           --------     -------
                  Net cash provided by (used in) 
                   investing activities                        (398)      4,441
                                                           --------     -------
Cash flows from financing activities:
    Proceeds from sales of common stock                         600         510
    Proceeds from loan                                          216           -
    Payment for treasury stock                                    -        (141)
    Proceeds from issuance of preferred stock                   157         282
    Proceeds from exercise of warrants and options              612           -
    Payment of long-term debt                                  (652)     (5,352)
    Payment of preferred stock dividends                       (154)          -
    Stock issuance costs and other                             (140)        (43)
                                                           --------      ------
                  Net cash provided by (used in) 
                   financing activities                         639      (4,744)
                                                           --------      ------

Net increase (decrease) in cash and cash equivalents            165      (1,244)
Cash and cash equivalents at beginning of period                113       1,610
                                                           --------      ------
Cash and cash equivalents at end of period                $     278   $     366
                                                           ========     =======

 The accompanying notes are an integral part of these financial statements.
<PAGE>
                  XCL Ltd. and Subsidiaries
                              
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                              
                       March 31, 1997

(1)     Basis of Presentation

      The  consolidated financial statements  at  March  31,
1997, and for the three months then ended have been prepared
by  the  Company, without audit, pursuant to the  Rules  and
Regulations  of  the  Securities  and  Exchange  Commission.
Certain   information  and  footnote  disclosures   normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or  omitted  pursuant  to such Rules and  Regulations.   The
Company  believes that the disclosures are adequate to  make
the  information  presented herein  not  misleading.   These
consolidated  financial  statements  should   be   read   in
conjunction  with  the financial statements  and  the  notes
thereto included in the Company's Annual Report on Form 10-K
for  the  year  ended December 31, 1996. 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  March
31, 1997,  and 1996, and the results of their operations for
the  three months ended March 31, 1997 and  1996, have  been
included. Certain reclassifications have been made to  prior
period  financial  statements to  conform  to  current  year
presentation.  These reclassifications had no effect on  net
loss  or  shareholders equity. The results of the  Company's
operations  for  such  interim periods are  not  necessarily
indicative of the results for the full year.

      Loss  per common and common equivalent share has  been
computed  by dividing net loss attributable to common  stock
by  the  weighted average number of common and common  share
equivalents outstanding.

(2)     Liquidity and Capital Resources

      At  March 31, 1997, the Company had an operating  cash
balance  of $278,000 and a working capital deficit of  $47.5
million,  which includes $17.3 million owed  to  ING  (U.S.)
Capital  Corp.  ("ING")  under its  Credit  Facility,  $15.0
million  of  Secured Subordinated Debt, and $5.3 million  in
limited  recourse debt collateralized only  by  the  Lutcher
Moore  Tract.  On  March  31,  1997,  the  Company's  office
building was sold for $900,000, $750,000 in cash and a  note
for  $150,000.   The mortgage debt on the  building  in  the
amount  of  $652,000 was repaid in full  with  interest  and
prepayment  penalties thereon.  The note bears  interest  at
9.25% and is of a 22 month term.  Contemporaneously with the
sale,  the  Company leased back one floor of the  two  story
building for a 22 month term.

      The  Company has incurred losses in each of  its  last
five fiscal years and the quarter ended March 31, 1997,  and
anticipates  it  will continue to do so in fiscal  1997  and
1998  because  production from the Zhao Dong  Block  is  not
projected to commence until late 1998.  As of May 14,  1997,
the Company is in the process of offering for sale Units  of
Senior  Secured  Discount Notes due 2007  (face  amount  $70
million, net $56 million) and Common Stock Purchase Warrants
(the  "Offering").  Concurrently  with  the  Offering,   the
Company  is  offering  $25 million  of  units  comprised  of
preferred  stock and warrants to acquire Common  Stock  (the
"Concurrent Equity Offering"). The closing of both offerings
are  contingent on each other. The successful completion  of
the offerings, subsequent release of certain proceeds from a
cash collateral account, and the sale of domestic properties
will  enable  the  Company to meet all  of  its  obligations
including (1) certain exploration and development  costs  of
the  Zhao Dong Block, (2) repayment of outstanding debt  and
(3) payment of other current liabilities.  In the event such
offerings  are  not  successful the Company  believes  other
means  of  obtaining working capital are available based  on
the  estimated future nondiscounted net cash  flow  of  $143
million ($80 million discounted) from proved China reserves,
as  reported in the independent engineering report  of  H.J.
Gruy  and  Associates, Inc.  The form and  timing  of  these
alternatives are not determinable at this time and there can
be no assurance they will occur and, if they do occur, would
not  significantly reduce the future potential revenue  from
the  Company's  share  of oil revenues.   In  addition,  the
Company's efforts to secure additional working capital  will
be  impaired if  its Common Stock is delisted from the AMEX.
See Note 6.

      Longer  term  liquidity is dependent on the  Company's
commencement of production in China and continued access  to
capital  markets, including its ability to issue  additional
debt  and  equity  securities, which in  certain  cases  may
require  the  consent of the holders of the  Senior  Secured
Discount Notes and holders of the preferred stock should the
offerings be successfully completed, or the consent of  ING,
the  holders of the Company's Secured Subordinated Debt  and
the   holders  of  preferred  stock  should  it   not.    By
shareholder vote on July 30, 1996, the shareholders approved
an increase of 150,000,000 authorized shares of Common Stock
and 1,200,000 authorized shares of preferred stock.

       The  Company's  Series  A  Preferred  Stock  dividend
requirements  are approximately 2.9 million pounds  sterling
(U.K.)  ($4.75 million) annually and currently  insufficient
liquidity  exists  to  continue to  pay  such  amounts.  The
Company  declared  the  Series A  Preferred  Stock  dividend
payable  June 30, 1995. A portion of this dividend was  paid
with  shares  of  Common  Stock and  approximately  $900,000
remains to be paid in cash. As the Company was unable to pay
this dividend by June 30, 1996, the holders of the Series  A
Preferred   Stock   can  now  demand   Board   of   Director
representation.  The December 31, 1995 dividend  payment  on
the  Series  A  Preferred  Stock  was  declared  payable  in
additional  shares  of  Series  A  Preferred  Stock  and  in
February and March 1997, 63,595 shares of Series A Preferred
Stock  were  issued. The Board of Directors elected  not  to
declare the dividends payable June 30, 1996 and December 31,
1996.

      The  Company was, to April 10, 1997, in default  under
terms  of  its  Credit Facility with ING and, by  virtue  of
certain  cross default provisions, the Secured  Subordinated
Debt.  By agreement dated April 10, 1997,  as amended,  (the
"Forbearance  Agreement")  ING,  in  consideration  of   the
Company's   commitment  to  grant  ING  or  its  designee(s)
warrants to acquire 7 million shares of Common Stock, agreed
to  forbear taking any action pending the completion of  the
offerings  and release of such funds from a cash  collateral
account.  The proceeds from the Offering are expected to  be
used to repay such debt.  Forbearance has been granted until
May 31, 1997 when the offerings is expected to be completed.
The  Offering  proceeds are then to  be  placed  in  a  cash
collateral  account  and the Forbearance Agreement  extended
until  December 1, 1997, the anticipated date by  which  the
Joint  Management  Committee  of  the  Zhao  Dong  Block  is
expected to have approved the development plan for  the  C-D
Field of the Zhao Dong Block.

      By  agreement with Apache effective December 13, 1996,
the  D-2  well, which the Company spudded in November  1996,
has  been  substituted for Apache's obligation to carry  the
Company  on  a  fourth exploration well and amounts  due  to
Apache  were  reduced accordingly.  On April 10,  1997,  the
remaining amount due Apache was further reduced by a payment
of  $3.1  million  leaving a balance  due  of  approximately
$979,790,  which  amount is in dispute and is  presently  in
arbitration.   The Company raised the $3.1  million  through
the  placement  of  promissory notes of XCL-China  Ltd.  and
warrants to acquire Common Stock of the Company with a group
of  institutional and accredited investors who are currently
major shareholders  in the Company (the "XCL-China Debt").

      In  addition to capital commitments to fund  the  Zhao
Dong Block development (estimated to be $63,589,000 to fully
develop the C-D Field), the Company has capital requirements
for its lubricating oil and coalbed methane projects.

      As  a  result  of the substantial capital requirements
described above, and the Company's recurring net losses, the
report of the Company's independent accountants dated  April
10,  1997, as of, and for the year ended December 31,  1996,
contains  an explanatory paragraph regarding the ability  of
the Company to continue as a going concern.

(3)     Supplemental Cash Flow Information

      There were no income taxes paid during the three month
periods ended March 31, 1997 and 1996.

     Interest and associated capitalized costs for the three
month periods ended March 31, 1997 and 1996 was $549,000 for
each  year.   Interest paid during the three  month  periods
ended  March  31,  1997 and 1996 amounted  to  $106,000  and
$870,000, respectively.

 (4)     Debt

Long-term debt consists of the following (000's):

                                                     March 31    December 31
                                                       1997          1996
                                                       ----          ----
   
     Collateralized credit facility                   $ 17,279     $ 17,279
     Secured Subordinated Debt                          15,000       15,000
     Office building mortgage                                -          652
                                                       -------      -------
                                                        32,279       32,931
     Lutcher Moore Group Limited Recourse Debt           5,324        5,091
                                                       -------      -------  
                                                        37,603       38,022
     Less current maturities:
         Lutcher Moore Group Limited Recourse Debt      (5,324)      (5,091)
         Collateralized credit facility                (17,279)     (17,279)
         Secured Subordinated Debt                     (15,000)     (15,000)
         Office building mortgage                            -         (652)
                                                       -------      -------
                                                      $      -     $      -
                                                       =======      =======    

     Substantially all of the Company's assets collateralize
these  borrowings.  Accounts payable  and  accrued  expenses
include interest accrued at March 31, 1997, of approximately
$2.5 million.

