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                                      FORM 10-K

                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C.  20549


              [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934
                    For the fiscal year ended: September 30, 1996

                                         OR

            [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934
                      For the transition period from:       to:


                           Commission file number:  1-8979


                               HONDO OIL & GAS COMPANY
               (Exact name of registrant as specified in its charter)


                            Delaware                    95-1998768
                  (State or other jurisdiction       (I.R.S. Employer
               of incorporation or organization)      Identification
                                                         Number)


         10375 Richmond Avenue, Suite 900, Houston, TX    77042
            (Address of principal executive offices)    (Zip Code)


         Registrant's telephone number, including area code: (713) 954-4600


             Securities registered pursuant to Section 12(b) of the Act:

                                                       Name of each
                                                         exchange
                      Title of each class          on which registered
                      -------------------          -------------------
                       Common stock, par              American Stock
                       value $1 per share                Exchange


             Securities registered pursuant to Section 12(g) of the Act:

                                        None


                                     (continued)






                                           1




       Indicate by check mark whether the registrant (1) has filed all reports
       required to be filed by Section 13 or 15(d) of the Securities Exchange
       Act of 1934 during the preceding 12 months (or for such shorter period
       that the registrant was required to file such reports), and (2) has been
       subject to such filing requirements for the past 90 days.   Yes X    No

       Indicate by check mark if disclosure of delinquent filers pursuant to
       Item 405 of Regulation S-K (section 229.405 of this chapter) is not
       contained herein, and will not be contained, to the best of registrant's
       knowledge, in definitive proxy or information statements incorporated by
       reference in Part III of this Form 10-K or any amendment to this Form
       10-K.  [ ]

       The aggregate market value of the voting stock of the registrant held by
       non-affiliates of the registrant on December 6, 1996 based on the
       closing price on the American Stock Exchange of such stock on such date
       was $37,971,277.

       Registrant's Common Stock outstanding at December 6, 1996 was 13,776,194
       shares.

       DOCUMENTS INCORPORATED BY REFERENCE:  Portions of the proxy statement
       for the annual shareholders meeting are incorporated by reference into
       Part III.





































                                           2




                               HONDO OIL & GAS COMPANY

                         INDEX TO ANNUAL REPORT ON FORM 10-K


                     Caption                                             Page

       PART I

           Item  1.  Business .............................................4

           Item  2.  Properties ...........................................14

           Item  3.  Legal Proceedings ....................................16

           Item  4.  Submission of Matters to a Vote of Security
                      Holders .............................................16

       PART II

           Item  5.  Market for Registrant's Common Equity and
                      Related Stockholder Matters .........................17

           Item  6.  Selected Financial Data ..............................18

           Item  7.  Management's Discussion and Analysis of Financial
                      Condition and Results of Operations .................20

           Item  8.  Financial Statements .................................31

           Item  9.  Changes In and Disagreements with Accountants
                      on Accounting and Financial Disclosure ..............60

       PART III

           Item 10.  Directors and Executive Officers of
                      the Registrant ......................................60

           Item 11.  Executive Compensation ...............................60

           Item 12.  Security Ownership of Certain Beneficial
                      Owners and Management ...............................60

           Item 13.  Certain Relationships and Related Transactions .......60

       PART IV

           Item 14.  Exhibits, Financial Statement Schedules, and
                      Reports on Form 8-K .................................60












                                           3




                                       PART I

       As used in this report, unless the context otherwise requires, the terms
       "Registrant", "the Company" and "Hondo Oil" refer to Hondo Oil & Gas
       Company and its consolidated subsidiaries.


       Item 1.   BUSINESS

       (a)  General Development of Business

       The Company is an independent oil and gas company, presently focusing on
       international oil and gas exploration and development.  The Company was
       incorporated as Pauley Petroleum Inc. ("Pauley") in 1958.  In January
       1988, The Hondo Company ("Hondo") acquired a controlling interest in
       Pauley in exchange (the "Exchange") for all of the outstanding stock of
       Hondo's subsidiary, Hondo Oil & Gas Company.  In March 1988, the Company
       acquired Fletcher Oil and Refining Company ("Fletcher" or the "Fletcher
       refinery").  In January 1990, Pauley merged ("the Merger") with the
       wholly-owned subsidiary acquired in the Exchange, Hondo Oil & Gas
       Company.  In conjunction with the Merger, Pauley Petroleum Inc., the
       surviving corporation, changed its name to Hondo Oil & Gas Company.

       In December 1989, the Company permanently suspended operations at its
       wholly-owned subsidiary, Newhall Refining Co., Inc. ("Newhall
       refinery").  During 1991, Hondo Oil adopted plans of disposal for both
       its refining and marketing operations and its real estate operations
       (primarily the land underlying the Newhall refinery).  The Company
       suspended operations at its Fletcher refinery in October 1992 and
       completed a sale of substantially all of the refining and marketing
       operations in October 1993.

       In June 1992, the Company completed a sale of substantially all of its
       domestic oil and gas assets and repaid a substantial portion of its
       long-term debt with the proceeds.

       The Company's principal asset is its exploration concession in Colombia.

       (b)  Financial Information About Industry Segments

       See Note 11 to the Consolidated Financial Statements in Item 8.  The
       Company presently operates in one segment.

       (c)  Narrative Description of Business

       INTERNATIONAL OPERATIONS

       The Company's wholly-owned subsidiary, Hondo Magdalena Oil & Gas Limited
       ("Hondo Magdalena"), participates in the Opon Association Contract (the
       "Opon Contract") with Empresa Colombiana de Petroleos ("Ecopetrol"),
       Opon Development Company ("ODC") and Amoco Colombia Petroleum Company
       ("Amoco Colombia").  Ecopetrol is a quasi-governmental corporate
       organization wholly-owned by the government of Colombia.  The Opon
       Contract was entered into between Ecopetrol and ODC in 1987, and
       approved by the Ministry of Mines and Energy in 1988, to explore and
       develop an area of approximately 190 square miles located in the Middle
       Magdalena Basin about 125 miles north of Bogota, Colombia.  The Opon




                                           4




       Contract is divided into an exploration period and an exploitation
       period and expires in July 2015.

       The Opon Contract provides for an exploration period of six years, which
       commenced in July 1988 and was extended through September 30, 1995.  The
       Opon Contract required the associate parties (Amoco Colombia, Hondo
       Magdalena and ODC) to perform certain minimum work obligations each year
       of the exploration period.  There are no minimum work obligations after
       the completion of the exploration period.

       At the end of the exploration period, the associate parties may seek to
       declare the field capable of producing hydrocarbons to be commercial
       (capable of repaying investment and expenses and returning a profit) by
       presenting an application to Ecopetrol.  Ecopetrol has 90 days to
       respond to the associate parties' application.  If Ecopetrol agrees,
       then the field is declared to be commercial and production may commence.
       Upon the designation of an area or field as commercial, Ecopetrol
       acquires a 50% interest in such area or field and will reimburse the
       associate parties for 50% of the direct exploration costs for each
       commercial discovery from its share of production.  Thereafter,
       Ecopetrol will pay 50% of costs and will receive 50% of production.
       Revenue from the Opon Contract area is subject to a 20% royalty, which
       is paid to the Colombian government.

       The associate parties completed the minimum work obligations for each of
       the six years of the exploration period, which ended with completion of
       the Opon No. 4 well in September 1995.  An application for commerciality
       was submitted by Amoco Colombia in February 1996.  On May 8, 1996,
       Ecopetrol approved a commercial field of approximately 2,500 acres
       around the Opon No. 3 and No. 4 wells (described below).  The interests
       in the commercial field are approximately: Ecopetrol, 50%, Amoco
       Colombia, 30%, Hondo Magdalena, 15.4%, and ODC, 4.6%.  Amoco Colombia,
       Hondo Magdalena and ODC have interests in the remainder of the Opon
       Contract area of approximately 60%, 30.9% and 9.1%, respectively.  The
       commercial field is substantially smaller than that requested by Amoco
       Colombia.  The commercial field may be enlarged by future drilling
       and/or additional technical information.  Ecopetrol will not pay for its
       share of expenditures to enlarge the commercial field until the new
       areas are proven and declared commercial.  Ecopetrol will participate in
       further development costs of the existing commercial field.  As
       described below, Ecopetrol has agreed to reimburse in cash certain costs
       related to the construction of pipeline and wellhead facilities incurred
       before commerciality was declared.

       The Opon Contract provides that at the end of the exploration period, if
       a field capable of producing hydrocarbons in commercial quantities has
       been discovered, the Opon Contract area will be reduced by 50%.  Two
       years thereafter, the Opon Contract area will be further reduced to 25%
       of the original area.  Two years thereafter, the Opon Contract area will
       be reduced to the area of the commercial field  that is in production or
       development, plus a reserve zone of five kilometers in width around the
       productive limit of such field.  The commercial field plus the zone
       surrounding such field will become the area of exploitation.  The
       associate parties designate the acreage to be released.  Additional
       wells will be required to enlarge the commercial area and to increase
       the size of the area of exploitation.





                                           5




       The first acreage relinquishment of 50% was completed during 1996.  The
       Opon Contract area now covers 25,021.5 hectares (61,828 acres).  The
       Company believes that the first relinquishment did not cause the loss of
       significant exploration opportunities. Drilling of additional wells and
       further assessment of geological and geophysical information will be
       necessary to evaluate the effects of further acreage reductions.

       Hondo Magdalena acquired its interest in the Opon Contract from ODC.
       Prior to fiscal 1993, Hondo Magdalena and ODC drilled four wells to the
       shallow Mugrosa formation.  Following extended production and pressure
       testing, one of these wells was declared a dry hole.  In fiscal 1993,
       Hondo Magdalena drilled the Lilia No. 10 well to the La Paz formation at
       its sole cost.  The well was drilled to a total depth of 10,003 feet.
       The well encountered mechanical problems after the logs were run, and it
       was temporarily plugged and suspended.  The well may be re-entered at a
       future date.  By completing these operations, Hondo Magdalena acquired
       an 80% interest in the Opon Contract from ODC.

       Under a Farmout Agreement dated August 9, 1993, Amoco Colombia earned a
       60% participating interest in the Opon Contract, 50% from Hondo
       Magdalena and 10% from ODC.  Hondo Magdalena retained a 30% interest.
       Amoco Colombia paid $3.0 million in cash and paid Hondo Magdalena's
       costs related to the Opon No. 3 well, a well drilled to the La Paz
       formation.  Under the Farmout Agreement, Amoco Colombia paid Hondo
       Magdalena an additional $5.0 million in October 1994 and paid all but
       $2.0 million of Hondo Magdalena's costs related to the Opon No. 4 well,
       also drilled to the La Paz formation.

       The Opon No. 3 well, completed in September 1994, was drilled to a depth
       of 12,710 feet at a total cost of approximately $30.0 million.  The well
       tested at a daily rate of 45 million cubic feet of natural gas and 2,000
       barrels of condensate.  The hydrocarbons were tested from 1,118 feet of
       perforations in the La Paz formation through a 42/64-inch opening at the
       surface with 6,000 pounds-per-square-inch flowing tubing pressure.
       Downhole restrictions prevented the well from testing at higher rates.
       The Opon No. 4 well, completed in September 1995, was drilled to a depth
       of 11,500 feet at a total cost of approximately $28.5 million.  The well
       tested at a daily rate of 58 million cubic feet of natural gas and 1,900
       barrels of condensate.  The hydrocarbons were tested from 1,022 feet of
       perforations in the La Paz formation through a 40/64-inch opening at the
       surface with 8,121 pounds-per-square-inch flowing tubing pressure.
       These two wells have confirmed the existence of a significant natural
       gas field.

       The Company has for the first time attributed proved reserves to the
       discovery described above. See Note 3 to the Consolidated Financial
       Statements in Item 8 and Supplementary Information About Oil and Gas
       Producing Activities and Reserves (Unaudited) following the Consolidated
       Financial Statements in Item 8.  The rules concerning reporting of
       proved reserves require that the hydrocarbons be recoverable under
       existing economic and operating conditions.  The quantum of proved
       reserves reported is limited to the volumes that the Company has
       reasonable certainty will be sold under existing and pending sales
       arrangements.

       The next well on the Opon Contract area, the Opon No. 6 well, commenced
       drilling on October 24, 1996.  This well is slightly more than 1




                                           6




       kilometer north of the Opon No. 3 well and is outside the presently
       designated commercial area.  Hondo Magdalena will pay 30.9% of the costs
       of this well estimated at $23.7 million.  This well is intended to
       confirm the existence of the La Paz reservoir in this area.  Contingent
       upon the results of the Opon No. 6 well, the next well will be either
       (i) the Opon No. 14 well, located south of the commercial area, to
       confirm the existence of the La Paz reservoir in that area or (ii) the
       Opon No. 5 well, located within the commercial area to support sales
       commitments.

       Prior to Hondo Magdalena's participation, eight wells had been drilled
       to various depths in the Opon Contract area.  All of these wells are the
       property of Ecopetrol, and are not considered to be included in the Opon
       Contract area.  None of these wells are currently producing and none of
       the former contract holders have any rights in the Opon Contract.

       The principal objective at Opon is to confirm and commercially develop
       hydrocarbons from the La Paz formation.  However, geologic and
       geophysical modeling indicates that, in addition to the potentially
       significant hydrocarbons discovered in the Opon No. 3 and No. 4 wells,
       other potential hydrocarbon-bearing traps may lie within the Opon
       Contract area.  Other traps and formations are possible objectives of
       further exploration efforts.

       Operations in the Opon Contract area are subject to the operating risks
       normally associated with exploration for, and production of, oil and
       gas, including blowouts, cratering, and fires, each of which could
       result in damage to, or destruction of, the oil and gas wells,
       formations or production facilities or properties.  In addition, there
       are greater than normal mechanical drilling risks at the Opon Contract
       area associated with high pressures in the La Paz and other formations.
       These pressures may: cause collapse of the well bore, impede the drill
       string while drilling, or cause difficulty in completing a well with
       casing and cement.  These potential problems were substantially overcome
       in the drilling of the Opon No. 3 and No. 4 wells by the use of a top-
       drive drilling rig, heavy-weight drilling fluids and other technical
       drilling enhancements.  The Opon No. 6 well is utilizing oil-based
       drilling mud in an attempt to further limit such problems.

       Production is subject to political risks inherent in all foreign
       operations, including: (i) loss of revenue, property, and equipment as a
       result of unforeseen events such as expropriation, nationalization, war
       and insurrection, (ii) risks of increases in taxes and governmental
       royalties, (iii) renegotiation of contracts with governmental entities,
       as well as, (iv) changes in laws and policies governing operations of
       foreign-based companies in Colombia.  Guerrilla activity in Colombia has
       disrupted the operation of oil and gas projects, including those  at the
       Opon Contract area.  Security in the area has been improved and the
       associate parties have taken steps to enhance relations with the local
       population through a community relations program.  The government
       continues its efforts through negotiation and legislation to reduce the
       problems and effects of insurgent groups, including regulations
       containing sanctions such as impairment or loss of contract rights on
       companies and contractors if found to be giving aid to such groups.  The
       associate parties will continue to cooperate with the government, and do
       not expect that future guerrilla activity will have a material impact on
       the exploration and development of the Opon Project.  However, there can




                                           7




       be no assurance that such activity will not occur or have such an impact
       and no opinion can be given on what steps the government may take in
       response to any such activity.

       Colombia is among several nations whose progress in stemming the
       production and transit of illegal drugs is subject to annual
       certification by the President of the United States.  In March 1996, the
       President of the United States announced that Colombia would neither be
       certified nor granted a national interest waiver.  The consequences of
       the failure to receive certification generally include the following:
       all bilateral aid, except anti-narcotics and humanitarian aid, has been
       or will be suspended; the Export-Import Bank of the United States and
       the Overseas Private Investment Corporation will not approve financing
       for new projects in Colombia; U. S. representatives at multilateral
       lending institutions will be required to vote against all loan requests
       from Colombia, although such votes will not constitute vetoes; and the
       President of the United States and Congress retain the right to apply
       future trade sanctions.  Each of these consequences of the failure to
       receive such certification could result in adverse economic consequences
       in Colombia and could further heighten the political and economic risks
       associated with the Company's operations in Colombia.

       The government of Colombia has established a natural gas policy and is
       pursuing a program to maximize the utilization of natural gas throughout
       the country, including the industrial cities of Medellin, Cali and
       Bogota, where developed markets and infrastructure do not currently
       exist.  The Colombian government's policy on natural gas is intended to
       increase the consumption of natural gas in order to provide a more
       balanced use of energy resources.  The policy includes the use of
       natural gas in place of higher cost electricity and in place of wood to
       reduce deforestation.  The government intends to encourage the
       development of markets for natural gas and is pursuing the development
       of pipeline transportation systems for new markets.  The proximity of
       the Opon Contract area to these potential gas markets will be an
       advantage for marketing the natural gas.

       Hondo Magdalena, ODC, Amoco Colombia and Ecopetrol executed a Memorandum
       of Understanding ("MOU") in July 1995 for the construction of a pipeline
       and wellhead facilities (which were not contemplated in the Opon
       Contract) and the sale of natural gas from the Opon Contract area.  The
       MOU provided that the parties will construct a 16 inch pipeline
       approximately 88 kilometers in length from the Opon Contract area north
       to Ecopetrol's gas processing plant at El Centro, and from there to
       Ecopetrol's refinery at Barrancabermeja.  The pipeline will have a
       capacity of 120 million cubic feet per day and is estimated to cost
       $40.6 million.  Under the MOU, Hondo Magdalena, ODC and Amoco Colombia
       each pay their respective share of the costs incurred prior to July 1,
       1995, up to a maximum of 10% of the total pipeline costs.  Ecopetrol
       will pay cash for its share of pipeline costs incurred after July 1,
       1995; the remainder of Ecopetrol's share of costs (those incurred prior
       to July 1, 1995) will be recovered out of production.  The investment in
       pipeline costs will be recovered through a pipeline tariff.  In the MOU,
       Ecopetrol agreed to construct improvements at its El Centro gas
       processing plant to handle incremental production from the Opon Contract
       area.  Ecopetrol will recover its investment through a gas processing
       fee.  The parties agreed in the MOU to negotiate contracts necessary to
       carry out the agreements made in the MOU.  Ecopetrol agreed to fund 80%




                                           8




       of its share of wellhead facilities (total estimated cost of $23.5
       million) in cash with 20% to be recovered subsequently from production.

