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, 1998
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.
22,995,804 shares Common Stock, $.01 par value were
outstanding on May 13, 1998.
<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 12
PART II
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
<PAGE>
XCL Ltd. and Subsidiaries
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
(Unaudited)
March 31 December 31
A S S E T S 1998 1997
----------- ---- ----
Current assets:
Cash and cash equivalents $ 18,102 $ 21,952
Cash held in escrow (restricted) 10,317 10,263
Accounts receivable, net 133 101
Refundable deposits 200 1,200
Other 453 451
------- -------
Total current assets 29,205 33,967
------- -------
Property and equipment:
Oil and gas (full cost method):
Proved properties under development
not being amortized 24,147 21,172
Unevaluated properties 36,740 33,132
------- -------
60,887 54,304
Other 1,209 1,163
------- -------
62,096 55,467
Accumulated depreciation, depletion and
amortization (932) (1,000)
------- -------
61,164 54,467
------- -------
Investments 4,530 4,173
Assets held for sale 21,152 21,155
Debt issue costs, less amortization 4,102 4,268
Other assets 1,224 1,059
------- -------
Total assets $ 121,377 $ 119,089
======= =======
L I A B I L I T I E S A N D S H A R E H O L D E R S' E Q U I T Y
- -------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued costs $ 881 $ 907
Accrued interest 4,480 1,820
Due to joint venture partner 5,156 4,504
Dividends payable 3,833 1,813
Current maturities of long term debt 2,374 2,524
------- -------
Total current liabilities 16,724 11,568
------- -------
Long-term debt, net of current maturities 61,847 61,310
Other non-current liabilities 5,354 5,386
Commitments and contingencies (Note 6)
Shareholders' equity:
Preferred stock-$1.00 par value; authorized
2.4 million shares; issued shares of
1,176,538 at March 31, 1998 and
1,196,236 at December 31, 1997 -
liquidation preference of $101 million
at March 31, 1998 1,177 1,196
Common stock-$.01 par value; authorized
500 million shares; issued shares of
22,991,191 at March 31, 1998 and
21,710,257 at December 31, 1997 230 217
Common stock held in treasury -
$.01 par value; 69,470 shares (1) (1)
Unearned compensation (11,861) (12,021)
Additional paid-in capital 299,503 298,588
Accumulated deficit (251,596) (247,154)
------- -------
Total shareholders' equity 37,452 40,825
------- -------
Total liabilities and
shareholders' equity $ 121,377 $ 119,089
======= =======
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)
(Unaudited)
Three Months Ended
March 31
-------------------
1998 1997
---- ----
Oil and gas revenues from properties held for sale $ 32 $ 85
----- ------
Costs and operating expenses:
Operating 57 67
Depreciation and amortization 9 18
Depletion - oil and gas assets held for sale 15 38
General and administrative 1,557 720
Taxes, other than income 47 58
----- -----
1,685 901
----- -----
Operating loss (1,653) (816)
----- -----
Other income (expense):
Interest expense, net of amounts capitalized (762) (634)
Interest Income 409 1
Other, net (9) 238
----- -----
(362) (395)
----- -----
Net loss (2,015) (1,211)
Preferred stock dividends (2,427) (1,404)
----- -----
Net loss attributable to common stock $ (4,442) $ (2,615)
===== =====
Net loss per share (basic) $ (.20) $ (.14)
===== =====
Net loss per share (diluted) $ (.20) $ (.14)
===== =====
Average number of shares used in per
share computations:
Basic 22,318 19,204
Diluted 22,318 19,204
The accompanying notes are an integral part of these financial statements.
<PAGE>
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Total
Preferred Common Treasury Paid-In Accumulated Unearned Shareholders'
Stock Stock Stock Capital Deficit Compensation Equity
--------- ------- -------- ------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 $1,196 $ 217 $ (1) $298,588 $ (247,154) $ (12,021) $ 40,825
Net loss -- -- -- -- (2,015) -- (2,015)
Dividends -- -- -- -- (2,427) -- (2,427)
Preferred shares issued 4 -- -- -- -- -- 4
Preferred shares converted
to common shares (23) 6 -- 162 -- -- 145
Common shares issued -- 1 -- 222 -- -- 223
Exercise of stock purchase
warrants -- 6 -- 325 -- -- 331
Unearned compensation -- -- -- 206 -- 160 366
----- ----- ----- ------- -------- ------- ------
Balance, March 31, 1998 $1,177 $ 230 $ (1) $299,503 $ (251,596) $ (11,861) $ 37,452
===== ===== ===== ======= ======== ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
XCL Ltd. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
Three Months Ended
March 31
------------------
1998 1997
---- ----
Cash flows from operating activities:
Net loss $ (2,015) $ (1,211)
------ ------
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation, depletion and amortization 24 56
Amortization of discount on Senior Secured Notes 537 --
Stock compensation programs 366 --
Stock issued to consultant 223 --
Change in assets and liabilities:
Accounts receivable (32) (24)
Refundable deposits 1,000 --
Accounts payable and accrued costs (26) 102
Accrued interest 559 484
Other, net (160) 10
----- -----
Total adjustments 2,491 628
----- -----
Net cash provided by (used in) operating
activities 476 (583)
----- -----
Cash flows from investing activities:
Capital expenditures (3,965) (386)
Investments (357) (269)
Proceeds from sale of assets -- 759
Other -- 5
----- -----
Net cash provided by (used in) investing
activities (4,322) 109
----- -----
Cash flows from financing activities:
Proceeds from sales of common stock -- 600
Proceeds from loan -- 216
Proceeds from issuance of preferred stock -- 157
Proceeds from exercise of warrants and options 331 612
Payment of long-term debt (150) (652)
Other (131) (294)
------ -----
Net cash provided by financing activities 50 639
------ -----
Net increase (decrease) in cash and cash equivalents (3,796) 165
Cash and cash equivalents at beginning of period 32,215 113
------ -----
Cash and cash equivalents at end of period $28,419 $ 278
====== =====
The accompanying notes are an integral part of these financial statements.