Credit Facility
- ---------------

      The  Company  failed  to make a principal  payment  of
$664,008  due  January  2,  1997 and  interest  payments  of
$248,626 due October 1, 1996, $412,896 due January  2,  1997
and  $395,137  due  April 1, 1997 to  ING,  resulting  in  a
default  under the Credit Facility and, by virtue of certain
cross default provisions, the Secured Subordinated Debt.  By
letter  dated January 9, 1997, ING acknowledged that failure
to  make such principal and interest payments constituted an
event  of  default and advised that such past  due  payments
bear  interest  at the Late Payment Rate in effect  on  such
date.   From January 2, 1997, the Late Payment rate has been
12.25%. Under the terms of the Forbearance Agreement between
the Company, XCL-China and ING, ING agreed that it would not
accelerate  the  maturity  of, or commence  any  foreclosure
procedures  to  collect, the indebtedness under  the  Credit
Facility  until May 31, 1997.  Further, if the Offering  has
been closed by that date, ING's agreement to forbear will be
extended  to  December  1, 1997.  The Forbearance  Agreement
does  not  operate  to remove any default under  the  Credit
Facility,  and ING will be free to reserve all of its  legal
and  equitable rights at the end of the forbearance  period.
In  addition,  the Forbearance Agreement requires  that  the
proceeds of the Concurrent Equity Offering be used first  to
pay   the  costs  of  issuance  associated  with  both   the
Concurrent Equity Offering and the Offering and to repay the
XCL-China Debt ($3.1 million borrowed on April 10, 1997 from
a  group  of  institutional  and  accredited  investors  and
evidenced by promissory notes of XCL-China); second, to  pay
current  obligations  of  XCL-China  and  to  reestablish  a
reserve   for  such  obligations  (under  terms   reasonably
acceptable  to ING) pending release of the proceeds  of  the
Offering; third, to pay reasonable and necessary general and
administrative  expenses through December 1,  1997  (not  to
exceed  $2,750,000);  and fourth, to  the  extent  that  any
proceeds  of  the Concurrent Equity Offering remain,  to  be
applied  against the indebtedness under the Credit Facility.
As  consideration for the Forbearance Agreement, the Company
issued  warrants  to  ING,  pledged  the  stock  of  certain
subsidiaries,  and  provided ING  with  a  guaranty  of  the
indebtedness  under the Credit Facility  by  XCL-China.   In
addition,  the Credit Facility was amended to  provide  that
proceeds  from  any direct or indirect sale of  the  Lutcher
Moore  Tract are to be used first to pay debt on the Lutcher
Moore  Tract  (up  to  $5.2 million plus accrued  interest),
second  to pay the XCL-China Debt, or if the XCL-China  Debt
has  been paid, to establish a reserve of up to $3.1 million
for current and future obligations of XCL-China incurred  on
or   before  December  1,  1997,  and  third  to   pay   the
indebtedness under the Credit Facility.

Secured Subordinated Debt
- -------------------------

      During  April 1993, the Company issued  in  a  private
placement,  $15 million of Secured Subordinated Note  Units.
Each of these 40 units consisted of a $375,000 note payable,
warrants  to acquire 100,000 shares of the Company's  Common
Stock at $0.90 per share (which were previously issued to  a
group  of  banks in a prior credit facility), a net  profits
interest  in  certain exploration leases and  a  contractual
interest  in  the  net  revenues  of  XCL-China,  under  the
Contract  relating  the  Zhao  Dong  Block,  which  was  not
material.   This borrowing bears interest at  12%,  if  paid
with  cash,  or  14%, if the Company elects  to  use  Common
Stock, with payment at 125%  of the interest due if paid  in
unregistered  shares.   It  is collateralized  by  a  second
mortgage  on  all the Company's producing properties  and  a
second lien on the stock of XCL-China.  Payment on this debt
cannot  be  made prior to payment on the indebtedness  under
the  Credit Facility.  The terms of the Secured Subordinated
Debt  provide  that  an event of default  under  the  Credit
Facility  which  has  not been waived  and  permits  ING  to
accelerate the maturity of its indebtedness is an  event  of
default on the Secured Subordinated Debt.  In the case of an
event  of  default, the holders of the Secured  Subordinated
Debt   cannot   take   any  enforcement  action   (including
acceleration  of  the Secured Subordinated Debt)  while  the
Credit  Facility is outstanding until the lapse of a 180-day
blocking  period.  A blocking period commences with  deliver
of a blocking notice by holders of 70 percent of the Secured
Subordinated Debt.  No such blocking notice has been  given.
As  noted above, an event of default exists under the Credit
Facility, therefore an event of default exists with  respect
to the Secured Subordinated Debt.

Lutcher Moore Group Limited Recourse Debt
- -----------------------------------------

      In  connection  with  the  Lutcher  Moore  Tract,  the
Company's indirect ownership of such tract was subjected  to
a  first  mortgage,  with  a current  principal  balance  of
approximately $2.3 million, and a number of sellers'  notes,
with an aggregate current principal balance of approximately
$3.0 million (the "Lutcher Moore Tract").

(5)     Preferred Stock and Common Stock

      As  of  March 31, 1997, the Company had the  following
shares of Preferred Stock issued and outstanding:

                                          1997 Dividends (In Thousands)
                                          --------------------------------   
                          Liquidation
                Shares       Value        Declared    In Arrears     Total
                ------    -----------     --------    ----------     ----- 
Series A       641,359   $  52,745,364(1) $      -     $  1,171    $  1,171
Series B        44,954       4,495,400         111            -         111
Series E        48,982       4,898,200           -           60          60
Series F        21,057       2,105,700           -           62          62
               -------    ------------     -------      -------     -------
               756,352   $  64,244,664    $    111     $  1,293    $  1,404
     __________
      (1)  50  pounds sterling (U.K.) per share (U.K.  pound
sterling = U.S. $1.6448 at March 31, 1997).

Series A Preferred Stock
- ------------------------

     During February 1997, the Company sold 13,458 shares of
Series  A  Preferred Stock for $157,240.  The proceeds  were
used  to  pay the withholding taxes and fractional interests
with respect to the December 31, 1995 dividend payment.   In
March  1997, the Company issued an additional 50,137  shares
of  Series  A  Preferred Stock in payment of this  dividend,
therefore  fulfilling  its  obligation  for  such   dividend
period.

      During  March  1997, 39 shares of Series  A  Preferred
Stock were converted into 819 shares of Common Stock.

Series B Preferred Stock
- ------------------------

      During the first quarter of 1997, 1 million shares  of
Series B Redemption Stock were sold and the proceeds applied
against accrued dividends.

Series E Preferred Stock
- ------------------------

      In  January 1997, the Company issued 2,328  shares  of
Series E Preferred Stock in payment of the December 31, 1996
dividend.

Series F Preferred Stock
- ------------------------

      In December 1996, XCL authorized the issuance of up to
50,000  shares of a new series of Preferred Stock designated
the  Series F, Cumulative Convertible Preferred Stock, $1.00
par  value  per  share ("Series F Preferred Stock")  to  two
existing  stockholders  of XCL. During  February  1997,  the
Company  issued  a  total  of  21,057  shares  of  Series  F
Preferred Stock in consideration of $225,000, assignment  of
1,408,125  shares of Common Stock and 2,600,000 warrants  to
purchase  Common Stock and the release by the purchasers  of
certain   claims  against  the  Company  arising  from   the
Company's  inability to perform under the terms of  existing
agreements.   Each  share of Series  F  Preferred  Stock  is
convertible,  at  the holder's option, into  400  shares  of
Common  Stock.  The Series F Preferred Stock bears  a  fixed
cumulative  dividend at the annual rate of  $12  per  share,
payable semi-annually in cash, or, at the XCL's election, in
additional shares of Series F Preferred Stock, subject to an
increase  in  the  event  XCL fails  to  pay  any  regularly
scheduled dividend.

Common Stock
- ------------

     During February 1997, the Company offered to reduce the
exercise price on a total of 5.52 million warrants issued in
connection  with  the  Regulation S offerings  conducted  by
Rauscher  Pierce  & Clark, as Placement Agent,  in  December
1995  and  March  1996,  in  exchange  for  their  immediate
exercise  of such warrants.  The exercise price was  reduced
from  $0.25 to $0.22 per share.  One holder of 2.64  million
warrants  accepted  the offer and at  March  31,  1997,  had
exercised 1,703,100 warrants. The Placement Agent agreed  to
accept  $0.01  per  share commission rather  than  $0.02  as
provided for in the Placement Agency Agreement resulting  in
the Company receiving $0.21 per share net.

 (6)     Commitments and Contingencies and Subsequent Events

      Other commitments, contingencies and subsequent events
include:

     o    The Company acquired the rights to the exploration,
          development and production of the Zhao Dong Block by
          executing a Production Sharing Agreement with CNODC in
          February 1993. Under the terms of the Production Sharing
          Agreement, the Company and 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
               (The   Contractor  has  drilled  two  wildcat
               wells, satisfied the seismic acquisition  and
               minimum  expenditure  requirements  and   has
               received  an extension allowing the  drilling
               of  the  third wildcat well during the  first
               year  of the second exploration phase.   Upon
               completion  of  drilling,  logging  and,   if
               applicable,  testing  of  the  F-1  well  now
               drilling,  the  first phase commitments  will
               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
               (The  Contractor has elected to proceed  with
               the   second  phase  of  the  Contract.   The
               seismic data acquisition requirement for  the
               second phase has been satisfied.);
          
          3.      During  the last two years, the Contractor
               is  required to drill two wildcat  wells  and
               expend a minimum of $4 million.

          The Production Sharing Agreement may be terminated
          by  the Contractor at the end of each phase of the
          Exploration period, without further obligation.
     
     o    By letter dated November 8, 1996, the AMEX informed the
          Company that they are reviewing the Company's continued
          listing eligibility because:

          (1)       the Company has incurred net losses  for
               each  of  the past five fiscal years and  the
               first six months of the current fiscal year;
          (2)      the  Company has disclosed that  it  does
               not have sufficient cash flow from operations
               to meet its obligations;
          (3)      the  Company is in default of payment  of
               certain debt;
          (4)      the Company's independent accountants  in
               their  report on the Company's 1995 financial
               statements noted that as a consequence of the
               matters  discussed  above, substantial  doubt
               has  been raised as to the Company's  ability
               to continue as a going concern.
               
