[1991 Notes]

                          CONSOLIDATED, AMENDED AND RESTATED
                                    PROMISSORY NOTE

       US $40,000,000.00                            As of December 18, 1997

            FOR VALUE RECEIVED, Hondo Oil & Gas Company, a Delaware  corporation
       ("Borrower"), hereby promises to pay to the order of London Australian  &
       General   Property  Company   Limited,  a   United  Kingdom   corporation
       ("Lender"), the  principal sum of  FORTY MILLION AND  00/100 DOLLARS  (US
       $40,000,000.00) or so much as may be advanced (including the addition  of
       interest  to  principal) and  outstanding  hereunder  (the  "Loans"),  on
       January  15,  1999 (the  "Maturity  Date").   Borrower  promises  to  pay
       interest  on the  unpaid principal  balance hereof  from (and  including)
       October 1, 1997  to (but excluding) the date of  payment in full of  such
       amount at  a rate per annum  equal at all times  to six percent (6%)  per
       annum  (or the  maximum  interest rate  permitted  by law,  whichever  is
       less).   Interest  shall be  payable  on each  April  1 (for  the  period
       through March  31) and October  1 (for the  period through September  30)
       until maturity; provided, however,  that any amount of principal that  is
       not  paid  when due  (whether  at  stated maturity,  by  acceleration  or
       otherwise) shall  bear interest from  (and including) the  date on  which
       such amount is due until (but excluding) the date such amount is paid  in
       full on demand, at a rate per annum equal at all times to eleven  percent
       (11%)  per  annum  (or  the  maximum  interest  rate  permitted  by  law,
       whichever  is less).   Both  interest and  principal as  herein  provided
       shall be payable in lawful money  of the United States of America at  the
       offices of  Lender, 4  Grosvenor Place, London  SW1X 7DL  England, or  at
       such other  place as from time  to time may be  designated in writing  by
       Lender.

            Notwithstanding anything  in the foregoing to  the contrary, if,  in
       the opinion of its Board of Directors, Borrower does not have  sufficient
       cash resources to pay interest on  this Note when due, then Borrower  may
       offer to Lender a payment of the interest in shares of Borrower's  common
       stock, valued  at (i) the last  reported sales price  regular way on  the
       interest due day  or, in case no such reported  sale takes place on  such
       day, the  average of the  reported closing bid  and asked prices  regular
       way on such day, in either  case on the American Stock Exchange or  other
       principal national securities  exchange on which Borrower's common  stock
       is listed or, if not listed  on any national securities exchange, on  The
       Nasdaq  Stock Market's  National Market  System or,  (ii) if  (i) is  not
       applicable, the  average of the bid  and asked prices at  the end of  the
       interest due day in the  over-the-counter market as furnished by any  New
       York Stock  Exchange member  firm selected by  Lender in  good faith  for
       that purpose.   In making this determination, Borrower's management  will
       not,  without the  consent  of Lender,  allocate  cash resources  to  new
       capital projects not related to the Opon Association Contract dated  July
       15, 1987  between Empressa Colombiana de  Petroleos and Opon  Development
       Company.  Lender will then notify Borrower whether it will either  accept
       the payment of interest in Borrower's  common stock or add the amount  of
       interest  due to  the principal  of this  Note.   If Lender  accepts  the
       payment of interest in  Borrower's common stock, Borrower will issue  the
       requisite  number of  shares to  Lender within  ten business  days  after
       Borrower receives  notice of acceptance from  Lender.  Lender  recognizes
       that any  shares of Borrower's common  stock that it  may acquire by  the
       payment  of  interest in  Borrower's  common  stock will  not  have  been


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       registered under the Securities Act of 1933, as amended (the "Act"),  and
       may not  be sold in the  absence of an  effective registration under  the
       Act or an  exemption from the registration requirements  of the Act.   If
       Lender so  requests at  any time  and from time  to time  after the  date
       shares of Borrower's common stock  are issued to Lender pursuant to  this
       provision,  Borrower will  use its  best efforts  to effect  registration
       under the Act of the shares so issued.

            No borrowings  may be  made by Borrower  under this  Note after  the
       date  hereof, except  pursuant to  the immediately  preceding  paragraph.
       All  additions  to  principal (including  the  addition  of  interest  to
       principal) and  payments made pursuant  to this Note  may be recorded  by
       Lender on  its books and records  or any Grid  attached hereto, and  such
       books  and records  and any  Grid attached  hereto (or  any statement  or
       certificate of Lender based thereon) shall be conclusive as to  existence
       and amounts thereof absent manifest error.

            This Note is  secured under, and entitled  to the benefits of,  that
       certain Security Interest Agreement dated May 13, 1997 among the  Lender,
       the Borrower, Folio Trust Company Limited and Folio Nominees Limited  (as
       same has  been and  may be  supplemented, modified,  amended or  restated
       from time to time, the "Security Interest Agreement").