       After new regulations were adopted in late 1995 by the Comision de
       Regulacion de Energia y Gas (Commission for the Regulation of Energy and
       Gas, "CREG"), an agency of the Ministry of Mines and Energy of the
       Colombian government, the parties began to renegotiate certain terms of
       the MOU.  The regulations set a ceiling price for natural gas and a
       maximum rate of return of 12.0% (after Colombian taxes, except for a 14%
       Remittance Tax on foreign exchange returned to the United States) for
       pipeline tariffs.  The ceiling price has been interpreted to include
       costs or fees for the processing of natural gas, thus processing costs
       cannot be passed on to the buyer as contemplated in the MOU.  Ecopetrol
       was unwilling to provide the terms outlined in the MOU related to the
       buyer's payment of gas processing fees and the 13.2% rate of return
       (after Colombian taxes) included in the pipeline tariff because of these
       new regulations.

       Three contracts, covering the sale of natural gas, the sale of
       condensate and natural gas liquids, and the processing of the gas stream
       are complete and have been signed by all parties.  Management believes
       that the new contracts achieve an arrangement that is an economic
       equivalent to the terms of the MOU and comply with the new CREG
       regulations.  The three contracts provide for: (i) the sale of 100
       million cubic feet of natural gas per day for the life of the Opon
       Contract at the regulated price determined semi-annually by a formula
       based upon the average price received by Ecopetrol for exported fuel oil
       during the prior two six-month periods (currently US$1.20 per million
       British Thermal Units); (ii) the sale of condensate and natural gas
       liquids at market-related and market-indexed prices; and (iii) the
       processing of the gas stream at Ecopetrol's El Centro gas processing
       plant for a fee of $0.20 per thousand cubic feet of gas.  Amoco Colombia
       has received a letter from Ecopetrol dated December 16, 1996, stating
       that the three contracts previously signed are effective and enforceable
       without the need for the completion and signing of a fourth contract.
       Ecopetrol's letter confirmed that because the pipeline being built to
       transport gas is owned by the parties who own the gas, a transportation
       agreement will not be necessary.  The Company had previously reported
       that a fourth contract, covering the transportation of the gas and
       liquids was required for all of the contracts to become effective.

       Preliminary work for the pipeline began in late 1994 and construction
       began in July 1996. Completion of the pipeline is estimated to occur in
       March 1997.  Construction of wellsite facilities began in August 1996;
       completion is estimated to occur in March 1997.  Ecopetrol has begun the
       improvements to the El Centro gas plant; completion is estimated  to
       occur in the summer of 1997.  Production will commence when all of these
       construction projects are completed, estimated in the summer of 1997.
       The estimates of the completion dates of the three projects are subject
       to delays due to weather, labor interruptions, guerrilla activity,
       unanticipated shortages of materials or equipment and other causes
       beyond the control of the associate parties.

       Development of the Opon Project will require significant future capital
       expenditures for which the Company will need additional funds. See
       Management's Discussion and Analysis of Financial Condition and Results
       of Operations-Liquidity and Capital Resources in Item 7.




                                           9




       U.S OIL AND GAS OPERATIONS

       The Company explored for, developed and produced oil and gas in
       approximately 13 states from 1987 until 1992.  In June 1992, the Company
       completed a sale of substantially all of its domestic oil and gas
       assets.  The Company's departure from the domestic oil and gas business
       was in part driven by management's belief that more profitable
       exploration and production opportunities exist abroad.

       DISCONTINUED OPERATIONS

       Refining and Marketing Operations

       On October 1, 1993, the Company completed the sale of the common stock
       of its Fletcher refinery and the assets of the Hilo, Hawaii asphalt
       terminal.  The Company's 41,000 bbl asphalt barge was sold in May 1993.
       An asphalt terminal in Honolulu, Hawaii and two gasoline stations
       acquired through bankruptcy proceedings against a former customer of
       Fletcher were disposed of in 1994.  There are no remaining assets of the
       refining and marketing operations.  See Note 12 to the Consolidated
       Financial Statements in Item 8.

       Real Estate Operations

       On December 15, 1989, the Company suspended operations at its Newhall
       refinery.  Subsequently, the Company adopted a plan of disposition which
       included dismantling the refinery, effecting environmental remediation
       of the land and further developing the land to a condition where it may
       be sold.  Execution of the plan was suspended in September 1993 and the
       Company is now marketing the site in its current condition and with
       existing land-use entitlements.  The Newhall refinery site consists of
       approximately 105 acres located adjacent to a major freeway intersection
       in northern Los Angeles County.  See Management's Discussion and
       Analysis of Financial Condition and Results of Operations in Item 7 and
       Note 12 to the Consolidated Financial Statements in Item 8.

       The Company owns in fee simple approximately 11 acres of undeveloped
       land located in eastern Los Angeles County.  An option to a developer on
       the Company's Via Verde tract expired on August 18, 1996 and will be
       extended until December 1997 at an option price of $3.1 million.  The
       renegotiated option agreement will allow the Company the right to be
       released from the current agreement should there be a potential sale of
       the parcel to a ready and willing buyer.

       Each of the above real properties is subject to a mortgage in favor of
       Lonrho Plc.  See Note 5 to the Consolidated Financial Statements in Item
       8.


       COMPETITIVE FACTORS

       Because of the sale of substantially all of the Company's domestic oil
       and gas properties in 1992 and the sale of substantially all of its
       discontinued refining and marketing assets in 1993, management believes
       that the only competition the Company currently faces domestically is
       from other parties offering undeveloped raw land for sale in Los Angeles
       County.




                                          10





       Other parties have developed or announced discoveries of natural gas in
       Colombia.  These reserves and potential reserves exist on the north
       coast of Colombia and in the Llanos Basin, east of the Company's
       interest at the Opon Contract area.  In the developing gas market of
       Colombia, these gas supplies will compete for existing and new markets,
       and for access to transportation facilities for natural gas.  Such
       competition may adversely affect the Company's ability to market its
       natural gas and/or the price of natural gas.  No prediction can be made
       at this time as to the effect such competition will ultimately have upon
       the Company.


       OTHER FACTORS AFFECTING THE COMPANY'S BUSINESS

       Environmental matters

       The Company's operations are subject to certain federal, state and local
       laws, including those of Colombia, and regulations governing the
       management of hazardous materials, the discharge of pollutants into the
       environment and the handling and disposal of solid and hazardous waste.

       (1)  General

            Minor spillage or discharge of petroleum and related substances are
            a common occurrence at oil refineries and at oil and gas production
            and drilling facilities.  Such spills and discharges could create
            liability under various federal, state and local environmental laws
            and regulations.  As is the case with other companies engaged in
            oil and gas exploration, production and refining, the Company faces
            exposure from potential claims and lawsuits involving environmental
            matters.  These matters may involve alleged soil and water
            contamination and air pollution.  The Company's policy is to accrue
            environmental and clean-up costs when it is probable that a
            liability has been incurred and the amount of the liability is
            reasonably estimable.  However, future environmental related
            expenditures cannot be reasonably quantified in many circumstances
            due to the conjectural nature of remediation and clean-up cost
            estimates and methods, the imprecise and conflicting data regarding
            the characteristics of various types of waste, the number of other
            potentially responsible parties involved and changing environmental
            laws and interpretations.  Management believes the reduced scope of
            the Company's operations following the sale of the Company's
            domestic oil and gas properties and the Fletcher refinery has
            significantly reduced the Company's potential exposure to
            environmental liability.

       (2)  Newhall Refinery Site

            The Company has evaluated the Newhall Refinery site to determine
            the impact of refining activities on the environment.  The Company
            has conducted an environmental assessment of the refinery site and
            a remediation plan for the site has been submitted to the Regional
            Water Quality Control Board and has received staff approval.  The
            Company estimates that $2.0 million would be incurred in executing
            the approved remediation plan; however, the Company expects to sell
            the property without incurring these costs by reducing the purchase




                                          11




            price.  The Company's estimate of the net realizable value of this
            property has been reduced by estimated remediation costs in
            determining the carrying value of the property and therefore the
            remediation costs will not affect future results of operations.
            See Note 12 to the Consolidated Financial Statements in Item 8.

       (3)  Fletcher Refinery

            Generators of hazardous substances found in disposal sites at which
            environmental problems are alleged to exist, as well as the owners
            of those sites and certain other classes of persons, are subject to
            claims brought by state and federal regulatory agencies.  Fletcher
            has been notified by the EPA that it is a potentially responsible
            party in a proceeding under the Comprehensive Environmental
            Response, Compensation and Liability Act ("CERCLA").  The notice
            relates to the Operating Industries, Inc. ("OII") dump site in
            Monterey Park, California.  During fiscal 1993, the Company sold
            the Fletcher refinery in a stock sale through which the purchaser
            assumed environmental liabilities of Fletcher, known and unknown.
            Any liability related to OII (to which Fletcher has asserted the
            defense of bankruptcy discharge and with respect to which Fletcher
            entered into a settlement with certain potentially responsible
            parties at the time of the bankruptcy) remains a liability of
            Fletcher and is no longer a liability of the Company.  However, the
            statutes impose liability on "owners" and "operators," and these
            statutes have been used to assert claims against controlling
            shareholders of corporations involved in claims under CERCLA and
            related statutes.  The Company is sole shareholder of Pauley
            Pacific Inc. which was sole shareholder of Fletcher.  The assertion
            of such a claim against the Company in the case of OII is
            considered by management to be remote, since the Company was not an
            owner of Fletcher until after the events occurred that are the
            basis of the notice to Fletcher on the OII dump site.

       Government Regulations and Legislative Proposals

       The Company is subject to governmental regulations which include various
       controls on the exploration for, production, sale, and transportation of
       crude oil and natural gas in Colombia.  See International Operations
       above, particularly the description of regulations adopted by CREG.  A
       number of foreign, federal and other legislative proposals, if enacted,
       may have adverse effects on companies in the petroleum industry,
       including the Company.  These proposals involve, among other matters,
       the imposition of additional taxes, price controls, land use controls
       and other restrictive measures. The Company cannot determine to what
       extent future operations and earnings may be affected by new regulations
       or changes in current regulations.

       EMPLOYEES

       The Company employed 7 full-time personnel as of September 30, 1996.










                                          12




       CAUTIONARY STATEMENTS

       The Company believes that this report contains certain forward-looking
       statements, as defined in the Private Securities Litigation Reform Act
       of 1995, including, without limitation, statements containing the words
       "believes," "anticipates," "estimates," "expects," "may" and words of
       similar import, or statements of management's opinion.  Such forward
       looking statements involve known and unknown risks, uncertainties and
       other factors which may cause the actual results, performance or
       achievements of the Company to be materially different from any future
       results, performance or achievements expressed or implied by such
       forward-looking statements.  Such factors include, among others, the
       following:

       Substantial Reliance On Single Investment.  The Company's success
       currently is dependent on its investment in the Opon project in
       Colombia, South America.  The Company has no operating assets which are
       presently generating cash to fund its operating and capital
       requirements.  At September 30, 1996 the Company had a deficiency in net
       assets of $80.9 million.  See Note 1 to the Consolidated Financial
       Statements in Item 8.

       Role Of Ecopetrol.  Ecopetrol is a quasi-governmental corporate
       organization wholly-owned by the Colombian government.  See
       International Operations, above.  At present, the price of natural gas
       is set by law enacted by the legislature of Colombia in 1983.  The
       regulated price of natural gas could be changed in the future by
       governmental action.  The participation of Ecopetrol, a government-owned
       company, in the Opon project as a producer and as a purchaser, and the
       power of the government of Colombia to set the price of natural gas
       creates the potential for a conflict of interest in Ecopetrol and/or the
       government. If such a conflict of interest materializes, the economic
       value of the Company's interest in the Opon project could be diminished.

       Marketing Of Natural Gas.  The Company must secure additional markets
       and sales contracts for natural gas in Colombia in order to increase
       production and cash flow from the Opon project.  This will depend on the
       continued development of markets for, and an infrastructure for the
       delivery of natural gas in Colombia.  Also, competition from other
       producers of natural gas may adversely affect the amount of the market
       for natural gas the Company may secure.  See International Operations
       and Competitive Factors, above.

       Foreign Operations.  Operations in Colombia are subject to the risks
       inherent in foreign operations.  See International Operations, above.

       Risks Of Oil And Gas Exploration.  Inherent to the oil and gas industry
       is the risk that future wells will not find hydrocarbons where existing
       wells and engineering and geological data indicate hydrocarbons should
       be found.  Further, existing wells can deplete at rates faster than
       those anticipated, potentially causing revisions to reserve estimates
       and increasing costs due to replacement wells. Operations in the Opon
       project are also subject to operating risks associated with the
       exploration for, and production of oil and gas.  See International
       Operations, above.






                                          13




       Laws And Regulations.  The Company may be adversely affected by new laws
       or regulations in the United States or Colombia affecting its operations
       and/or environmental compliance, or by existing laws and regulations.
       See Other Factors Affecting the Company's Business, above.

       Limited Capital.  The Company has no source of current income from its
       operations.  The Company's principal asset, its investment in the Opon
       project, does not currently provide any income and will require
       additional capital for exploitation.  See Liquidity and Capital
       Resources in Item 7 and Note 1 to the Consolidated Financial Statements
       in Item 8.

       Losses From Operations.  The Company experienced losses of $11,056,000,
       $11,906,000 and $12,657,000 for the years ended September 30, 1994, 1995
       and 1996, respectively.  As discussed above under Limited Capital,
       because the Company's principal asset does not currently provide any
       income and requires additional capital for exploitation, the Company
       anticipates continued losses through fiscal 1998.  See Results of
       Operations in Item 7.

       Continuation Of American Stock Exchange Listing.  Because of losses in
       prior years and negative shareholders' equity, the Company does not
       fully meet all of the guidelines of the American Stock Exchange for
       continued listing of its shares.  See Market for Registrant's Common
       Equity and Related Stockholder Matters in Item 5.

       Given these uncertainties, prospective investors are cautioned not to
       place undue reliance on such forward-looking statements.  The Company
       disclaims any obligation to update any such factors or to publicly
       announce the result of any revisions to any of the forward-looking
       statements contained herein to reflect future events or developments.

       (d)  Financial Information About Foreign Operations

       See Note 11 to the Consolidated Financial Statements in Item 8.  The
       Company operates in one foreign location: Colombia, South America.  See
       International Operations, above.


       Item 2.   PROPERTIES

       OIL AND GAS PROPERTIES

       The Company's principal asset is its interest in the Opon Association
       Contract (the "Opon Contract"), an exploration concession for an area in
       the Middle Magdalena Valley of Colombia, South America.  Two wells
       drilled during 1994 and 1995 have confirmed the existence of a
       significant natural gas field.  The following information should be read
       in conjunction with the description of the Opon Contract contained in
       International Operations in Item 1, particularly the descriptions of
       commerciality, acreage relinquishment, and the term of the Opon
       Contract.









                                          14




       (1)  For estimated net quantities of proved oil and gas reserves,
            results of operations from oil and gas producing activities and the
            standardized measure of discounted future net cash flows relating
            to proved oil and gas reserve quantities for the years ended
            September 30, 1996, 1995 and 1994, as applicable, see Supplementary
            Information about Oil and Gas Producing Activities and Reserves
            (Unaudited) following the Consolidated Financial Statements in Item
            8.

       (2)  The only estimates of total proved net oil and gas reserves filed
            with any federal agency during fiscal 1996 are those contained in
            this Annual Report on Form 10-K as filed with the Securities and
            Exchange Commission.

       (3)  No production income and cost per unit data for the years ended
            September 30, 1996, 1995 and 1994 exists and none will be reported
            until production in Colombia commences.

       (4)  The Company had two (0.3 net) wells capable of production (located
            in Colombia) at September 30, 1996.  An area of 2,500 acres (386
            net acres), which encompasses the two completed wells, was declared
            commercial in May 1996.  The Company's interest in the commercial
            area is 15.444375%.  Additional wells are permitted to be drilled
            on this acreage and additional areas reported as undeveloped in (5)
            below may be declared commercial in the future.

       (5)  Undeveloped acreage at September 30, 1996, all located in Colombia,
            consists of 59,327 gross acres, or 18,325 net acres, contained
            within the areas of the Opon Contract which have not been declared
            commercial.  The Company's interest in this area is 30.88875%.
            Portions of this acreage are subject to relinquishment to Ecopetrol
            in the future.

        (6) Net wells completed (all located in Colombia) for the years ended
            September 30:

                                          1996      1995     1994
                                          ____      ____     ____

            Productive exploratory          -       0.3      0.3
            Dry exploratory                 -         -        -
            Productive development          -         -        -
            Dry development                 -         -        -

            The Company's interest in net productive exploratory wells is
            computed at the Company's interest at the time they are drilled.
            The Company's interest in these wells is subject to a 50% reduction
            upon a declaration of commerciality.

       (7)  Present activity: The Opon No. 6 well was commenced on October 24,
            1996 in the non-commercial area of the Opon Contract.










                                          15




       (8)  Delivery Commitments:

            The Company has negotiated a contract for sales of specific
            quantities of natural gas from the Company's wells in Colombia.
            See International Operations in Item 1.  The Company believes the
            reserves discovered in the Opon No. 3 and 4 wells are adequate to
            meet these sales commitments in the near future.  Additional wells
            are and will be drilled to insure the ability to meet delivery
            commitments over the life of the contract.


       OTHER PROPERTIES

       Refer to Item 1 for descriptions of properties owned by the Company
       other than those described in Item 2, above.