          On   December  16,  1996,  the  Company  met  with
          representatives of the AMEX to present information
          in  support  of  a continued listing.   By  letter
          dated  January  16,  1997, the AMEX  notified  the
          Company  that  it has determined to defer  further
          consideration  of the Company's continued  listing
          eligibility  until it has reviewed  the  Company's
          1996  Form  10-K, and the further  review  of  the
          Company's   favorable   progress   in   satisfying
          guidelines for continued listing.
     
     o    On April 10, 1997, a wholly owned subsidiary of the
          Company sold $3.1 million of notes and  10.1 million
          warrants to purchase a like number of shares of Common Stock
          of the Company at $0.01 per share.  These notes are expected
          to be repaid from proceeds of the Concurrent Equity
          Offering.  The proceeds from these notes were immediately
          paid to Apache for unpaid cash calls.
     
     o    The Company has future commitments of $1.4 million
          associated with its joint venture contract to enter the
          lubricating oil business in China.
     
     o    The Company is in dispute over a 1992 tax assessment by
          the Louisiana Department of Revenue for the years 1987
          through 1991 in the approximate amount of $2.5 million
          including penalties and interest.  It is the Company's
          intent to defend these assessments vigorously and the
          Company believes adequate provision has been made in the
          financial statements for any liability.
     
     o    On July 26, 1996, an individual filed three lawsuits
          against a wholly owned subsidiary.  One suit alleges actual
          damage of $580,000 plus additional amounts that could result
          form an accounting of a pooled interest.  Another seeks
          legal and related expenses of $56,473 from an allegation the
          plaintiff was not adequately represented before the Texas
          Railroad Commission.  The third suit seeks a declaratory
          judgement that a pooling of a 1938 lease and another in 1985
          should be declared terminated and further plaintiffs seek
          damages in excess of $1 million to effect environmental
          restoration.  The Company believes these claims are without
          merit and intends to vigorously defend itself.
     
     o    The Company is subject to other legal proceedings some
          of which arise in the ordinary course of its business.  In
          the opinion of Management, the amount of ultimate liability
          with respect to these actions will not materially affect the
          financial position or results of operations of the Company.
     
     o    The Company is subject to existing federal, state and
          local laws and regulations governing environmental quality
          and pollution control. Although management believes that
          such operations are in general 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.

                  XCL LTD. AND SUBSIDIARIES

                       March 31, 1997


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 1997 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
- -------------------------------

      At  March 31, 1997, the Company had an operating  cash
balance  of $278,000 and a working capital deficit of  $47.5
million,  which includes $17.3 million owed  to  ING  (U.S.)
Capital  Corp.  ("ING")  under its  Credit  Facility,  $15.0
million  of  Secured Subordinated Debt, and $5.3 million  in
limited  recourse debt collateralized only  by  the  Lutcher
Moore  Tract.  On  March  31,  1997,  the  Company's  office
building was sold for $900,000, $750,000 in cash and a  note
for  $150,000.   The mortgage debt on the  building  in  the
amount  of  $652,000 was repaid in full  with  interest  and
prepayment  penalties thereon.  The note bears  interest  at
9.25% and is of a 22 month term.  Contemporaneously with the
sale,  the  Company leased back one floor of the  two  story
building for a 22 month term.

      The  Company has incurred losses in each of  its  last
five fiscal years and the quarter ended March 31, 1997,  and
anticipates  it  will continue to do so in fiscal  1997  and
1998  because  production from the Zhao Dong  Block  is  not
projected to commence until late 1998.  As of May 14,  1997,
the Company is in the process of offering for sale Units  of
Senior  Secured  Discount Notes due 2007  (face  amount  $70
million, net $56 million) and Common Stock Purchase Warrants
(the  "Offering").  Concurrently  with  the  Offering,   the
Company  is  offering  $25 million  of  units  comprised  of
preferred  stock and warrants to acquire Common  Stock  (the
"Concurrent Equity Offering"). The closing of both offerings
are  contingent on each other. The successful completion  of
the offerings, subsequent release of certain proceeds from a
cash collateral account, and the sale of domestic properties
will  enable  the  Company to meet all  of  its  obligations
including (1) certain exploration and development  costs  of
the  Zhao Dong Block, (2) repayment of outstanding debt  and
(3) payment of other current liabilities.  In the event such
offerings  are  not  successful the Company  believes  other
means  of  obtaining working capital are available based  on
the  estimated future nondiscounted net cash  flow  of  $143
million ($80 million discounted) from proved China reserves,
as  reported in the independent engineering report  of  H.J.
Gruy  and  Associates, Inc.  The form and  timing  of  these
alternatives are not determinable at this time and there can
be no assurance they will occur and, if they do occur, would
not  significantly reduce the future potential revenue  from
the  Company's  share  of oil revenues.   In  addition,  the
Company's efforts to secure additional working capital  will
be  impaired if  its Common Stock is delisted from the AMEX.
See Note 6.

      Longer  term  liquidity is dependent on the  Company's
commencement of production in China and continued access  to
capital  markets, including its ability to issue  additional
debt  and  equity  securities, which in  certain  cases  may
require  the  consent of the holders of the  Senior  Secured
Discount Notes and holders of the preferred stock should the
offerings be successfully completed, or the consent of  ING,
the  holders of the Company's Secured Subordinated Debt  and
the   holders  of  preferred  stock  should  it   not.    By
shareholder vote on July 30, 1996, the shareholders approved
an increase of 150,000,000 authorized shares of Common Stock
and 1,200,000 authorized shares of preferred stock.

       The  Company's  Series  A  Preferred  Stock  dividend
requirements  are approximately 2.9 million pounds  sterling
(U.K.)  ($4.75 million) annually and currently  insufficient
liquidity  exists  to  continue to  pay  such  amounts.  The
Company  declared  the  Series A  Preferred  Stock  dividend
payable  June 30, 1995. A portion of this dividend was  paid
with  shares  of  Common  Stock and  approximately  $900,000
remains to be paid in cash. As the Company was unable to pay
this dividend by June 30, 1996, the holders of the Series  A
Preferred   Stock   can  now  demand   Board   of   Director
representation.  The December 31, 1995 dividend  payment  on
the  Series  A  Preferred  Stock  was  declared  payable  in
additional  shares  of  Series  A  Preferred  Stock  and  in
February and March 1997, 63,595 shares of Series A Preferred
Stock  were  issued. The Board of Directors elected  not  to
declare the dividends payable June 30, 1996 and December 31,
1996.

      The  Company was, to April 10, 1997, in default  under
terms  of  its  Credit Facility with ING and, by  virtue  of
certain  cross default provisions, the Secured  Subordinated
Debt.  By agreement dated April 10, 1997,  as amended,  (the
"Forbearance  Agreement")  ING,  in  consideration  of   the
Company's  commitment  to grant to ING  or  its  designee(s)
warrants to acquire 7 million shares of Common Stock, agreed
to  forbear taking any action pending the completion of  the
offerings  and release of such funds from a cash  collateral
account.  The proceeds from the Offering are expected to  be
used to repay such debt.  Forbearance has been granted until
May 31, 1997 when the offerings is expected to be completed.
The  Offering  proceeds are then to  be  placed  in  a  cash
collateral  account  and the Forbearance Agreement  extended
until  December 1, 1997, the anticipated date by  which  the
Joint  Management  Committee  of  the  Zhao  Dong  Block  is
expected to have approved the development plan for  the  C-D
Field of the Zhao Dong Block.

      By  agreement with Apache effective December 13, 1996,
the  D-2  well, which the Company spudded in November  1996,
has  been  substituted for Apache's obligation to carry  the
Company  on  a  fourth exploration well and amounts  due  to
Apache  were  reduced accordingly.  On April 10,  1997,  the
remaining amount due Apache was further reduced by a payment
of  $3.1  million  leaving a balance  due  of  approximately
$979,790,  which  amount is in dispute and is  presently  in
arbitration.   The Company raised the $3.1  million  through
the  placement  of  promissory notes of XCL-China  Ltd.  and
warrants to acquire Common Stock of the Company with a group
of  institutional and accredited investors who are currently
major shareholders  in the Company (the "XCL-China Debt").

      In  addition to capital commitments to fund  the  Zhao
Dong Block development (estimated to be $63,589,000 to fully
develop the C-D Field), the Company has capital requirements
for its lubricating oil and coalbed methane projects.

      As  a  result  of the substantial capital requirements
described above, and the Company's recurring net losses, the
report of the Company's independent accountants dated  April
10,  1997, as of, and for the year ended December 31,  1996,
contains  an explanatory paragraph regarding the ability  of
the Company to continue as a going concern.

Other General Considerations
- ----------------------------

     The Company believes that inflation has had no material
impact on the Company's sales, revenues or income during the
reporting  periods.   Drilling  costs  and  costs  of  other
related  services during the relevant periods have  remained
stable.

      The Company is subject to existing federal, state  and
local  laws and regulations governing environmental  quality
and  pollution  control.  Although management believes  that
such  operations  are in general compliance with  applicable
environmental  regulations, risks of substantial  costs  and
liabilities  are  inherent in oil and  gas  operations,  and
there  can  be  no  assurance  that  significant  costs  and
liabilities will not be incurred.

New Accounting Pronouncement
- ----------------------------

      In  February 1997, the Financial Accounting  Standards
Board  issued  Statement of Financial  Accounting  Standards
"SFAS  No.  128 Earnings Per Share" effective for  financial
statements  issued  for periods ending  after  December  15,
1997.    The  board  has  also  issued  Statement  No.   129
"Disclosure  of  Information About Capital  Structure"  also
effective  the same date.  The Company does not believe  the
effect  of  adopting these statements will have  a  material
impact on the Company.

Results of Operations
- ---------------------

     During the three month periods ended March 31, 1997 and
March  31,  1996, the Company incurred net  losses  of  $1.2
million and $1.6 million, respectively.