            Borrower  and  Lender,  as assignee  of  Thamesedge  Ltd.,  in  turn
       assignee of Lonrho Plc ("Original Lender"), are parties to those  certain
       letter  agreements dated  May 20,  1991, June  20, 1991,  July 19,  1991,
       September   1,  1991,   November  1,   1991,   and  December   20,   1991
       (collectively, the "1991 Letter Agreements") by and between Borrower  and
       Original  Lender (as  amended by  letter  agreements dated  December  18,
       1992, December 17, 1993,  November 10, 1994, December 22, 1995,  December
       13, 1996  and December 18,  1997, and as  same may be  from time to  time
       further  supplemented, amended  or  restated, collectively,  the  "Letter
       Agreements") pursuant to  which 1991 Letter Agreements Lender made  loans
       to Borrower  in the total  amount of US $32,000,000,  and to which  there
       has been added to  principal, pursuant to the Letter Agreements,  accrued
       but unpaid interest in the total amount of $7,137,048.86 through  October
       1, 1997 and against which a  payment of $5,000,000 of principal was  made
       on October 18, 1994.

            Borrower  hereby  acknowledges,  certifies  and  agrees  that:   (a)
       pursuant  to the  Letter Agreements,  Borrower has  issued the  following
       promissory notes to Lender (collectively, the "Prior Notes"):  Promissory
       Notes dated (i)  September 1, 1991, in  the original principal amount  of
       $10,000,000 (which,  in turn,  consolidated, renewed  and replaced  those
       certain three  Promissory Notes, being  the Note dated  May 20, 1991,  in
       the original principal amount of  US $5,000,000, the Note dated June  20,
       1991, in  the original principal  amount of US $3,000,000,  and the  Note
       dated July 19, 1991, in the original principal amount of US  $2,000,000),
       (ii) November 1, 1991, in the original principal amount of US  $9,000,000
       and  (iii) December  20, 1991,  in the  original principal  amount of  US
       $13,000,000; (b) pursuant  to the Prior Notes,  Lender has made loans  to
       Borrower that  are outstanding  as of the  date hereof  in the  aggregate
       principal  amount  of U.S.$34,137,048.86,  after  giving  effect  to  the
       aforesaid  payment of  $5,000,000  of  principal paid  against  the  Note
       issued on September 1, 1991 and interest added to principal of the  Prior
       Notes as hereinabove provided; (c) this Note has been issued by  Borrower
       to  renew, extend,  consolidate, amend,  restate  and replace  the  Prior
       Notes (in order to, among other things, implement the aforesaid  December
       18,  1997 letter  agreement),  to  evidence all  indebtedness  and  other


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       amounts outstanding  under the Prior  Note, and to  evidence any  further
       interest that  may be added to  principal pursuant to  the terms of  this
       Note;   (d) although issued  in substitution for  and restatement of  the
       Prior  Notes, this  Note shall  not  be deemed  to  have been  issued  in
       payment,  satisfaction, cancellation  or novation  of  any of  the  Prior
       Notes;  and  (e)  Borrower's  obligations  to  repay  those  loans  (with
       interest) to Lender and to perform or otherwise satisfy Borrower's  other
       obligations,  as well  as the  security interests  granted to  Lender  by
       Borrower under  the Security Interest  Agreement, and  any other  related
       loan  documents (i)  each remain  and shall  continue in  full force  and
       effect,  both  before  and  after  giving  effect  to  this  renewal  and
       extension,  (ii) are  not subject  as of  the date  of this  renewal  and
       extension  to any  defense, counterclaim,  setoff, right  of  recoupment,
       abatement, reduction or other  claim or determination, and (iii) are  and
       shall be governed  by the terms and provisions  of this Note, the  Letter
       Agreements and the Security Interest Agreement.

            Notwithstanding  the foregoing,  the Lender  may, by  notice to  the
       Borrower  at any  time thereafter,  declare  all or  any portion  of  the
       principal amount of  this Note, all or any part  of the then accrued  but
       unpaid interest thereon, and  any or all other amounts payable  hereunder
       to be forthwith due and payable at any time after:

                 (a)  the  Borrower  shall  fail  to  pay  any  installment   of
                 principal  of, or  interest on,  this Note  when due  and  such
                 failure shall remain unremedied for three (3) days;