<PAGE>
XCL Ltd. and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(1) Basis of Presentation
The consolidated financial statements at March 31, 1998, 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, 1997. 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, 1998, and 1997, and the results
of their operations for the three months ended March 31, 1998 and
1997, 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.
During 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 "Earnings Per Share" ("SFAS No.
128") and has restated all years presented in accordance
therewith. SFAS No. 128 requires a dual presentation of basic
and diluted earnings per share ("EPS") on the face of the
statement of operations. Basic EPS is computed by dividing income
available to common stockholders by the weighted average number
of common shares for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that
would then share in earnings.
(2) Liquidity and Capital Resources
The Company, in connection with its 1995 decision to dispose
of its domestic properties, is generating minimal annual revenues
and is devoting all of its efforts toward the development of its
China properties. Although the Company has cash available in the
amount of approximately $28.4 million as of March 31, 1998
(including restricted cash of approximately $10.3 million) and a
positive working capital position, management anticipates that
additional funds will be needed to meet all of its development
and exploratory obligations until sufficient cash flows are
generated from anticipated production to sustain its operations
and to fund future development and exploration obligations.
Management plans to generate the additional cash needed
through the sale or financing of its domestic assets held for
sale and the completion of additional equity, debt or joint
venture transactions. There is no assurance, however, that the
Company will be able to sell or finance its assets held for sale
or to complete other transactions in the future at commercially
reasonable terms, if at all, or that it will be able to meet its
future contractual obligations. If production from the China
properties commences in late 1998 or the first half of 1999, as
anticipated, the Company's proportionate share of the related
cash flow will be available to help satisfy cash requirements.
However, there is likewise no assurance that such development
will be successful and production will commence, and that such
cash flow will be available.
(3) Supplemental Cash Flow Information
There were no income taxes paid during the three month
periods ended March 31, 1998 and 1997.
Capitalized interest for the three month periods ended March
31, 1998 and 1997 was $2.7 million and $0.5 million,
respectively. Interest paid during the three month periods ended
March 31, 1998 and 1997 amounted to $38,000 and $106,000,
respectively.
(4) Debt
Long-term debt consists of the following (000's):
March 31 December 31
1998 1997
-------- -----------
Senior secured notes, net of unamortized discount $ 61,847 $ 61,310
Lutcher Moore Group Limited Recourse Debt 2,374 2,524
------ ------
64,221 63,834
Less current maturities:
Lutcher Moore Group Limited Recourse Debt (2,374) (2,524)
------ ------
$ 61,847 $ 61,310
====== ======
Substantially all of the Company's assets collateralize
these borrowings.
(5) Preferred Stock and Common Stock
As of March 31, 1998, the Company had the following shares
of Preferred Stock issued and outstanding:
1998 Dividends (In Thousands)
----------------------------
Liquidation
Shares Value Declared Accrued Total
------ ----- -------- ------- -----
Amended Series A 1,129,453 $ 96,003,505 $ -- $ 3,800 $ 3,800
Amended Series B 47,085 4,708,500 -- 33 33
--------- ----------- ----- ------ ------
1,176,538 $100,712,005 $ -- $ 3,833 $ 3,833
Series B Preferred Stock/Amended Series B Preferred Stock
- ---------------------------------------------------------
In connection with the settlement of a lawsuit initiated by
the holder of the Series B Preferred Stock, in March 1998, the
holder of the Series B Preferred Stock revoked and withdrew its
redemption notice and sold its shares of Series B Preferred Stock
and accompanying warrants. The purchasers exchanged the stock
and warrants for 44,465 shares of Amended Series B Preferred
Stock and warrants to purchase 250,000 shares of Common Stock at
an exercise price of $5.50 per share, subject to adjustment,
expiring March 2, 2002, and received 2,620 shares of Amended
Series B Preferred Stock in payment of all accrued and unpaid
dividends on the Series B Preferred Stock.