      Oil  and gas revenues for the three month period ended
March 31, 1997, were $85,000 compared to $576,000 during the
corresponding  period  in 1996. Revenues  will  continue  to
decline  as  the Company completes its announced program  of
selling  substantially all of its U.S. producing properties.
Interest expense remained relatively unchanged in the  first
quarter  of 1997 as compared to the corresponding period  in
1996..

      As  the  Company continues to focus its  resources  on
exploration  and development of the Zhao Dong  Block  future
oil  and gas revenues will initially be directly related  to
the  degree of drilling success experienced in the Zhao Dong
Block.    The   Company  does  not  anticipate   significant
increases  in  its oil and gas production in the  short-term
and  expects  to incur operating losses until such  time  as
sufficient  revenues  from the China projects  are  realized
which exceed operating costs.

                  XCL LTD. AND SUBSIDIARIES
                              
                       March 31, 1997
                              
                 PART II - OTHER INFORMATION


Item 1.          Legal Proceedings

      Other than as disclosed in the Company's Annual Report
on   Form   10-K,  there  are  no  material  pending   legal
proceedings  to which the Company or any of its subsidiaries
is a party or to which any of their properties are subject.

Item 2(c).  Changes in Securities

o On April 10, 1997, in connection with obtaining a loan
  for XCL-China Ltd. of $2.9 million, the Company granted an
  aggregate of 9,441,743 warrants to a group of four limited
  partnerships   managed   by  Kayne   Anderson   Investment
  Management,  Inc. ("KAIM") (6,186,020);  J.  Edgar  Monroe
  Foundation (325,580); Estate of J. Edgar Monroe (976,740);
  Boland Machine & Mfg. Co., Inc. (325,580); and Construction
  Specialists,   Inc.  d/b/a  Con-Spec,  Inc.   (1,627,900),
  entitling such lenders the right to acquire 9,441,743 shares
  of Common Stock at $0.01 per share, exercisable on or before
  April 9, 2002.  The warrant agreements include a provision
  that  should the Company not have a sufficient  number  of
  shares of Common Stock reserved at the time of exercise of
  the warrants, the warrants are exercisable into a new series
  of  preferred stock which will be created by May 10, 1997,
  and  the shares of which will be reserved for exercise  of
  such warrants.  All proceeds of this financing were applied
  to reduce the Company's indebtedness to Apache incurred in
  connection with Zhao Dong Block operations.

o On  February 10, 1997, the Company issued an aggregate
  of 1,874,467 warrants to purchase 1,874,467 shares of Common
  Stock to T. Jerald Hanchey (1,632,807 warrants) and Donald
  A. and Joanne R. Westerberg (241,660 warrants) in connection
  with  their  purchase of the Company's remaining  interest
  (41.089%)  in the Seller Notes securing the Lutcher  Moore
  Tract  ($217,961  in  principal) for  $193,916  net  after
  discount.  The warrants are exercisable at $0.25 per share
  and expire on December 31, 1999.

o On January 9, 1997, the Company accepted subscriptions
  for  an  aggregate of 21,057 shares of Series F  Preferred
  Stock,  issued in February to Mitch Leigh (18,448 shares);
  Abby Leigh (1,731 shares) and Arthur Rosenbloom (878 shares)
  at   $65.00/share,  in  exchange  for  $225,000  in  cash,
  cancellation of a consulting agreement between the Company
  and  Mitch Leigh, surrender by Mitch Leigh of Common Stock
  and  Warrants  issued  in connection with  the  consulting
  agreement, surrender by Mitch Leigh and Abby Leigh of rights
  to  acquire units of registered Common Stock and Warrants,
  surrender of certain registration rights covering 3,000,000
  shares; and surrender by Arthur Rosenbloom of certain shares
  of  Common  Stock  and Warrants issued in connection  with
  compensation for past fundraising activities, surrender of
  rights  to  acquire units of registered Common  Stock  and
  Warrants  and certain registration rights covering  75,000
  shares.

o On January 2, 1997, the Company issued 2,328 shares of
  Series E Preferred Stock to the holders thereof in lieu of a
  cash dividend totaling $233,270 payable December 31, 1996,
  calculated pursuant to the terms of the Series E Preferred
  Stock.  The Series E Preferred Stock has a face  value  of
  $100/share.

Item 3.     Defaults Upon Senior Securities.

(a)     Debt

      The  Company  failed  to make a principal  payment  of
$664,008  due  January  2,  1997 and  interest  payments  of
$248,626 due October 1, 1996, $412,896 due January  2,  1997
and  $395,137  due  April 1, 1997 to  ING,  resulting  in  a
default  under the Credit Facility and, by virtue of certain
cross default provisions, the Secured Subordinated Debt.  By
letter  dated January 9, 1997, ING acknowledged that failure
to  make such principal and interest payments constituted an
event  of  default and advised that such past  due  payments
bear  interest  at the Late Payment Rate in effect  on  such
date.   From January 2, 1997, the Late Payment rate has been
12.25%. Under the terms of the Forbearance Agreement between
the Company, XCL-China and ING, ING agreed that it would not
accelerate  the  maturity  of, or commence  any  foreclosure
procedures  to  collect, the indebtedness under  the  Credit
Facility  until May 31, 1997.  Further, if the Offering  has
been closed by that date, ING's agreement to forbear will be
extended  to  December  1, 1997.  The Forbearance  Agreement
does  not  operate  to remove any default under  the  Credit
Facility,  and ING will be free to reserve all of its  legal
and  equitable rights at the end of the forbearance  period.
In  addition,  the Forbearance Agreement requires  that  the
proceeds of the Concurrent Equity Offering be used first  to
pay   the  costs  of  issuance  associated  with  both   the
Concurrent Equity Offering and the Offering and to repay the
XCL-China Debt ($3.1 million borrowed on April 10, 1997 from
a  group  of  institutional  and  accredited  investors  and
evidenced by promissory notes of XCL-China); second, to  pay
current  obligations  of  XCL-China  and  to  reestablish  a
reserve   for  such  obligations  (under  terms   reasonably
acceptable  to ING) pending release of the proceeds  of  the
Offering; third, to pay reasonable and necessary general and
administrative  expenses through December 1,  1997  (not  to
exceed  $2,750,000);  and fourth, to  the  extent  that  any
proceeds  of  the Concurrent Equity Offering remain,  to  be
applied  against the indebtedness under the Credit Facility.
As  consideration for the Forbearance Agreement, the Company
issued  warrants  to  ING,  pledged  the  stock  of  certain
subsidiaries,  and  provided ING  with  a  guaranty  of  the
indebtedness  under the Credit Facility  by  XCL-China.   In
addition,  the Credit Facility was amended to  provide  that
proceeds  from  any direct or indirect sale of  the  Lutcher
Moore  Tract are to be used first to pay debt on the Lutcher
Moore  Tract  (up  to  $5.2 million plus accrued  interest),
second  to pay the XCL-China Debt, or if the XCL-China  Debt
has  been paid, to establish a reserve of up to $3.1 million
for current and future obligations of XCL-China incurred  on
or   before  December  1,  1997,  and  third  to   pay   the
indebtedness under the Credit Facility.

      During  April 1993, the Company issued  in  a  private
placement, $15 million of Secured Subordinated Note Units  .
Each of these 40 units consisted of a $375,000 note payable,
warrants  to acquire 100,000 shares of the Company's  Common
Stock at $0.90 per share (which were previously issued to  a
group  of  banks in a prior credit facility), a net  profits
interest  in  certain exploration leases and  a  contractual
interest  in  the  net  revenues  of  XCL-China,  under  the
Contract  relating  the  Zhao  Dong  Block,  which  was  not
material.   This borrowing bears interest at  12%,  if  paid
with  cash,  or  14%, if the Company elects  to  use  Common
Stock, with payment at 125%  of the interest due if paid  in
unregistered  shares.   It  is collateralized  by  a  second
mortgage  on  all the Company's producing properties  and  a
second lien on the stock of XCL-China.  Payment on this debt
cannot  be  made prior to payment on the indebtedness  under
the  Credit Facility.  The terms of the Secured Subordinated
Debt  provide  that  an event of default  under  the  Credit
Facility  which  has  not been waived  and  permits  ING  to
accelerate the maturity of its indebtedness is an  event  of
default on the Secured Subordinated debt.  In the case of an
event  of  default, the holders of the Secured  Subordinated
Debt   cannot   take   any  enforcement  action   (including
acceleration  of  the Secured Subordinated Debt)  while  the
Credit  Facility is outstanding until the lapse of a 180-day
blocking  period.  A blocking period commences with  deliver
of a blocking notice by holders of 70 percent of the Secured
Subordinated Debt.  No such blocking notice has been  given.
As  noted above, an event of default exists under the Credit
Facility, therefore an event of default exists with  respect
to the Secured Subordinated Debt.

(b)     Preferred Stock

      The Series A Preferred Stock dividend requirements are
approximately  2.9 million pounds sterling  (U.K.)  annually
(approximately  $4.75  million) and  currently  insufficient
liquidity exists to continue to pay such amounts.   Further,
the  Credit  Facility restricts payment of  cash  dividends.
With  the  approval of its lender, the Company declared  the
June 30, 1995 dividend payable in cash, with such cash to be
obtained from the sale of Common Stock.  In order to  reduce
the  cash requirement, effective June 26, 1995, the  Company
entered into agreements with three U.S. holders of Series  A
Preferred Stock representing approximately 59 percent of the
class,  pursuant  to  which they elected  to  receive  their
dividends  in  Common Stock of the Company.  Cash  dividends
remaining  to  be  paid with respect to the  June  30,  1995
dividend declaration, aggregate approximately $900,000.   As
the  Company  was unable to pay this dividend  by  June  30,
1996,  the  holders  of  the Series A  Preferred  Stock  are
entitled to representation on the Board of Directors.

