[Facility Note]

                         AMENDED AND RESTATED PROMISSORY NOTE


       US $7,500,000.00                             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 SEVEN MILLION FIVE HUNDRED THOUSAND AND
       00/100 DOLLARS (US $7,500,000.00) 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 he Company'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 borrowing 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 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 1994 Credit Letter Lender made loans to
       Borrower in the total amount of US $5,000,000 and to which there has
       been added to principal, pursuant to the Letter Agreements, accrued but
       unpaid interest in the total amount of $455,545.22 through October 1,
       1997.

       Borrower hereby acknowledges, certifies and agrees that: (a) pursuant to
       the Letter Agreements, Borrower has issued a Promissory Note dated
       October 31, 1994 in the original principal amount of $5,000,000 (the
       "Prior Note"); (b) pursuant to the Prior Note, Lender has made loans to
       Borrower that are outstanding as of the date hereof in the aggregate
       principal amount of U.S.$5,455,545.22, after giving effect to interest
       added to principal of the Prior Note as hereinabove provided; (c) this
       Note has been issued by Borrower to renew, extend, amend, restate and
       replace the Prior Note (in order to, among other things, implement the
       aforesaid December 18, 1997 letter agreement), to evidence all
       indebtedness and other amounts outstanding under the Prior Note, and to
       evidence any further advances of 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 Note, this Note shall not be deemed to
       have been issued in payment, satisfaction, cancellation or novation of
       the Prior Note; 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



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       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 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


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       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
       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-


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       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.


                                               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          --        $5,455,545.22
                      Note








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