MODIFICATION TO AGREEMENT


         THIS MODIFICATION TO AGREEMENT,  made as  of this  31st day of January,
l96l, by and between

                  CANADA SOUTHERN PETROLEUM LTD., a   corporation   incorporated
                  under   the  laws  of  Canada  (hereinafter sometimes referred
                  to as "Canada Southern"),

                                     - and -

                  MAGELLAN   PETROLEUM   CORPORATION,   a   Panama   corporation
                  (hereinafter sometimes referred to as "Magellan"),

                                     - and -

                  OIL  INVESTMENTS,  INC.,  a  Panama  corporation  (hereinafter
                  sometimes referred to as "Oil Investments"),

                  (which   aforesaid    three   corporations   are   hereinafter
                  collectively referred to as  "C-M-O"  and  individually  as  a
                  member of the C-M-O Group)

                                       AND

                  HOME OIL COMPANY LIMITED, a corporation incorporated under the
                  laws of Canada (hereinafter sometimes referred to as "Home")

                                     - and -

                  KERN COUNTY LAND  COMPANY,  a company  incorporated  under the
                  laws  of  California  (hereinafter  sometimes  referred  to as
                  "Kern"),

                                     - and -

                  ALMINEX LIMITED,  a  company  incorporated  under  the laws of
                  Canada (hereinafter sometimes referred to as "Alminex")

                                     - and -

                  UNITED OILS,  LIMITED,  a corporation  incorporated  under the
                  laws of Canada (hereinafter sometimes referred to as "United")


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                                     - and -

                  SIGNAL OIL AND GAS COMPANY,  a company  incorporated under the
                  laws  of  Delaware  (hereinafter   sometimes  referred  to  as
                  "Signal")

                  (the  said  Home,  Kern,  Alminex,  United  and  Signal  being
                  hereinafter collectively referred to as "H-S" and individually
                  as a member of the H-S Group),

         WITNESSETH THAT WHEREAS:

         A. By Agreement  dated May 28,  1959,  the parties  hereto  agreed on a
program for the exploration and development for oil, gas and other  hydrocarbons
of  certain  lands  situated  in the  Northwest  Territories  and  in the  Yukon
Territory of Canada,  all as more  particularly  described in said Agreement and
all subject to the terms, conditions and provisions as therein contained.

         B. Pursuant to paragraph  3.1 (B)(a) of Article III of said  Agreement,
H-S is to drill a minimum of five (5) exploratory  wells on the lands subject to
said Agreement,  of which at least one such well shall be located on the Western
Block of the properties (as that term is defined in said Agreement),  consisting
of Permits Nos. 1006, 1007, 1132, 1133 and 1135.

         C. As a result of present  information,  it now appears that a required
well drilled on said Western Block would not be to the mutual  advantages of the
parties hereto.

         NOW,  THEREFORE,  for and in  consideration  of the sum of Ten  Dollars
($10.00)  paid  by H-S to each  member  of the  C-M-O  Group  and of the  mutual
benefits  to be  obtained  and of other  good and  valuable  consideration,  the
receipt and  sufficiency  of all of which are hereby  acknowledged,  the parties
hereto hereby agree that said Agreement  shall be modified and  supplemented  as
follows:

1.       H-S shall have no  obligation  under said Agreement dated May 28, 1959,
to C-M-O, or otherwise,  to drill any of the five (5) exploratory wells referred
to in paragraph 3.1 (B)(a) of Article III  of said  Agreement  on  said  Western
Block.


<PAGE>

2.       H-S shall in respect of any operations required to be carried out by it
pursuant to Article III of the said Agreement dated May 28, 1959, carry blow out
insurance with a reputable  insurance company or companies in the minimum amount
of $1,000,000.00  and with a maximum  deductible of $25,000.00 in respect of any
one claim.

3.       Expenditures incurred by H-S in respect of any blow out which occurs in
operations  conducted by H-S pursuant to Article III of the said Agreement dated
May 28, 1959, whether incurred before or after the date of this agreement, shall
be  included  in the  total  cost  of the  exploratory  program  referred  to in
paragraph  3.1  (B)(b)  of  the  said  Agreement,   after  deduction  from  such
expenditures of any amount received by H-S pursuant to the insurance required to
be carried by H-S pursuant to clause 2 of this amending  agreement.  For greater
clarity it is  acknowledged  that any deductible up to the maximum  specified in
clause 2 of this amending agreement which H-S is required to pay on the occasion
of any claim  pursuant  to such  insurance  shall be included in the cost of the
said exploratory  program. In addition,  the cost of premiums in respect of such
insurance shall also be included in the cost of the said exploratory program.

4.       The well known as Home Signal  C.S.P.  Celibeta  No. 2  well  shall  be
deemed to be a well not capable  of production  in commercial  quantities within
the meaning of the said Agreement dated May 28, 1959.

5.       Except as expressly provided herein,  nothing herein contained shall be
deemed to amend, modify,  enlarge or reduce  the obligation  of H-S  to  drill a
minimum of  five (5)  exploratory  wells  as  otherwise  provided  in  the  said
Agreement dated May 28, 1959,  nor the obligation to incur the total cost of the
exploratory  program referred to in  paragraph 3.1 (B)(b) of Article III of said
Agreement.

6.       Except as herein modified and supplemented,  the said  Agreement  dated
May 28, 1959,  is hereby  ratified and  confirmed and shall remain in full force
and effect.


<PAGE>

7.       This agreement  shall enure to  the benefit of  and be binding upon the
parties hereto and their respective successors and assigns.

         IN WITNESS WHEREOF the parties hereto have caused this instrument to be
executed as of the date first above written.


CANADA SOUTHERN PETROLEUM LTD.              HOME OIL COMPANY LIMITED

per:  ______________________________        per:  ______________________________
                                                                  VICE-PRESIDENT
per:  ______________________________
                                            per:  ______________________________
                                                             ASSISTANT SECRETARY
MAGELLAN PETROLEUM CORPORATION
                                            KERN COUNTY LAND COMPANY
per:  ______________________________
                                            per:  ______________________________
per:  ______________________________                              VICE-PRESIDENT

                                            per:  ______________________________
OIL INVESTMENTS, INC.                                        ASSISTANT SECRETARY

per:  ______________________________        ALMINEX LIMITED

per:  ______________________________        per:  ______________________________
                                                                  VICE-PRESIDENT

                                            per:  ______________________________
                                                             ASSISTANT SECRETARY

                                            UNITED OILS, LIMITED

                                            per:  ______________________________
                                                                  VICE-PRESIDENT

                                            per:  ______________________________
                                                                        DIRECTOR

                                            SIGNAL OIL AND GAS COMPANY

                                            per:  ______________________________
                                                                  VICE-PRESIDENT

                                            per:  ______________________________
                                                                       SECRETARY

                                                           H-S Group