      The December 31, 1995 dividend payment on the Series A
Preferred  Stock  has  been declared payable  in  additional
shares  of Series A Preferred Stock. During 1996, the  terms
of  the  Series A Preferred Stock were amended to allow  for
payment  of  the  December 31, 1995 and subsequent  dividend
payments  to  be  made  in additional  shares  of  Series  A
Preferred  Stock.   The  Board of Directors  correspondingly
approved a 250,000 share increase in the number of shares of
authorized  Series  A  Preferred  Stock  authorized.  During
February  1997, the Company sold 13,458 shares of  Series  A
Preferred Stock for $157,240.  The proceeds were used to pay
the  withholding taxes and fractional interests with respect
to  the December 31, 1995 dividend payment.  In March  1997,
the  Company issued an additional 50,137 shares of Series  A
Preferred  Stock  in  payment of  this  dividend,  therefore
fulfilling  its  obligation for such  dividend  period.  The
Board  of  Directors  elected not to declare  the  dividends
payable June 30, 1996 and December 31, 1996.

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.

2.0     Not applicable

3(i)     Articles of incorporation

3.1     Certificate of Incorporation of the Company dated
     December 28, 1987.  (A)(i)

3.2     Certificate of Amendment to the Certificate of
     Incorporation of the Company dated March 30, 1988.
     (A)(ii)

3.3     Certificate of Amendment to the Certificate of
     Incorporation of the Company dated June 22, 1990.
     (B)(i)

3.4     Certificate of Amendment to the Certificate of
     Incorporation of the Company dated June 12, 1993. (C)

3.5     Certificate of Amendment to the Certificate of
     Incorporation of the Company dated June 8, 1992,
     whereby Article Fourth was amended to increase the
     number of shares of Common Stock authorized.  (D)(i)

3.6     Certificate of Amendment to the Certificate of
     Incorporation of the Company dated September 29, 1993,
     whereby Article Fourth was amended to increase the
     number of shares of Common Stock authorized. (E)(i)

3.7     Certificate of Amendment dated July 1, 1994, whereby
     Article Fourth was amended to increase the number of
     shares of Common Stock and the name of the Company was
     changed. (F)(i)

3.8     Certificate of Amendment dated June 19, 1995,
     whereby Article Fourth was amended to increase the
     number of shares of Common Stock. (N)(i)

3.9     Certificate of Amendment dated July 30, 1996,
     whereby Article Fourth was amended to increase the
     number of shares of Common Stock and Preferred Stock.
     (Q)(i)

3(ii)     Amended and Restated Bylaws of the Company as
     currently in effect.  (A)(iii)

4.0     Instruments defining rights of security holders,
     including indentures:

4.1     Form of Common Stock Certificate. (A)(iv)

4.2     Certificate of Designation of Series A, Cumulative
     Convertible Preferred Stock. (G)

4.3     Form of Series A, Cumulative Convertible Preferred
     Stock Certificate. (B)(ii)

4.4     Certificate of Designation of Series B, Cumulative
     Preferred Stock. (H)(i)

4.5     Form of Series B, Cumulative Preferred Stock
     Certificate. (H)(ii)

4.6     Form of Class B Warrants issued to China Investment
     & Development Co. Ltd. to purchase 2,500,000 shares of
     Common Stock at $2.00 per share payable upon redemption
     of the Series B, Cumulative Preferred Stock.  (H)(iii)

4.7     Form of Amendment to Certificate of Designation of
     Series B Preferred Stock dated August 7, 1992. (D)(ii)

4.8     Certificate of Designation of Series C, Cumulative
     Convertible Preferred Stock. (E)(ii)

4.9     Copy of Amendment to Certificate of Designation of
     Series C Preferred Stock dated February 18, 1994.(I)(i)

4.10     Form of Series C, Cumulative Convertible Preferred
     Stock Certificate. (I)(iii)

4.11     Certificate of Designation of Series D, Cumulative
     Convertible Preferred Stock. (I)(iv)

4.12     Form of Amendment to Certificate of Designation of
     Series D Preferred Stock dated January 24, 1994.
     (I)(ii)

4.13     Form of Series D, Cumulative Convertible Preferred
     Stock  Certificate.  (E)(v)

4.14     Form of Warrant dated January 31, 1994 to purchase
     2,500,000 shares of Common Stock at an exercise price
     of $1.00 per share, subject to adjustment, issued to
     INCC.  (I)(iii)

4.15     Form of Registrar and Stock Transfer Agency
     Agreement, effective March 18, 1991, entered into
     between the Company and Manufacturers Hanover Trust
     Company (predecessor to Chemical Bank), whereby
     Chemical Bank serves as the Company's Registrar and
     U.S. Transfer Agent.  (J)

4.16     Copy of Warrant Agreement and Stock Purchase
     Warrant dated March 1, 1994 to purchase 500,000 shares
     of Common Stock at an exercise price of $1.00 per
     share, subject to adjustment, issued to EnCap
     Investments, L.C. (I)(iv)

4.17     Copy of Warrant Agreement and form of Stock
     Purchase Warrant dated March 1, 1994 to purchase an
     aggregate 600,000 shares of Common Stock at an exercise
     price of $1.00 per share, subject to adjustment, issued
     to principals of San Jacinto Securities, Inc. in
     connection with its financial consulting agreement with
     the Company. (I)(v)

4.18     Form of Warrant Agreement and Stock Purchase
     Warrant dated April 1, 1994, to purchase an aggregate
     6,440,000 shares of Common Stock at an exercise price
     of $1.25 per share, subject to adjustment, issued to
     executives of the Company surrendering all of their
     rights under their employment contracts with the
     Company. (F)(ii)

4.19     Form of Warrant Agreement and Stock Purchase
     Warrant dated April 1, 1994, to purchase an aggregate
     878,900 shares of Common Stock at an exercise price of
     $1.25 per share, subject to adjustment, issued to
     executives of the Company in consideration for salary
     reductions sustained under their employment contracts
     with the Company. (F)(iii)

4.20     Form of Warrant Agreement and Stock Purchase
     Warrant dated April 1, 1994, to purchase 200,000 shares
     of Common Stock at an exercise price of $1.25 per
     share, subject to adjustment, issued to Thomas H.
     Hudson.   (F)(iv)

4.21     Form of Warrant Agreement and Stock Purchase
     Warrant dated May 25, 1994, to purchase an aggregate
     100,000 shares of Common Stock at an exercise price of
     $1.25 per share, subject to adjustment, issued to the
     holders of Purchase Notes B, in consideration of
     amendment to   payment terms of such Notes. (F)(v)

4.22     Form of Warrant Agreement and Stock Purchase
     Warrant dated May 25, 1994, to purchase an aggregate
     100,000 shares of Common Stock at an exercise price of
     $1.25 per share, subject to adjustment, issued to the
     holders of Purchase Notes B, in consideration for the
     granting of an option to further extend payment terms
     of such Notes.   (F)(vi)

4.23     Form of Amendment to Certificate of Designation of
     Series B Preferred Stock dated June 30, 1994. (F)(vii)

4.24     Form of Warrant Agreement and Stock Purchase
     Warrant dated January 31, 1995, to purchase 100,000
     shares of Common Stock at an exercise price of $.75 per
     share, subject to adjustment, issued to Energy
     Advisors, Inc.  (L)(i)

4.25     Copy of Amendment to Certificate of Designation of
     Series A Preferred Stock dated October 31, 1995.
     (N)(ii)

4.26     Copy of Certificate of Designation of Series E,
     Cumulative Convertible Preferred Stock dated November
     2, 1995. (N)(iii)

4.27     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  (O)(i)

4.28     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  (O)(ii)

4.29     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  (O)(iii)

4.30     Form of Amendment of Certificate of Designation of
     Series A Preferred Stock dated April 11, 1996. (O)(iv)

4.31     Stock Purchase Agreement between the Company and
     Janz Financial Corp. Ltd. dated August 14, 1996,
     whereby clients of Janz Financial Corp. Ltd. purchased
     2,800,000 units comprised of one shares of Common Stock
     and one warrant to purchase one share of Common Stock
     in a Regulation S transaction. (P)(i)

4.32     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. (P)(ii)

4.33     Stock Purchase Agreement between the Company and
     Provincial Securities Ltd. dated August 16, 1996,
     whereby Provincial purchased 1,500,000 shares of Common
     Stock in a Regulation S transaction. (P)(iii)

4.34     Stock Purchase Warrant issued to Terrenex
     Acquisitions Corp. dated August 16, 1996, entitling the
     holder thereof to purchase up to 3,000,000 shares of
     Common Stock at $0.25 per share on or before December
     31, 1998. (P)(iv)

4.35     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 (Q)(i)

4.36     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. (Q)(ii)

4.37     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 (Q)(iii)

4.38     Certificate of Designation of Series F, Cumulative
     Convertible Preferred Stock, par value $1.00 per share
     (Q)(iv)

4.39     Form of Subscription Agreement for Series F,
     Cumulative Convertible Preferred Stock with respect to
     the following purchases:

     Subscriber                              Shares
     ----------                              ------ 
     Mitch Leigh                              18,448
     Abby Leigh                                1,731
     Arthur Rosenbloom                           878 (Q)(v)

4.40     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  (Q)(vi)

10.0     -     Material Contracts

10.1     Contract for Petroleum Exploration, Development and
     Production on Zhao Dong Block in Bohai Bay Shallow
     Water Sea Area of The People's Republic of China
     between China National Oil and Gas Exploration and
     Development Corporation and XCL - China, Ltd., dated
     February 10,    1993. (E)(vi)

10.2     $35,000,000 Credit Agreement dated as of January
     31, 1994 between the Company and Internationale
     Nederlanden (U.S.) Capital Corporation ("INCC"), as
     Agent. (I)(vi)

10.3     Copy of Subordination Agreement among the Company,
     INCC and the holders of the Secured Notes dated.
     (I)(vii)

10.4     Form of First Amendment of Secured Subordinated
     Note dated January 31, 1994. (I)(viii)

10.5     Form of First Amendment of Limited Recourse Secured
     Lease Note dated January 31,  1994. (I)(ix)

10.6     Stock Pledge Agreement dated January 31, 1994,
     among the Company and INCC.  (I)(x)

10.7     Deed of Trust, Mortgage, Assignment, Security
     Agreement and Financing Statement from XCL-Texas, Inc.
     to INCC dated January 31, 1994. (I)(xi)

