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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) June 28,
1999
__________________________________________
XCL LTD.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or other Jurisdiction of Incorporation)
1-10669 51-0305643
(Commission File Number) (I.R.S. Employer
Identification Number)
110 Rue Jean Lafitte, 2nd Floor
Lafayette, Louisiana 70508
(Address of Principal Executive Offices)
318-237-0325
(Registrant's Telephone Number, Including Area Code)
Item 5. Other Events.
On June 28, 1999, the Company issued a press release
announcing that it has notified Apache Corporation that it will
seek the removal of Apache China LDC, Apache's wholly owned
subsidiary, as operator of the companies' joint venture project
in the Zhao Dong Block in Bohai Bay, China.
XCL Ltd.'s wholly owned subsidiary, XCL-China Ltd. ("XCL"),
discovered oil reserves on the 50,000-acre Zhao Dong Block in
1994 and 1995. XCL sold 33 1/3 percent of its interest in the
Block to Apache in 1994. In 1995, Apache increased its interest
to 50 percent and XCL and China National Oil and Gas Exploration
and Development Corporation ("CNODC"), the Chinese partner in the
joint venture, agreed that Apache could become operator. This
agreement was based on Apache's representation to XCL and CNODC
that Apache would rapidly develop the existing discoveries on the
Zhao Dong Block.
"After four years, Apache has still not begun development of
our discoveries, failing in its most important obligation as
operator," said Marsden W. Miller, Jr., chairman and chief
executive officer. "This step is required to put the project back
on the fast track where it belongs. Our action is in the best
interest of XCL shareholders, bondholders and our Chinese
partners."
Grounds for Apache's removal include delays in developing
the C/D Field on the Zhao Dong Block, failure to properly manage
project costs and delays in exploration drilling.
Under the joint operating agreement, Apache has 30 days to
cure its breaches before it can be removed as operator. CNODC
must approve the removal.
In a separate action, XCL has initiated a $17 million
arbitration proceeding against Apache Corporation. This action
centers on engineering and design costs incurred by Apache of
approximately $18.5 million. Although Apache has billed XCL for
one-half of this amount, Apache had authority from the Chinese
and XCL to spend, at most, only $2.5 million.
"$16 million of these charges were not only unauthorized,"
said Miller, "but were unnecessary and wasteful."
In addition to the unauthorized and excessive engineering
and design costs, Apache has also attempted to charge XCL for
$5.3 million of project costs, which were its sole
responsibility, and a further $3.9 million in exploration costs
that were Apache's responsibility under an agreement signed on
May 10, 1995.
XCL started arbitration proceedings when Apache demanded
that XCL pay $10 million of Apache's improper and excessive
expenditures. In the arbitration proceedings, XCL formally
challenges these expenditures and further demands a refund of
$7.2 million for amounts previously overpaid to Apache.
"In an attempt to keep the project going, we have paid $7.2
million of Apache's overbillings," Miller said. "Because Apache
continues to delay the project, we want this back. We also want
Apache to be responsible for its unauthorized, excessive and
wasteful expenditures. Most importantly, for the last four
years, we have pushed Apache to honor its obligations as a
prudent operator to start oil production in the Zhao Dong Block.
If Apache still refuses to honor these obligations, it is time
for it to be removed as operator so that the project can move
forward."
Through their wholly owned subsidiaries, XCL and Apache each
own a 50 percent interest in the 49 percent Foreign Contractor's
share of the Zhao Dong Block. CNODC owns the remaining 51
percent share.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
XCL LTD.
June 28, 1999 /s/ Lisha C. Falk
_________________________
By:_______________________________
Date Lisha C. Falk
Secretary