       Item 3.   LEGAL PROCEEDINGS

       The Company is involved in a number of legal and administrative
       proceedings incident to the ordinary course of its business.  In the
       opinion of management, any liability to the Company relative to the
       various proceedings will not have a material adverse effect on the
       Company's operations or financial condition.

       The Company has evaluated the Newhall Refinery site to determine the
       impact of refining activities on the environment.  The Company has
       conducted an environmental assessment of the refinery site and a
       remediation plan for the site has been submitted to the Regional Water
       Quality Control Board and has received staff approval.  The Company
       estimates that $2.0 million would be incurred in executing the approved
       remediation plan; however, the Company expects to sell the property
       without incurring these costs by reducing the purchase price.  The
       Company's estimate of the net realizable value of this property has been
       reduced by estimated remediation costs in determining the carrying value
       of the property and therefore the remediation costs will not affect
       future results of operations.  See Note 12 to the Consolidated Financial
       Statements in Item 8.


       Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

       No matters were submitted to a vote of security holders during the
       fourth quarter of the fiscal year.

















                                          16




                                       PART II

       Item 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
                 MATTERS

       Closing stock price ranges for the quarterly periods during the fiscal
       years ended September 30, 1996 and 1995, as reported by the American
       Stock Exchange Monthly Market Statistics reports, were as follows:

                    December 31      March 31       June 30      September 30
                    ___________      ________       _______      ____________
       Fiscal 1996:
            Low       $ 13.50        $  9.25        $ 11.13        $ 11.00
            High      $ 20.88        $ 13.88        $ 14.50        $ 16.88

       Fiscal 1995:
            Low       $ 11.50        $  9.38        $ 11.88        $ 18.50
            High      $ 16.25        $ 14.00        $ 18.50        $ 24.13

       The common stock is listed on the American Stock Exchange under the
       symbol HOG.  The Company does not fully meet all of the guidelines of
       the American Stock Exchange for continued listing of its shares.  The
       delisting policies and procedures of the Exchange provide guidelines
       under which the Exchange will normally give consideration to suspending
       dealings in a security, or removing a security from listing.  Among
       those guidelines that may be applicable to the Company are: (i) having
       stockholders' equity of less than $2,000,000 if such company has
       sustained losses from continuing operations and/or net losses in two of
       its three most recent fiscal years; or (ii) having sustained losses
       which are so substantial in relation to its overall operations or its
       existing financial resources, or its financial condition has become so
       impaired that it appears questionable, in the opinion of the Exchange,
       as to whether such company will be able to continue operations and/or
       meet its obligations as they mature; or (iii) having sold or otherwise
       disposed of its principal operating assets or having ceased to be an
       operating company or having discontinued a substantial portion of its
       operations or business for any reason whatsoever.  Where the company has
       substantially discontinued the business that it conducted at the time it
       was listed or admitted to trading, and has become engaged in ventures or
       promotions which have not developed to a commercial stage or the success
       of which is problematical, it shall not be considered an operating
       company for the purposes of continued trading and listing on the
       Exchange.

       The number of shareholders of record on December 6, 1996 was 710.

       DIVIDEND POLICY

       The Company has not paid a dividend on its common stock in the two most
       recent fiscal years, nor has it ever done so.  The Company's loan
       agreement with Thamesedge, Ltd. restricts the payment of dividends to
       35% of the Company's Consolidated Net Adjusted Income (as defined in the
       loan agreement) plus $2.0 million.  Since the Company has incurred net
       losses during this fiscal year and prior years, the payment of dividends
       is restricted.






                                          17

ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<HEADING>
                                      For the Fiscal Year Ended September 30,
                             ---------------------------------------------------------
                              1996 a      1995 a      1994 a       1993       1992 e
                             ---------   ---------   ---------   ---------   ---------
                                       (In Thousands Except Per Share Data)
<S>                          <C>         <C>         <C>         <C>         <C>      <C>
OPERATING DATA

Revenue                          $112         $46        $728        $980     $50,557
Gain (loss) on sale of assets      (6)         --      (1,240)         (8)     21,403
Operating costs and expenses    6,293       1,943       2,880       5,910      38,687
Depreciation, depletion           156
  and amortization                            266         220         365      16,230
Interest expense                5,009       4,680       4,605       3,411       9,939
Provision for income taxes          5         113        (199)        (46)       (285)
                             ---------   ---------   ---------   ---------   ---------
Income (loss) from
  continuing operations       (11,357)     (6,956)     (8,018)     (8,668)      7,389

Loss from discontinued
  operations                   (1,300) b   (4,950) c   (3,038) c  (15,176) d  (64,147) e
                             ---------   ---------   ---------   ---------   ---------

Net Loss                     $(12,657)   $(11,906)   $(11,056)   $(23,844)   $(56,758)
                             =========   =========   =========   =========   =========

Earnings (loss) per share
  Continuing operations        $(0.83)     $(0.53)     $(0.62)     $(0.67)      $0.57
  Discontinued operations       (0.10)      (0.37)      (0.23)      (1.16)      (4.94)
                             ---------   ---------   ---------   ---------   ---------

                               $(0.93)     $(0.90)     $(0.85)     $(1.83)     $(4.37)
                             =========   =========   =========   =========   =========

Weighted average common
  shares outstanding           13,673      13,171      13,009      13,007      13,001
                             =========   =========   =========   =========   =========
</TABLE>






















                                            18



<TABLE>
<HEADING>
                                      For the Fiscal Year Ended September 30,
                             ---------------------------------------------------------
                              1996 a      1995 a      1994 a       1993       1992 e
                             ---------   ---------   ---------   ---------   ---------
                                                  (In Thousands)
<S>                          <C>         <C>         <C>         <C>         <C>      <C>
OTHER FINANCIAL DATA

Working capital (deficit)     $(5,109)    $(1,077)     $2,413      $1,729      $8,142
                             =========   =========   =========   =========   =========

Properties, net               $21,248     $12,777     $10,855     $15,910     $10,758
                             =========   =========   =========   =========   =========

Net assets of discontinued
  operations                   $2,202  b   $2,978  c   $6,851  c   $7,750  d  $24,129  e
                             =========   =========   =========   =========   =========

Total assets                  $24,540     $18,398     $24,908     $30,142     $59,532
                             =========   =========   =========   =========   =========

Long-term debt                $83,334     $82,213     $81,888     $78,828     $67,005
                             =========   =========   =========   =========   =========

Shareholders' equity (deficit$(80,891)   $(73,364)   $(66,681)   $(55,815)   $(31,971)
                             =========   =========   =========   =========   =========
</TABLE>









-----------------------------

a Under the terms of a Farmout Agreement, the Company's partner in the
  Company's Colombian operations paid for most costs incurred (both capitalized
  and expensed) in Colombia in 1995 and 1994.  The Company became responsible
  for its share of costs in Colombia in 1996.

b The Company recorded valuation provisions against the carrying value of its
  discontinued real estate operations in 1996.

c The Company recorded valuation provisions against the carrying value of its
  discontinued real estate operations and accrued for a contingent liability
  arising from its discontinued refining and marketing operations in 1995 and
  1994.

d The Company completed the sale of substantially all of its discontinued
  refining and marketing segment and recorded valuation provisions against the
  carrying value of its discontinued real estate segment in 1993.

e In 1992, the Company sold substantially all of its domestic oil and gas
  operations, repaid significant portions of its debt with the proceeds from
  the sale, and recorded valuation provisions against the carrying value of its
  discontinued segments.

                                            19





       Item 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                 AND RESULTS OF OPERATIONS


       GENERAL DISCUSSION

       Hondo Oil & Gas Company is an independent oil and gas company focusing
       on international oil and gas exploration and development.  The Company's
       domestic exploration and production assets were sold in 1992 and
       substantially all of its refining and marketing assets were disposed of
       in 1993.  Today, the Company's principal asset is its interest in the
       Opon Association Contract (the "Opon Contract"), an exploration
       concession for an area in the Middle Magdalena Valley of Colombia, South
       America.  Significant reserves of natural gas and condensate were shown
       to exist in the Opon Contract area by two discovery wells drilled during
       1994 and 1995.  In accordance with the terms of the Opon Contract,
       Empresa Colombiana de Petroleos ("Ecopetrol") declared a portion of the
       area as commercial in May 1996.  A pipeline and related facilities to
       deliver natural gas and condensate to a market is under construction.  A
       new well, Opon No. 6, is being drilled to confirm additional gas
       resources north of the commercial area.  As further described below, the
       Company will require additional financing to continue development of the
       Opon project.

       CAUTIONARY STATEMENTS

       The Company believes that this report contains certain forward-looking
       statements, as defined in the Private Securities Litigation Reform Act
       of 1995, including, without limitation, statements containing the words
       "believes," "anticipates," "estimates," "expects," "may" and words of
       similar import, or statements of management's opinion.  Such forward
       looking statements involve known and unknown risks, uncertainties and
       other factors which may cause the actual results, performance or
       achievements of the Company to be materially different from any future
       results, performance or achievements expressed or implied by such
       forward-looking statements.  Such factors include, among others, the
       following:

       Substantial Reliance On Single Investment.  The Company's success
       currently is dependent on its investment in the Opon project in
       Colombia, South America.  The Company has no operating assets which are
       presently generating cash to fund its operating and capital
       requirements.  At September 30, 1996 the Company had a deficiency in net
       assets of $80.9 million.  See Note 1 to the Consolidated Financial
       Statements in Item 8.

       Role Of Ecopetrol.  Ecopetrol is a quasi-governmental corporate
       organization wholly-owned by the Colombian government.  See
       International Operations in Item 1.  At present, the price of natural
       gas is set by law enacted by the legislature of Colombia in 1983.  The
       regulated price of natural gas could be changed in the future by
       governmental action.  The participation of Ecopetrol, a government-owned
       company, in the Opon project as a producer and as a purchaser, and the
       power of the government of Colombia to set the price of natural gas
       creates the potential for a conflict of interest in Ecopetrol and/or the
       government. If such a conflict of interest materializes, the economic
       value of the Company's interest in the Opon project could be diminished.



                                         20





       Marketing Of Natural Gas.  The Company must secure additional markets
       and sales contracts for natural gas in Colombia in order to increase
       production and cash flow from the Opon project.  This will depend on the
       continued development of markets for, and an infrastructure for the
       delivery of natural gas in Colombia.  Also, competition from other
       producers of natural gas may adversely affect the amount of the market
       for natural gas the Company may secure.  See International Operations
       and Competitive Factors in Item 1.

       Foreign Operations.  Operations in Colombia are subject to the risks
       inherent in foreign operations.  See International Operations in Item 1.

       Risks Of Oil And Gas Exploration.  Inherent to the oil and gas industry
       is the risk that future wells will not find hydrocarbons where existing
       wells and engineering and geological data indicate hydrocarbons should
       be found.  Further, existing wells can deplete at rates faster than
       those anticipated, potentially causing revisions to reserve estimates
       and increasing costs due to replacement wells. Operations in the Opon
       project are also subject to operating risks associated with the
       exploration for, and production of oil and gas.  See International
       Operations in Item 1.

       Laws And Regulations.  The Company may be adversely affected by new laws
       or regulations in the United States or Colombia affecting its operations
       and/or environmental compliance, or by existing laws and regulations.
       See Other Factors Affecting the Company's Business in Item 1.

       Limited Capital.  The Company has no source of current income from its
       operations.  The Company's principal asset, its investment in the Opon
       project, does not currently provide any income and will require
       additional capital for exploitation.  See Liquidity and Capital
       Resources, below, and Note 1 to the Consolidated Financial Statements in
       Item 8.

       Losses From Operations.  The Company experienced losses of $11,056,000,
       $11,906,000 and $12,657,000 for the years ended September 30, 1994, 1995
       and 1996, respectively.  As discussed above under Limited Capital,
       because the Company's principal asset does not currently provide any
       income and requires additional capital for exploitation, the Company
       anticipates continued losses through fiscal 1998.  See Results of
       Operations, below.

       Continuation Of American Stock Exchange Listing.  Because of losses in
       prior years and negative shareholders' equity, the Company does not
       fully meet all of the guidelines of the American Stock Exchange for
       continued listing of its shares.  See Market for Registrant's Common
       Equity and Related Stockholder Matters in Item 5.

       Given these uncertainties, prospective investors are cautioned not to
       place undue reliance on such forward-looking statements.  The Company
       disclaims any obligation to update any such factors or to publicly
       announce the result of any revisions to any of the forward-looking
       statements contained herein to reflect future events or developments.







                                         21




       Opon Exploration
       ----------------
       Hondo Magdalena Oil & Gas Limited ("Hondo Magdalena"), a wholly-owned
       subsidiary, became involved in the Opon Contract through a farmout
       agreement with Opon Development Company ("ODC") in 1991.  During 1991,
       1992 and 1993, Hondo Magdalena and ODC drilled four shallow oil wells to
       the Mugrosa formation, one of which was a dry hole, and one deep gas
       well to the La Paz formation.  These efforts met with limited success.
       In August 1993, Hondo Magdalena and ODC entered into a Farmout Agreement
       under which Amoco Colombia Petroleum Company ("Amoco Colombia") earned a
       60% participating interest in the Opon Contract.  To earn the interest,
       Amoco Colombia paid $3.0 million in cash in 1993 and paid all of the
       costs related to drilling the Opon No. 3 well in 1994.  In addition,
       Amoco Colombia paid Hondo Magdalena $5.0 million in October 1994 and
       paid all but $2.0 million of Hondo Magdalena's costs for drilling the
       Opon No. 4 well in 1995.

       The Opon No. 3 well, completed in September 1994, was drilled to a depth
       of 12,710 feet at a total cost of approximately $30.0 million.  The well
       tested at a daily rate of 45 million cubic feet of natural gas and 2,000
       barrels of condensate.  Downhole restrictions prevented the well from
       testing at higher rates.  The Opon No. 4 well, completed in September
       1995, was drilled to a depth of 11,500 feet at a total cost of
       approximately $28.5 million.  The well tested at a daily rate of 58
       million cubic feet of natural gas and 1,900 barrels of condensate.
       These two wells have confirmed the existence of a significant natural
       gas field.

       The Company has for the first time attributed proved reserves to the
       discovery described above. See Note 3 to the Consolidated Financial
       Statements in Item 8 and Supplementary Information About Oil and Gas
       Producing Activities and Reserves (Unaudited) following the Consolidated
       Financial Statements in Item 8.  The rules concerning reporting of
       proved reserves require that the hydrocarbons be recoverable under
       existing economic and operating conditions.  The quantum of proved
       reserves reported is limited to the volumes that the Company has
       reasonable certainty will be sold under existing and pending sales
       arrangements.

       Presently, Amoco Colombia, Hondo Magdalena and ODC have interests in the
       Opon Contract (outside the commercial area described below) of
       approximately 60%, 30.9% and 9.1%, respectively.  As provided in the
       Opon Contract, upon the designation of an area or field as commercial,
       Ecopetrol acquires a 50% interest in such area or field and will
       reimburse the associate parties for 50% of the direct exploration costs
       for each commercial discovery from its share of production.  An
       application for commerciality was submitted by Amoco Colombia in
       February 1996.  On May 8, 1996, Ecopetrol approved a commercial field of
       approximately 2,500 acres around the Opon No. 3 and No. 4 wells.  The
       interests in the commercial field are approximately: Ecopetrol, 50%,
       Amoco Colombia, 30%, Hondo Magdalena, 15.4%, and ODC, 4.6%.  The
       commercial field is substantially smaller than that requested by Amoco
       Colombia.  The commercial field may be enlarged by future drilling
       and/or additional technical information.  Ecopetrol will not pay for its
       share of expenditures to enlarge the commercial field until the new
       areas are proven and declared commercial.  Ecopetrol will participate in
       further development costs of the existing commercial field.  As




                                         22




       described below, Ecopetrol has agreed to reimburse in cash certain costs
       related to the construction of pipeline and wellhead facilities incurred
       before commerciality was declared.

       The Opon Contract provides that at the end of the exploration period, if
       a field capable of producing hydrocarbons in commercial quantities has
       been discovered, the Opon Contract area will be reduced by 50%.  Two
       years thereafter, the Opon Contract area will be further reduced to 25%
       of the original area.  Two years thereafter, the Opon Contract area will
       be reduced to the area of the commercial field that is in production or
       development, plus a reserve zone of five kilometers in width around the
       productive limit of such field.  The commercial field plus the zone
       surrounding such field will become the area of exploitation.  The
       associate parties designate the acreage to be released.  Additional
       wells will be required to enlarge the commercial area and to increase
       the size of the area of exploitation.

       The first acreage relinquishment of 50% was completed during 1996.  The
       Opon Contract area now covers 25,021.5 hectares (61,828 acres).  The
       Company believes that the first relinquishment did not cause the loss of
       significant exploration opportunities.  Drilling of additional wells and
       further assessment of geological and geophysical information will be
       necessary to evaluate the effects of further acreage reductions.

       The next well on the Opon Contract area, the Opon No. 6 well, commenced
       drilling on October 24, 1996.  This well is slightly more than 1
       kilometer north of the Opon No. 3 well and is outside the presently
       designated commercial area.  Hondo Magdalena will pay 30.9% of the costs
       of this well estimated at $23.7 million.  This well is intended to
       confirm the existence of the La Paz reservoir in this area.  Contingent
       upon the results of the Opon No. 6 well, the next well will be either
       (i) the Opon No. 14 well, located south of the commercial area, to
       confirm the existence of the La Paz reservoir in that area or (ii) the
       Opon No. 5 well, located within the commercial area to support sales
       commitments.

