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                                                                   EXHIBIT 10.27


                    [NATIONAL ENERGY GROUP, INC. LETTERHEAD]


March 27,1997

Mr. W. David Willig 
Atocha Exploration, Inc.
1201 Louisiana, Suite 1050
Houston, Texas 77002

Mr. Robert A. Potosky
Potosky Oil and Gas
1201 Louisiana, Suite 1050
Houston, Texas 77002

Sandefer Oil and Gas
Two Houston Center
Suite 3250
Houston, Texas 77010


Re:      Memorandum of Amendment
         to (i) Agreement dated January 1, 1996
         and (ii) Consulting Agreement
         dated January 1, 1996

Gentlemen:

         This Memorandum shall act to express the mutual understanding and
agreement by and between National Energy Group, Inc. ("NEG") and Atocha
Exploration, Inc. ("Atocha"), Potosky Oil and Gas Company ("POG") and Sandefer
Oil & Gas, Inc. ("SOG") with respect to amending that certain Agreement by and
between NEG and SOG dated January 1, 1996 (the "Agreement") and that certain
Consulting Agreement between SOG, Atocha and POG dated January 1, 1996 (the
"Consulting Agreement") which provides for the services of W. David Willig
("Willig") and Robert A. Potosky ("Potosky").

         In consideration of the mutual covenants and agreements contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

1.       Paragraph 3 of the Agreement and Paragraph 4 of the Consulting
         Agreement, Initial Term, shall be amended to provide that the period
         of January 1, 1998 through December 31, 1998 shall be defined as the
         "Secondary Term".
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Atocha Exploration, Inc.
Potosky Oil and Gas Company
Sandefer Oil & Gas, Inc.
March 27, 1997
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2.       Paragraph 4 of the Agreement and Paragraph 6 of the Consulting
         Agreement, Prospect Generation By SOG and Obligations of Potosky and
         Atocha, respectively, shall be amended to provide that Potosky and
         Willig shall generate Prospects exclusively for NEG; provided that in
         the event any such Prospect is declined by NEG, Atocha and POG shall
         be free to offer the Prospect to any other party as described in
         Paragraph 11 of the Agreement, Rejection of Proposals, etc.. Potosky
         and Willig further agree that they shall not provide consulting work
         or services to others without the prior written consent of NEG, which
         consent shall not be unreasonably withheld.

3.       Paragraph 6 of the Agreement and Paragraph 7 of the Consulting
         Agreement, Compensation, shall be amended to provide that effective
         April 1, 1997 through the end of the Secondary Term and any renewals
         and/or extensions thereof, the monthly fee paid to Atocha and POG
         shall (i) be paid on or before the fifteenth day of each month, (ii)
         be increased to the amount of $29,000.00 per month and (iii) include
         all expenses incurred by Atocha and POG.

4.       Paragraph 8 of the Consulting Agreement, Reimbursement or Payment of
         Costs etc., shall be amended to provide that the $29,000.00 monthly
         fee paid to Atocha and POG shall be inclusive of all expenses incurred
         by Atocha and POG; provided that direct expenses related to Prospect
         generation, which have been approved in writing by the Company prior
         to expenditure, shall be reimbursed to Atocha and POG.

5.       Paragraph 4 of the Agreement, Prospect Generation by SOG, shall be
         amended to provide that the following Prospects, together with any
         additional Prospects generated prior to December 31, 1997, shall be
         those Prospects which shall determine cost reimbursement to NEG as
         applied to the Initial Term Program with respect to the provisions of
         Paragraph 12 of the Agreement, Disbursement of Proceeds:

                 (a) South Lake Arthur             (e) West Grand Bayou
                 (b) Southeast Gueydon             (f) Northwest Bayou Sorrel
                 (c) Tiger Bayou                   (g) Berry Bayou
                 (d) South Tiger Bayou             (h) Mushroom

6.       Paragraph 12 of the Agreement, Disbursement of Proceeds, shall be
         amended to provide that cost reimbursement to NEG with respect to any
         Prospects generated during the Secondary Term shall be separate and
         distinct from any Prospects generated during the Initial Term.