Series F Preferred Stock
- ------------------------
In January 1998, the holders of the Series F Preferred Stock
approved an amendment to the "forced conversion" terms of the
Series F Preferred Stock. Effective January 16, 1998, the
Company forced conversion of the Series F Preferred Stock and an
aggregate of 633,893 shares of Common Stock were issued upon
conversion and in payment of accrued and unpaid dividends. In
consideration for such amendment the holders of the Series F
Preferred Stock were issued warrants to acquire an aggregate of
153,332 shares of Common Stock at an exercise price of $0.15 per
share.
Loss Per Share
- --------------
The following table sets forth the computation of basic and
diluted loss per share.
For the Three Months Ended
March 31,
_________________________
1998 1997
---- ----
Number of shares on which basic loss per
share is calculated:
22,318 19,204
Number of shares on which diluted loss per
share is calculated: 22,318 19,204
Net loss applicable to common shareholders $ (4,442) $ (2,615)
Basic loss per share $ (0.20) $ (0.14)
Diluted loss per share $ (0.20) $ (0.14)
The effect of 19,668,013 and 5,482,712 shares of potential
common stock were anti-dilutive in the three months ended March
31, 1998 and 1997, respectively, due to the losses in both
periods.
(6) Commitments and Contingencies
Other commitments and contingencies include:
* The Company acquired the rights to the exploration,
development and production of the Zhao Dong Block by executing a
Production Sharing Agreement with CNODC in February 1993. Under
the terms of the Production Sharing Agreement, the Company and
its partner are responsible for all exploration costs. If a
commercial discovery is made, and if CNODC exercises its option
to participate in the development of the field, all development
and operating costs and related oil and gas production will be
shared up to 51 percent by CNODC and the remainder by the
Company and its partner.
The Production Sharing Agreement includes the following
additional principal terms:
The Production Sharing Agreement is basically divided
into three periods: the Exploration period, the
Development period and the Production period. Work to
be performed and expenditures to be incurred during the
Exploration period, which consists of three phases
totaling seven years from May 1, 1993, are the
exclusive responsibility of the Contractor (the Company
and its partner as a group). The Contractor's
obligations in the three exploration phases are as
follows:
1. During the first three years, the Contractor is
required to drill three wildcat wells, perform
seismic data acquisition and processing and expend
a minimum of $6 million. These obligations have
been met.
2. During the next two years, the Contractor is
required to drill two wildcat wells, perform
seismic data acquisition and processing and expend
a minimum of $4 million (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.
4. The Production Period for any oil and/or gas
field covered by the Contract (the "Contract
Area") will be 15 consecutive years (each of 12
months), commencing for each such field on the
date of commencement of commercial production (as
determined under the terms of the Contract).
However, prior to the Production Period, and
during the Development Period, oil and/or gas may
be produced and sold during a long-term testing
period.
The Production Sharing Agreement may be terminated by
the Contractor at the end of each phase of the
Exploration period, without further obligation.
* The Company is in dispute over a 1992 tax assessment by the
Louisiana Department of Revenue and Taxation for the years 1987
through 1991 in the approximate amount of $2.5 million. The
Company has also received a proposed assessment from the
Louisiana Department of Revenue and Taxation for income tax years
1991 and 1992, and franchise tax years 1992 through 1996 in the
approximate amount of $3.0 million. The Company has filed written
protests as to these proposed assessments, and will vigorously
contest the asserted deficiencies through the administrative
appeals process and, if necessary, litigation. The Company
believes that adequate provision has been made in the financial
statements for any liability.
* On July 26, 1996, an individual filed three lawsuits against
a wholly owned subsidiary with respect to oil and gas properties
held for sale. One suit alleges actual damage of $580,000 plus
additional amounts that could result from an accounting of a
pooled interest. Another seeks legal and related expenses of
$56,473 from an allegation the plaintiff was not adequately
represented before the Texas Railroad Commission. The third suit
seeks a declaratory judgement that a pooling of a 1938 lease and
another in 1985 should be declared terminated and further
plaintiffs seek damages in excess of $1 million to effect
environmental restoration. The Company believes these claims are
without merit and intends to vigorously defend itself.
* The Company is subject to other legal proceedings 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
of the Company or results of operations of the Company.
(7) XCL-China Ltd.