       Hondo Magdalena, ODC, Amoco Colombia and Ecopetrol executed a Memorandum
       of Understanding ("MOU") in July 1995 for the construction of a pipeline
       and wellhead facilities (which were not contemplated in the Opon
       Contract) and the sale of natural gas from the Opon Contract area.  The
       MOU provides that the parties will construct a 16 inch pipeline
       approximately 88 kilometers in length from the Opon Contract area north
       to Ecopetrol's gas processing plant at El Centro, and from there to
       Ecopetrol's refinery at Barrancabermeja.  The pipeline will have a
       capacity of 120 million cubic feet per day and is estimated to cost
       $40.6 million.  Under the MOU, Hondo Magdalena, ODC and Amoco Colombia
       each pay their respective share of the costs incurred prior to July 1,
       1995, up to a maximum of 10% of the total pipeline costs.  Ecopetrol
       will pay cash for its share of pipeline costs incurred after July 1,
       1995; the remainder of Ecopetrol's share of costs (those incurred prior
       to July 1, 1995) will be recovered out of production.  The investment in
       pipeline costs will be recovered through a pipeline tariff.  In the MOU,
       Ecopetrol agreed to construct improvements at its El Centro gas
       processing plant to handle incremental production from the Opon Contract
       area.  Ecopetrol will recover its investment through a gas processing
       fee.  The parties agreed in the MOU to negotiate contracts necessary to
       carry out the agreements made in the MOU.  Ecopetrol agreed to fund 80%




                                         23




       of its share of wellhead facilities (total estimated cost of $23.5
       million) in cash with 20% to be recovered subsequently from production.

       After new regulations were adopted in late 1995 by the Comision de
       Regulacion de Energia y Gas (Commission for the Regulation of Energy and
       Gas, "CREG"), an agency of the Ministry of Mines and Energy of the
       Colombian government, the parties began to renegotiate certain terms of
       the MOU.  The regulations set a ceiling price for natural gas and a
       maximum rate of return of 12.0% (after Colombian taxes, except for a 14%
       Remittance Tax on foreign exchange returned to the United States) for
       pipeline tariffs.  The ceiling price has been interpreted to include
       costs or fees for the processing of natural gas, thus processing costs
       cannot be passed on to the buyer as contemplated in the MOU.  Ecopetrol
       was unwilling to provide the terms outlined in the MOU related to the
       buyer's payment of gas processing fees and the 13.2% rate of return
       (after Colombian taxes) included in the pipeline tariff because of these
       new regulations.

       Three contracts, covering the sale of natural gas, the sale of
       condensate and natural gas liquids, and the processing of the gas stream
       are complete and have been signed by all parties.  Management believes
       that the new contracts achieve an arrangement that is an economic
       equivalent to the terms of the MOU and comply with the new CREG
       regulations.  The three contracts provide for: (i) the sale of 100
       million cubic feet of natural gas per day for the life of the Opon
       Contract at the regulated price determined semi-annually by a formula
       based upon the average price received by Ecopetrol for exported fuel oil
       during the prior two six-month periods (currently US$1.20 per million
       British Thermal Units); (ii) the sale of condensate and natural gas
       liquids at market-related and market-indexed prices; and (iii) the
       processing of the gas stream at Ecopetrol's El Centro gas processing
       plant for a fee of $0.20 per thousand cubic feet of gas.  Amoco Colombia
       has received a letter from Ecopetrol dated December 16, 1996, stating
       that the three contracts previously signed are effective and enforceable
       without the need for the completion and signing of a fourth contract.
       Ecopetrol's letter confirmed that because the pipeline being built to
       transport gas is owned by the parties who own the gas, a transportation
       agreement will not be necessary.  The Company had previously reported
       that a fourth contract, covering the transportation of the gas and
       liquids was required for all of the contracts to become effective.

       Negotiations are continuing for another contract for the sale of up to
       60 million cubic feet of natural gas per day.  The gas will be used as
       fuel to generate electricity in a power generation plant to be built
       near the Opon field.

       Preliminary work for the pipeline began in late 1994 and construction
       began in July 1996. Completion of the pipeline is estimated to occur in
       March 1997.  Construction of wellsite facilities began in August 1996;
       completion is estimated to occur in March 1997.  Ecopetrol has begun the
       improvements to the El Centro gas plant; completion is estimated to
       occur in the summer of 1997.  Production will commence when all of these
       construction projects are completed, estimated to occur in the summer of
       1997.  The estimates of the completion dates of the three projects are
       subject to delays due to weather, labor interruptions, guerrilla
       activity, unanticipated shortages of materials or equipment and other
       causes beyond the control of the associate parties.




                                         24





       Amoco Colombia submitted a budget to Hondo Magdalena and ODC for
       calendar 1996 in April 1996.  Hondo Magdalena approved capital
       expenditures for wells and the pipeline projects, and certain other
       expenditures, but did not approve the proposed overhead.  Similarly,
       Amoco Colombia submitted a budget for calendar 1997 on November 5, 1996,
       and Hondo Magdalena approved capital expenditures for wells and the
       pipeline projects, and certain other expenditures, but did not approve
       the proposed overhead.  As of this date, no final budget has been
       approved for calendar years 1996 and 1997.  The parties continue to try
       to resolve the dispute about overhead.  Hondo Magdalena has paid
       invoices from Amoco Colombia, including disputed overhead and has
       charged the full overhead amount to expense.  It is management's opinion
       that the Company is not obligated to pay for overhead unless charged
       pursuant to an approved budget; however the Company has paid Amoco
       Colombia's invoices, under protest and subject to audit, in the hope of
       resolving the dispute about overhead.  If the dispute cannot be
       resolved, the joint operating agreement among Amoco Colombia, Hondo
       Magdalena and ODC provides for arbitration of disputes.


       Corporate Activities
       --------------------
       In fiscal 1996, the Company continued to maintain general and
       administrative expenses at the lowest levels prudent to maintain its
       business.  The Company moved its principal offices to Houston, Texas in
       March 1996 to facilitate its relationships with Amoco Colombia, the
       international oil and gas community in general, and travel to Colombia.

       On December 20, 1995, Lonrho Plc and Robert O. Anderson and his family
       entered into a Revised Settlement Agreement under which the parties
       reallocated their ownership in The Hondo Company, the Company's
       controlling shareholder.  Lonrho Plc now owns or controls 76.6% of The
       Hondo Company, has an option to acquire the remaining 23.4% of The Hondo
       Company in three years for 1.1 million shares of the Company's common
       stock owned by The Hondo Company, and controls the Company.  Robert O.
       Anderson and his family have informed Lonrho Plc that they will exercise
       their call for 300,000 of the shares in January 1997 in exchange for
       approximately 6.4% of The Hondo Company.


       Discontinued Operations
       -----------------------
       The Company began an effort to sell its refining and marketing assets in
       April 1991.  On October 1, 1993 the Company completed a transaction for
       the sale of its Fletcher refinery and asphalt terminal in Hilo, Hawaii.
       The Company received net proceeds of $1.1 million in 1994.  Further
       proceeds from the sale of certain components of the refinery equipment
       have not been realized and the Company wrote off the related receivable
       in 1996.  The Company completed disposal of the remaining minor portions
       of the refining and marketing assets during 1994.

       In the agreement for the sale of the Fletcher refinery, the Company
       indemnified the buyer as to liabilities in excess of $0.3 million for
       certain federal and state excise taxes arising from periods prior to the
       sale.  Fletcher notified the Company in July 1994 that an audit for
       California Motor Vehicle Fuels Tax was underway and a preliminary review




                                         25




       by then Fletcher employees indicated that a significant liability might
       exist. The Company retained a consultant to evaluate the contingent
       liability.  In September 1994, the Company accrued $1.4 million as a
       result of the consultant's evaluation.  An additional $0.7 million was
       accrued in September 1995, primarily because of increases in the
       estimated amounts of penalties and interest which will be due. The State
       of California issued a preliminary report in June 1996 which concludes
       taxes and penalties of $10.8 million are due as a result of the audit.
       However, no final audit report or assessment has been issued and the
       Company does not believe the preliminary report is accurate.  The buyer
       has notified the Company that it claims indemnity in this matter.  The
       Company has provided its consultant to Fletcher to assist in disputing
       the preliminary report.  The Company believes the liability accrued is
       sufficient to provide for the amount that will ultimately be paid based
       on the information available.  The State of California's audit is still
       in process and could result in a liability different from that accrued
       when concluded.

       The Company owns in fee simple approximately 11 acres of undeveloped
       land located in eastern Los Angeles County.  An option to a developer on
       the Via Verde tract expired on August 18, 1996 and will be extended
       until December 1997 at an option price of $3.1 million.  The
       renegotiated option agreement will allow the Company the right to be
       released from the current agreement should there be a potential sale of
       the parcel to a ready and willing buyer.

       In 1993, the Company suspended a development plan for the Valley Gateway
       property, a former refinery site, due to the Company's limited cash
       resources and poor market conditions in California.  The Company listed
       the Valley Gateway property with a broker for $5.0 million and recorded
       additional loss provisions of $4.3 million and $1.4 million for its
       discontinued real estate operations during 1995 and 1994, respectively.
       In September 1996, the Company revised its estimate of the realizable
       value of the Valley Gateway property to zero, resulting in an additional
       loss provision of $0.9 million and making the carrying value a liability
       of $0.3 million (due to accruals for future carrying costs).  Management
       believes it can dispose of the property and any associated liabilities
       for an insignificant price and little or no additional cost.  See Note
       12 to the Consolidated Financial Statements in Item 8.


       Other
       -----
       Because of continuing losses and decreases in shareholders' equity, the
       Company does not fully meet all of the guidelines of the American Stock
       Exchange for continued listing of its shares.  See Item 5, Market For
       Registrant's Equity and Related Shareholder Matters.  Management has
       kept the Exchange fully informed regarding the Company's present status
       and future plans.  Although the Company does not or may not meet all of
       the guidelines, to date, the American Stock Exchange has chosen to allow
       the Company's shares to remain listed.  However, no assurances can be
       given that the Company's shares will remain listed on the Exchange in
       the future.

       The Company is subject to various federal, state and local environmental
       laws and regulations.  As is the case with other companies engaged in
       oil and gas exploration, production and refining, the Company faces




                                         26




       exposure from actual or potential claims and lawsuits involving
       environmental matters.  These matters may involve alleged soil and water
       contamination and air pollution.  Future environmental related
       expenditures cannot be reasonably quantified in many circumstances due
       to the conjectural nature of remediation and clean-up cost estimates and
       methods, the imprecise and conflicting data regarding the
       characteristics of various types of waste, the number of other
       potentially responsible parties involved and changing environmental laws
       and interpretations.  Management believes the reduced scope of the
       Company's operations following the sale of the Company's domestic oil
       and gas properties and the Fletcher refinery have significantly reduced
       the Company's potential exposure to environmental liability.  The
       Company will continue to closely monitor and administer its compliance
       with environmental matters.  See Other Factors Affecting the Company's
       Business in Item 1.


       RESULTS OF OPERATIONS

       Results of operations for the year ended September 30, 1996 amounted to
       a loss of $12.7 million, or 93 cents per share, of which $11.4 million
       arose from continuing operations and $1.3 million resulted from
       discontinued operations.  The Company reported a net loss of $11.9
       million, or 90 cents per share, for the year ended September 30, 1995.
       The 1995 loss included discontinued loss provisions of $5.0 million and
       a loss of $6.9 million from continuing operations.  In 1994, the Company
       reported a net loss of $11.0 million, or 85 cents per share, which
       included losses from discontinued operations of $3.0 million and a loss
       of $8.0 million from continuing operations.

       As described previously, the Company is in transition from a domestic
       oil and gas operation to a foreign oil and gas operation.  The
       historical results of continuing operations contain many non-recurring
       transactions.  As a result, they are not comparable and are a poor
       indicator of the Company's future operating results.  Management expects
       losses from continuing operations to continue through fiscal 1998.


       1996 vs 1995
       ------------
       The Company's share of expenses from the Opon operation was borne solely
       by Amoco Colombia during 1995 and 1994 while the Opon Nos. 3 and 4 wells
       were being drilled.  The increases in operating expenses, overhead -
       Colombian operations and exploration costs of $0.1 million, $2.5 million
       and $1.6 million, respectively, for the year ended September 30, 1996 as
       compared to the year ended September 30, 1995, all arise from the
       Company assuming its share of these costs in 1996.

       Management has the following expectations for 1997 results of
       operations: revenue and related operating costs and depreciation,
       depletion and amortization will increase significantly in conjunction
       with the commencement of production in the summer of 1997; overhead -
       Colombian operations should not vary significantly from 1996;
       exploration expenses should decline to a negligible amount as the 1996
       seismic data acquisition program is complete and no further activity is
       presently planned.





                                         27




       The increase in interest expense of $0.3 million between the years
       arises primarily from Colombian costs financed with the Funding
       Agreement described in Liquidity and Capital Resources below.
       Management expects interest expense to continue to increase in 1997 as
       additional costs are financed with the Funding Agreement.


       1995 vs 1994
       ------------
       The decreases in operating revenues, other income, operating costs and
       loss on sale of assets all arise primarily from non-recurring
       transactions recorded in 1994.

       The decrease in general and administrative expense of $0.6 million
       between the years arises primarily from reductions in the number of
       employees and insurance costs.  Exploration costs had no significant
       activity in 1994 but reflect the beginning of a seismic data acquisition
       program in 1995.


       Discontinued Operations
       -----------------------
       The Company implemented disposal accounting for its refining and
       marketing and real estate segments during 1991.  In 1996, the Company
       recorded loss provisions of $0.4 million and $0.9 million for its
       refining and marketing and real estate segments, respectively, as
       described previously.  Loss provisions of $0.7 million for the refining
       and marketing segment and $4.3 million for the real estate segment were
       recorded in 1995.  Loss provisions for 1994 amounted to $2.0 million and
       $1.4 million for refining and marketing and real estate, respectively.

       Operating losses from discontinued operations of $0.1 million, $0.4
       million, and $0.4 million for 1996, 1995, and 1994, respectively, were
       charged against loss provisions established in earlier periods.



























                                         28




       LIQUIDITY AND CAPITAL RESOURCES

       During fiscal 1996, cash inflows of $1.8 million, and $0.2 million arose
       from borrowings from Lonrho Plc under existing loan agreements, and
       issuance of common stock as a result of the exercise of stock options,
       respectively.  The Company utilized cash of $2.1 million and $0.2
       million to finance continuing and discontinued operations, respectively,
       $0.9 million for capital expenditures, and made scheduled debt
       repayments of $0.2 million.  At September 30, 1996, the Company had cash
       balances of $0.4 million.

       In December 1993, the Company restructured the terms of its debts to
       Lonrho Plc.  The revised terms included reduction of interest rates to a
       fixed rate of 6% and provisions allowing the Company to offer payment of
       future interest in shares of its common stock, and allowing Lonrho Plc
       to either accept such payment in kind or add the amount of the interest
       due to principal.  The ability to pay interest in kind or capitalize
       interest allows the Company to service its debt while cash resources are
       scarce.

       The Company obtained an additional facility loan of $13.5 million in a
       Revolving Credit Agreement dated as of June 28, 1996, between the
       Company and Thamesedge, Ltd., a subsidiary of Lonrho Plc.  The facility
       is to be used for Hondo Magdalena's requirements for the Opon project
       and for general corporate expenses.  The interest rate is 13%, due
       semiannually; as provided in other debts to Thamesedge and described
       above, the Company may make payment of interest in shares of its common
       stock.  The first draw on this facility of $4.0 million occurred in
       October 1996.

       In December 1996, the Company obtained extensions of the maturity of its
       debts to Lonrho Plc.  The maturity of all loans from Lonrho Plc was
       extended from not earlier than October 1, 1997 to not earlier than
       January 1, 1998.  As consideration for the extensions and certain other
       financial undertakings, the Company has granted to Lonrho a security
       interest in all of the shares of Hondo Magdalena and agreed to give
       Lonrho an option to convert $13.5 million of existing loans with an
       interest rate of 6% (see Note 5 to the Consolidated Financial Statements
       in Item 8) into the Company's common stock.  The debt will be
       convertible at Lonrho's option at any time prior to maturity (January 1,
       1998) at a rate of $12.375 per share.  The portion of the debt that may
       be converted into common stock will not be secured by the pledge of the
       Hondo Magdalena shares.  The option to convert the debt into common
       stock will be subject to the approval of the Company's shareholders at
       the 1997 annual meeting.  If the conversion option is not approved by
       the shareholders, the interest rate on the $13.5 million will revert to
       13.5%, the rate of interest on such debt prior to the December 1993
       restructuring.

       On May 5, 1995, Hondo Magdalena, ODC and Amoco Colombia entered into a
       Funding Agreement for Tier I Development Project costs (the "Funding
       Agreement") for the interim financing of costs associated with the
       construction of a pipeline from the Opon Contract area (see Note 6 to
       the Consolidated Financial Statements in Item 8 and General Discussion,
       Opon Exploration, above) and certain other costs related to the Opon
       Contract.  The Funding Agreement became effective on July 26, 1995 with
       the execution of the MOU.  Hondo Magdalena may finance its share of the




                                         29




       costs (including overhead) for the pipeline and an approved geological
       and geophysical work program for up to 365 days after the date that
       production from the Opon Contract area begins.  The Funding Agreement
       provides that Hondo Magdalena may repay the amounts financed from prior
       to the date of first production until 365 days thereafter, along with an
       equity premium computed on a 22% annualized interest rate.  The equity
       premium will be computed monthly on Hondo Magdalena's share of
       expenditures (including any amounts to be later recouped from Ecopetrol
       after commerciality).  Alternatively, from the date of first production
       until 90 days thereafter, Hondo Magdalena may elect to repay 125% of its
       share (excluding any amounts to be later recouped from Ecopetrol after
       commerciality) of the total costs accumulated up to the date of
       repayment.  If the financed amounts are not repaid within 365 days after
       the date of first production, an additional penalty of 100% of the
       amount then due would be recovered out of Hondo Magdalena's revenues.
       Hondo Magdalena's revenues from production of the first 80 million cubic
       feet of natural gas and corresponding condensate and natural gas liquids
       are pledged to secure its obligations under the Funding Agreement.  See
       Note 6 to the Consolidated Financial Statements in Item 8.

