EXHIBIT 10.12


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                                                                   EXHIBIT 10.12


              AMENDMENT TO THE THIRD AMENDED AND RESTATED AGREEMENT
                            OF LIMITED PARTNERSHIP OF
                          HEP OPERATING PARTNERS, L.P.


         This  Amendment   ("Amendment")  to  the  Third  Amended  and  Restated
Agreement of Limited  Partnership (the  "Agreement") of HEP Operating  Partners,
L.P. (the  "Partnership"),  is executed as of November 26, 1996, by The Hallwood
Group Incorporated,  a Delaware corporation,  as the outgoing general partner of
the  Partnership  on behalf of itself and Hallwood  Energy  Partners,  L.P., the
Limited  Partners of the  Partnership,  and by HEPGP Ltd., the incoming  general
partner of the Partnership.

         WHEREAS,   the  Third   Amended  and  Restated   Agreement  of  Limited
Partnership  of HEP  Operating  Partners,  L.P. was entered into on May 9, 1990,
with Hallwood Energy Corporation as the sole general partner.

         WHEREAS, Hallwood Energy Corporation was merged into The Hallwood Group
Incorporated effective November 26, 1996;

         WHEREAS,  pursuant to Sections  10.2(b) and 11.2 of the Agreement,  The
Hallwood Group Incorporated assumed the rights and duties of the General Partner
as a result of its merger with Hallwood Energy Corporation;

         WHEREAS, the General Partner has determined that the Agreement permits,
and that it is in the best interest of the  Partnership to effect,  the transfer
of the general  partner  interest in the  Partnership  to HEPGP Ltd.,  a limited
partnership  100% of the  interest  of  which is  owned  by The  Hallwood  Group
Incorporated,  with the effect that HEPGP Ltd. become the new general partner of
the Partnership.

         NOW, THEREFORE, the Agreement is hereby amended as follows:

         1.  To  reflect  that  HEPGP  Ltd.  be and it is  hereby  admitted  and
substituted  as the general  partner of the  Partnership  for all purposes,  The
Hallwood  Group  Incorporated  is  withdrawn  as  the  general  partner  of  the
Partnership,  and all references to the General  Partner in the Agreement  shall
refer to HEPGP Ltd.



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         IN WITNESS WHEREOF,  the undersigned have executed this Amendment as of
the date first set forth above.

                                       OUTGOING GENERAL PARTNER:

                                       THE HALLWOOD GROUP INCORPORATED


                                       By:      /s/William L. Guzzetti
                                       Name: William L. Guzzetti
                                       Title:   Vice President

                                       INCOMING GENERAL PARTNER:

                                       HEPGP LTD.

                                       By:      Hallwood G.P., Inc

                                       By:      /s/William L. Guzzetti
                                       Name: William L. Guzzetti
                                       Title:   President

                                       LIMITED PARTNER

                                       By:      Hallwood Energy Partners, L.P.

                                       By:      The Hallwood Group Incorporated,
                                                          General Partner


                                       By:     /s/William L. Guzzetti
                                       Name: William L. Guzzetti
                                       Title:  President




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