7.       In the event there is an election to accept a Deferred Leasehold
         Interest as described in Paragraph 17 of the Agreement, NEG agrees
         that it shall timely execute and deliver to Potosky and Willig et al.
         an Assignment substantially in the form of Exhibit "A", attached
         hereto.
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Atocha Exploration, Inc.
Potosky Oil and Gas Company
Sandefer Oil & Gas, Inc.
March 27, 1997
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8.       Atocha, POG, Potosky and Willig agree to execute, and shall cause SOG
         to execute, that certain Letter Agreement dated December 20, 1996,
         attached hereto as Exhibit "B" with respect to the definition of the
         respective ORRI's and Back-In Interests as such apply to the PANACO,
         Inc. transaction described in such Letter Agreement.

9.       NEG agrees that it shall provide office space for Atocha and POG in
         Houston, Texas at the Wedge International Tower and shall execute a
         Lease agreement, substantially in the form of Exhibit "C", attached
         hereto.

10.      NEG shall make available to each of Potosky and Willig through the end
         of the Secondary Term and any renewals and/or extensions thereof, the
         health and dental benefits available to employees of NEG; provided
         that the amount described in Paragraph 3 hereof shall be reduced by an
         amount equal to $615.00 per month for each of Willig and/or Potosky in
         any month either of them are participants in NEG's medical and/or
         dental plan.

11.      In the event NEG requests Atocha and POG to perform services with
         respect to the interpretation of 3-D data incidental to Prospect
         development of Bayou Sorrel or any other Prospect, NEG shall provide
         them with the use of a 3-D station for such time that their
         interpretive services are requested by NEG; provided that such use
         shall be exclusively for the benefit of NEG and shall not exceed the
         expiration of the Secondary Term and any renewals and/or extensions
         thereof.

12.      Miscellaneous:

                 (a)      CHOICE OF LAW. THIS MEMORANDUM AND ALL OF THE RIGHTS
                          AND OBLIGATIONS OF THE PARTIES ARISING FROM OR
                          RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT OR
                          THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE
                          GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE
                          WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING THE
                          CONFLICT OF LAWS AND RULES OF SUCH STATE.

                 (b)      Other Agreements. This Memorandum supersedes any
                          prior agreements between the parties with respect to
                          the subject matter of hereof.

                 (c)      Confidentiality. SOG, Atocha, Willig, POG and/or
                          Potosky shall not disclose the terms of this
                          Memorandum to any third party, except to the extent
                          required by law, rule, regulation or court order.
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Atocha Exploration, Inc.
Potosky Oil and Gas Company
Sandefer Oil & Gas, Inc.
March 27, 1997
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                 (d)      Mediation. In the event any dispute regarding this
                          Memorandum cannot be reconciled by the parties, then
                          they shall attempt to resolve any such dispute
                          through (i) mediation, using a mutually acceptable
                          mediator, and if necessary through (ii) binding
                          arbitration, using a mutually acceptable arbitrator.
                          No dispute related to this Agreement shall be brought
                          before any court of law or equity. Any arbitration
                          will be conducted in Houston, Harris County, Texas
                          using the commercial rules of the American
                          Arbitration Association.

         The parties agree that this Memorandum shall be reduced to a formal
amendment of the Agreement and the Consulting Agreement with respect to those
provisions relevant thereto.

         If the foregoing reflects our mutual understanding and agreement of
the subject matter contained herein, please so indicate by executing in the
appropriate space below. This Memorandum shall be effective as of the date
first written hereinabove.

Sincerely,
National Energy Group, Inc.


By: /s/ MILES D. BENDER
   -------------------------------
Name: Miles D. Bender
Title: President and CEO


ATOCHA EXPLORATION, INC.


By: /s/ W. DAVID WILLIG
   -------------------------------
Name: W. DAVID WILLIG
Title: President


POTOSKY OIL AND GAS COMPANY


By:  /s/ ROBERT A. POTOSKY
   -------------------------------
Name: ROBERT A. POTOSKY
Title: President


SANDEFER OIL & GAS, INC.


By: /s/ STEPHEN F. SMITH
   -------------------------------
Name: STEPHEN F. SMITH
Title: Executive Vice President