       Based upon the Company's budget and current information, management
       believes existing cash, available facilities and commitments, and the
       interim Funding Agreement will be sufficient to finance the Company's
       known obligations (the pipeline and related facilities, drilling of the
       Opon No. 6 well, overhead obligations unrelated to capital projects and
       other business activities) during fiscal 1997.  However, management
       believes the Company will need additional cash to participate in the
       drilling of additional wells in Colombia, or to participate in other
       capital projects which may be proposed in Colombia.  In addition, funds
       are required to retire the Funding Agreement since a significant portion
       of the anticipated cash flow is dedicated to servicing the Funding
       Agreement.  There is a financial incentive to prepay the Funding
       Agreement within 90 days after production begins.  If the Company
       becomes obligated for the drilling of an additional well, or other
       capital projects, the Company has the option to not participate in some
       or all of the capital projects.  In management's view, use of this
       election would be a last resort to preserve the Company's existing
       interest in the Opon Contract area because substantial penalties would
       be incurred by not participating.

       Cash from operations are not expected to be a source of funds until the
       Opon Project begins commercial production, estimated in summer 1997.
       Management is reviewing several options for raising funds including
       sale of the Company's 15.4 % interest in the pipeline.  Management
       continues to pursue discussions with a number of financial institutions
       regarding debt or equity financing of the Company's future obligations
       for the Opon project but has received no commitments.   While the
       Company will continue to seek permanent financing in the near-term,
       there can be no assurance that the Opon Project will be successfully
       developed or that additional debt or equity funds will become available.











                                         30

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                          HONDO OIL & GAS COMPANY

                     CONSOLIDATED FINANCIAL STATEMENTS

                             SEPTEMBER 30, 1996



                       INDEX TO FINANCIAL STATEMENTS

                                                                       PAGE
                                                                       ----

  Report of Independent Auditors                                         32


  Financial Statements:
    Consolidated Balance Sheets as of
      September 30, 1996 and 1995                                        33

    Consolidated Statements of Operations for the years ended
      September 30, 1996, 1995 and 1994                                  34

    Consolidated Statements of Shareholders' Equity (Deficit)
      for the years ended September 30, 1996, 1995 and 1994              35

    Consolidated Statements of Cash Flows for the years ended
      September 30, 1996, 1995 and 1994                                  36

    Notes to Consolidated Financial Statements                           37


  Supplementary Information about Oil and Gas Producing Activities
    and Reserves (Unaudited)                                             55



























                                    31

<AUDIT-REPORT>
                       REPORT OF INDEPENDENT AUDITORS


Board of Directors and Shareholders
Hondo Oil & Gas Company


We have audited the accompanying consolidated balance sheets of Hondo
Oil & Gas Company as of September 30, 1996 and 1995, and the related
consolidated statements of operations, shareholders' equity (deficit),
and cash flows for each of the three years in the period ended
September 30, 1996.  Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements
and schedule are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements
and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Hondo Oil & Gas Company at September 30, 1996
and 1995, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended September 30,
1996, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set
forth therein.



                                      /s/ ERNST & YOUNG LLP



Denver, Colorado
November 19, 1996,
except for Note 5 as to which the date is
December 17, 1996











</AUDIT-REPORT>



                                    32

                          HONDO OIL & GAS COMPANY
                        CONSOLIDATED BALANCE SHEETS
                  (In Thousands Except Share Information)


                                                        September 30,
                                                      1996         1995
                                                   -----------  -----------
ASSETS
Current assets:
  Cash and cash equivalents                              $374       $1,771
  Accounts receivable, net of allowances
    of $332 and $399, respectively                        317          440
  Prepaid expenses and other                               79            7
                                                   -----------  -----------
    Total current assets                                  770        2,218

Properties, net (Note 3)                               21,248       12,777
Net assets of discontinued operations (Note 12)         2,202        2,978
Other assets                                              320          425
                                                   -----------  -----------
                                                      $24,540      $18,398
                                                   ===========  ===========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable                                     $2,849         $355
  Current portion of long-term debt (Note 5)              738          235
  Accrued expenses and other (Note 4)                   2,292        2,705
                                                   -----------  -----------
    Total current liabilities                           5,879        3,295

Long-term debt, including $80,109 and
  $78,284, respectively, payable to a
  related party (Note 5)                               83,334       82,213
Funding agreement (Note 6)                             11,513        1,148
Other liabilities, including $2,411 and
  $2,367, respectively, payable to a
  related party (Note 7)                                4,705        5,106
                                                   -----------  -----------
                                                      105,431       91,762

Contingent liabilities (Notes 8 and 12)

Shareholders' equity (deficit) (Notes 5 and 9):
  Preferred stock                                          --           --
  Common stock, $1 par value, 30,000,000 shares
    authorized; shares issued and outstanding:
    13,776,194 and 13,423,378, respectively            13,776       13,423
  Additional paid-in capital                           53,581       48,804
  Accumulated deficit                                (148,248)    (135,591)
                                                   -----------  -----------
                                                      (80,891)     (73,364)
                                                   -----------  -----------
                                                      $24,540      $18,398
                                                   ===========  ===========






The accompanying notes are an integral part of these financial statements.

                                    33

<TABLE>
<CAPTION>
                                 HONDO OIL & GAS COMPANY
                          CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In Thousands Except Share and Per Share Data)


                                                            For the years ended
                                                   -------------------------------------
                                                               September 30,
                                                      1996         1995         1994
                                                   -----------  -----------  -----------
<S>                                                <C>          <C>          <C>
REVENUES
Sales and operating revenue                                $2          $23         $369
Other income                                              110           23          359
                                                   -----------  -----------  -----------
                                                          112           46          728
                                                   -----------  -----------  -----------

COSTS AND EXPENSES
Operating costs                                           169           47          668
Depreciation, depletion, and amortization                 156          266          220
Overhead, Colombian operations                          2,576          119           --
General and administrative                              1,779        1,608        2,210
Exploration costs                                       1,769          169            2
Interest on indebtedness including $4,786,
  $4,659 and $4,604, respectively, to a
  related party (Note 5)                                5,009        4,680        4,605
Loss on sale of assets                                      6           --        1,240
                                                   -----------  -----------  -----------
                                                       11,464        6,889        8,945
                                                   -----------  -----------  -----------
Loss from continuing operations
  before income taxes                                 (11,352)      (6,843)      (8,217)
Income tax expense (benefit) (Note 10)                      5          113         (199)
                                                   -----------  -----------  -----------
Loss from continuing operations                       (11,357)      (6,956)      (8,018)

Loss from discontinued operations (Note 12)            (1,300)      (4,950)      (3,038)
                                                   -----------  -----------  -----------
Net Loss                                             $(12,657)    $(11,906)    $(11,056)
                                                   ===========  ===========  ===========

Loss per share:
  Continuing operations                                $(0.83)      $(0.53)      $(0.62)
  Discontinued operations                               (0.10)       (0.37)       (0.23)
                                                   -----------  -----------  -----------
  Net loss per share                                   $(0.93)      $(0.90)      $(0.85)
                                                   ===========  ===========  ===========

Weighted average common shares outstanding         13,672,722   13,171,049   13,009,174
</TABLE>









The accompanying notes are an integral part of these financial statements.

                                         34

<TABLE>
<CAPTION>
                                       HONDO OIL & GAS COMPANY
                      CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                                 (In Thousands Except Common Shares)


                                                         Common Stock                      Retained
                                                   ------------------------  Additional    Earnings
                                                                               Paid-In   (Accumulated
                                                     Shares       Amount       Capital     Deficit)
                                                   -----------  -----------  -----------  -----------
<S>                                                <C>          <C>          <C>          <C>
Balance at October 1, 1993                         13,006,892      $13,007      $43,807    $(112,629)

  Exercise of stock options (Note 9)                   25,384           25          165           --
  Net loss                                                 --           --           --      (11,056)
                                                   -----------  -----------  -----------  -----------
Balance at September 30, 1994                      13,032,276       13,032       43,972     (123,685)

  Purchase of interest in Opon Association
    Contract with common stock (Note 3)                44,438           44          845           --
  Payment of interest with common stock (Note 5)      189,080          189        2,104           --
  Exercise of stock options (Note 9)                  157,584          158        1,883           --
  Net loss                                                 --           --           --      (11,906)
                                                   -----------  -----------  -----------  -----------
Balance at September 30, 1995                      13,423,378       13,423       48,804     (135,591)

  Payment of interest with common stock (Note 5)      319,316          319        4,423           --
  Exercise of stock options (Note 9)                   33,500           34          354           --
  Net loss                                                 --           --           --      (12,657)
                                                   -----------  -----------  -----------  -----------
Balance at September 30, 1996                      13,776,194      $13,776      $53,581    $(148,248)
                                                   ===========  ===========  ===========  ===========
</TABLE>



























The accompanying notes are an integral part of these financial statements.

                                                 35

<TABLE>
<CAPTION>
                                       HONDO OIL & GAS COMPANY
                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            (In Thousands)


                                                                         For the years ended
                                                                -------------------------------------
                                                                            September 30,
                                                                   1996         1995         1994
                                                                -----------  -----------  -----------
<S>                                                             <C>          <C>          <C>
Cash flows from operating activities:
  Pretax loss from continuing operations                          $(11,352)     $(6,843)     $(8,217)
  Adjustments to reconcile pretax loss from continuing
    operations to net cash used by continuing operations:
    Depreciation, depletion and amortization                           156          266          220
    Loss on sale of assets                                               6           --        1,240
    Capitalized interest                                              (180)          --           --
    Accrued interest added to long-term debt                            34        2,385        2,250
    Accrued interest paid with common stock                          4,742        2,292           --
    Changes in operating assets and liabilities:
      Decrease (increase) in:
        Accounts receivable                                             10          199        1,735
        Inventory                                                       --           --          770
        Prepaid expenses and other                                     (72)          26          132
        Other assets                                                   (12)        (201)         121
      Increase (decrease) in:
        Accounts payable                                             1,189          159       (1,675)
        Accrued expenses and other                                      --          123         (577)
        Funding agreement                                            3,361          275           --
        Other liabilities                                                2         (357)       2,968
                                                                -----------  -----------  -----------
      Net cash used by continuing operations                        (2,116)      (1,676)      (1,033)
      Net cash used by discontinued operations                        (210)        (473)        (511)
                                                                -----------  -----------  -----------
      Net cash used by operating activities                         (2,326)      (2,149)      (1,544)
                                                                -----------  -----------  -----------
Cash flows from investing activities:
  Sale of assets                                                         1        4,804        1,971
  Capital expenditures                                                (913)      (2,021)        (897)
                                                                -----------  -----------  -----------
      Net cash provided (used) by investing activities                (912)       2,783        1,074
                                                                -----------  -----------  -----------
Cash flows from financing activities:
  Proceeds from long-term borrowings                                 1,825        3,175        1,000
  Principal payments on long-term debt                                (235)      (5,220)        (180)
  Issuance of stock                                                    251        2,041          190
                                                                -----------  -----------  -----------
      Net cash provided (used) by financing activities               1,841           (4)       1,010
                                                                -----------  -----------  -----------

Net increase (decrease) in cash and cash equivalents                (1,397)         630          540

Cash and cash equivalents at the beginning of the year               1,771        1,141          601
                                                                -----------  -----------  -----------
Cash and cash equivalents at the end of the year                      $374       $1,771       $1,141
                                                                ===========  ===========  ===========

</TABLE>Refer to Notes 3 and 6 for descriptions of non-cash transactions.

The accompanying notes are an integral part of these financial statements.

                                                 36

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


1)  Nature of Business
    ------------------

    Hondo Oil & Gas Company ("Hondo Oil" or "the Company") is an independent oil
    and gas exploration and development company.  The Hondo Company owns 70.9%
    of Hondo Oil & Gas Company.  Lonrho Plc ("Lonrho"), a publicly-traded
    English company and the Company's primary lender, controls The Hondo Company
    and owns an additional 5.7% of the Company through another wholly-owned
    subsidiary. In total, Lonrho controls 76.6% of the Company's outstanding
    shares.

    During 1991 the Company adopted plans of disposal for its refining and
    marketing and real estate operations.  Substantially all of the refining and
    marketing assets were sold in 1993.  Following the sale of substantially all
    of its domestic oil and gas properties in 1992, the Company's sole
    continuing business activity is exploitation of an oil and gas concession in
    Colombia, South America.

    The Company's wholly-owned subsidiary, Hondo Magdalena Oil & Gas Limited
    ("Hondo Magdalena"), became involved in the Opon Association Contract (the
    "Opon Contract") in Colombia in 1991.  Amoco Colombia Petroleum Company
    ("Amoco Colombia") earned an interest in the Opon Contract through a Farmout
    Agreement executed in 1993.  Amoco Colombia, Hondo Magdalena, and Opon
    Development Company presently have working interests of approximately 60%,
    31%, and 9%, respectively.  The Colombian national oil company, Ecopetrol,
    has the right to acquire 50% of the Opon Contract when commerciality is
    declared and will reimburse the associate parties (out of future production)
    for 50% of the direct exploration costs.  Ecopetrol has agreed to include
    certain costs related primarily to construction of a pipeline and wellsite
    facilities in the commercial area, and to pay cash for its share of those
    costs. Commerciality was declared for a portion of the Contract area in May
    1996 and Ecopetrol reimbursed the associate parties for its share of the
    above described costs in September 1996 (See Note 6).  Subsequent to the
    declaration of commerciality, the Company's share of costs for activities
    within the commercial area is approximately 15%.

    Amoco Colombia was obligated by the 1993 Farmout Agreement to fund all but
    $2,000 of Hondo Magdalena's share of drilling and related costs during the
    drilling of two exploration wells and to make certain payments to Hondo
    Magdalena. Amoco Colombia spent approximately $56,500 to drill the  first
    two exploratory natural gas wells in 1994 and 1995.  The combined results of
    production tests of these wells indicate they will produce at a daily rate
    of 103 million cubic feet of natural gas and 3,900 barrels of condensate.
    The Company was able to attribute proved reserves to this discovery as of
    September 30, 1996 following completion of negotiations for sales of the
    discovered hydrocarbons. As more fully described in Note 6, Amoco Colombia
    agreed to finance the Company's share of costs to build a natural gas
    pipeline, construct wellhead facilities, and acquire seismic data, including
    related overhead.  Acquisition of the seismic data was completed during
    fiscal 1996, the pipeline and related wellhead facilities are under
    construction, and the drilling of a third well has begun.  The third well is
    located in the non-commercial portion of the concession, therefore,
    Ecopetrol will not pay a share of the drilling costs.




                                    37

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


1)  Nature of Business (continued)
    ------------------------------

    The Company has no operating assets which are presently generating cash to
    fund its operating and capital expenditure requirements.  Additionally, at
    September 30, 1996 the Company had a deficiency in net assets. Based upon
    the Company's budget and current information, management believes existing
    cash, available facilities and commitments, and the interim Funding
    Agreement (see Note 6) will be sufficient to finance the Company's known
    obligations (the pipeline and related facilities, drilling of the third
    exploratory well, overhead obligations unrelated to capital projects and
    other business activities) during fiscal 1997.  The Company will require
    significant additional funding for the continued development of the Opon
    Contract area subsequent to fiscal 1997. The Company has the option to not
    participate in some or all of the Opon capital projects which may be
    proposed in the future if it does not have sufficient funds. However,
    substantial penalties would be incurred by not participating.

    The Company's cash resources are presently limited to cash on hand and
    advances under a line of credit from Lonrho Plc (See Note 5). Cash from
    operations is not expected to be a source of funds until revenues from the
    Colombian concession commence.  Management estimates its available cash
    resources are sufficient to meet its cash needs for the next fiscal year
    assuming no material adverse changes to present plans occur. Management
    believes that permanent financing may not be forthcoming until production
    commences, presently estimated to be the summer of 1997. Obtaining permanent
    financing for development of the Company's Opon project is vital to the
    Company's ability to successfully exploit this concession in the future.
    There can be no assurance that the Opon Project will be successfully
    developed or that additional debt or equity funds will become available.


2)  Summary of Significant Accounting Policies
    ------------------------------------------

    (a) Basis of Consolidation and Presentation
        ---------------------------------------

    The consolidated financial statements of Hondo Oil include the accounts of
    all subsidiaries, all of which are wholly owned.  All significant
    intercompany transactions have been eliminated.

    In 1991, the Company adopted plans of disposal for its refining and
    marketing and its real estate segments, respectively.  Accordingly, the
    results of operations and the net assets of the discontinued segments have
    been reclassified to discontinued operations for all periods presented.
    Assets of discontinued operations are recorded at the lower of cost or net
    realizable value.  On October 1, 1993, the Company completed the sale of
    substantially all of its refining and marketing assets.  Refer to Note 12.








                                    38

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


2)  Summary of Significant Accounting Policies (continued)
    ------------------------------------------------------

    (b) Cash Equivalents
        ----------------

    Cash equivalents represent highly liquid investments with original
    maturities of three months or less.

    (c) Oil and Gas Properties
        ----------------------

    Oil and gas properties are accounted for using the successful efforts
    method.  Under this method, property acquisition costs are capitalized when
    incurred.  Exploratory geological and geophysical costs and general and
    administrative costs, including salaries, are expensed as incurred. The
    Company capitalizes interest expense for individual capital projects
    requiring more than three months for completion and costing more than
    $1,000.  The costs of drilling exploratory wells are capitalized pending
    determination of whether the wells have found proved reserves.  If proved
    reserves are not discovered, such dry hole costs are expensed.  All
    developmental drilling costs, including intangible drilling and equipment
    costs incurred on unsuccessful wells, are capitalized.

    Acquisition costs of unproved properties which are considered to be
    individually significant are periodically assessed for impairment on a
    property-by-property basis.  Individually insignificant properties are
    assessed for impairment as a group.  Any decline in value is included in the
    statement of operations in exploration costs.

    Intangible drilling and development costs and tangible equipment are
    depleted by the units-of-production method using proved developed reserves
    on a field basis.  Leasehold costs are also depleted on a field basis using
    total proved reserves.  Estimates of proved reserves are based upon reports
    of independent petroleum engineers.