The following summary financial information of XCL-China
Ltd., a wholly owned subsidiary, reflects its financial position
and its results of operations for the periods presented (in
thousands of dollars):
March 31, December 31,
1998 1997
A S S E T S ---- ----
-----------
Current assets $ 146 $ 103
Oil and gas properties (full cost method):
Proved properties under development,
net of amounts being amortized 24,147 21,172
Unevaluated properties 36,740 33,132
------ ------
60,887 54,304
------ ------
Other assets 1,044 834
------ ------
$ 62,077 $ 55,241
====== ======
L I A B I L I T I E S A N D E Q U I T Y
-----------------------------------------
Total current liabilities $ 5,287 $ 4,788
Due to parent 58,982 52,383
Retained deficit (2,192) (1,930)
------ ------
$ 62,077 $ 55,241
====== ======
Three Months Ended
March 31,
------------------
1998 1997
---- ----
Costs and expenses $ 262 $ 115
------ -------
Net loss $ (262) $ (115)
====== =======
<PAGE>
XCL LTD. AND SUBSIDIARIES
March 31, 1998
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 1998 and beyond, the Company's expectations
as to funding its capital expenditures and other statements of
expectations, beliefs, future plans and strategies, anticipated
events or trends, and similar expressions concerning matters that
are not historical facts. The forward-looking statements in this
report are subject to risks and uncertainties that could cause
actual results to differ materially from those expressed in or
implied by the statements.
Liquidity and Capital Resources
- --------------------------------
The Company has generated minimal cash from operations since
the fourth quarter of 1995, when management made the decision to
focus its attention on operations in China and to sell its other
assets. This decision is supported by the excellent well test
results on the China properties.
At March 31, 1998, the Company had an operating cash balance of
$28.4 million, including $10.3 million held in a restricted
escrow account for payment of interest through November 1, 1998,
on the outstanding senior secured notes. The Company's
unrestricted cash will be used for working capital (primarily
general and administrative expenses) and exploration, development
and production expenditures on the Zhao Dong Block. CNODC has
given notice that it will participate as to its full 51% share of
the C-D Field and has urged that production begin during 1998.
Except for exploratory wells on which Apache has an obligation to
pay for the Company's costs, the Company is required to fund 50%
of all exploration expenditures and 24.5% of all development and
production expenditures. The Company estimates that its share of
actual exploration and development expenditures for the C-D Field
for the remainder of 1998 will be approximately $21 million. The
Company presently projects that these funds will be available
from current unrestricted cash reserves and a portion of the
proceeds from the sale or refinancing of the Lutcher Moore Tract.
The Company estimates that its share of development expenses for
1999 will be approximately $22 million. After expenditure of
these projected development expenses, the Company projects that
proceeds from production will pay for additional expenditures.
XCL, Apache, and CNODC are working together to reduce
capital costs and to determine whether the commencement of
production from the C-4 Well area can be accelerated into late
1998. This work has already resulted in potential reductions of
capital costs of approximately $35 million from the original
approved ODP, based on a change in the conceptual design, and a
determination that it is technically feasible to commence
production from the C-4 Well area in 1998. The Company, Apache
and CNODC have now all agreed to make every effort to achieve
initial production in 1998.
The Company's opinion that it will be able to obtain the
funds necessary to pay its share of capital expenditures to the
point where cash flow is sufficient to pay costs is based on the
Company's assessment of the ultimate quantity of oil reserves
which will be produced from the Block. Presently proven gross
oil reserves under the Zhao Dong Block of approximately 47
million barrels represents only 6.5% of the Company's independent
engineers' estimates of approximately 725 million barrels of
ultimately recoverable gross oil reserves in all categories of
proven, probable, possible and exploration. Additionally, the
Company believes, based on discussions with the Chinese
authorities during the last year, that it will acquire additional
oil and gas exploration and development blocks in China, with
proven oil reserves, which will further enhance the Company's
ability to timely obtain adequate funds for its obligations in
China.
Additional funds may be available from a number of sources,
including cash flow from production on the Zhao Dong Block, the
sale or recapitalization of the Lutcher Moore Tract and the other
assets held for sale, project financing, increasing the amount of
senior secured debt, supplier financing, additional equity,
including the exercise of currently outstanding warrants to buy
common stock and joint ventures with other oil companies. Based
on continuing discussions with major stockholders, investment
bankers, potential purchasers and other oil companies, the
Company believes that such funds will be available. There is no
assurance, however, that such funds will be available and, if
available, that it will be available on commercially reasonable
terms, or that sufficient cash flow will be available from the
Zhao Dong Block. Any new debt would require approval of the
holders of the Company's senior secured notes and there is no
assurance that such approval would be obtained.
Although the Company is not obligated to make any additional
capital payments to its other projects, the Company has advanced
$2.4 million for its lubricating oil project. The Company
believes that both the lubricating oil and coalbed methane
projects will be successful and grow. If successful, the Company
may make additional investments in these businesses.
Other
- -----
Pursuant to the Company's December 17, 1997 shareholders'
meeting, whereby several compensation plans were approved, the
Company recorded unearned compensation of approximately $12.8
million. This amount will be amortized ratably over future
periods of up to five years and is recorded as a non-cash expense
in the Statement of Operations. Because certain of these awards
are based on market capitalization there may be additional
amounts which may become payable. Approximately $0.9 million of
compensation expense was recorded in connection with these awards
during 1997. An additional $0.4 million of compensation expense
was recorded in the first three months of 1998.
