Apache Corporation Seeks Involuntary Bankruptcy for XCL-China Subsidiary

Strategic Insights -

Apache Corporation reported that its Apache China subsidiary filed a petition in U.S. Bankruptcy Court to place XCL-China into involuntary bankruptcy for failure to pay over $10 million owed for project costs associated with the Zhao Dong Block in China. XCL-China has not made any payments since November 1998, and its parent company, XCL Ltd., has admitted to not having sufficient funds to cover working capital requirements and capital expenditure obligations. Apache has announced that it will contest allegations made by XCL-China in arbitration filings.

Key Takeaways:

  • Apache Corporation's Apache China subsidiary has filed a petition to place XCL-China into involuntary bankruptcy for failure to pay $10 million+ in project costs.
  • XCL-China has not made any payments since November 1998, despite owing $10 million+ to Apache China.
  • XCL Ltd., XCL-China's parent company, has admitted to not having sufficient funds to cover working capital requirements and capital expenditure obligations.
  • Completion of the Zhao Dong project requires at least $150 million in additional investment, which XCL-China lacks the capacity to finance.
  • Apache China operates the Zhao Dong Block with a 50% interest, while XCL-China holds a 50% contractor interest, and China National Oil and Gas Exploration and Development Corporation owns 51% of the block.
  • XCL-China's parent company, XCL Ltd., has not made payments on $7.3 million in cash calls to Apache Corporation as of May 1999.
  • XCL Ltd. acknowledged in its 10-K filing that it has insufficient funds to cover working capital requirements and capital expenditure obligations on the Zhao Dong and Zhang Dong Blocks during 1999.

Statistics:

  • $10 million+ owed by XCL-China to Apache China in project costs.
  • $7.3 million in cash calls with Apache Corporation that XCL Ltd. has not yet paid as of May 1999.
  • $150 million in additional investment required to complete the Zhao Dong project.
  • 50% interest held by Apache China in the Zhao Dong Block.
  • 50% contractor interest held by XCL-China in the Zhao Dong Block.
  • 51% ownership of the Zhao Dong Block by China National Oil and Gas Exploration and Development Corporation.

Sources:

  • Apache Corporation
  • U.S. Bankruptcy Court in Opelousas, Louisiana
  • SEC Filings: XCL Ltd. 10-Q and 10-K
  • XCL-China's arbitration filings