                      (b)  the  Borrower, Hondo  Magdalena  Oil &  Gas  Limited,
                 presently  a wholly-owned  subsidiary of  the Borrower  ("Hondo
                 Magdalena"),  and any  of their  respective subsidiaries  shall
                 (i) fail to pay any Debt (but excluding indebtedness  evidenced
                 by  this  Note)  of  the  Borrower,  Hondo  Magdalena  or  such
                 subsidiary (as  the case may  be), or any  interest or  premium
                 thereon, when  due (whether upon  scheduled maturity,  required
                 prepayment, acceleration, demand  or other notice or  formality
                 of  any  kind)  and  such  failure  shall  continue  after  the
                 applicable grace period, if any, specified in the agreement  or
                 instrument relating  to such Debt  or (ii) fail  to perform  or
                 observe  any term,  covenant or  condition on  its part  to  be
                 performed  or  observed  under  any  agreement  or   instrument
                 relating to  any such Debt,  when required to  be performed  or
                 observed, and such failure shall continue after the  applicable
                 grace  period,   if  any,  specified   in  such  agreement   or
                 instrument,  if  the  effect of  such  failure  to  perform  or
                 observe is  to accelerate, or  to permit  the acceleration  of,
                 the maturity of such Debt;  or any such Debt shall be  declared
                 to be due  and payable, or required  to be prepaid (other  than
                 by a  regularly scheduled  required prepayment),  prior to  the
                 stated maturity  thereof.   "Debt" means  all (i)  indebtedness
                 for  borrowed  money,  (ii)  obligations  evidenced  by  bonds,
                 debentures,   notes  or   other  similar   instruments,   (iii)
                 obligations to pay  the deferred purchase price of property  or
                 services, (iv)  obligations as  lessee under  leases that  have
                 been  or  should be,  in  accordance  with  generally  accepted
                 accounting  principles,   recorded  as   capital  leases,   (v)
                 obligations under direct or indirect guaranties in respect  of,
                 and  obligations  (contingent  or  otherwise)  to  purchase  or
                 otherwise acquire,  or otherwise to  assure a creditor  against
                 loss in  respect of, indebtedness or  obligations of others  of


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                 the kinds  referred to in  clauses (i) through  (v) above,  and
                 (vi) liabilities in  respect of unfunded vested benefits  under
                 plans covered by Title IV of ERISA;

                 (c)   the Borrower shall  have failed to furnish to Lender,  by
                 October 1,  1998, a proved  gas reserve  report of  Netherland,
                 Sewell &  Associates that shows  that a  minimum of  13,000,000
                 mcf (25%)  of proved gas reserve  exists, which are subject  to
                 the Opon  Association Contract  in which  Hondo Magdalena  then
                 participates, above  the proved gas  reserve of 52,475,554  mcf
                 at September 30, 1997;

                 (d)  the Borrower, Hondo  Magdalena or any of their  respective
                 subsidiaries shall generally  not pay its debts as they  become
                 due, shall admit in writing  its inability to pay its debts  or
                 shall make a  general assignment for the benefit of  creditors;
                 or  any  proceeding  shall be  instituted  by  or  against  the
                 Borrower,   Hondo  Magdalena   or  any   of  their   respective
                 subsidiaries seeking to adjudicate it a bankrupt or  insolvent,
                 or   seeking    liquidation,   winding   up,    reorganization,
                 arrangement, adjustment, protection, relief, or composition  of
                 it  or  its  Debts  under  any  law  relating  to   bankruptcy,
                 insolvency or reorganization  or relief of debtors, or  seeking
                 the  entry of  an order  for  relief or  the appointment  of  a
                 receiver, trustee, or other similar official for it or for  any
                 substantial  part  of its  property;  or  the  Borrower,  Hondo
                 Magdalena or  any of their  respective subsidiaries shall  take
                 any corporate or other  action to authorize any of the  actions
                 set forth above in this paragraph (d); or

                      (e)  a final  judgment or order for  the payment of  money
                 in excess  of $75,000 shall be  rendered against the  Borrower,
                 Hondo Magdalena  or any of  their respective subsidiaries,  and
                 any such  judgment or order shall  continue unsatisfied and  in
                 effect for a period of 60 consecutive days.

                 (f)  any  other default  (whether in  whole or  in part)  shall
                 occur in  the due observance or  performance of any other  term
                 or  provision  of  this Note,  the  Letter  Agreements  or  the
                 Security Interest Agreement;

                      (g)  This  Note,  the  Letter  Agreements,  the   Security
                 Interest Agreement (in whole or  in part) shall cease to be  in
                 full  force or  effect or  shall  be contested,  challenged  or
                 repudiated by the Borrower or any surety.

            If this Note  is placed in the hands  of an attorney for  collection
       after default,  or if all or  any part of  the indebtedness   represented
       hereby  is proved,  established  or collected  in  any court  or  in  any
       bankruptcy,  receivership,   debtor  relief,  probate   or  other   court
       proceedings, Borrower and all endorsers, sureties and guarantors of  this
       Note jointly  and severally agree to  pay reasonable attorneys' fees  and
       collection costs to  the holder hereof in  addition to the principal  and
       interest payable hereunder.