The Company believes that inflation has had no material
impact on its sales, revenues or income during the reporting
periods. In light of increased oil and gas exploration activity
worldwide, and in the Bohai Bay in particular, increased rates
for equipment and services, and limited rig availability may have
an impact in the future.
The Company is subject to existing domestic and Chinese
federal, state and local laws and regulations governing
environmental quality and pollution control. Although management
believes that such operations are in general compliance with
applicable environmental regulations, risks of substantial costs
and liabilities are inherent in oil and gas operations, and there
can be no assurance that significant costs and liabilities will
not be incurred.
New Accounting Pronouncements
- -----------------------------
In June 1997, the FASB Issued SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information", which
is effective the Company's year ended December 31, 1998. This
statement establishes standards for reporting of information
about operating segments. The Company will be analyzing SFAS No.
131 during 1998 to determine what, if any, additional disclosures
will be required.
Results of Operations
- ---------------------
During the three month periods ended March 31, 1998 and
March 31, 1997, the Company incurred net losses of $2.0 million
and $1.2 million, respectively.
Oil and gas revenues for the three month period ended March
31, 1998, were $32,000 compared to $85,000 during the
corresponding period in 1997. Revenues will continue to decline
as the Company completes its announced program of selling
substantially all of its U.S. producing properties.
Interest expense, net of amounts capitalized, for the three
months ended March 31, 1998 was $762,000 compared to $634,000 for
the same period in 1997. The increase of $128,000 was the result
of higher debt levels and interest rates. Also included in
interest expense was amortization of warrant costs and offering
expenses on the senior secured notes issued in May 1997.
Preferred stock dividends were $2.4 million for the three
months ended March 31, 1998, as compared to $1.4 million for the
same period in 1997. The increase is the result of the issuance
of additional shares in the equity offering concluded in May
1997. These dividends will be paid in additional shares of
preferred stock at the option of the Company.
Interest income for the three months ended March 31, 1998
was $409,000 and resulted from the short-term investment of cash
still available from the May 1997 debt and equity offerings.
General and administrative expenses were $1.6 million for
the three months ended March 31, 1998, as compared to $0.7
million for the same period in 1997. The increase of $0.9
million was primarily attributable to an increase of $0.4 million
in non-cash compensation charges related to stock and
appreciation options approved by shareholders in December, 1997.
Public company expenses increased $0.1 million in the first
quarter of 1998 because of the reverse stock split and related
transactions. Legal, accounting and consulting expenses also
increased $0.2 million during the first quarter of 1998 because
of additional services required.
<PAGE>
XCL LTD. AND SUBSIDIARIES
March 31, 1998
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
* In January 1998, the Series F, Cumulative Convertible
Preferred Stock was converted, in accordance with its terms, into
633,893 shares of Common Stock. The shares were issued in a
transaction intended to qualify for exemption from registration
pursuant to Section 4(2) under the Securities Act of 1933, as
amended.
* On January 19, 1998, the Company issued 55,625 shares of
Common Stock in payment of one-half of the remaining $445,000
payable to a resident of Taiwan, pursuant to an agreement
effective October 1, 1997, as compensation and to settle certain
instruments relating to prior compensation arrangements with the
Company. This transaction is intended to qualify for the
exemption from registration provided by Regulation S of the
Securities Act of 1933, as amended.
* On January 23, 1998, the Company sold 11,333 shares of
Common Stock, through the exercise of stock purchase warrants.
The warrants were exercisable at $1.875 per share and the Company
received proceeds of $21,250 in payment of the exercise price.
The shares were sold pursuant to Regulation S of the Securities
Act of 1933, as amended.
* In March 1998, the holder of the Series B Preferred Stock
revoked and withdrew its redemption notice and sold its shares of
Series B Preferred Stock and accompanying warrants. The
purchasers exchanged the stock and warrants for 44,465 shares of
Amended Series B Preferred Stock and warrants to purchase 250,000
shares of Common Stock at an exercise price of $5.50 per share,
subject to adjustment, expiring March 2, 2002, and received 2,620
shares of Amended Series B Preferred Stock in payment of all
accrued and unpaid dividends on the Series B Preferred Stock.
* In March 1998, the Company sold an aggregate of 128,887
shares of Common Stock to certain institutional investors,
through the exercise of stock purchase warrants. The warrants
were exercisable at $1.875 per share and the Company received
proceeds of $241,663 in payment of the exercise price.
* In March 1998, the Company sold an aggregate of 455,809
shares of Common Stock to certain institutional investors,
through the exercise of stock purchase warrants. These warrants
were exercisable at $0.15 per share and the Company received
proceeds of $68,371 in payment of the exercise price.
Item 4. Submission of Matters to a Vote of Security-Holders
There were no matters submitted to a vote of the security
holders of the Company during the period covered by this report.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-K.
See Index to Exhibits.
(b) Reports on Form 8-K
In January 1998, the Company filed a Current Report on Form
8-K to report the issuance of Common Stock pursuant to Regulation
S transactions.