10.8     Form of Net Revenue Interest Assignment dated
     February 23, 1994, between the Company and the
     purchasers of the Company's Series D, Cumulative
     Convertible Preferred Stock. (I)(xii)

10.9     Modification Agreement for Petroleum Contract on
     Zhao Dong Block in Bohai Bay Shallow Water Sea Area of
     The People's Republic of China dated March 11, 1994,
     between the Company, China National Oil and Gas
     Exploration and Development corporation and Apache
     China Corporation LDC. (I)(xiii)

10.10     Letter Agreement dated May 25, 1994 between the
     Company, L.M. Holdings Associates, L.P. and vendors
     holding Purchase Note B with respect to the Lutcher
     Moore Tract. (E)(vii)

10.11     Letter Agreement dated June 30, 1994 between the
     Company, China Investment & Development Co. Ltd. and
     China Investment and Development Corporation. (F)(ix)

10.12     Letter Agreement dated July 10, 1994 between the
     Company and holders of the Lease Notes. (F)(x)

10.13     Stock Purchase Agreement between the Company and
     Provincial Securities Limited dated May 17, 1994.
     (F)(xi)

10.14     Consulting agreement between the Company and Sir
     Michael Palliser dated April 1, 1994. (K)(i)

10.15     Consulting agreement between the Company and Mr.
     Arthur W. Hummel, Jr. dated April 1, 1994. (K)(ii)

10.16     Letter Agreement between the Company and Mr.
     William Wang dated June 2, 1992, executed effective
     February 10, 1993. (K)(iii)

10.17     First Amendment to Credit Agreement between the
     Company and Internationale Nederlanden (U.S.) Capital
     Corporation dated April 13, 1995. (L)(ii)

10.18     Letter of Intent between the Company and CNPC
     United Lube Oil Corporation for a joint venture for the
     manufacture and sale of lubricating oil dated January
     14, 1995. (L)(iii)

10.19     Purchase and Sale Agreement dated May 10, 1995,
     between XCL Land, Ltd., a wholly owned subsidiary of
     the Company ("Seller") and The Succession of Edward M.
     Carmouche, Matilda Gray Stream, Harold H. Stream, III,
     The Opal Gray Trust, Matilda Geddings Gray Trust for
     Harold H. Stream, III, Matilda Geddings Gray Trust for
     William Gray Stream, Matilda Geddings Gray Trust for
     Sandra Gray Stream, M.G. Stream Trust for Harold H.
     Stream, III, M.G. Stream Trust for William Gray Stream,
     and M.G. Stream Trust for Sandra Gray Stream
     ("Purchasers") whereby the Purchasers will acquire
     Seller's fee interest in and to a parcel of
     southwestern   Louisiana land known as the Phoenix Lake
     Tract. (L)(iv)

10.20     Farmout Agreement dated May 10, 1995, between XCL
     China Ltd., a wholly owned subsidiary of the Company
     and Apache Corporation whereby Apache will acquire an
     additional interest in the Zhao Dong Block, Offshore
     People's Republic of China. (L)(v)

10.21     Modification  Agreement of Non-Negotiable
     Promissory Note  and  Waiver  Agreement  between
     Lutcher  &  Moore Cypress Lumber Company and L.M.
     Holding Associates, L.P. dated June 15, 1995. (M)(i)

10.22     Third  Amendment to Credit Agreement between
     Lutcher-Moore  Development Corp., Lutcher & Moore
     Cypress Lumber Company,  The First National Bank of
     Lake Charles,  Mary Elizabeth Mecom, The Estate of John
     W. Mecom,  The  Mary Elizabeth Mecom Irrevocable Trust,
     Matilda Gray  Stream, The   Opal  Gray  Trust,  Harold
     H.  Stream  III,   The Succession  of  Edward  M.
     Carmouche,  Virginia  Martin Carmouche  and L.M.
     Holding Associates, L.P. dated  June 15, 1995. (M)(ii)

10.23      Second   Amendment  to  Appointment  of  Agent
     for Collection and Agreement to Application of Funds
     between Lutcher-Moore Development Corp., Lutcher &
     Moore Cypress Lumber  Company, L.M. Holding Associates,
     L.P. and  The First  National  Bank of Lake Charles,
     dated  June  15, 1995. (M)(iii)

10.24     Contract of Chinese Foreign Joint Venture dated
     July 17,  1995, between United Lube Oil Corporation
     and  XCL China   Ltd.  for  the  manufacturing  and
     selling   of lubricating oil and related products.
     (M)(iv)

10.25     Letter  of  Intent dated July 17, 1995  between
     CNPC United  Lube Oil Corporation and XCL Ltd. for
     discussion of further projects. (M)(v)

10.26     Form  of  Letter Agreement dated  June  26,  1995
     between  the  Company and three of its U.S.  holders
     of Series  A  Preferred Stock, whereby the  following
     such holders have agreed to accept Common Stock in
     respect of dividends payable December 31, 1994 and June
     30, 1995 in the amounts set forth:

                              12/31/94        6/30/95
      Holder                  Dividend        Dividend         Shares
      ------                  --------        --------         ------
    Kayne Anderson
    Investment Management     $627,788.12     $689,238.87   2,225,024
    Cumberland Associates     $429,056.51     $445,838.59   1,487,294
    T. Rowe Price &
     Associates, Inc.         $159,975.00     $166,232.25      554,543 (M)(vi)

10.27     Copy of Letter Agreement dated March 31, 1995,
     between the  Company and China National Administration
     of  Coal Geology for the exploration and development of
     coal  bed methane  in  Liao Ling Tiefa and Shanxi
     Hanchang  Mining Areas. (N)(iv)

10.28     Copy of  Second Amendment to Credit Agreement
     between the Company and Internationale  Nederlanden
     (U.S.)  Capital  Corporation  dated  effective as of
     September 29, 1995. (N)(v)

10.29     Copy of Fee Agreement dated October 26, 1995,
     between the Company and EnCap Investments L.C. for past
     services and proposed European equity offering. (N)(vi)

10.30     Copy of  Engagement Letter dated November 9, 1995,
     between  the Company and Rauscher Pierce & Clark for a
     proposed  Unit  offering  to  be  conducted  in
     Europe.  (N)(vii)

10.31     Memo of Understanding dated December 14, 1995,
     between  XCL Ltd. and China National Administration of
     Coal Geology. (O)(v)

10.32     Copy of Purchase and Sale Agreement dated December
     28,  1995,  between XCL Ltd., XCL-Texas, Inc. and Cody
     Energy Corporation, for the sale to Cody Energy of  the
     Mestena Grande Field located in Texas. (O)(vi)

10.33     Form of Fourth Amendment to Credit Agreement
     between Lutcher-Moore Development Corp., Lutcher &
     Moore Cypress Lumber Company, The First National Bank
     of Lake Charles, Mary Elizabeth Mecom, The Estate of
     John W. Mecom, The  Mary  Elizabeth  Mecom  Irrevocable
     Trust, Matilda Gray Stream, The Opal Gray  Trust,
     Harold  H. Stream  III, The Succession of  Edward  M.
     Carmouche, Virginia Martin Carmouche and L.M. Holding
     Associates,  L.P. dated January 16, 1996. (O)(vii)

10.34     Form of Third Amendment to Appointment of Agent
     for  Collection and Agreement to application  of  Funds
     between Lutcher-Moore Development Corp., Lutcher &
     Moore Cypress  Lumber  Company, L.M. Holding
     Associates,  L.P.  and The First National Bank of Lake
     Charles,  dated  January 16, 1996. (O)(viii)

10.35     Copy of Purchase and Sale Agreement dated March 8,
     1996, between XCL-Texas, Inc. and Tesoro  E&P  Company,
     L.P.  for  the sale of the Gonzales Gas Unit located in
     south Texas. (O)(ix)

10.36     Copy  of  Limited  Waiver  between  the Company
     and Internationale  Nederlanden (U.S.)  Capital
     Corporation dated April 3, 1996. (O)(x)

10.37     Copy  of Purchase and Sale Agreement dated  April
     22, 1996, between XCL-Texas, Inc. and  Dan  A.  Hughes
     Company for the sale of the Lopez Gas Units located in
     south Texas. (P)

10.38     Form of Sale of Mineral Servitude dated June 18,
     1996, whereby the Company sold its 75 percent mineral
     interest in the Phoenix Lake Tract to the Stream Family
     Limited Partners and Virginia Martin Carmouche Gayle.
     (Q)(ii)

10.39     Form of Fifth Amendment to Credit Agreement
     between Lutcher-Moore Development Corp., Lutcher &
     Moore Cypress Lumber Company, The First National Bank
     of Lake Charles, Mary Elizabeth Mecom, The Estate of
     John W. Mecom, The  Mary  Elizabeth  Mecom  Irrevocable
     Trust, Matilda Gray Stream, The Opal Gray  Trust,
     Harold  H. Stream  III, The Succession of  Edward  M.
     Carmouche, Virginia Martin Carmouche and L.M. Holding
     Associates,  L.P. dated August 8, 1996. (Q)(vii)

10.40     Form of Assignment and Sale between XCL
     Acquisitions, Inc. and purchasers of an interest in
     certain promissory notes held by XCL Acquisitions, Inc.
     as follows:

          Date               Purchaser                   Principal  Purchase 
                                                          Amount     Price
     November 19, 1996   Opportunity Associates, L.P.   $15,627.39  $12,499.98
     November 19, 1996   Kayne Anderson Non-Traditional
                           Investments, L.P.            $78,126.36  $62,499.98
     November 19, 1996   Offense Group Associates, L.P. $39,063.18  $31,249.99
     November 19, 1996   Arbco Associates, L.P.         $93,743.14  $75,000.04
     November 19, 1996   Nobel Insurance Company        $15,627.39  $12,499.98
     November 19, 1996   Evanston Insurance  Company    $15,627.39  $12,499.98
     November 19, 1996   Topa Insurance Company         $23,435.79  $18,750.01
     November 19, 1996   Foremost Insurance Company     $31,249.48  $25,000.04
     February 10, 1997   Donald A. and Joanne R.
                          Westerberg                    $25,000.00  $28,100.00
     February 10, 1997   T. Jerald Hanchey             $168,915.74 $189,861.29 
      (Q)(viii)