    (d) Other Fixed Assets
        ------------------

    Other fixed assets are recorded at historical cost and are depreciated by
    the straight-line method using useful lives of 7 to 10 years.

    (e) Earnings Per Share
        ------------------

    Net income per share amounts are computed using the weighted average number
    of common shares and dilutive common equivalent shares outstanding.  The
    effect of common stock equivalents is not included for periods with losses.
    Fully diluted per share amounts are the same as primary per share amounts,
    and accordingly, are not presented.







                                    39

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


2)  Summary of Significant Accounting Policies (continued)
    ------------------------------------------------------

    (f) Income Taxes
        ------------

    The Company accounts for income taxes under the provisions of SFAS No. 109,
    "Accounting For Income Taxes". Under Statement 109, the liability method is
    used in accounting for income taxes.  Deferred tax assets and liabilities
    are determined based on reversals of differences between financial reporting
    and tax bases of assets and liabilities and are measured using the enacted
    effective tax rates and laws that will be in effect when the differences are
    expected to reverse.

    Investment tax credits are accounted for by the flow-through method which
    recognizes related benefits in the year realized.

    (g) Loan Fees
        ---------

    Capitalized loan fees pertaining to long-term loans are included in other
    assets.  The loan fees are stated at cost and are amortized by the
    straight-line method, which approximates the level yield method, over the
    life of the related loan.

    (h) Foreign Currency Translation
        ----------------------------

    The Company's Colombian business is conducted in a highly inflationary
    economic environment.  Accordingly, the financial statements of the
    Company's foreign subsidiary are remeasured as if the functional currency
    were the U.S. dollar using historical exchange rates.  Exchange gains and
    losses, which have been immaterial to date, are included in operating costs.

    (i) Use of Estimates
        ----------------

    The preparation of financial statements in conformity with generally
    accepted accounting principles requires management to make estimates and
    assumptions, particularly in regard to discontinued operations, that affect
    the amounts reported in the financial statements and accompanying notes.
    Actual results could differ from those estimates.

    (j) Fair Value of Financial Instruments
        -----------------------------------

    SFAS Statement No. 107, Disclosures About Fair Value of Financial
    Instruments, requires disclosures of fair value information about financial
    instruments for which it is practicable to estimate that value. The
    Company's financial instruments include: cash and cash equivalents,
    receivables, accounts payable, long-term debt, the Funding Agreement, and
    certain other long-term liabilities. Disclosures of fair values determined
    in accordance with SFAS No. 107 are included in Notes 5, 6, and 7. The
    Company believes that the recorded values approximate fair values for
    financial instruments for which no separate disclosure of fair value is
    made.

                                    40

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


2)  Summary of Significant Accounting Policies (continued)
    ------------------------------------------------------

    (k) New Accounting Standards
        ------------------------

    The Financial Accounting Standards Board has recently issued two standards
    applicable to the Company.  Statement of Financial Accounting Standard
    ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets and for
    Long-Lived Assets to be Disposed Of, was implemented for the year ended
    September 30, 1995 and did not have a material impact on the Company's
    financial statements. SFAS No. 123, Accounting and Disclosure of Stock-Based
    Compensation, gives companies the option to either follow fair value
    accounting or to follow Accounting Principles Board Opinion No. 25,
    Accounting for Stock Issued to Employees ("APB No. 25"), and related
    interpretations.  The Company has elected to continue to follow APB No. 25
    for future stock options and stock-based awards.

    (l) Reclassifications
        -----------------

    Certain reclassifications have been made to the prior years' amounts to make
    them comparable to the fiscal 1996 presentation.  These additional changes
    had no impact on previously reported results of operations or shareholders'
    equity (deficit).


3)  Properties
    ----------

    Properties, at cost, consist of the following:

                                                        September 30,
                                                      1996         1995
                                                   -----------  -----------

    Oil and gas properties (Colombia):
      Proved, undeveloped                             $11,803          $--
      Accumulated depletion, depreciation
        and amortization                                   --           --
                                                   -----------  -----------
                                                       11,803           --
                                                   -----------  -----------
    Other properties - Colombia:
      Wellsite facilities (a)                           2,039           70
      Pipelines (a)                                     5,398          803
      Drilling in progress                              1,858       11,775
    Other properties - domestic
      Other fixed assets                                  311          279
      Accumulated depreciation                           (161)        (150)
                                                   -----------  -----------

                                                      $21,248      $12,777
                                                   ===========  ===========

    (a) Under construction.

                                    41

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


3)  Properties (continued)
    ----------------------

    The balance of drilling in progress includes non-cash increases of $2,112
    which were accrued in accounts payable as of September 30, 1996.  The
    balances of wellsite facilities and pipelines include non-cash increases of
    $7,968 and $816 for 1996 and 1995, respectively, which were charged to the
    Funding Agreement (Note 6). The balances of drilling in progress, wellsite
    facilities and pipelines include a non-cash decrease of $2,916 for 1996
    pertaining to amounts due from Ecopetrol under the commerciality declaration
    (See Note 1), of which $2,629 had been collected and applied to the Funding
    Agreement as of September 30, 1996. The balance of $287 was retained by
    Ecopetrol subject to completion of an audit and is included in accounts
    receivable as of September 30, 1996.

    Total costs incurred (both capitalized and expensed) in Colombia for oil and
    gas producing activities were:
<TABLE>
<HEADING>
                                                            For the years ended
                                                   -------------------------------------
                                                               September 30,
                                                      1996         1995         1994
                                                   -----------  -----------  -----------
    <S>                                            <C>          <C>          <C>
    Property acquisition costs (a)                        $38         $889          $--
                                                   ===========  ===========  ===========
    Exploration costs                                  $3,731         $169       $2,068
                                                   ===========  ===========  ===========
    Development costs                                  $2,558         $190          $--
                                                   ===========  ===========  ===========
</TABLE>
    (a) In September 1995, the Company acquired an additional 0.88875%
        interest in the Opon Contract by the issuance of 44,438 shares of its
        common stock.


4)  Accrued expenses
    ----------------

    Accrued expenses consist of the following:

                                                        September 30,
                                                      1996         1995
                                                   -----------  -----------

    Refining and marketing costs (Note 12)             $2,028       $2,114
    Drilling costs                                         --          190
    Other                                                 264          401
                                                   -----------  -----------
                                                       $2,292       $2,705
                                                   ===========  ===========





                                    42

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


5)  Long-Term Debt
    --------------

    Long-term debt consists of the following:
                                                        September 30,
                                                      1996         1995
                                                   -----------  -----------
    Notes payable to Lonrho Plc (a),(b):
      Note A (c)                                       $3,277       $3,277
      Note B (c)                                        4,271        4,271
      Note C (d)                                       36,361       36,361
      Note D (d)                                       31,200       31,200
      Note E (e)                                        5,000        3,175
      Note F (f)                                           --           --
    Pollution Control Revenue Bonds (g)                 2,475        2,710
    Industrial Development Revenue Bonds (g)            1,000        1,000
    Other                                                 488          454
                                                   -----------  -----------
                                                       84,072       82,448
    Less current maturities                              (738)        (235)
                                                   -----------  -----------

                                                      $83,334      $82,213
                                                   ===========  ===========

    Maturities are as follows for the years ending September 30:
    1997                                                 $738
    1998                                               56,155
    1999                                               19,969
    2000                                                1,804
    2001                                                1,824
    Thereafter                                          3,582
                                                   -----------
                                                      $84,072
                                                   ===========

    Hondo Oil paid interest of $234, $248 and $260 for the years ended September
    30, 1996, 1995 and 1994, respectively.  In accordance with the provisions of
    SFAS No. 107, the Company has estimated the fair value of its long-term debt
    to be $76,743 as of September 30, 1996 using a discount rate of 13% .

    (a) In December 1996, the Company and Lonrho agreed to defer commencement
        of principal amortization for each of the six loans.  The maturity
        terms noted below reflect the revisions.  As consideration for the
        extensions and certain other financial undertakings, the Company has
        granted to Lonrho a security interest in all of the shares of Hondo
        Magdalena and agreed to give Lonrho an option to convert $13,500 of
        Note C into the Company's common stock.  The debt will be convertible
        at Lonrho's option at any time prior to maturity at a rate of $12.375
        per share.  The portion of the debt that may be converted into common
        stock will not be secured by the pledge of the Hondo Magdalena shares.
        The option to convert the debt into common stock will be subject to
        shareholder approval at the Company's 1997 annual meeting.  If the
        conversion option is not approved by the shareholders, the interest
        rate on the $13,500 will revert to 13.5%, the rate of interest on such
        debt prior to the 1993 restructuring.

                                    43

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)

5)  Long-Term Debt (continued)
    --------------------------

    (b) The following terms apply to each of the first five notes:
        (1) Interest is payable semiannually at a rate of 6%.
        (2) If management determines sufficient cash is not available to pay
        interest, management may offer to issue the Company's unregistered
        stock valued at the American Stock Exchange closing price on the
        interest due date as payment in kind. Lonrho may choose to either add
        the accrued interest to the balance of the debt outstanding or accept
        the payment in kind.  The Company has an obligation to register any
        shares issued in connection with the above if so requested by Lonrho.
        (3) Accrued interest of $2,411, $2,354, $2,250 and $6,005  has been
        added to the outstanding debt as of October 1, 1996, October 1, 1994,
        April 1, 1994 and September 30, 1993, respectively.  Accrued interest
        of $2,375, $2,367 and $2,293 has been paid by the issuance of 197,944,
        121,372 and 189,080 shares, respectively, of the Company's common
        stock for amounts due on April 1, 1996, October 1, 1995 and April 1,
        1995, respectively.
        (4) As consideration for past deferrals of interest and principal
        payments due under the terms of the first four notes, the Company has
        granted Lonrho Plc a 5% share of the Company's net profits, as
        defined, under the Opon Contract.  Following repayment of these notes,
        Lonrho's entitlement will be reduced by half.
        (5) Net proceeds from asset sales are to be applied to the reduction
        of Notes C and D.

    (c) Notes A and B are secured by the Company's real estate included in
        discontinued operations.  Absent repayment in full as a result of the
        sale of the securing real estate, principal amortization in ten equal
        semiannual installments will commence January 1, 1998.  Note A is
        secured by the Company's Via Verde Bluffs real estate.  Note B is
        secured by the Company's Valley Gateway real estate.

    (d) Notes C and D are secured by the Company's Valley Gateway real estate.
        Notes C and D are due January 1, 1998.  Notes C and D are subordinated
        to the Company's other indebtedness existing at September 30, 1996.

    (e) In October 1994, the Company received $4,800, net of withholding
        taxes, from Amoco Colombia under the terms of the Farmout Agreement
        (See Note 1).  Also in October 1994, the Company paid $5,000 to Lonrho
        Plc to reduce the balance of Note D and the related interest expense.
        At the same time, Lonrho Plc made available $5,000 in the form of a
        new facility loan to be drawn as needed by the Company. The Company
        drew $3,175 of this facility loan during 1995 and the remaining $1,825
        during 1996.

    (f) On June 28, 1996, Lonrho Plc agreed to provide the Company an
        additional facility loan of $13,500 at a rate of 13%, payable
        semiannually.  The provisions for payment of interest with the
        Company's common shares described in (b) above apply to this loan. The
        loan is due January 1, 1998 and is secured by free cash flow, as
        defined, from Hondo Magdalena's operations. The Company made its first
        draw on this facility in October 1996 in the amount of $4,000.




                                    44

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


5)  Long-Term Debt (continued)
    --------------------------

    (g) Both issues of these tax-exempt bonds were issued under the authority
        of the California Pollution Control Financing Authority.  The
        Pollution Control Revenue bonds bear interest at an average rate of
        6.14%, payable semiannually, and mature serially through  November 1,
        2003.  The Industrial Development Revenue Bonds bear interest at a
        rate of 7.5%, payable semiannually, and mature September 1, 2011.
        Both bond issues are collateralized by certain refinery facilities and
        equipment located at Valley Gateway and the Fletcher refinery. The
        collateral at the Fletcher refinery is leased to the buyer for a
        nominal annual fee.  The trustee of the bonds was notified of changes
        to the collateral in 1993 and the trustee has not taken any action to
        declare a breach of covenant or a default. The Company routinely
        communicates with the Trustee and has received no indication that the
        Trustee is contemplating any such action.

    According to the terms of the various credit agreements, the Company is
    restricted in its ability to: (a) incur additional debt; and (b) pay
    dividends on and/or redeem capital stock.


6)  Funding Agreement
    -----------------

    Effective July 26, 1995, Hondo Magdalena, Amoco Colombia, and Opon
    Development Company entered into a Funding Agreement for Tier I Development
    Project costs (the "Funding Agreement") for the interim financing of costs
    associated with the construction of a pipeline from the Opon Contract area,
    certain wellsite facilities, a geological and geophysical work program, and
    for related overheads.  The Funding Agreement provides that Hondo Magdalena
    may repay the amounts financed by Amoco Colombia from prior to the date of
    first production until 365 days thereafter, along with an equity premium
    computed using a 22% annualized interest rate. The equity premium will be
    computed monthly on Hondo Magdalena's share of expenditures (including any
    amounts to be recouped from Ecopetrol after commerciality). Alternatively,
    from the date of first production until 90 days thereafter, Hondo Magdalena
    may elect to repay 125% of its share (excluding any amounts to be recouped
    from Ecopetrol after commerciality) of the total costs accumulated up to the
    date of repayment. If the financed amounts are not repaid within 365 days
    after the date of first production, an additional penalty of 100% of the
    amount then due would be recovered out of Hondo Magdalena's revenues.  Hondo
    Magdalena's revenues from production of the first 80 million cubic feet of
    natural gas and related condensate and natural gas liquids are pledged to
    secure its obligations under the Funding Agreement.

    The Company has accrued equity premiums computed in accordance with the 22%
    annualized interest rate option. Equity premiums of $1,262 and $57 related
    to the financed pipeline costs and wellsite facilities have been capitalized
    for the years ended September 30, 1996 and 1995, respectively.  The
    remainder of the equity premiums accrued to date, relating to the financed
    geological and geophysical work and overheads, have been expensed.




                                    45

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


6)  Funding Agreement (continued)
    -----------------------------

    The balance of the Funding Agreement consists of the following:

                                                        September 30,
                                                      1996         1995
                                                   -----------  -----------

    Outstanding principal                              $9,771       $1,071
    Equity premiums                                     1,742           77
                                                   -----------  -----------
                                                      $11,513       $1,148
                                                   ===========  ===========

    The balance of the Funding Agreement was reduced by $2,629 in September 1996
    by application of the Company's share of payments from Ecopetrol arising
    from the declaration of commerciality (Note 1).

    In accordance with the provisions of SFAS No. 107, the Company has estimated
    the fair value of the Funding Agreement to be $12,911 as of September 30,
    1996 using a discount rate of 13% .


7)  Other Liabilities
    -----------------

    Other liabilities consist of the following:

                                                        September 30,
                                                      1996         1995
                                                   -----------  -----------

    Interest payable to Lonrho Plc (Note 5)            $2,411       $2,367
    City of Long Beach (a)                              1,533        1,533
    Deferred compensation contracts (b)                   610          671
    Other                                                 151          535
                                                   -----------  -----------
                                                       $4,705       $5,106
                                                   ===========  ===========

    (a) The due date of this obligation has been extended from January 1, 1997
        to January 1, 1999.  As part of the extension, the Company agreed to
        pay interest at a rate of 6%, due January 1, 1999.  In accordance with
        the provisions of SFAS No. 107, the Company has estimated the fair
        value of this liability to be $1,311 as of September 30, 1996 using a
        discount rate of 13% .

    (b) The Company has deferred compensation contracts with two former
        officers of the Company.  The contracts were entered into to provide
        benefits greater than the amounts allowable (in accordance with IRS
        regulations) under a former defined benefit plan available to all
        employees (terminated in 1989). The amounts above represent the
        actuarial present value of the Company's liability under the contracts
        computed with discount rates of 8.0% and 7.5% for September 30, 1996
        and 1995, respectively.

                                    46

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


8)  Contingent liabilities
    ----------------------

    The Company is involved in a number of legal and administrative proceedings
    incident to the ordinary course of its business.  In the opinion of
    management, any liability to the Company relative to the various proceedings
    will not have a material adverse effect on the Company's operations or
    financial condition.

    The Company is subject to various environmental laws and regulations of the
    United States and Colombia.  As is the case with other companies engaged in
    similar industries, the Company faces exposure from actual or potential
    claims and lawsuits involving environmental matters.  These matters may
    involve alleged soil and water contamination and air pollution.  The
    Company's policy is to accrue environmental and clean-up costs when it is
    probable that a liability has been incurred and the amount of the liability
    is reasonably estimable. However, future environmental related expenditures
    cannot be reasonably quantified in many circumstances due to the conjectural
    nature of remediation and clean-up cost estimates and methods, the imprecise
    and conflicting data regarding the characteristics of various types of
    waste, the number of other potentially responsible parties involved, and
    changing environmental laws and interpretations.  Management believes the
    reduced scope of the Company's operations following the sale of the
    Company's domestic oil and gas properties and the Fletcher refinery have
    significantly reduced the Company's potential exposure to environmental
    liability, including potential Superfund claims against Fletcher, which
    liability, in the opinion of management, is not material.


9)  Shareholders' Equity
    --------------------

    In addition to its common shares, the Company has authorized 10,000,000
    shares of one dollar par value preferred stock.  No preferred shares have
    been issued as of September 30, 1996.

    The Company has a stock option plan under which options to purchase common
    shares of the Company are granted to certain officers, directors and key
    employees.  The options are priced equal to or greater than the market price
    in effect at the date of grant. Accordingly, no compensation expense is
    recognized in connection with this plan.