            Borrower and  all endorsers, sureties  and guarantors  of this  Note
       hereby severally waive  demand, presentment for payment, protest,  notice
       of protest, notice of intention to accelerate the maturity of this  Note,
       diligence in collection, the bringing  of any suit against any party  and


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       any notice of or defense on account of any extensions, renewals,  partial
       payments or changes  in any manner of  or in this Note  or in any of  its
       terms, provisions and covenants, or any releases or substitutions of  any
       security, or  any delay, indulgence or  other act of  any trustee or  any
       holder hereof, whether before or after maturity.

            This Note and the rights and  duties of the parties hereto shall  be
       governed by  the laws of  the State of  New York (other  than those  that
       would defer  to the substantive laws  of another jurisdiction).   Without
       in  any way  limiting the  preceding choice  of law,  the parties  intend
       (among  other things)  to  thereby avail  themselves  of the  benefit  of
       Section 5-1401 of the General Obligations Law of the State of New York.

            All notices  and other communications  provided for hereunder  shall
       be in writing and shall be delivered to the addressees at the  applicable
       addresses set  forth below by  mail, telecopy, Federal  Express or  other
       equivalent  overnight  carrier or  by  telephone  (confirmed  in  writing
       within 24 hours) or telecopy or hand-delivered, if to Borrower, to it  at
       Hondo Oil &  Gas Company, 10375 Richmond  Avenue, Suite 900, Houston,  TX
       77042, telephone  (713) 954-4600, telecopier  (713) 954-4601,  Attention:
       John  J. Hoey;  if  to Lender,  to  it  at London  Australian  &  General
       Property Company, 4 Grosvenor Place, London, SW1X 7DL England,  telephone
       011-44-171-201-6000,  telecopier  011-44-171-201-6100,  Attention  R.  E.
       Whitten with a copy to Rudolph  H. Funke, Esq. at 805 Third Avenue,  18th
       Floor,  New York,  NY 10022,  telephone 212-715-7001,  telecopy  212-838-
       8141; or,  as to each  party, to  it at such  other address  as shall  be
       designated by  such party in a  written notice to the  other party.   All
       such notices and communications shall not be effective until received  by
       Lender.

            Borrower hereby irrevocably  submits to the jurisdiction of any  New
       York State or United States Federal  court sitting in New York City  over
       any  action or  proceeding  arising out  of  or relating  to  the  Letter
       Agreements,  this Note  or the  Security Interest  Agreement, and  hereby
       irrevocably  agrees  that  all  claims  in  respect  of  such  action  or
       proceeding may be heard and determined in such New York State or  Federal
       court.   Borrower  irrevocably consents  to the  service of  any and  all
       process  in any  such action  or  proceeding by  sending copies  of  such
       process to  it at  its address  and in  the manner  determined under  the
       immediately preceding  paragraph hereof.   Borrower agrees  that a  final
       judgment in any such action or proceeding shall be conclusive and may  be
       enforced in other jurisdictions by suit  on the judgment or in any  other
       manner provided by law.  Borrower further waives any objections to  venue
       in such State and any objection to an action or proceeding in such  State
       on the basis of forum non  conveniens.  Borrower further agrees that  any
       action or proceeding brought by  it against Lender shall be brought  only
       in New  York State or  United States Federal  court sitting  in New  York
       County, New York.    Borrower and Lender waive  any right it may have  to
       jury trial.  Nothing in this  paragraph shall affect the right of  Lender
       to serve  legal process in any  other manner permitted  by law or  affect
       the right of  Lender to bring any  action or proceeding against  Borrower
       or any of  its properties in the courts of  any other jurisdictions.   To
       the extent that Borrower has  or hereafter may acquire any immunity  from
       jurisdiction  of  any court  or  from  any legal  process  (whether  from
       service or  notice, attachment prior  to judgment, attachment  in aid  of
       execution,  execution  or  otherwise)  with  respect  to  itself  or  its
       property, Borrower hereby irrevocable waives such immunity in respect  of
       its obligations under the  Letter Agreements, this Note and the  Security
       Interest Agreement.


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                                          HONDO OIL & GAS COMPANY


                                          By:  /s/ John J. Hoey
                                               -------------------------------
                                               John J. Hoey, President

                                     [END OF PAGE]

                                   SCHEDULE TO NOTE

                      Amount of      Principal      Principal      Notation
            Date      Advance        Paid           Outstanding    Made By
            ----      ---------      ---------      -----------    --------
                      Carryover
            12/18/97  from Prior          --        $34,137,048.86
                      Note











































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