10.41     Form of Sixth Amendment to Credit Agreement
     between Lutcher-Moore Development Corp., Lutcher &
     Moore Cypress Lumber Company, The First National Bank
     of Lake Charles, The Estate of Mary Elizabeth Mecom,
     The Estate of  John W. Mecom, The  Mary  Elizabeth
     Mecom  Irrevocable  Trust, Matilda Gray Stream, The
     Opal Gray  Trust,  Harold  H. Stream  III, The
     Succession of  Edward  M. Carmouche, Virginia Martin
     Carmouche and L.M. Holding  Associates,  L.P. dated
     January 28, 1997. (Q)(ix)

10.42     Form of Act of Sale between the Company and The
     Schumacher Group of Louisiana, Inc. dated March 31,
     1997, where in the Company sold its office building.
     (Q)(x)

10.43     Amendment No. 1 to the May 1, 1995 Agreement with
     Apache Corp. dated April 3, 1997, effective December
     13, 1996. (Q)(xi)

10.44     Form of Guaranty dated April 9, 1997 by XCL-China
     Ltd. in favor of ING (U.S.) Capital Corporation
     executed in connection with the sale of certain
     Unsecured Notes issued by XCL-China Ltd. (Q)(xii)

10.45     Form of First Amendment to Stock Pledge Agreement
     dated April 9, 1997, between the Company and ING (U.S.)
     Capital Corporation adding XCL Land Ltd. to the Stock
     Pledge Agreement dated as of January 31, 1994.
     (Q)(xiii)

10.46     Form of Agreement dated April 9, 1997, between ING
     (U.S.) Capital Corporation, XCL-China and holders of
     the Senior Unsecured Notes, subordinating the Guaranty
     granted by XCL-China in favor of ING to the Unsecured
     Notes. (Q)(xiv)

10.47     Form of Forbearance Agreement dated April 9, 1997
     between the Company and ING (U.S.) Capital Corporation.
     (Q)(xv)

10.48     Form of a series of Unsecured Notes dated April
     10, 1997, between the Company and the following
     entities:

     Note Holder                                  Principal Amount

     Kayne Anderson Offshore, L.P.                     $200,000
     Offense Group Associates, L.P.                    $500,000
     Kayne Anderson Non-Traditional Investments, L.P.  $500,000
     Opportunity Associates, L.P.                      $400,000
     Arbco Associates, L.P.                            $500,000
     J. Edgar Monroe Foundation                        $100,000
     Estate of J. Edgar Monroe                         $300,000
     Boland Machine & Mfg. Co., Inc.                   $100,000
     Construction Specialists, Inc. 
        d/b/a Con-Spec, Inc.                           $500,000 (Q)(xvi)

10.49     Form of Subscription Agreement dated April 10,
     1997, by and between XCL-China, Ltd., the Company and
     the subscribers of Units, each unit comprised of
     $100,000 in Unsecured Notes and 325,580 warrants.
     (Q)(xvii)

10.50     Form of Intercompany Subordination Agreement dated
     April 10, 1997, between the Company, XCL-Texas, Ltd.,
     XCL Land Ltd., The Exploration Company of Louisiana,
     Inc., XCL-Acquisitions, Inc., XCL-China Coal Methane
     Ltd., XCL-China LubeOil Ltd., XCL-China Ltd., and
     holders of the Unsecured Notes. (Q)(xviii)

11.     Statement re computation of per share earnings *

15.     Not applicable.

18.     Not applicable.

19.     Not applicable.

22.     Not applicable.

23     Not applicable.

24.     Not applicable.

27.     Financial Data Schedule *

99     Glossary of Terms *

- ------------
*     Filed herewith.

(A)     Incorporated by reference to the Registration
     Statement on Form 8-B filed on July 28, 1988, where it
     appears as: (i) through (iii) as Exhibits 3(a) through
     3(c), respectively; and (iv) as Exhibit 4.1.

(B)     Incorporated by reference to a Quarterly Report on
     Form 10-Q filed on August 14, 1990, where it appears
     as: (i) Exhibit 3 and (ii) Exhibit 4.4.

(C)     Incorporated by reference to an Annual Report on
     Form 10-K filed on March 30, 1992, where it appears as
     Exhibit (3)(g).

(D)     Incorporated by reference to a Quarterly Report on
     Form 10-Q filed August 14, 1992, where it     appears
     as:  (i) Exhibit 4.25 and (ii) Exhibit 4.28.

(E)     Incorporated by reference to a Registration
     Statement on Form S-3 (File No. 33-68552) where it
     appears as: (i) Exhibit 4.27; (ii) Exhibit 4.14; (iii)
     Exhibit 4.16; (iv) Exhibit 4.17; (v) Exhibit 4.19; (vi)
     Exhibit 10.1; and (vii) Exhibit 10.6.

(F)     Incorporated by reference to Post-Effective
     Amendment No. 2 to Registration Statement on Form S-3
     (File No. 33-68552) where it appears as: (i) through
     (iii) Exhibits 4.28 through 4.30, respectively; (iv)
     through (viii) Exhibits 4.34 through 4.38,
     respectively; and (ix) through (xi) Exhibits 10.8
     through 10.10, respectively.

(G)     Incorporated by reference to a Current Report on
     Form 8-K filed on August 13, 1990, where it appears  as
     Exhibit 4.

(H)     Incorporated by reference to Quarterly Report on
     Form 10Q filed May 15, 1991, where it appears as:  (i)
     Exhibit 4.1; (ii) Exhibit 4.2; and (iii) Exhibit 4.5.

(I)     Incorporated by reference to Amendment No. 1 to
     Annual Report on Form 10-K filed April 15, 1994, where
     it appears as:  (i) Exhibit 4.35; (ii) Exhibit 4.31;
     (iii) Exhibit 4.32; (iv) Exhibit 4.36; (v) Exhibit
     4.37; (vi) through (xii) Exhibit 10.41 through Exhibit
     10.47, respectively; and (xii) Exhibit 10.49.

(J)     Incorporated by reference to an Annual Report on
     Form 10K for the fiscal year ended December 31, 1990,
     filed April 1, 1991, where it appears as Exhibit 10.27.

(K)     Incorporated by reference to Amendment No. 1 to an
     Annual Report on Form 10-K/A No. 1 for the fiscal year
     ended December 31, 1994, filed April 17, 1995, where it
     appears as: (i) through (iii) Exhibits 10.22 through
     10.24, respectively.

(L)     Incorporated by reference to Quarterly Report on
     Form  10-Q  for the quarter ended March  31,  1995,
     filed  May  15, 1995, where it appears as: (i)  Exhibit
     4.28;  and  (ii)  through  (v) Exhibits  10.25  through
     10.28, respectively.

(M)     Incorporated  by reference to Quarterly  Report  on
     Form 10-Q for the quarter ended June 30, 1995,  filed
     August 14, 1995, where it appears as: (i) through  (vi)
     Exhibits 10.29 through 10.34, respectively.

(N)     Incorporated by reference to Quarterly  Report on
     Form 10-Q for the quarter ended September 30, 1995,
     filed  November  13, 1995, where it  appears  as:   (i)
     Exhibit  3.8;  (ii) and (iii) Exhibits 4.29  and  4.30,
     respectively;  and  (iv) through (vii)  Exhibits  10.35
     through 10.38, respectively.

(O)     Incorporated by reference to Annual Report  on Form
     10-K for the year ended December 31, 1995,  filed April
     15, 1996, where it appears as:  (i) through  (iv)
     Exhibits  4.28  through  4.31,  respectively;  and  (v)
     through (x) Exhibits 10.31 through 10.36, respectively.

(P)     Incorporated by reference to Quarterly Report on
     Form 10-Q for the quarter ended March 31, 1996, filed
     May 15, 1996, where it appears as Exhibit 10.37.

(Q)      Incorporated by reference to Quarterly Report on
     Form 10-Q for the quarter ended June 30, 1996, filed
     August 14, 1996, where it appears as (i) Exhibit 3.9
     and (ii) Exhibit 10.38.

(P)     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 (i)
     through (iv) Exhibits 4.31 through 4.34.

(Q)      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 (vi) Exhibits
     4.35  through  4.40 and (vii) through (xviii)  Exhibits
     10.39 through 10.50.

 (b)     Reports on Form 8-K

      A current report on Form 8-K was filed  to report that
on  February 4, 1997 through February 11, 1997, the  Company
had  sold  an aggregate of 1,340,200 shares of Common  Stock
pursuant  to Regulation S of the Securities Act of 1933,  as
amended  (the "Act") through the exercise of stock  purchase
warrants.

      A  current report on Form 8-K was filed to report that
on  February 20, 1997 through February 24, 1997, the Company
had  sold  an  aggregate of 289,900 shares of  Common  Stock
pursuant to Regulation S of the Act through the exercise  of
stock purchase warrants.

      A  current report on Form 8-K was filed to report that
on  March  21, 1997, the Company had sold 73,000  shares  of
Common Stock pursuant to Regulation S of the Act through the
exercise of stock purchase warrants.

      A  current report on Form 8-K was filed to report that
from April 18, 1997 through April 30, 1997, the Company  had
sold  an  aggregate  of  3,066,900 shares  of  Common  Stock
pursuant to Regulation S of the Act through the exercise  of
stock purchase warrants.

                         SIGNATURES

Pursuant  to the requirements of the Securities and Exchange
Act  of 1934, the Registrant has duly caused this report  to
be  signed  on its behalf by the undersigned thereunto  duly
authorized.


                              XCL Ltd.