<PAGE>
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/ Steven B. Toon
By: __________________________
Steven B. Toon
Chief Financial Officer
Date: May 14, 1998
<PAGE>
INDEX TO EXHIBITS
(a) Exhibits required by Item 601 of Regulation S-K.
2.0 Not applicable
3(i) Articles of incorporation
3.1 Amended and Restated Certificate of Incorporation of the
Company dated December 17, 1998. (R)(i)
3(ii) Amended and Restated Bylaws of the Company as currently
in effect. (A)(i)
4.0 Instruments defining rights of security holders,
including indentures:
4.1 Forms of Common Stock Certificates. (R)(ii)
4.2 Form of Warrant dated January 31, 1994 to purchase
2,500,000 shares of Common Stock at an exercise price of
$1.00 per share, subject to adjustment, issued to INCC.
(D)(i)
4.3 Form of Registrar and Stock Transfer Agency Agreement,
effective March 18, 1991, entered into between the Company
and Manufacturers Hanover Trust Company (predecessor to
Chemical Bank), whereby Chemical Bank (now known as
ChaseMellon Shareholder Services) serves as the Company's
Registrar and U.S. Transfer Agent. (E)
4.4 Copy of Warrant Agreement and Stock Purchase Warrant
dated March 1, 1994 to purchase 500,000 shares of Common
Stock at an exercise price of $1.00 per share, subject to
adjustment, issued to EnCap Investments, L.C. (D)(ii)
4.5 Copy of Warrant Agreement and form of Stock Purchase
Warrant dated March 1, 1994 to purchase an aggregate 600,000
shares of Common Stock at an exercise price of $1.00 per
share, subject to adjustment, issued to principals of San
Jacinto Securities, Inc. in connection with its financial
consulting agreement with the Company. (D)(iii)
4.6 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. (C)(i)
4.7 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. (C)(ii)
4.8 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. (C)(iii)
4.9 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. (C)(iv)
4.10 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. (C)(v)
4.11 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 (J)(i)
4.12 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 (J)(ii)
4.13 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 (J)(iii)
4.14 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. (M)(i)
4.15 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. (M)(ii)
4.16 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. (M)(iii)
4.17 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 (N)(i)
4.18 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. (N)(ii)
4.19 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 (N)(iii)
4.20 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 (N)(iv)
4.21 Form of Purchase Agreement dated May 13, 1997, between
the Company and Jefferies & Company, Inc. (the "Initial
Purchaser") with respect to 75,000 Units each consisting of
$1,000 principal amount of 13.5% Senior Secured Notes due
May 1, 2004, Series A and one warrant to purchase 1,280
shares of the Company's Common Stock with an exercise price
of $0.2063 per share ("Note Warrants"). (O)(i)
4.22 Form of Purchase Agreement dated May 13, 1997, between
the Company and Jefferies & Company, Inc. (the "Initial
Purchaser") with respect to 294,118 Units each consisting of
one share of Amended Series A, Cumulative Convertible
Preferred Stock ("Amended Series A Preferred Stock") and one
warrant to purchase 327 shares of the Company's Common Stock
with an exercise price of $0.2063 per share ("Equity
Warrants"). (O)(ii)
4.23 Form of Warrant Agreement and Warrant Certificate dated
May 20, 1997, between the Company and Jefferies & Company,
Inc., as the Initial Purchaser, with respect to the Note
Warrants. (O)(iii)
4.24 Form of Warrant Agreement and Warrant Certificate dated
May 20, 1997, between the Company and Jefferies & Company,
Inc., as the Initial Purchaser, with respect to the Equity
Warrants. (O)(iv)
4.25 Form of Designation of Amended Series A Preferred Stock
dated May 19, 1997. (O)(v)
4.26 Form of Amended Series A Preferred Stock certificate.
(O)(vi)
4.27 Form of Global Unit Certificate for 75,000 Units
consisting of 13.5% Senior Secured Notes due May 1, 2004 and
Warrants to Purchase Shares of Common Stock. (O)(vii)
4.28 Form of Global Unit Certificate for 293,765 Units
consisting of Amended Series A Preferred Stock and Warrants
to Purchase Shares of Common Stock. (O)(viii)
4.29 Form of Warrant Certificate dated May 20, 1997, issued
to Jefferies & Company, Inc., with respect to 12,755
warrants to purchase shares of Common Stock of the Company
at an exercise price of $0.2063 per share. (O)(ix)
4.30 Form of Stock Purchase Agreement dated effective as of
October 1, 1997, between the Company and William Wang,
whereby the Company issued 800,000 shares of Common Stock to
Mr. Wang, as partial compensation pursuant to a Consulting
Agreement. (Q)(i)
4.31 Form of Stock Purchase Warrants dated effective as of
February 20, 1997, issued to Mr. Patrick B. Collins with
respect to 200,000 warrants to purchase shares of Common
Stock of the Company at an exercise price of $0.25 per
share, issued as partial compensation pursuant to a
Consulting Agreement. (Q)(ii)
4.32 Certificate of Amendment to the Certificate of
Designation of Series F, Cumulative Convertible Preferred
Stock dated January 6, 1998. (R)(iii)
4.33 Form of Stock Purchase Warrants dated January 16, 1998,
issued to Arthur Rosenbloom (6,389), Abby Leigh (12,600) and
Mitch Leigh (134,343) to purchase shares of Common Stock of
the Company at an exercise price of $0.15 per share, on or
before December 31, 2001. (R)(iv)
4.34 Certificate of Designation of Amended Series B,
Cumulative Convertible Preferred Stock dated March 4, 1998.