    The Company granted an option for 25,000 shares at $7.50 per share to a
    former officer in March 1995.  The option was not granted under the stock
    option plan and was priced less than the market price at date of grant.
    Compensation of $138 was included in general and administrative expense at
    the date of grant.  The option was exercised during 1996.










                                    47

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


9)  Shareholders' Equity (continued)
    --------------------------------

    The following table summarizes certain information relative to stock options
    outstanding:
                                                      Share
                                                     Options
                                                   -----------
    Outstanding at October 1, 1995                    187,732
      Granted (a)                                      50,000
      Exercised (b)                                   (33,500)
      Expired or terminated                                --
                                                   -----------
    Outstanding at September 30, 1996 (c)             204,232
                                                   ===========

    (a) An additional 14,000 options have been tentatively granted to two
        directors of the Company by the other members of the Board of
        Directors.  This transaction is subject to shareholder approval at the
        next annual meeting.

    (b) Priced at $7.50.

    (c) Includes 54,232, 85,000, 15,000, and 50,000 options priced at $7.50,
        $14.625, $12.625, and $14.125, respectively; 154,232 options are
        exercisable at September 30, 1996.

    As of September 30, 1996 and 1995 additional options of 15,000 and 79,000,
    respectively, were available for future grants under the stock option plan.

    A total of 319,316 and 233,518 shares of common stock were issued during
    1996 and 1995, respectively, in transactions not involving stock options.
    See Notes 3 and 5.


10) Income Taxes
    ------------

    The components of income tax expense (benefit) from continuing operations
    are as follows:
<TABLE>
<HEADING>
                                                            For the years ended
                                                   -------------------------------------
                                                               September 30,
                                                      1996         1995         1994
                                                   -----------  -----------  -----------
<S>                                                <C>          <C>          <C>
    Current:
      Foreign                                              $5         $113          $--
    Deferred:
      Federal                                              --           --        ($190)
      State                                                --           --           (9)
                                                   -----------  -----------  -----------
                                                           $5         $113        $(199)
                                                   ===========  ===========  ===========
</TABLE>
                                    48

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


10) Income Taxes (continued)
    ------------------------

    Significant components of the Company's deferred tax assets and
    liabilities are as follows:
                                                        September 30,
                                                      1996         1995
                                                   -----------  -----------
    Deferred tax assets, long-term:
      Domestic net operating loss carryforwards       $43,734      $42,739
      Foreign income tax basis of
        capitalized assets in excess of
        financial reporting basis                       1,432        1,355
      Income tax basis of real estate in
        excess of financial reporting basis             1,965        1,654
      Financial reporting basis of accrued
        liabilities in excess of tax basis              1,045        1,101
      Valuation allowances                            (47,467)     (45,643)
                                                   -----------  -----------
                                                          709        1,206
                                                   -----------  -----------
    Deferred tax liabilities, long-term:
      Foreign income tax depreciation in
        excess of financial reporting
        depreciation                                      709        1,206
                                                   -----------  -----------
                                                          709        1,206
                                                   -----------  -----------
    Net deferred tax liability                            $--          $--
                                                   ===========  ===========

    The differences between income tax expense (benefit) from continuing opera-
    tions and the amount computed by applying the statutory Federal income tax
    rate to loss from continuing operations before income taxes are as follows:
<TABLE>
<HEADING>
                                                            For the years ended
                                                   -------------------------------------
                                                               September 30,
                                                      1996         1995         1994
                                                   -----------  -----------  -----------
<S>                                                <C>          <C>          <C>
    Benefit computed at the effective
      statutory rate                                  $(4,499)     $(2,365)     $(2,794)
    Reduction of future reversals by utilization
      of net operating loss carryforwards                  --           --           93
    State taxes, net                                       --           --           (9)
    Alternative minimum tax                                --           --         (190)
    Nondeductible interest                              1,425           --           --
    Losses from foreign operations                      1,919          215          137
    Foreign income tax expense                              5          113           --
    Net operating loss for which no benefit
      is recognized                                     1,155        2,150        2,564
                                                   -----------  -----------  -----------
                                                           $5         $113        $(199)
                                                   ===========  ===========  ===========
</TABLE>
                                    49

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


10) Income Taxes (continued)
    ------------------------

    At September 30, 1996, the Company had the following domestic net operating
    loss and investment tax credit carryforwards:
<TABLE>
<HEADING>
                                                                Alternative
                                                     Tax Net    Minimum Net  Investment
                                                    Operating   Tax Operating    Tax
    Year of Expiration                                Loss         Loss        Credit
    ------------------                             -----------  -----------  -----------
    <S>                                            <C>          <C>          <C>
    Consolidated Carryforwards:
      2003                                             $3,166          $--
      2004                                             12,469      $10,917
      2005                                              2,803           --
      2006                                             26,612       22,012
      2007                                             15,781       30,041
      2008                                             25,551       23,919
      2009                                             13,115       14,517
      2010                                              7,616        7,620
      2011                                              3,298        3,298
                                                   -----------  -----------
                                                     $110,411     $112,324
                                                   ===========  ===========

    Separate Carryforwards (a)
      1997                                                $--          $--         $259
      1998                                                 --           --          144
      1999                                                 --           --          210
      2000                                            $12,397      $12,397           74
      2002                                              6,101        6,101           --
      2003                                              6,714       10,715           --
                                                   -----------  -----------  -----------
                                                      $25,212      $29,213         $687
                                                   ===========  ===========  ===========
</TABLE>
    (a) These separate carryforwards can only be used against future income
        and tax liabilities of the company within the consolidated group which
        generated the carryforwards.

    In conjunction with the sale of the Fletcher refinery in 1993 as described
    in Note 12, unrestricted net operating loss carryforwards of $59,658 and
    separate net operating loss carryforwards of $23,983 pertaining to the
    Fletcher refinery were reattributed to Hondo Oil.











                                    50

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


11) Segment information
    -------------------

    Following reclassification of the Company's refining and marketing and real
    estate segments to discontinued operations in 1991, the Company's operations
    have been concentrated in one industry segment: the exploration for and
    production of reserves of oil and natural gas.  In 1992, the Company sold
    substantially all of its domestic oil and gas reserves.   The Company's
    continuing activities are presently limited to exploration for oil and gas
    reserves located in Colombia. The Company has no foreign sales and no export
    sales as yet.  The Company has no significant customers (comprising more
    than 10% of continuing operation's revenue) with which it will do business
    in the foreseeable future.  Information segregating the Company's continuing
    domestic and foreign operations is as follows:

<TABLE>
<HEADING>
                                                            For the years ended
                                                   -------------------------------------
                                                               September 30,
                                                      1996         1995         1994
                                                   -----------  -----------  -----------
    <S>                                            <C>          <C>          <C>
    Sales and operating revenue:
      United States                                        $2          $23         $369
      Foreign                                              --           --           --
                                                   -----------  -----------  -----------
                                                           $2          $23         $369
                                                   ===========  ===========  ===========

    Operating profit (loss):
      United States                                      $(45)       $(140)        $155
      Foreign                                          (4,511)        (326)        (283)
                                                   -----------  -----------  -----------
      Operating loss                                   (4,556)        (466)        (128)
      Loss on sale of assets                               (6)          --       (1,240)
      Interest expense                                 (5,009)      (4,680)      (4,605)
      Corporate expense and other                      (1,781)      (1,697)      (2,244)
                                                   -----------  -----------  -----------
      Loss from continuing operations
        before income taxes                          $(11,352)     $(6,843)     $(8,217)
                                                   ===========  ===========  ===========

    Identifiable assets:
      United States                                    $2,973       $5,645       $9,175
      Foreign                                          21,567       12,753       15,733
                                                   -----------  -----------  -----------
                                                      $24,540      $18,398      $24,908
                                                   ===========  ===========  ===========
</TABLE>







                                    51

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


12) Discontinued Operations
    -----------------------

    In 1991, the Company adopted plans of disposal for its refining and
    marketing and real estate segments. The refining and marketing segment had
    operating revenues of $64 in 1994.  A summary, by segment, of the results of
    discontinued operations is as follows:

<TABLE>
<HEADING>
                                                            For the years ended
                                                   -------------------------------------
                                                               September 30,
                                                      1996         1995         1994
                                                   -----------  -----------  -----------
    <S>                                            <C>          <C>          <C>
    Refining and marketing                              $(400)       $(650)     $(2,000)
    Real estate                                          (900)      (4,300)      (1,400)
    Income tax expense (benefit)                           --           --         (362)
                                                   -----------  -----------  -----------
                                                      $(1,300)     $(4,950)     $(3,038)
                                                   ===========  ===========  ===========

    Per share                                          $(0.10)      $(0.37)      $(0.23)
                                                   ===========  ===========  ===========
</TABLE>

    In September 1993, the Company executed an agreement for the sale of its
    Fletcher refinery and its asphalt terminal in Hilo, Hawaii. These assets
    represented the material portion of the Company's refining and marketing
    segment. Loss provisions pertaining to the refining and marketing segment of
    $400, $650 and $2,000 have been required in 1996, 1995 and 1994 for reasons
    described below.

    The agreement for the sale of Fletcher included a provision allowing the
    Company to share in the proceeds from the sale of certain components of the
    refinery equipment which the buyer planned to sell. Based on estimates of a
    broker of used refinery equipment, the Company recorded $1,000 as the
    estimated realizable value at the time of the transaction.  The buyer and
    the Company have not succeeded in selling this equipment. In September 1994,
    the Company reduced the carrying value of the receivable by $600 on the
    basis of an offer from the buyer for the Company's share of equipment sale
    proceeds.  In September 1996, the Company wrote off the remaining receivable
    of $400 as uncollectible.













                                    52

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


12) Discontinued Operations (continued)
    -----------------------------------

    In the agreement for the sale of the Fletcher refinery, the Company
    indemnified the buyer as to liabilities in excess of $300 for certain
    federal and state excise taxes arising from periods prior to the sale.
    Fletcher notified the Company in July 1994 that an audit for California
    Motor Vehicle Fuels Tax was underway and a preliminary review by then
    Fletcher employees indicated that a significant liability might exist. The
    Company retained a consultant to evaluate the contingent liability.  In
    September 1994, the Company accrued $1,400 as a result of the consultant's
    evaluation.  An additional $650 was accrued in September 1995, primarily
    because of increases in the estimated amounts of penalties and interest
    which will be due. The State of California issued a preliminary report in
    June 1996 which concludes taxes and penalties of $10,820 are due as a result
    of the audit.  However, no final audit report or assessment has been issued
    and the Company does not believe the preliminary report is accurate.  The
    buyer has notified the Company that it claims indemnity in this matter. The
    Company has provided its consultant to Fletcher to assist in disputing the
    preliminary report.  The Company believes the liability accrued is
    sufficient to provide for the amount that will ultimately be paid based on
    the information available.  The State of California's audit is still in
    process and could result in a liability different from that accrued when
    concluded.

    In 1989, the Company permanently suspended operations at its Newhall
    refinery because of expectations of continued operating losses.  The Company
    reclassified the cost of Newhall's dismantled properties to the real estate
    segment.  All costs incurred subsequent to 1989 have been charged against
    previously established loss provisions.  In 1993, the Company suspended
    execution of a development plan for the property, now referred to as Valley
    Gateway, which included dismantling the refinery, effecting environmental
    remediation of the land and further developing the land to a condition where
    it could be sold as land ready for construction.  This decision was made as
    a result of continued declines in the local real estate market and the
    Company's limited cash resources.  Management believed that a sale of the
    property in its present condition with existing entitlements was the best
    course of action. The Company has conducted an environmental assessment of
    the refinery site and a remediation plan for the site has been submitted to
    the Regional Water Quality Control Board and has received staff approval.
    The Company estimates that $2.0 million would be incurred in executing the
    approved remediation plan; however, the Company expects to sell the property
    without incurring these costs by reducing the purchase price.  The Company's
    estimate of the net realizable value of this property has been reduced by
    estimated remediation costs in determining the carrying value of the
    property and therefore the remediation costs will not affect future results
    of operations.

    In addition to the Valley Gateway property, the Company owns the 11 acre Via
    Verde Bluffs property, carried at $2,548 and $2,528 at September 30, 1996
    and 1995, respectively.  Both properties have been listed with brokers since
    1994.





                                    53

                          HONDO OIL & GAS COMPANY
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


12) Discontinued Operations (continued)
    -----------------------------------

    In 1995 and 1994, the carrying value of the real estate was reduced by
    $4,300 and $1,400, respectively, as a result of depressed demand in the
    local market, sale negotiations, and the timing of possible sales.  In
    September 1996, the Company revised its estimate of the realizable value of
    the Valley Gateway property to zero, resulting in an additional loss
    provision of $900 and making the carrying value a liability of $346 (due to
    accruals for future carrying costs).  This decision was made following three
    years of unsuccessful efforts to sell the property in its present state and
    little interest from potential buyers.  Management believes it can dispose
    of the property and any associated liabilities for an insignificant price
    and little or no additional cost.

    Changes in the balance of real estate are as follows:

                                                        September 30,
                                                      1996         1995
                                                   -----------  -----------

    Beginning balance                                  $2,978       $6,851
      Development and dismantlement costs                  --           --
      Valuation provisions established                   (900)      (4,300)
      Valuation provisions used                           124          427
                                                   -----------  -----------
    Ending balance                                     $2,202       $2,978
                                                   ===========  ===========

    Remaining acres                                       116          116
                                                   ===========  ===========

    Interest expense included in the losses from discontinued operations
    pertains only to debt directly attributable to the discontinued segments.
    Allocations of interest to the real estate operations were $262, $274 and
    $285 for 1996, 1995 and 1994, respectively.





















                                    54

                          HONDO OIL & GAS COMPANY
           SUPPLEMENTARY INFORMATION ABOUT OIL AND GAS PRODUCING
                    ACTIVITIES AND RESERVES (UNAUDITED)
                             September 30, 1996

                     (All Dollar Amounts in Thousands)

The following supplemental information regarding the oil and gas
activities of Hondo Oil is presented pursuant to the disclosure
requirements promulgated by the Securities and Exchange Commission
("SEC") and Statement of Financial Accounting Standards ("SFAS") No.
69, "Disclosures About Oil and Gas Producing Activities."  Estimated
Reserve Quantities and the Standardized Measure of Discounted Future
Net Cash Flows Relating to Proved Reserves are presented on the basis
of reserve reports prepared by Netherland, Sewell and Associates.
Information regarding capitalized costs relating to oil and gas
producing activities and costs incurred for property acquisition,
exploration, and development activities are included in Note 3 to the
consolidated financial statements.

SEC rules limit the disclosure of reserves to proved reserves. Proved
reserves are estimated quantities of crude oil, condensate, natural
gas, and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future
years from known reservoirs under existing economic and operating
conditions.  Proved reserves do not include hydrocarbons the recovery
of which is subject to reasonable doubt because of uncertainty as to
economic factors.  These rules mean that the Company cannot report
reserves beyond the volumes that can be sold with reasonable
certainty.

The Company successfully completed drilling of a second well in
Colombia in September 1995. Construction of a pipeline and related
wellhead facilities for production and transportation of the
discovered natural and related liquids is underway.  Production is
expected to commence in the summer of 1997.

During fiscal 1996, three contracts covering the sale of natural
gas, the sale of condensate and natural gas liquids, and the
processing of the gas stream have been executed with the Colombian
national oil company, Ecopetrol.  These provide for (i) the sale of
100 million cubic feet of natural gas per day for the life of the
concession (July 2015) at the regulated price determined
semi-annually by a formula based upon the average price received by
Ecopetrol for exported fuel oil during the prior two six-month
periods; (ii) the sale of condensate and natural gas liquids at
market-related and market-indexed prices; and (iii) the processing
of the gas stream at Ecopetrol's El Centro gas processing plant for
a fee of $0.20 per thousand cubic feet of gas.  In addition,
negotiations are proceeding for sales of another 30 million cubic
feet of natural gas per day to an electric generation facility
proposed to be constructed adjacent to the concession.

The quantum of proved reserves which are reported below is
economically limited to the volumes described above.









                                    55

                          HONDO OIL & GAS COMPANY
           SUPPLEMENTARY INFORMATION ABOUT OIL AND GAS PRODUCING
                    ACTIVITIES AND RESERVES (UNAUDITED)
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


Assumptions used in determining proved reserves and future net cash flows are:

- Natural gas reserve volumes reportable as proved reserves are
  limited to 130 million cubic feet per day for the life of the
  concession (July 2015). Condensate reserves produced in association
  with the natural gas are a function of the natural gas reserves.
- The Company's share of reserves and future net cash flows is
  15.444375%, subject to a royalty of 20% payable to the Colombian
  government.
- Prices of $21.31 per barrel of condensate and natural gas liquids
  and $1.20 per million British Thermal Units of natural gas are used
  in the cash flow projections for September 30, 1996.  These prices
  were determined in accordance with the terms of the executed sales
  contracts described above. Both prices are held constant through
  the life of the properties.  Production costs and capital costs
  were projected at current price levels.
- Pipeline capital and operating costs are not included in the cash
  flow projections because these costs will be recovered through
  pipeline tariffs.

Estimated Reserve Quantities
----------------------------

Proved reserves are estimated quantities of crude oil, condensate,
natural gas, and natural gas liquids which geological and engineering
data demonstrate with reasonable certainty to be recoverable in future
years from known reservoirs under existing economic and operating
conditions.  Proved developed reserves are those proved reserves that
can be expected to be recovered through existing wells with existing
equipment and operating methods.

Estimates of oil and gas proved reserves and production, all located
in Colombia, are as follows:
                                                     Oil (a)        Gas
                                                     (MBBLS)      (MMCF)
                                                   -----------  -----------
Proved reserves, October 1, 1995                           --           --
  Revisions in previous estimates                          --           --
  Extensions, discoveries and purchases                 2,337       61,561
                                                   -----------  -----------
Proved reserves, September 30, 1996                     2,337       61,561
                                                   ===========  ===========

  (a) All natural gas condensate

None of the above reserves may be classified as proved developed
reserves until production commences.