                              /s/ David A. Melman
                         By: __________________________
                              David A. Melman
                              Executive Vice President and
                              General Counsel

Date: May 14, 1997




                              
                              
                  XCL Ltd. and Subsidiaries
                              
  Exhibit 11-Computation of Earnings Per Common and Common
                      Equivalent Share
                              
      (Amounts in thousands except, per share amounts)

                                                      Three Months Ended
                                                           March 31
                                                      ------------------
                                                       1997          1996
                                                       ----          ----
PRIMARY:

Net loss                                             $  (1,211)   $  (1,641)

Dividends on preferred stock                            (1,404)      (1,191)
                                                      --------      ------- 
Net loss attributable to common stock                $  (2,615)   $  (2,832)
                                                      ========      =======  
Weighted average number of shares common 
  stock outstanding                                    288,058      256,807

Common stock equivalents (computed using 
  treasury stock method)                                     -            -
                                                       -------      -------
Average number of shares of common stock and 
  common stock equivalents outstanding                 288,058      256,807
                                                       =======      ======= 

Net loss per common and common equivalent share      $    (.01)   $    (.01)
                                                       =======      =======
FULLY DILUTED:

Fully diluted net loss per common and common 
  equivalent share                                        (1)          (1)

- ------------
(1)  All amounts are anti-dilutive or immaterial and
     therefore not presented in the financial statements.





<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of XCL Ltd. and Subsidiaries for the quarter
ended March 31, 1997, and is qualifed in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-END>                               MAR-31-1997
<CASH>                                             278
<SECURITIES>                                         0
<RECEIVABLES>                                      148
<ALLOWANCES>                                       101
<INVENTORY>                                          0
<CURRENT-ASSETS>                                   526
<PP&E>                                          35,742
<DEPRECIATION>                                   1,085
<TOTAL-ASSETS>                                  62,076
<CURRENT-LIABILITIES>                           48,007
<BONDS>                                              0
                                0
                                        756
<COMMON>                                         2,923
<OTHER-SE>                                       7,707
<TOTAL-LIABILITY-AND-EQUITY>                    62,076
<SALES>                                             85
<TOTAL-REVENUES>                                    85
<CGS>                                              901
<TOTAL-COSTS>                                      901
<OTHER-EXPENSES>                                 (239)
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 634
<INCOME-PRETAX>                                (1,211)
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                            (1,211)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   (1,211)
<EPS-PRIMARY>                                    (.01)
<EPS-DILUTED>                                        0
        

</TABLE>

                      GLOSSARY OF TERMS
                              
The following is a glossary of commonly used terms in the
oil and gas industry which is being provided for ease of
reference and convenience purposes only.

"area of mutual interest" or "AMI" - An agreement by which
parties attempt to describe a geographical area within which
they agree to share certain existing and additional leases
acquired by any of them in the future.

"APO/BPO" - After payout/before payout.

"Btu/MMBtu" - British Thermal Units, a measure of the
heating value of fuel.  MMBtu stands for one million Btu.

"Bbls/MBbls" - A Bbl. or barrel is 42 U.S. gallons of crude
oil or condensate measured at 60 degrees Fahrenheit. MBbls
stands for one thousand Bbls.

"carried interest" - A fractional working interest in an oil
and gas lease, the holder of which is carried and has no
liability for a portion or all of the attirubtable
development and operating costs. The person advancing the
costs is the carrying party; the other is the carried party.

"casing point" - The time when the operator recommends that
a completion attempt be made, or when the well is plugged
and abandoned without a completion attempt being made.

"choke/choke size" - A pipe section having an orifice for
restricting and controlling the flow of oil and gas. Choke
size is the orifice diameter and is commonly expressed in
64ths of an inch.

"continuous drilling" - A lease clause providing that
drilling of another well be commenced within a specified
time after completion of the preceding well.  As a general
rule, if this is not done, all undeveloped acreage must be
released.

"development" - The drilling of a well within the productive
area of an oil or gas reservoir, as indicated by reasonable
interpretation of available data, with the object of
completing the well in that reservoir.

"exploration" - Operations conducted in search of
undiscovered oil, gas and/or condensate.

"farmout/farmin" - An agreement providing for assignment of
a lease.  A typical characteristic of a farmout is the
obligation of the assignee to conduct drilling operations on
the assigned acreage as a pre-requisite to completion of the
assignment.  The assignor will usually reserve some type of
interest in the lease.  The transaction is characterized as
a farmout to the assignor and farmin to the assignee.

"field" - An area within a lease or leases where production
of oil, gas and/or condensate has been established and which
has been so designated by the appropriate regulatory
authority.

"gathering facilities" - Pipelines and other facilities
used to collect gas from various wells and bring it by
separate and individual lines to a central point where it is
delivered into a single line.

"gathering gas" - The first taking or the first retaining of
possession of gas for transmission through a pipeline, after
the severance of such gas, and after the passage of such gas
through any separator, drip, trap or meter that may be
located at or near the well.  In the case of gas containing
gasoline or liquid hydrocarbons that are removed or
extracted in commercial quantities at a plant by scrubbing,
absorption, compression, or any similar process, the term
means the first taking or the first retaining of possession
of such gas for transmission through a pipeline after such
gas has passed through the outlet of such plant.  The act of
collecting gas after it has been brought from the earth.

"gathering line" - Pipes used to transport oil or gas from
the lease to the main pipeline in the area.  In the case of
oil, the lines run from the lease tanks to a central pump
station at the beginning of the main pipeline.  In the case
of gas, the flow is continuous from the well head to the
ultimate consumer, since gas cannot be stored. Gathering
lines collect gas under fluctuating pressures which are then
regulated by regulating stations before the gas is
introduced into trunk or transmission lines.

"gathering system" - The gathering lines, pumps, auxiliary
tanks (in the case of oil), and other equipment used to move
oil or gas from the well site to the main pipeline for
eventual delivery to the refinery or consumer, as the case
may be.  In the case of gas, the gathering system includes
the processing plant (if any) in which the gas is prepared
for the market.

"gross/net" - The term "gross" is used when reference is
made, for example, to the total acreage of a lease.  The
term "net" is used when reference is made to the working
interest or net revenue interest in a lease of one
particular leaseholder.  The same term may be applied to a
leaseholder's interest in reserves and/or production from a
lease.

"held by production" or "HBP" - A provision in a lease to
the effect that such lease will be kept in force as long as
there is production from the lease in paying quantities.

"lease bonus" - A cash payment by the lessee for the
execution of an oil and gas lease by the mineral owner.

"lease" or "leasehold" - An interest for a specified term in
property allowing for the exploration for and production of
oil, gas and/or condensate.

"log" - A record of the formations penetrated by a well,
from which their depth, thickness, rock properties and (if
possible) contents may be obtained.

"Mcf/MMcf/Bcf" - Mcf stands for one thousand cubic feet of
gas, measured at 60 degrees Fahrenheit and at atmospheric
pressure of 14.7 pounds per square inch. MMcf stands for one
million cubic feet of gas.  Bcf stands for one million Mcf.

"net revenue interest" or "NRI" - The share of revenues to
which the holder of a working interest is entitled upon
fulfilling the obligations, after deduction of all
royalties, overriding royalties or similar burdens,
attributable to his working interest.

"operator" - The person or company having the operational
management responsibility for the drilling of or production
from any oil, gas and/or condensate well.

"overriding royalty" - A form of royalty, entitling the
holder to receive a percentage of oil, gas and/or condensate
produced from the wells on a specified lease, or the
revenues arising from the sale thereof, free of all expenses
arising therefrom, save for production taxes. Generally, the
rights accruing to working interest holders are subject to
the rights of overriding royalty holders and any rights of
overriding royalty holders terminate upon cancellation or
reversion of the underlying lease.

"pay" - The geological deposit in which oil, gas and/or
condensate is found in commercial quantities.

"payout" - Generally, that point in time, determined by
agreement, when a person has recouped his investment in the
drilling, development, equipping and operating of a well or
wells.

"permeability" - A measure of the resistance offered by rock
to the movement of fluids through it.

"porosity" - The volume of the pore spaces between mineral
grains as compared to the total rock volume.  Porosity is a
measure of the capacity of rock to hold oil, gas and water.

"probable reserves" - The estimated quantities of
commercially recoverable hydrocarbons associated with known
accumulations, which are based on engineering and geological
data similar to those used in the estimates of proved
reserves but, for various reasons, these data lack the
certainty required to classify the reserves as proved. In
some cases, economic or regulatory uncertainties may dictate
the probable classification.  Probable reserves are less
certain to be recovered than proved reserves.

"prospect" - One lease comprising, or several leases which
together comprise, a geographical area believed to contain
commercial quantities of oil, gas and/or condensate.

"prospective" - A geographical area or structure believed to
contain commercial quantities of oil, gas and/or condensate.

"proved reserves" - Estimated quantities of crude oil,
condensate, natural gas, and natural gas liquids that
geological and engineering data demonstrate with reasonable
certainty to be commercially recoverable in the future from
known reservoirs under existing conditions using established
operating procedures and under current governmental
regulations.

"psig" - Pounds per square inch, gauge.

"rental payment" - A sum of money payable to the lessor by
the lessee for the privilege of deferring the commencement
of drilling operations or the commencement of production
during the primary term of the lease.

"reserves" - The estimated value of oil, gas and/or
condensate which is economically recoverable.  Reserves may
be categorized as proved or probable.

"reservoir" - A porous, permeable, sedimentary rock
containing commercial quantities of oil, gas and/or
condensate.

"salt dome" - A mass or plug of salt which has pushed or
domed up sedimentary beds around it; this type structure is
favorable to oil and gas accumulation.

"sand" - A sedimentary rock consisting mostly of sand
grains.

"shut-in royalty" - A payment made when a gas well, capable
of producing in paying quantities, is shut-in for lack of a
market for the gas.

"structure" - A configuration of subsurface rock formations
considered, on the basis of geological or geographical
interpretation, to be capable of containing a reservoir.

"target depth" - The primary geological formation or depth
identified in an agreement applicable to the relevant well
or wells.

"test well" - An exploratory well.

"tight formation" - A zone of relatively low permeability
and thus low well productivity.  Wells in such zones usually
require fracturing or other stimulation. Typically, the
productive capacity of a new well completed in a tight zone
declines rapidly for several months or longer after
completion.

"working interest" or "WI" - An interest in a lease carrying
the obligation to bear a proportion of drilling and
operating costs and the right to receive a proportion of the
production or gross revenues attributable thereto.

"workover" - Remedial operations on a well with the
intention of restoring or increasing production.



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