(R)(v)
4.35 Correction to Certificate of Designation of Amended
Series B, Cumulative Convertible Preferred Stock dated
March 5, 1998. (R)(vi)
4.36 Second Correction to Certificate of Designation of
Amended Series B Preferred Stock dated March 19, 1998.
(R)(vii)
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. (B)
10.2 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.
(D)(iv)
10.3 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.
(D)(v)
10.4 Consulting agreement between the Company and Sir Michael
Palliser dated April 1, 1994. (F)(i)
10.5 Consulting agreement between the Company and Mr. Arthur
W. Hummel, Jr. dated April 1, 1994. (F)(ii)
10.6 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. (G)(i)
10.7 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. (G)(ii)
10.8 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. (H)(i)
10.9 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. (H)(ii)
10.10 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. (H)(iii)
10.11 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. (H)(iv)
10.12 Letter of Intent dated July 17, 1995 between CNPC
United Lube Oil Corporation and XCL Ltd. for discussion of
further projects. (H)(v)
10.13 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. (I)(i)
10.14 Memorandum of Understanding dated December 14, 1995,
between XCL Ltd. and China National Administration of Coal
Geology. (J)(iv)
10.15 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. (J)(v)
10.16 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. (J)(vi)
10.17 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. (J)(vii)
10.18 Copy of Limited Waiver between the Company and
Internationale Nederlanden (U.S.) Capital Corporation
dated April 3, 1996. (J)(viii)
10.19 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.
(K)
10.20 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. (L)(i)
10.21 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. (N)(v)
10.22 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:
Principal Purchase
Date Purchaser 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
(N)(vi)
10.23 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. (N)(vii)
10.24 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. (N)(viii)
10.25 Amendment No. 1 to the May 1, 1995 Agreement with
Apache Corp. dated April 3, 1997, effective December 13,
1996. (N)(ix)
10.26 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. (N)(x)
10.27 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 (N)(xi)
10.28 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. (N)(xii)
10.29 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. (N)(xiii)
10.30 Form of Indenture dated as of May 20, 1997, between the
Company, as Issuer and Fleet National Bank, as Trustee
("Indenture"). (O)(x)
10.31 Form of 13.5% Senior Secured Note due May 1, 2004,
Series A issued May 20, 1997 to Jefferies & Company, Inc. as
the Initial Purchaser (Exhibit A to the Indenture). (O)(xi)
10.32 Form of Pledge Agreement dated as of May 20, 1997,
between the Company and Fleet National Bank, as Trustee
(Exhibit C to the Indenture). (O)(xii)
10.33 Form of Cash Collateral and Disbursement Agreement
dated as of May 20, 1997, between the Company and Fleet
National Bank, as Trustee and Disbursement Agent, and Herman
J. Schellstede & Associates, Inc., as Representative
(Exhibit F to the Indenture). (O)(xiii)
10.34 Form of Intercreditor Agreement dated as of May 20,
1997, between the Company, ING (U.S.) Capital Corporation,
the holders of the Secured Subordinated Notes due April 5,
2000 and Fleet National Bank, as trustee for the holders of
the 13.5% Senior Secured Notes due May 1, 2004 (Exhibit G to
the Indenture). (O)(xiv)
10.35 Registration Rights Agreement dated as of May 20, 1997,
by and between the Company and Jefferies & Company, Inc.
with respect to the 13.5% Senior Secured Notes due May 1,
2004 and 75,000 Common Stock Purchase Warrants (Exhibit H to
the Indenture). (O)(xv)
10.36 Form of Security Agreement, Pledge and Financing
Statement and Perfection Certificate dated as of May 20,
1997, by the Company in favor of Fleet National Bank, as
Trustee (Exhibit I to the Indenture). (O)(xvi)
10.37 Registration Rights Agreement dated as of May 20, 1997,
by and between the Company and Jefferies & Company, Inc.
with respect to the 9.5% Amended Series A Preferred Stock
and Common Stock Purchase Warrants. (O)(xvii)
10.38 Form of Restated Forbearance Agreement dated effective
as of May 20, 1997, between the Company, XCL-Texas, Inc. and
ING (U.S.) Capital Corporation. (O)(xviii)
10.39 Form of Seventh 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 May 8, 1997. (P)(i)
10.40 Form of Eighth 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 July 29, 1997. (P)(ii)
10.41 Form of Consulting Agreement dated February 20, 1997,
between the Company and Mr. Patrick B. Collins, whereby Mr.