                                    56

                          HONDO OIL & GAS COMPANY
           SUPPLEMENTARY INFORMATION ABOUT OIL AND GAS PRODUCING
                    ACTIVITIES AND RESERVES (UNAUDITED)
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


Standardized Measure of Discounted Future Net Cash Flows Relating to
--------------------------------------------------------------------
Proved Reserves
---------------

The following table sets forth the computation of the standardized
measure of discounted future cash flows relating to proved reserves.
The standardized measure is the estimated future cash inflows from
proved reserves less estimated future production and development
costs, estimated future income taxes and a discount factor.  Future
cash inflows represent expected revenues from the production of proved
reserves based on prices in existence at the fiscal year end.
Escalation based on inflation, regulatory changes and supply and
demand are not considered.  Estimated future production and
development costs related to future production of reserves are based
on historical information, as available, and estimates drawn from
similar gas fields in other locations.  Such costs include, but are
not limited to, production, drilling development wells and
installation of production facilities.  Inflation and other
anticipatory costs are not considered until the actual cost change
takes effect.  Estimated future income tax expenses are computed using
tax rates legislated in Colombia.  Consideration is given to the
effects of permanent differences, utilization of net operating loss
carryforwards, tax credits and allowances.  A discount rate of 10% is
applied to the annual future net cash flows after income taxes.

The methodology and assumptions used in calculating the standardized
measure are those required by SFAS NO. 69.  It is not intended to be
representative of the fair market value of proved reserves.  The
valuations of revenues and costs do not necessarily reflect the
amounts to be received or expended by the Company.  In addition to
the valuations used, numerous other factors are considered in
evaluating known and prospective oil and gas reserves.

                                                   For the year
                                                      ended
                                                   September 30,
                                                      1996
                                                   -----------

Future cash inflows                                  $126,564
Future production costs                               (33,934)
Future development costs                              (36,063)
Future income tax expenses                            (14,843)
                                                   -----------
  Net future cash flows                                41,724
10% annual discount for estimated timing
  of cash flows                                       (22,071)
                                                   -----------
Standardized measure of discounted
  future net cash flows                               $19,653
                                                   ===========




                                    57

                          HONDO OIL & GAS COMPANY
           SUPPLEMENTARY INFORMATION ABOUT OIL AND GAS PRODUCING
                    ACTIVITIES AND RESERVES (UNAUDITED)
                             September 30, 1996

                     (All Dollar Amounts in Thousands)


Results of Operations for Oil and Gas Producing Activities
----------------------------------------------------------

The following table sets forth the results of operations from oil
and gas producing and exploration activities.  Income tax expense
was computed using the statutory tax rate for the period adjusted
for utilization of net operating loss carryforwards, permanent
differences, tax credits and allowances.
<TABLE>
<HEADING>                                                   For the years ended
                                                   -------------------------------------
                                                               September 30,
                                                      1996         1995         1994
                                                   -----------  -----------  -----------
<S>                                                <C>          <C>          <C>
Revenues                                                   $2          $23         $369
Production costs                                       (2,745)        (166)        (386)
Exploration expenses                                   (1,769)        (169)          (2)
Depreciation, depletion and amortization                   --           --           --
                                                   -----------  -----------  -----------
                                                       (4,512)        (312)         (19)
Income tax benefit                                     (1,787)        (124)          (7)
                                                   -----------  -----------  -----------
Results of operations from exploration
  and production activities (excluding
  corporate overhead and interest)                    $(2,725)       $(188)        $(12)
                                                   ===========  ===========  ===========

</TABLE>



























                                    58

                                       HONDO OIL & GAS COMPANY
                           Schedule II - VALUATION AND QUALIFYING ACCOUNTS
                                          September 30, 1996

                                  (All Dollar Amounts in Thousands)


<TABLE>
<HEADING>
                                                                 Additions
                                                   Balance at   charged to                  Balance
                                                    beginning    costs and                  at end
                                                    of period    expenses    Write-offs    of period
                                                   -----------  -----------  -----------  -----------
Allowance for doubtful receivables:
<S>                                                <C>          <C>          <C>          <C>
Continuing operations:
  1996                                                   $399           $4         $(71)        $332
                                                   ===========  ===========  ===========  ===========
  1995                                                   $399          $--          $--         $399
                                                   ===========  ===========  ===========  ===========
  1994                                                   $555          $61        $(217)        $399
                                                   ===========  ===========  ===========  ===========

</TABLE>







































                                                 59

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

There has been no change in the Company's auditors during the two most
recent fiscal years.

                                  PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item will be contained in the
Company's Proxy Statement to be filed within 120 days after fiscal
year end and is incorporated herein by reference.

Item 11. EXECUTIVE COMPENSATION

The information required by this item will be contained in the
Company's Proxy Statement to be filed within 120 days after fiscal
year end and is incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item will be contained in the
Company's Proxy Statement to be filed within 120 days after fiscal
year end and is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item will be contained in the
Company's Proxy Statement to be filed within 120 days after fiscal
year end and is incorporated herein by reference.

                                  PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) (1) Financial Statements:  See the Index to Financial Statements
        in  Item 8 hereof.

    (2) Financial Statement Schedules:                   Page

        II.  Valuation and Qualifying Accounts              59

        Schedules other than those listed above are omitted because they are
        not required or not applicable, or because the information required in
        a schedule is otherwise included in the Notes to Consolidated
        Financial Statements.

    (3) Exhibits filed with this report:  See Item (c) below.

(b) Reports on Form 8-K:

    The Company filed no reports on Form 8-K during the quarter
    ended September 30, 1996.

(c) Exhibits: See Exhibit Index on page 63 for exhibits required by
    Item 601 of Regulation S-K.

(d) Financial statement schedules required by Regulation S-X which
    are excluded from the annual report to shareholders by Rule
    14a-3 (b)(1): See Item (a)(2) above.



                                    60
















                                 SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the registrant has duly caused this report
on Form 10-K for the year ended September 30, 1996 to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                      HONDO OIL & GAS COMPANY

Date: December 27, 1996             By/s/ Stanton J. Urquhart
                                      ------------------------
                                      Stanton J. Urquhart
                                      Vice President


































                                (continued)

                                    61


Pursuant to the requirements of the Securities Exchange Act of 1934,
this report on Form 10-K for the year ended September 30, 1996 has
been signed below by the following persons on behalf of the registrant
in the capacities and on the dates indicated.
<TABLE>
<HEADING>
       Signature                                Title                             Date
-----------------------               --------------------------           -----------------
<S>                                   <C>                                  <C>
/s/ Dieter Bock                       Director                             December 27, 1996
-----------------------
DIETER BOCK


/s/ John J. Hoey                      President, Chief Executive           December 27, 1996
-----------------------               Officer, and Director
JOHN J. HOEY


/s/ C.B. McDaniel                     Secretary, Director                  December 27, 1996
-----------------------
C.B. MCDANIEL


/s/ Douglas G. McNair                 Director                             December 27, 1996
-----------------------
DOUGLAS G. MCNAIR


/s/ Nicholas J. Morrell               Director                             December 27, 1996
-----------------------
Nicholas J. Morrell


/s/ John F. Price                     Director                             December 27, 1996
-----------------------
JOHN F. PRICE


/s/ Robert K. Steer                   Director                             December 27, 1996
-----------------------
ROBERT K. STEER


/s/ R.E. Whitten                      Director                             December 27, 1996
-----------------------
R.E. WHITTEN


/s/ Stanton J. Urquhart               Vice President, Principal            December 27, 1996
-----------------------               Financial and Principal
STANTON J. URQUHART                   Accounting Officer

</TABLE>









                                    62

                               EXHIBIT INDEX


Exhibit
Number  Subject
------- ---------------------------------------------------------------------

   3.1  Restated Certificate of Incorporation.

   3.2  Bylaws, as amended on September 5, 1995.

*  4.1  Documents relating to the $1 million principal amount of California
        Pollution Control Authority, 7 1/2% Industrial Development Revenue
        Bonds (Newhall Refining Co., Inc. Project) including Installment Sale
        Agreement and Indenture of Trust.

*  4.2  Documents relating to the $5 million principal amount of California
        Pollution Control Financing Authority Pollution Control Revenue Bonds
        (Newhall Refining Co., Inc. Project), including Pollution Control
        Facilities Lease Agreement, Indenture, U.S. Small Business
        Administration Pollution Control Facility Payment Guaranty and
        Reimbursement Agreement.

* 10.1  Note Purchase Agreement and Letter Agreement dated November 28, 1988,
        between the Company and Thamesedge, Ltd.

**10.2  Letter Agreement dated December 18, 1992, between the Company and
        Thamesedge, Ltd., amending Note Purchase Agreement (Exhibit 10.1,
        above) (incorporated by reference to Exhibit 10.2 to the Company's
        Annual Report on Form 10-K for the fiscal year ended September 30,
        1992, filed with the Securities and Exchange Commission on December
        28, 1992).

**10.3  Loan Agreement dated December 20, 1991, by and between Hondo Oil & Gas
        Company and Lonrho Plc, including the Promissory Notes and Letter
        Agreement related thereto (incorporated by reference to Exhibit 10.13
        to the Company's Annual Report on Form 10-K for the fiscal year ended
        September 30, 1991, filed with the Securities and Exchange Commission
        on January 13, 1992).

**10.4  Letter Agreement dated December 18, 1992, between the Company and
        Lonrho Plc, amending Loan Agreement (Exhibit 10.3, above)
        (incorporated by reference to Exhibit 10.4 to the Company's Annual
        Report on Form 10-K for the fiscal year ended September 30, 1992,
        filed with the Securities and Exchange Commission on December 28,
        1992).

**10.5  Net Profits Share Agreement dated December 18, 1992, among the
        Company, Lonrho Plc, Thamesedge, Ltd. (incorporated by reference to
        Exhibit 10.5 to the Company's Annual Report on Form 10-K for the
        fiscal year ended September 30, 1992, filed with the Securities and
        Exchange Commission on December 28, 1992).

**10.6  Note Dated April 30, 1993, for $3,000,000, from Via Verde Development
        Company to Lonrho Plc; Guaranty of the Company (incorporated by
        reference to Exhibit 19.1 to the Company's Quarterly Report on Form
        10-Q for the quarter ended March 31, 1993, filed with the Securities
        and Exchange Commission on May 17, 1993).






                                    63

                         EXHIBIT INDEX (continued)


Exhibit
Number  Subject
------- ---------------------------------------------------------------------

**10.7  Note dated June 25, 1993 for $4,000,000 from the Company to Lonrho
        Plc; Letter Agreement relating to same (incorporated by reference to
        Exhibit 10.7 to the Company's Annual Report on Form 10-K for the
        fiscal year ended September 30, 1993, filed with the Securities and
        Exchange Commission on December 28, 1993).

**10.8  Letter Agreement dated December 17, 1993, by and among the Company,
        Via Verde Development Company, Newhall Refining Co., Inc., Lonrho Plc
        and Thamesedge Ltd. and Note Amendments, amending prior loan
        agreements and notes (Exhibits 10.1 through 10.7, above),(incorporated
        by reference to Exhibit 10.8 to the Company's Annual Report on Form
        10-K for the fiscal year ended September 30, 1993, filed with the
        Securities and Exchange Commission on December 28, 1993).

**10.9  Letter Agreement dated November 10, 1994, by and among the Company,
        Via Verde Development Company, Newhall Refining Co., Inc., Lonrho Plc
        and Thamesedge Ltd. and Note Amendments (excluding Exhibit E to the
        Letter Agreement filed as Exhibit 10.10, below) amending prior loan
        agreements and notes (Exhibits 10.1 through 10.8, above),(incorporated
        by reference to Exhibit 10.1 to the Company's Current Report on Form
        8-K dated November 29, 1994, filed with the Securities and Exchange
        Commission on November 29, 1994).

**10.10 Promissory Note dated October 31, 1994, in the original principal
        amount of $5,000,000, from the Company to Lonrho Plc (additional loan
        facility),(incorporated by reference to Exhibit 10.2 to the Company's
        Report on Form 8-K dated November 29, 1994, filed with the Securities
        and Exchange Commission on November 29, 1994).

**10.11 Letter Agreement dated December 22, 1995, by and among the Company,
        Via Verde Development Company, Newhall Refining Co., Inc., Lonrho Plc
        and Thamesedge Ltd. and Note Amendments amending prior loan agreements
        and notes (Exhibits 10.1 through 10.10, above),(incorporated by
        reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K
        for the year ended September 30, 1995, filed with the Securities and
        Exchange Commission on December 28, 1995).

**10.12 Revolving Credit Agreement dated as of June 28, 1996 between the
        Company and Thamesedge, Ltd., excluding exhibits and schedules
        (incorporated by reference to Exhibit 10.1 to the Company's Quarterly
        Report on Form 10-Q for the quarter ended June 30, 1996, filed with
        the Securities and Exchange Commission on August 14, 1996).

**10.13 Noted dated June 28, 1996, for $13,500,000 from the Company to
        Thamesedge, Ltd. delivered pursuant to the Revolving Credit Agreement
        (Exhibit 10.12, above), (incorporated by reference to Exhibit 10.2 to
        the Company's Quarterly Report on Form 10-Q for the quarter ended June
        30, 1996, filed with the Securities and Exchange Commission on August
        14, 1996).

**10.14 Guaranty dated as of June 28, 1996 of Hondo Magdalena Oil & Gas
        Limited guaranteeing the obligations of the Company under the
        Revolving Credit Agreement (Exhibit 10.12, above), (incorporated by
        reference to Exhibit 10.3 to the Company's Quarterly Report on Form
        10-Q for the quarter ended June 30, 1996, filed with the Securities
        and Exchange Commission on August 14, 1996).

                                    64

                         EXHIBIT INDEX (continued)


Exhibit
Number  Subject
------- ---------------------------------------------------------------------

  10.15 Letter Agreement dated December 13, 1996, by and among the Company,
        Via Verde Development Company, Newhall Refining Co., Inc., and
        Thamesedge Ltd. and Note Amendments amending prior loan agreements and
        notes (Exhibits 10.1 through 10.11, above).

* 10.16 Employee Capital Appreciation Savings Plan, effective January 1, 1985.

**10.17 Form of Indemnity Agreement between Pauley and its directors and
        officers, approved January 27, 1987 (incorporated by reference to
        Exhibit 10.10 to the Company's Annual Report on Form 10-K for the
        fiscal year ended September 30, 1992, filed with the Securities and
        Exchange Commission on December 28, 1992).

**10.18 Opon Association Contract (translation) dated July 15, 1987, between
        Ecopetrol and Opon Development Company, excluding exhibits and
        attachments (incorporated by reference to Exhibit 10.22 to the
        Company's Annual Report on Form 10-K for the fiscal year ended
        September 30, 1991, filed with Securities and Exchange Commission on
        January 13, 1992).

**10.19 Farmout Agreement dated August 9, 1993, among Hondo Magdalena Oil &
        Gas Limited, Opon Development Company and Amoco Colombia Petroleum
        Company, excluding exhibits (incorporated by reference to Exhibit 19.1
        to the Company's Quarterly Report on Form 10-Q for the quarter ended
        June 30, 1993, filed with the Securities and Exchange Commission on
        August 16, 1993).

**10.20 New Operating Agreement dated as of August 9, 1993, among Hondo
        Magdalena Oil & Gas Limited, Amoco Colombia Petroleum Company, and
        Opon Development Company (incorporated by reference to Exhibit 10.15
        to the Company's Annual Report on Form 10-K for the fiscal year ended
        September 30, 1993, filed with Securities and Exchange Commission on
        December 28, 1993).

**10.21 Stock and Asset Purchase Agreement dated September 15, 1993, between
        Signal Oil & Refining Company, Inc. and the Company and Pauley Pacific
        Inc., excluding exhibits (incorporated by reference to Exhibit 99.1 to
        the Company's Current Report on Form 8- K dated October 12, 1993,
        filed with the Securities and Exchange Commission on October 12,
        1993).

**10.22 Letter Agreement dated February 2, 1994 between the Company and the
        City of Long Beach, excluding exhibits (incorporated by reference to
        Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
        quarter ended December 31, 1993, filed with the Securities and
        Exchange Commission on February 14, 1994).

  10.23 Amendment to Letter Agreement dated November 26, 1996 between the
        Company and the City of Long Beach, excluding exhibits.

**10.24 Hondo Oil & Gas Company 1993 Stock Incentive Plan, excluding exhibits
        (incorporated by reference to Exhibit A to the Company's Proxy
        Statement on Schedule 14A filed with the Securities and Exchange
        Commission on January 28, 1994).



                                    65

                         EXHIBIT INDEX (continued)


Exhibit
Number  Subject
------- ---------------------------------------------------------------------

**10.25 Funding Agreement for Tier 1 Development Project dated May 5, 1995,
        among Hondo Magdalena Oil & Gas Limited, Amoco Colombia Petroleum
        Company and Opon Development Company, excluding exhibits (except
        exhibit A) (incorporated by reference to Exhibit 10.1 to the Company's
        Quarterly Report on Form 10-Q for the quarter ended June 30, 1995,
        filed with the Securities and Exchange Commission on July 28, 1995).

**10.26 Memorandum of Understanding (translation) dated July 26, 1995, among
        Hondo Magdalena Oil & Gas Limited, Amoco Colombia Petroleum Company,
        Opon Development Company, and Empresa Colombiana de Petroleos,
        excluding exhibits (except Exhibit A) (incorporated by reference to
        Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the
        quarter ended June 30, 1995, filed with the Securities and Exchange
        Commission on July 28, 1995).

  21    Subsidiaries of the Company.

  23    Consent of Ernst & Young LLP.

  27    Financial Data Schedules.


























--------

*   These exhibits, which were previously incorporated by reference
    to the Company's reports which have now been on file with the
    Commission for more than 5 years, are not filed with this Annual
    Report pursuant to 17 C.F.R. 229.601(b)(4)(iii)(A).  The Company
    agrees to furnish these documents to the Commission upon
    request.

**  Incorporated by reference

                                    66