Collins performs certain accounting advisory services.
(Q)(ii)
10.42 Form of Consulting Agreement dated effective as of June
1, 1997, between the Company and Mr. R. Thomas Fetters, Jr.,
a director of the Company, whereby Mr. Fetters performs
certain geological consulting services. (Q)(iii)
10.43 Form of Agreement dated October 1, 1997, between the
Company and Mr. William Wang, whereby Mr. Wang performs
certain consulting services with respect to its investments
in China. (Q)(iv)
10.44 Form of Services Agreement dated August 1, 1997,
between the Company and Mr. Benjamin B. Blanchet, an officer
of the Company. (Q)(v)
10.45 Form of Promissory Note dated August 1, 1997, in a
principal amount of $100,000, made by Mr. Benjamin B.
Blanchet in favor of the Company. (Q)(vi)
11. Not applicable.
15 Not applicable.
18. Not applicable.
19. Not applicable.
22. Not applicable.
23. Not applicable.
24. Not applicable.
27. Financial Data Schedule *
99.1 Glossary of Terms *
- ------------
* Filed herewith.
(A) Incorporated by reference to the Registration Statement
on Form 8-B filed on July 28, 1988, where it appears as
Exhibits 3(c).
(B) Incorporated by reference to a Registration Statement on
Form S-3 (File No. 33-68552) where it appears as Exhibit
10.1.
(C) Incorporated by reference to Post-Effective Amendment No.
2 to Registration Statement on Form S-3 (File No. 33-68552)
where it appears as: (i) Exhibit 4.29; (ii) Exhibit 4.30;
and (iii) through (v) Exhibits 4.34 through 4.36,
respectively.
(D) Incorporated by reference to Amendment No. 1 to Annual
Report on Form 10-K filed April 15, 1994, where it appears
as: (i) Exhibit 4.32; (ii) Exhibit 4.36; (iii) Exhibit
4.37; (iv) through (v) Exhibit 10.41 through Exhibit 10.47,
respectively; and (v) Exhibit 10.49.
(E) 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.
(F) 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 (ii) Exhibits 10.22 through 10.23,
respectively.
(G) 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 10.26; and (ii)
Exhibit 10.28.
(H) 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 (v) Exhibits 10.29
through 10.33, respectively.
(I) 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 Exhibit 10.35.
(J) Incorporated by reference to Annual Report on Form 10-K
for the year ended December 31, 1995, filed April 15, 1996,
where it appears as: (i) through (iii) Exhibits 4.28
through 4.30, respectively; and (iv) Exhibit 10.31 and
(v) through (vii) Exhibits 10.33 through 10.36,
respectively.
(K) 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.
(L) 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 Exhibit 10.38.
(M) 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 (iii) Exhibits
4.32 through 4.34.
(N) Incorporated by reference to Annual Report on Form 10-K
for the year ended December 31, 1996, filed April 15, 1997,
where it appears as (i) through (iii) Exhibits 4.35 through
4.38; (iv) Exhibit 4.40; (v) through (x) Exhibits 10.39
through 10.43, and (xi) through (xiii) Exhibits 10.47
through 10.49.
(O) Incorporated by reference to Current Report on Form 8-K
dated May 20, 1997, filed June 3, 1997, where it appears as
(i) through (ix) Exhibits 4.1 through 4.9 and (x) through
(xviii) Exhibits 10.51 through 10.59.
(P) Incorporated by reference to Quarterly Report on Form 10-
Q for the quarter ended June 30, 1997, filed August 14,
1997, where it appears as (i) and (ii) Exhibits 10.60 and
10.61.
(Q) Incorporated by reference to Quarterly Report on Form 10-
Q for the quarter ended September 30, 1997, filed November
14, 1997, where it appears as (i) Exhibit 4.52; and (ii)
through (vi) Exhibits 10.61 through 10.66.
(R) Incorporated by reference to Annual Report on Form 10-K
for the year ended December 31, 1997, filed April 15, 1998,
where it appears as (i) Exhibit 3.1, (ii) Exhibit 4.1, and
(iii) through (vii) Exhibits 4.32 through 4.36.
<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, 1998, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 28,419
<SECURITIES> 0
<RECEIVABLES> 133
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,205
<PP&E> 62,096
<DEPRECIATION> 932
<TOTAL-ASSETS> 121,377
<CURRENT-LIABILITIES> 16,724
<BONDS> 0
0
1,177
<COMMON> 230
<OTHER-SE> 36,045
<TOTAL-LIABILITY-AND-EQUITY> 121,377
<SALES> 32
<TOTAL-REVENUES> 32
<CGS> 0
<TOTAL-COSTS> 1,685
<OTHER-EXPENSES> (400)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 762
<INCOME-PRETAX> (2,015)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,015)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,015)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</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.
